I have come up with a bit of a possible trading idea that may work. It is only early days and I have only completed a few basic manual backtests on the 4hr and daily charts, and it seems to have some potential. If it does prove to work, then it would certainly be a good candidate for an EA. It is a simple system that may require some tweaks, as at the moment I am only getting the idea out there to get others opinions.
I am looking at a system where you basically stay in a trade as long as the indicators tell you to do so. When the indicators change direction, you open a trade in that new direction and close the previous trade. Now depending how your previous trade went, would dictate position size on this new trade. Then when there was a new signal in the opposite direction generated by the indicators, you would then open a new trade in the new direction, and again depending what happened previously, would determine your position size. This will be a lot clearer with examples shortly. In a nutshell, you would always be in the market, just the position size varies depending on your profit/loss situation. These trades will also be in sequences that will either close in profit or at break even. If there is a losing sequence, then we have blown our account. I can’t stress enough how important money management would be.
I will be using both the QQE Adv and MACD Platinum indicators for the trade signals. You could really use any indicators that suits you, but these are what I know best. Watch the LACW 1 & 2 videos on my YouTube channel called TradersKey. Also the video called JAGfx will also help with how I read these indicators.
Basically need both to be in alignment for there to be a valid signal. Also wait until the current candle closes so the signal is actually confirmed and all new trades are taken on the open of the very next candle. Doesn’t matter which time frame you are using here. I do prefer the 4hr charts though as they tend to suit my lifestyle and have some nice decent trends without too much noise.
I was toying with the idea of using the martingale type system here for position size, but I am now leaning towards a Fibonacci sequence as it appears to be not as brutal as quickly. For those that don’t know the sequence, it is 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89 etc. Just the last two numbers added together to the get the next number in the sequence.
Here is my theory on how it should work. Say I start with a buy signal. Open 1x long trade on the open of the next candle to begin the sequence and just let this trade run until there is a new signal to go short. Either that long trade will end in profit, break even or a loss. If it is in profit, then that is the end of the sequence as you take your profit and run and that trade is no longer considered. Same applies if it is a break even result. Simple enough so far. If it is a loss, then the sequence continues with the new sell trade, which will also be for 1x unit as per the fibs. And the loss from the long is recorded where you will then have to do some maths. Just to be clear, we are not hedging here, so we only have one trade open in one direction at all times.
Now because we have more than one trade in the sequence, the best we are looking for is to close out the sequence at an overall break even result. So we would take the loss from the previous long trade and work out where the new short trade would have to reach to achieve this overall break even result. If it hits that price, then that trade is closed out and that sequence is now complete with an overall result of break even. At the same time, another short trade for 1x unit is opened for the start of a new sequence. Easy so far.
Now if in the above example, if price on the short trade did not reach the overall break even price required, but bounced back up, where a new buy signal was generated, then that sell trade would be closed immediately and a new buy order opened for 2x units as this is the third trade in the sequence (1, 1, 2). You would calculate your profit or loss from that previous short, and either add it or deduct it to or from the loss of the long trade before that. This will give you a new figure and a new target for your new long trade to hit. Be aware as this trade is for 2x units, you would need to do the maths to work out your target as the first two trade results were based on 1x unit each. If this long trade then hit the required target, then the entire sequence would close at an overall break even result. And we would open a brand new long trade for 1x unit at that same price to commence a new sequence of trades.
If that long trade did not achieve that target and there was then a new sell signal, the long would be closed either at a profit or a loss, and a new short trade for 3x units would be opened. Again do all the maths on the previous trades on the sequence and work out your new break even target.
There will be a lot of break even results, as the winners will only come when the sequence only lasts the one trade. This may be from when a new signal is first generated to when there is a reversal, or it may be from when a new trade is immediately opened after a break even target has been hit until it is reversed. I was considering not taking any new trades once the break even target was hit, but instead wait until the next new clean signal, however I did notice that the market tended to take off and leave me behind, so hence my thoughts behind starting a new sequence immediately. Again, this keeps us always in the trade.
Not sure if something like this would work on the smaller time frames, especially for doing the maths all of the time. An EA would certainly help there. The indicators I use are fairly accurate most of the time, and the longer time frames in forex tend to trend very nicely, where you will eventually get the big move that will recover your losses and some.
It is just an idea at the moment, which i have manually backtested over quite a few daily and 4hr charts on the majors only. There have been some very consistent results, especially on the 4hr charts. The daily charts tend to have long periods where it is just break even after break even result, which would test the patience of many traders. Everyone likes to be in the action!
If there is any interest, I will do up a YouTube video which should help clarify a few things as I appreciate it is difficult to read an explanation of a trading method and then visualize what I am talking about. This type of method could be used with any indicators of your choice, so it isn't limited to what I have nominated. I was actually thinking that you may be able to work this same method on multiple time frames of the same pairs using different indicators, which would give you a basket of trades all going at the same time, ultimately giving you some hedging protection when the market is undecided, but pick up the big winners when the market breaks. Just thinking aloud here.
As always, money management is critical if you were to trade a method like this, so be warned. Looking forward to any feedback. Cheers. Jim
I am looking at a system where you basically stay in a trade as long as the indicators tell you to do so. When the indicators change direction, you open a trade in that new direction and close the previous trade. Now depending how your previous trade went, would dictate position size on this new trade. Then when there was a new signal in the opposite direction generated by the indicators, you would then open a new trade in the new direction, and again depending what happened previously, would determine your position size. This will be a lot clearer with examples shortly. In a nutshell, you would always be in the market, just the position size varies depending on your profit/loss situation. These trades will also be in sequences that will either close in profit or at break even. If there is a losing sequence, then we have blown our account. I can’t stress enough how important money management would be.
I will be using both the QQE Adv and MACD Platinum indicators for the trade signals. You could really use any indicators that suits you, but these are what I know best. Watch the LACW 1 & 2 videos on my YouTube channel called TradersKey. Also the video called JAGfx will also help with how I read these indicators.
Basically need both to be in alignment for there to be a valid signal. Also wait until the current candle closes so the signal is actually confirmed and all new trades are taken on the open of the very next candle. Doesn’t matter which time frame you are using here. I do prefer the 4hr charts though as they tend to suit my lifestyle and have some nice decent trends without too much noise.
I was toying with the idea of using the martingale type system here for position size, but I am now leaning towards a Fibonacci sequence as it appears to be not as brutal as quickly. For those that don’t know the sequence, it is 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89 etc. Just the last two numbers added together to the get the next number in the sequence.
Here is my theory on how it should work. Say I start with a buy signal. Open 1x long trade on the open of the next candle to begin the sequence and just let this trade run until there is a new signal to go short. Either that long trade will end in profit, break even or a loss. If it is in profit, then that is the end of the sequence as you take your profit and run and that trade is no longer considered. Same applies if it is a break even result. Simple enough so far. If it is a loss, then the sequence continues with the new sell trade, which will also be for 1x unit as per the fibs. And the loss from the long is recorded where you will then have to do some maths. Just to be clear, we are not hedging here, so we only have one trade open in one direction at all times.
Now because we have more than one trade in the sequence, the best we are looking for is to close out the sequence at an overall break even result. So we would take the loss from the previous long trade and work out where the new short trade would have to reach to achieve this overall break even result. If it hits that price, then that trade is closed out and that sequence is now complete with an overall result of break even. At the same time, another short trade for 1x unit is opened for the start of a new sequence. Easy so far.
Now if in the above example, if price on the short trade did not reach the overall break even price required, but bounced back up, where a new buy signal was generated, then that sell trade would be closed immediately and a new buy order opened for 2x units as this is the third trade in the sequence (1, 1, 2). You would calculate your profit or loss from that previous short, and either add it or deduct it to or from the loss of the long trade before that. This will give you a new figure and a new target for your new long trade to hit. Be aware as this trade is for 2x units, you would need to do the maths to work out your target as the first two trade results were based on 1x unit each. If this long trade then hit the required target, then the entire sequence would close at an overall break even result. And we would open a brand new long trade for 1x unit at that same price to commence a new sequence of trades.
If that long trade did not achieve that target and there was then a new sell signal, the long would be closed either at a profit or a loss, and a new short trade for 3x units would be opened. Again do all the maths on the previous trades on the sequence and work out your new break even target.
There will be a lot of break even results, as the winners will only come when the sequence only lasts the one trade. This may be from when a new signal is first generated to when there is a reversal, or it may be from when a new trade is immediately opened after a break even target has been hit until it is reversed. I was considering not taking any new trades once the break even target was hit, but instead wait until the next new clean signal, however I did notice that the market tended to take off and leave me behind, so hence my thoughts behind starting a new sequence immediately. Again, this keeps us always in the trade.
Not sure if something like this would work on the smaller time frames, especially for doing the maths all of the time. An EA would certainly help there. The indicators I use are fairly accurate most of the time, and the longer time frames in forex tend to trend very nicely, where you will eventually get the big move that will recover your losses and some.
It is just an idea at the moment, which i have manually backtested over quite a few daily and 4hr charts on the majors only. There have been some very consistent results, especially on the 4hr charts. The daily charts tend to have long periods where it is just break even after break even result, which would test the patience of many traders. Everyone likes to be in the action!
If there is any interest, I will do up a YouTube video which should help clarify a few things as I appreciate it is difficult to read an explanation of a trading method and then visualize what I am talking about. This type of method could be used with any indicators of your choice, so it isn't limited to what I have nominated. I was actually thinking that you may be able to work this same method on multiple time frames of the same pairs using different indicators, which would give you a basket of trades all going at the same time, ultimately giving you some hedging protection when the market is undecided, but pick up the big winners when the market breaks. Just thinking aloud here.
As always, money management is critical if you were to trade a method like this, so be warned. Looking forward to any feedback. Cheers. Jim
JAGfx