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Colostarr Jun 6, 2011 7:07am | Post# 1

Simple Simon Balance Line Trading
 
2 Attachment(s)
Before we begin I would like to go over a few basic rules:

1. Dignity and Respect at ALL times. Anyone not being respectful will be banned

2. If you don’t like this method, please move on. Take your opinion to another thread in this forum.

3. Know it All’s beware! Your opinion is valued here, but must be presented in a clear and concise manner. Please refrain from attempting to change the rules of this method because you think you know better. If you sincerely think you can make a suggestion that will improve this method, simply do that, make a sincere suggestion. Someone from the forum will look into it and get back to you.

4. If you are confused and need genuine help I ask that you PM myself or any of the other members that help me maintain this thread.

5. NO CONSPIRACY THEORY TALKS – TAKE THEM OFFLINE – NOT WELCOME HERE AT ALL

6. Please do not be negative in this forum. There are other people trying to learn, negativity breeds negativity. Negative posters will be banned.

Good luck to you and Happy Pippin!



This system is based on the “Balance Line” system (Dimension 5) of Bill Williams Trading Chaos system.

The system in and of itself is simple, yet very powerful.

The premise of the Balance Line according to Bill Williams is to think of the Blue line (balance line) as the top of a hill. As price approaches the blue line, it is moving up hill, therefore there is more resistance to GET to the blue line. Once at the top of the hill (the blue line) price moves away from the blue line easier (because it is now rolling down the hill).

My concept is this: Think of YOU as the BLUE LINE; You ARE the blue line. As the blue line, it is your job to react to price ONLY WHEN IT COMES TO YOU. When price moves away, take a nap (on that pair anyway) until it comes back to you.

Rules / tools:

Most effective on the 1H time frame and higher – I prefer 1H. Use pairs that trend well and have lower spreads

Tools: Apply Bill Williams Alligator to your chart. Change the color of the Red and Green lines to “NONE” within the properties. Save as template

What to look for:

You want to look for pairs that are in “immediate or shorter term trends” (long trends are excellent for bounce or continuation trades). Ranging or wild patterns are not recommended. Price hanging ON the blue line also not recommended.

Bounce Trades

A bounce off the Blue Line is when price has retraced from a trend and “touched the BLUE line”. When it touches and “bounces” off wait for the candle to close and set a pending sell / buy stop according to the rules below. This is prices way of telling you that the long term trend is potentially still intact and is about to continue.

Rules for Entry:

Look for HOW price approaches the blue line. If the angle is steep, the potential setup is more powerful. If price “CLOSES” really close to the blue line, again – more powerful; stay away from poor or no angle trades. Plenty of examples can be found in this thread with regard to angle. Keep in mind you are watching the “closing price” of a candle – “NOT THE OPEN PRICE” very important

Buy:

When the candle closes above the blue line (the closer to the blue line the better) set a pending buy stop order at the high of that candle plus the spread, plus 3 pips. The same applies for your stop loss. Set your stop at the low of the candle minus spread, minus 3 pips

EXAMPLE: GBP/JPY closes above blue line at 131.61, the spread for this pair is 3 pips (for my broker), plus 3 pips = Buy stop at 131.67 (131.61+.03+.03=131.67)

Sell

When the candle closes below the blue line (the closer to the blue line the better) set a pending sell stop order at the low of that candle minus the spread, minus 3 pips. The same applies for your stop loss. Set your stop at the high of the candle plus spread, plus 3 pips

EXAMPLE: GBP/JPY closes below the blue line at 131.61, the spread for this pair is 3 pips (for my broker), minus 3 pips = sell stop at 131.55 (131.61-.03-.03=131.55)

NEVER, EVER UNDER ANY CIRCUMSTANCES WILL YOU SET AN IMMEDIATE MARKET ORDER AT THE CLOSE OF A SIGNAL CANDLE. SET BUY/SELL STOPS ONLY!

THE DAY YOU STOP CHASING YOUR ENTRY, IS THE DAY YOU BEGIN TO REALIZE ACTUAL PROFITS.

LET PRICE COME TO YOU, YOU ARE THE BLUE LINE!
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3thPri Jun 6, 2011 9:44am | Post# 2

share the template
 
hello, can you share ur template and upload more examples ?

Colostarr Jun 6, 2011 9:58am | Post# 3

Template
 
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Here is the template. The examples will take some time. i am getting ready to head home just now, and will upload some from there if I get time. The system is pretty self explanatory though!~
balance line trading.tpl

3thPri Jun 6, 2011 10:31am | Post# 4

how long did u backtesting this system? how the result ?

3thPri Jun 6, 2011 10:50am | Post# 5

currency pairs
 
which currency pairs you trade with ?

Colostarr Jun 6, 2011 11:56am | Post# 6

No back testing
 
Sorry to burst your bubble but I don't do back testing. But you are more than welcome to. Apply the chart to any time frame - including monthly. I've been using all of Bill Williams systems for a few years now.

I shared the balance line system for it's raw power and simplicity.

Since the beginning of May (roughly) I don't really track anymore, I'd guess I am anywhere from 500 - 700 pips with this method.

I mocked up the GBPUSD for you - starting frm June 1st I am +114 pips o this pair. I'll post the chart in a new reply!

how long did u backtesting this system? how the result ?

Colostarr Jun 6, 2011 11:57am | Post# 7

Low spreads
 
I prefer the low spread pairs, and the ones that trend nicely.

GBPUSD; EURUSD; USDCHF; AUDUSD; NZDUSD

Really it's up to you!

which currency pairs you trade with ?

Colostarr Jun 6, 2011 12:12pm | Post# 8

GBPUSD
 
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Here are the trades I took on the GBPUSD (currently have one open right now).
1st trade signal formed and price triggered short at 1.6465 stopped out at 1.6439 = + 26 pips

2nd trade signal formed and price triggered short at 1.6451 stopped out for loss at 1.6475 = -24 pips

3rd trade signal formed and price triggered short at 1.6377 stopped out at 1.6337 = +40 pips

4th trade signal formed and price triggered short at 1.6338 stopped out at 1.6311 = +27 pips

5th trade signal formed (after NFP) and price triggered long at 1.6371 stopped out at 1.6416 = +45 pips

The last of these trades were how I closed out my weekend:
+26 pips
-24 pips
+40 pips
+27 pips
+45 pips
Total= 114 pips and a nice end to my week. Questions?
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Tania Jun 6, 2011 12:17pm | Post# 9

Appreciation
 
I personally believe you are perfect with this very simple and perfect system among so many indicators and systems
also you mentioned your favorite TF is H1 and higher but have you tried it in lower TF,as well?
Wish you best
Tani

Zurathustra Jun 6, 2011 12:25pm | Post# 10

The template you posted calls for an indicator:

NB S-R 4H&D.ex4

Which I and probably many others dont have, if you could post that indi it would be much appreciated.

Also. for the sake of simplicity, wouldn't it be better to remove the indicaters that aren't being used for the system. If I understand your trading rules correctly, then the AO, AC, Fractals, and I'm assuming the NB S-R 4H&D indicaters aren't even being used in this system and are simply adding noise to the chart.

This is based of the rules you posted the the trade examples in the screenshot.

Colostarr Jun 6, 2011 12:41pm | Post# 11

One more
 
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Here is one more chart before I go for the night: EURUSD from last week (starting 1 June):

1st trade: signal triggered short 1.4839 stopped at 1.4329 = +60 pips

2nd trade: Signal triggered long 1.4390 stopped at 1.4447 = +57 pips

3rd trade: Was a bounce trade thanks to NFP release: Triggered long at 1.4525 stopped at 1.4616 = +91 pips

+60
+57
+91

3 wins, 3 trades = 208 pips
Good night time for this kid to crash out
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Cbh123 Jun 6, 2011 12:44pm | Post# 12

Questions
 
Questions?
Hi Colostarr, thanks for sharing your method, and being so helpful with explanations.

I have a couple questions based on your chart for GBP/USD.

1. If the first signal gets stopped out do you typically wait for price to move away and come back to take another trade? I noticed after your 2nd signal you could have taken a long or the following short (albeit with a huge stop loss), just wondering if you typically wait for the first time back to do this.

2. There was a long trade right before the 3rd trade (short), could you explain why you chose not to take this one? (I'm sure it was something to do with your experience, I'm just thinking hearing your logic would be helpful)

3. Also, between trades 3 and 4, there were possible trades in both directions, could you explain why neither of these were taken?

Thanks again for sharing, and I hope these questions will be helpful to other traders as well.

Cory

rsh2000 Jun 6, 2011 12:52pm | Post# 13

thanks i will see
how much effective it is

Colostarr Jun 6, 2011 12:55pm | Post# 14

Sorry
 
2 Attachment(s)
Sorry about that, I probably could have explained better. This is not the only method I use. I use many different methods, and tend to combine them into one simple template.

As I explained before this is one of the 5 dimensions of Bill Williams Chaos system, only simplified.

The NB S-R 4H&D.ex4 is simply a pivot indicator taken from the Nanningbob system (I'll post it here for you to use if you like).

As to the AO and AC Oscillators, I do use them. I didn't want to confuse this very simple system by getting into the weeds of the Chaos theory. Read "Trading in the zone" section of Bill Williams Chaos second edition.

If it makes it easier for you, just remove the oscillators. The system all by itself is pretty simple.

Hope this helps - I must get some sleep! Good Luck

The template you posted calls for an indicator:

NB S-R 4H&D.ex4

Which I and probably many others dont have, if you could post that indi it would be much appreciated.

Also. for the sake of simplicity, wouldn't it be better to remove the indicaters that aren't being used for the system. If I understand your trading rules correctly, then the AO, AC, Fractals, and I'm assuming the NB S-R 4H&D indicaters aren't even being used in this system and are simply adding noise to the chart.

This is based of the rules you posted the the trade examples in...
NB S-R 4H&D.ex4
NB S-R 4H&D.mq4

Colostarr Jun 6, 2011 1:10pm | Post# 15

Good questions
 
Ok after this I MUST get to bed! To your questions:

1. If the first signal gets stopped out do you typically wait for price to move away and come back to take another trade?
A: If I get stopped out I always wait for the next signal, the cross and close above/below the balance line, nothing else.

2.
I noticed after your 2nd signal you could have taken a long or the following short (albeit with a huge stop loss), just wondering if you typically wait for the first time back to do this.
A: I took a loss, I was pissed!! I did set a long trade afterward, but you'll notice it never triggered ( entry=high plus the spread, plus 3 pips, will keep you out of danger my friend!). The subsequent DROP closed too far away from the balance line for my liking - I am a patient man and needed to see another signal before thinking about entering

3. Also, between trades 3 and 4, there were possible trades in both directions, could you explain why neither of these were taken?
A: This is where I use the AC oscillator, but simply put, price was too close to the balance line, and volatility dropped - wasn't comfortable taking these trades. Many of my trades are "eyeballed" - there has to be "Motion"

On top of having a terrible headache - I am dizzy tired. Will check in tomorrow. Good Luck

Hi Colostarr, thanks for sharing your method, and being so helpful with explanations.

I have a couple questions based on your chart for GBP/USD.

1. If the first signal gets stopped out do you typically wait for price to move away and come back to take another trade? I noticed after your 2nd signal you could have taken a long or the following short (albeit with a huge stop loss), just wondering if you typically wait for the first time back to do this.

2. There was a long trade right before the 3rd trade (short), could you explain why you chose...

Colostarr Jun 6, 2011 1:14pm | Post# 16

Yes
 
Thank you for the comment

I actually started using this method on the 5 and 15 TF, only to realize about a 55% win rate. You can get really whipsawed on the lower TF's if you don't follow basic stop loss rules! It works - but it can and WILL get you!

I personally believe you are perfect with this very simple and perfect system among so many indicators and systems
also you mentioned your favorite TF is H1 and higher but have you tried it in lower TF,as well?
Wish you best
Tani

Zurathustra Jun 6, 2011 1:36pm | Post# 17

2 Attachment(s)
Finally, on another note, the balance line you use (Blue Line) from the alligator is nothing more the a 13 Median MA Smoothed with an 8 shift.

For the sake of keeping things as simple as possible for the explanation of the system.

keep it simple.tpl

What your left with is a MA cross system that uses the statistical advantage of knowing that when the price reaches the MA, its initial move from the MA is likely to be a continuous move for the next several periods.

Here is a picture of the GBPUSD with what I hope are slightly better explanations of your entry rules.

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(A) After this bar closed you would have placed two pending orders, a SELL order at ~1.64650 and a BUY order at ~1.65050. Once one of them fills you cancel the one that didn't fill and place a SL on the one that did fill, and use a trailing stop of your choice to capture profits. (A) Eventually turned into a winner as your sell order was taken and didn't retrace up to hit your stop.

(B) Worked exactly the same, except it didn't have to be a looser, I'm guessing your trailing stop is/was large enough that it didn't catch enough pips to make it a positive trade before it retraced up and hit your SL. A trailing stop of 15 pips would have netted you some profit, rather then a loss.

(C) Is a tricky proposition, as it comes down to how do you determine which candle to use. If you use the first candle to touch/cross the blue line, then it would have been a loosing trade as your BUY order was taken and the SL hit (note that again profit with a 15 pip trailing stop). If you used the second candle it would have been a decent winner as the SELL would have been taken.

(D) Depending on how far away from the top of candle (D) you placed your stoploss you either have a winner or looser. Using a SL of +- Spread and +-3 pips as you suggest in the rules (5 pips for me) then trade D would barely hang on and turn into a winner .

(E) Is an obvious buy order placement with a big win.

(F) Again an excellent example of a good place to put your orders.

Ultimately this is a good system with consistent winners. But remember as always KISS .

So to recap your rules:

1. Wait for a candle to close on the Blue Line
2. Place a pending Sell at the LOW of that candle with a SL equal to the HIGH of that candle +Spread +3 Pips. Place a pending Buy at the HIGH of that candle with a SL equal to the LOW of that candle -Spread -3 Pips.
3. Wait for one of the trades to trigger, then cancel the other trade.
4. TP by using a trailing stop, pick whatever your comfortable with. (I prefer 15 myself).

Zurathustra Jun 6, 2011 1:59pm | Post# 18

Current example trading this method.
 
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Here is what a pending setup using this system looks like:
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As you can see when the previous bar touched the Blue line, I placed a Buy Stop the the previous HIGH with a SL of the Previous LOW -5 Pips (Spread + 3 Pips). I also placed a Sell Stop at the Previous LOW with a SL of the Previous HIGH +5 Pips (Spread + 3 Pips). I'm using a 15 Pip trailing stop for these trades, so we'll see where they go.

4Xfactor Jun 6, 2011 2:22pm | Post# 19

I’ve recently added this system to my arsenal of trading techniques. The method is extremely simple yet highly effective.

>courtesy snip>
What to look for: Trade pairs that are in obvious trends, I prefer pairs with smaller spreads.


4. BIGGEST RULE OF ALL: LET PRICE COME TO YOU!
Hello,

Could you please clarify how you define or identify the trend?

I was under the impression, from the statement above, that you would trade in one direction only i.e. as defined by the trend, but your example charts show you trading both long and short over a relatively short time frame.

(On reflection: a cross of the balance line defines the trend?)

With thanks,

Zurathustra Jun 6, 2011 2:54pm | Post# 20

I didn't see anything in his system rules that would imply a trend having anything to do with the trade setups. Which is why I left them out of the recap / simplification I posted earlier.

Defining a "trend" has and will always be a pain in the ass, and frankly I find the concept of a trend useless for predicting the future. Yeah, its easy to look back at the past and say "man, that market sure was trending there". But you will be hard pressed to find anybody who can look at a chart, no matter what indicators they use, and tell you with 100% certainty each and every time that the trend is going X direction. Because if they could, then someone would have figured out a way to do it already, and we would have our "holy grail" and all be billionairs.

On a side note, the trade setup I posted above entered and closed with a measly 2 pips profit on the sell because of the 15 Pip trailing stop. lol :0.

However its a reasonably good assumption that more profit could have been made had I not used the 15 pip trail.


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