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-   -   A Proven Simple Strategy (2MAs, 1 RSI) (https://www.forexfactory.com/showthread.php?t=574065)

Sis.yphus Jan 13, 2016 3:08pm | Post# 1

A Proven Simple Strategy (2MAs, 1 RSI)
 
8 Attachment(s)
Hello everyone, Its been a while since I have posted but I wanted to share a super simple system that has been proven profitable. I hope this will help some of you here on FF. I did not create this strategy and it is nothing new. Its often overlooked because it's so simple but often times the simplest strategies can be the best. I have modified the original trading rules a little bit to rules that fit my trading style a little better.

DISCLAIMER: THIS IS NO GRAIL. I AM NOT CLAIMING THIS TO BE A HOLY GRAIL. THIS IS JUST A SYSTEM THAT WORKS, THAT IS ALL.

Things To Keep in Mind:
1. This is intended to be traded on Daily Charts. I will also post the results for other timeframes towards the bottom of the post(coming soon).
2. There is no Hard SL or TP to this system. I have not found any configurations using ATR or similar tools to place an SL & TP that improved the system. As a result I do not use one with this system and just following the signals.
3. This system is not perfect. As with all systems, it performs better on certain pairs during certain conditions. What really allows you to take advantage of the system and avoid this variance is diversifying the instruments you trade it on!!!
4. Test results used a fixed lot size that does not increase.
5. Tests were performed on 7 major USD pairs(EU, GU, AU, NU, UJ, UCHF, UCAD).

Thread Rules:
1. Do not add additional indicators. You may adjust current indicator settings and share your results if you'd like.
2. If you are going to suggest changes to the system, please provide hard evidence to support why these changes are profitable or better.
3. Keep it friendly. Please no spam.
4. Again no one likes conjecture. Do not make statements or claims about this system or any other system in here if you do not provide proof for the claims you are making.
5. Have fun & keep learning!


Entry Rules:
Long:
1. Price is above 200 MA.
2. Price is below 5 MA.
3. RSI(2) is below 5.

Short:
1. Price is below 200 MA.
2. Price is above 5 MA.
3. RSI(2) is above 95.

Exit Rules:
Option 1(This option is for people who just want to check the chart at the end of the day, This is the Option used in results below):
Exit at the close of the candle that touches the 5 ma.

Option 2(This is a better option for people who want to watch their trades like a hawk):
Exit as soon as price touches 5 ma.

So as they say, the proof is in the pudding. Well, here is my pudding, along with some other peoples pudding.

The Pudding:

In House Pudding:
The first batch of pudding I will show you is my batch. Although there are other studies done about this system which I will share below, it is always smart to test the system for yourself before you even think about using it.

EURUSD Daily Jan 2010 - Dec 2015 - Fixed .10 Lots - Spread = Current(Tests ran during NY Session)

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Name: EURUSD.jpg
Size: 254 KB

Summary:
P/L: 290.00
Profit Factor: 1.10
Expected Payoff: 3.92
Max DD: 8.35%



GBPUSD Daily Jan 2010 - Dec 2015 - Fixed .10 Lots - Spread = Current(Tests ran during NY Session)

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Name: GBPUSD.jpg
Size: 267 KB

Summary:
P/L: 923.80
Profit Factor: 1.31
Expected Payoff: 9.15
Max DD: 6.71%


AUDUSD Daily Jan 2010 - Dec 2015 - Fixed .10 Lots - Spread = Current(Tests ran during NY Session)


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Name: AUDUSD.jpg
Size: 253 KB


Summary:
P/L: 459.10
Profit Factor: 1.20
Expected Payoff: 5.28
Max DD: 8.62%


NZDUSD Daily Jan 2010 - Dec 2015 - Fixed .10 Lots - Spread = Current(Tests ran during NY Session)


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Name: NZDUSD.jpg
Size: 273 KB


Summary:
P/L: (132.70)
Profit Factor: 0.95
Expected Payoff: (1.37)
Max DD: 4.23%

USDJPY Daily Jan 2010 - Dec 2015 - Fixed .10 Lots - Spread = Current(Tests ran during NY Session)


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Name: USDJPY.jpg
Size: 251 KB



Summary:
P/L: 2200.83
Profit Factor: 2.57
Expected Payoff: 21.57
Max DD: 2.63%

USDCHF Daily Jan 2010 - Dec 2015 - Fixed .10 Lots - Spread = Current(Tests ran during NY Session)


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Name: USDCHF.jpg
Size: 260 KB


Summary:
P/L: 61.42
Profit Factor: 1.02
Expected Payoff: 0.65
Max DD: 6.86%


USDCAD Daily Jan 2010 - Dec 2015 - Fixed .10 Lots - Spread = Current(Tests ran during NY Session)


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Name: USDCAD.jpg
Size: 270 KB



Summary:
P/L: 80.29
Profit Factor: 1.04
Expected Payoff: 0.80
Max DD: 5.90%


OVERALL RESULTS
P/L: 3882.74(38.82%)
Avg Profit Factor: 1.31
Avg Expected Payoff: 5.71
Avg MAX DD: 6.19%

Summary:
Overall this system performed quite well over the last 5 years. As I mentioned above it is key to diversify when using this strategy or others like it because some pairs will perform others as market conditions change. Diversifying will combat this variance as shown in the results above.


Out Sourced Pudding:

RSI-2 Strategy Results.pdf

Summary:
As you can also see from these results, diversifying really helps this system by reducing the natural variance that will occur between individual pair performance.

antonsatu Jan 17, 2016 4:11am | Post# 2

Trade daily TF no need to use any indicator, just the candlestick enough, simple and powerful. just suggestion.

vasily Jan 17, 2016 6:02am | Post# 3

OVERALL RESULTS
P/L: 3882.74(38.82%)
Avg Profit Factor: 1.31
Avg Expected Payoff: 5.71
Avg MAX DD: 6.19%

Duration : 6 years
39% / 6 = 6.50% annual
deposit your money to a bank, safer

abokwaik Jan 17, 2016 6:39am | Post# 4

Hello everyone, Its been a while since I have posted but I wanted to share a super simple system that has been proven profitable. I hope this will help some of you here on FF. I did not create this strategy and it is nothing new. Its often overlooked because it's so simple but often times the simplest strategies can be the best. I have modified the original trading rules a little bit to rules that fit my trading style a little better.
Hi Sis.yphus,

Thank you for sharing this system.

This is my understanding of the system as introduced:

  1. Type : Trend following system, where trend is defined by MA(200)
  2. Entry : Entry on retraces captured by MA(5) and RSI(2).
  3. Exit : On touch of MA(5).

The concept is good.
Entry is fine, although one condition -either MA(5) or RSI(2)- could be enough.

However for the Exit, I think we can manage better exits. And this is what I will try to prove in the coming days.

I am not sure if you generated these tests manually or using an EA,
Anyway, I will make an EA (if you don't mind), with the same concept and different exit options and see if we can get better results.

Best,

Khalil


Wholesome Jan 17, 2016 7:26am | Post# 5

'OVERALL RESULTS
P/L: 3882.74(38.82%)'


Initial Bank 70,000 (7 X 10,000)

Profit 3882.74 (5.54%)

Over 6 years = 0.92%/annum

I'd find another hobby if I were you.

porfirio Jan 17, 2016 7:28am | Post# 6

1 Attachment(s)
It's a good strategy, but ...

....and the SL ??????????????????????
Click to Enlarge

Name: d1 exit-no sl.png
Size: 192 KB

abokwaik Jan 17, 2016 8:32am | Post# 7

1 Attachment(s)
This is a quick EA to test the system.
I've added few options, but the default settings are as per Sis.yphus rules.
TwoMA_OneRSI.ex4

Xman43 Jan 17, 2016 10:10am | Post# 8

Dear all,
simple systems can be the most profitable.
Abo, thanks for the EA. Would be interesting to see the results.
Perhaps test the EA with a fixed SL/TP (TP being > than SL)?
cheers

Shemski Jan 17, 2016 11:13am | Post# 9

1 Attachment(s)
How about an SL set at 10 pips above highest price of closed candle (candle which broke the 5EMA). TP could be set at the end of next candle. Sure your risk/ratio will not always be 2:1 but it's simple to define and a quick exit.


For those looking to ride the trend, maybe using a SL set at half of the last closed candles range and just simply move it at the close when you are setting up your next entries.

See attachment

Thoughts?
Click to Enlarge

Name: 1Day SL.PNG
Size: 39 KB

Sis.yphus Jan 17, 2016 11:42am | Post# 10

Trade daily TF no need to use any indicator, just the candlestick enough, simple and powerful. just suggestion.
Please show us a super rigid/mechanical systems like this that does not use any indicators along with proof that system works. Most price action traders are king snake oil sales men. And its always so convenient how their systems can't be proven but they can work...

OVERALL RESULTS P/L: 3882.74(38.82%) Avg Profit Factor: 1.31 Avg Expected Payoff: 5.71 Avg MAX DD: 6.19% Duration : 6 years 39% / 6 = 6.50% annual deposit your money to a bank, safer
Again this is FIXED lot trading with a TINY account of 10,000. If you traded this system using a very large account(which most professional traders have money) you would have made a mint compounding your results.

Also please show me a bank(U.S.) with 6% interests rate and I will quit investing all together, stick my savings in their and never work again....

'OVERALL RESULTS P/L: 3882.74(38.82%)' Initial Bank 70,000 (7 X 10,000) Profit 3882.74 (5.54%) Over 6 years = 0.92%/annum I'd find another hobby if I were you.

With the lot sized used in the test you can trade all 7 pairs at the same time and not run into margin issues. In other words the same 10,000K can easily trade all 7 pairs at .1 lot size.

It's a good strategy, but ... ....and the SL ?????????????????????? {image}
... Please read the thread. It is the second thing to keep in mind on the OP....

2. There is no Hard SL or TP to this system. I have not found any configurations using ATR or similar tools to place an SL & TP that improved the system. As a result I do not use one with this system and just following the signals.

Also if that blue line is the 200 MA the trade you marked is invalid as price needs to close ABOVE the 200 and BELOW the 5. In the pic it is closing below both MAs.

Shemski Jan 17, 2016 11:54am | Post# 11

{quote} Please show us a super rigid/mechanical systems like this that does not use any indicators along with proof that system works. Most price action traders are king snake oil sales men. And its always so convenient how their systems can't be proven but they can work... {quote} Again this is FIXED lot trading with a TINY account of 10,000. If you traded this system using a very large account(which most professional traders) you would have made a mint compounding your results. Also please show me a bank with 6% interests rate and I will quit...
I really like where you are going with this and think this could have some legs. Rather than getting in to a flame war with some of the guys/gals on here, just use their critisizm and develop/evolv your system... I've learned a lot of things about myself and have become a better person over the years from harsh critisizm.

Again, I like where you are going! Any other thoughts rgding SL's and TP's??

Sis.yphus Jan 17, 2016 11:55am | Post# 12

{quote} Hi Sis.yphus, Thank you for sharing this system. This is my understanding of the system as introduced: Type : Trend following system, where trend is defined by MA(200) Entry : Entry on retraces captured by MA(5) and RSI(2). Exit : On touch of MA(5). The concept is good. Entry is fine, although one condition -either MA(5) or RSI(2)- could be enough. However for the Exit, I think we can manage better exits. And this is what I will try to prove in the coming days. I am not sure if you generated these tests manually or using an EA, Anyway, I...
Hello Khalil!

I personally have not found an SL that provides better results than not using one. And even with not using an SL the drawdown is still extremely low pair to pair. I do think a good one could be implemented as maybe a hard stop but then again the 5 MA catches up to the price very quickly.

I am very interested in seeing what you find when using the SL. I am going to play around with the EA you posted and will share the results I find.

{quote} I really like where you are going with this and think this could have some legs. Rather than getting in to a flame war with some of the guys/gals on here, just use their critisizm and develop/evolv your system... I've learned a lot of things about myself and have become a better person over the years from harsh critisizm. Again, I like where you are going! Any other thoughts rgding SL's and TP's??
Hello Shemski,

As I mentioned to Khalil, I have not found any useful SL that works and I think it is crucial that the TP the is exiting on the touch of the 5 min MA. Here are some statistics on SL(based on pip size and market spread & TP, so they do not directly apply to this strategy but they illustrate a point) that show the statistical disadvantages you face if you make them too small. This was posted on one of my old threads and it assumes the spread is .4(which most peoples is much higher so these numbers are much worse)

Assuming Spread is .2
(5 Pip Target for 1:1)
1:.25 = 11 Pips For 5 Pips = 4 Pip Pay Out or 12 Pip Loss After Commissions/Spread. True R:R 1:.45 - 6% Win Rate Needed To Make Up.
1:.5 = 7 Pips For 5 Pips = 4 Pip Pay Out or 8 Pip Loss After Commission/Spread. - True R:R 1:.71 - 8% Win Rate Needed To Make Up.
1:1 = 3 Pips For 5 Pips = 4 Pip Pay Out or 4 Pip Loss After Commission/Spread. - True R:R 1:1.66 - 13% Win Rate Needed To Make Up.
1:2 = 3 Pips For 9 Pips = 8 Pip Pay Out or 4 Pip Loss After Commission/Spread. - True R:R 1:3 - 8% Win Rate Needed To Make Up.
1:3 = 3 Pips For 13 Pips = 12 Pip Pay Out or 4 Pip Loss After Commissions/Spread. - True R:R 1:4.25 - 6% Win Rate Needed To Make Up.
1:4 = 3 Pips For 17 Pips = 16 Pip Pay Out or 4 Pip Loss After Commissions/Spread. - True R:R 1:5.66 - 6% Win Rate Needed To Make Up.
1:5 = 3 Pips For 21 Pips = 20 Pip Pay Out or 4 Pip Loss After Commissions/Spread. - True R:R 1:7 - 5% Win Rate Needed To Make Up.

(10 Pip Target for 1:1)
1:1 = 8 Pips For 10 Pips = 9 Pip Pay Out or 9 Pip Loss After Commissions/Spread. - True R:R 1:1.25 - 6% Win Rate Needed To Make Up.
1:2 = 8 Pips For 19 Pips = 18 Pip Pay Out or 9 Pip Loss After Commissions/Spread. - True R:R 1:2.37 - 4% Win Rate Needed To Make Up.
1:3 = 8 Pips For 28 Pips = 27 Pip Pay Out or 9 Pip Loss After Commissions/Spread. - True R:R 1:3.5 - 4% Win Rate Needed To Make Up.
1:4 = 8 Pips for 37 Pips = 36 Pip Pay Out or 9 Pip Loss After Commissions/Spread. - True R:R 1:4.63 - 3% Win Rate Needed To Make Up.
1:5 = 8 Pips for 46 Pips = 45 Pip Pay Out or 9 Pip Loss After Commissions/Spread. - True R:R 1:5.8 - 3% Win Rate Needed To Make Up

(20 Pip Target for 1:1)
1:1 = 18 Pips For 20 Pips = 19 Pip Pay Out or 19 Pip Loss After Commissions/Spread. - True R:R 1:1.11 - 3% Win Rate Needed To Make Up.
1:2 = 18 Pips For 39 Pips = 38 Pip Pay Out or 19 Pip Loss After Commissions/Spread. - True R:R 1:2.17 - 2% Win Rate Needed To Make Up.
1:3 = 18 Pips For 58 Pips = 57 Pip Pay Out or 19 Pip Loss After Commissions/Spread. - True R:R 1:3.22 - 2% Win Rate Needed To Make Up.
1:4 = 18 Pips For 77 Pips = 76 Pip Pay Out or 19 Pip Loss After Commissions/Spread. - True R:R 1:4.28 - 2% Win Rate Needed To Make Up.
1:5 = 18 Pips For 96 Pips = 95 Pip Pay Out or 19 Pip Loss After Commissions/Spread. - True R:R 1:5.33 - 2% Win Rate Needed To Make Up.

Assuming Spread is .4
(5 Pip Target for 1:1)
1:1 = 2.6 Pips For 5 Pips = 3.8 Pips Pay Out or 3.8 Pips Loss After Commission/Spread. - True R:R 1:1.92 - 17% Win Rate Needed To Make Up.
1:2 = 2.6 Pips For 8.8 Pips = 7.6 Pips Pay Out or 3.8 Pips Loss After Commission/Spread. - True R:R 1:3.38 - 11% Win Rate Needed To Make Up
1:3 = 2.6 Pips For 12.6 Pips = 11.4 Pips Pay Out or 3.8 Pip Loss After Commissions/Spread. - True R:R 1:4.85 - 10% Win Rate Needed To Make Up.
1:4 = 2.6 Pips For 16.4 Pips = 15.2 Pips Pay Out or 3.8 Pip Loss After Commissions/Spread. - True R:R 1:6.3 - 8% Win Rate Needed To Make Up.
1:5 = 2.6 Pips For 20.2 Pips = 19 Pips Pay Out or 3.8 Pip Loss After Commissions/Spread. - True R:R 1:7.77 - 6% Win Rate Needed To Make Up.

(10 Pip Target for 1:1)
1:1 = 7.6 Pips For 10 Pips = 8.8 Pip Pay Out or 8.8 Pip Loss After Commissions/Spread. - True R:R 1:1.32 - 8% Win Rate Needed To Make Up.
1:2 = 7.6 Pips For 18.8 Pips = 17.6 Pip Pay Out or 8.8 Pip Loss After Commissions/Spread. - True R:R 1:2.56 - 6% Win Rate Needed To Make Up.
1:3 = 7.6 Pips For 27.6 Pips = 26.4 Pip Pay Out or 8.8 Pip Loss After Commissions/Spread. - True R:R 1:3.63 - 5% Win Rate Needed To Make Up.
1:4 = 7.6 Pips For 36.4 Pips = 35.2 Pip Pay Out or 8.8 Pip Loss After Commissions/Spread. - True R:R 1:4.79 - 4% Win Rate Needed To Make Up.
1:5 = 7.6 Pips For 45.2 Pips = 44 Pip Pay Out or 8.8 Pip Loss After Commissions/Spread. - True R:R 1:5.95 - 4% Win Rate Needed To Make Up.

As you can see by doubling the spread, the win rate needed to make up almost triples. So if you traded with a spread of 2 and a 10 pip stop on a daily chart, you are basically putting yourself at a minimum 20%+ disadvantage(in other words your winrate needs to be extremely high to trade a 10 pip stop system, especially on a daily chart). Again, these numbers are based on pip size and market spread & TP, so they do not directly apply to this strategy but they illustrate the point I am trying to make anyways hope it makes sense.

Sis.yphus Jan 17, 2016 12:22pm | Post# 13

1 Attachment(s)
FOR ALL THE LEVERAGE JUNKIES

I have noticed a lot of people complaining about the returns demonstrated using extremely low leverage and risk... Well since most people on FF are looking to get rich quick or go busto trying, here are the results using super high leverage(I DO NOT RECOMMEND YOU TRADE LIKE THIS) and compounding the lot size based on the account size.

USDJPY - 6 Years(2010-2015) - Spread = 2 Pips - Super Leveraged Trading with compounding lot size.
Click to Enlarge

Name: Screen Shot 2016-01-17 at 10.20.35 AM.png
Size: 31 KB

Shemski Jan 17, 2016 12:29pm | Post# 14

{quote} Hello Shemski, As I mentioned to Khalil, I have not found any useful SL that works and I think it is crucial that the TP the is exiting on the touch of the 5 min MA. Here are some statistics on SL(based on pip size and market spread & TP, so they do not directly apply to this strategy but they illustrate a point) that show the statistical disadvantages you face if you make them too small. This was posted on one of my old threads and it assumes the spread is .4(which most peoples is much higher so these numbers are much worse) Assuming Spread...
I agree, your win rate has to be very good but assuming you risk 1% of your portfolio per trade and using my above example, your SL would be around 25-28 pips. Your profit on that trade alone would've been around 145-150 pips. that is a 5-5.5% gain and at the end of the day your risk was only 1%/portfolio.

I'll see if I can mess around with the EA and see what I can come up with...

Shemski Jan 17, 2016 12:31pm | Post# 15

FOR ALL THE LEVERAGE JUNKIES I have noticed a lot of people complaining about the returns demonstrated using extremely low leverage and risk... Well since most people on FF are looking to get rich quick or go busto trying, here are the results using super high leverage(I DO NOT RECOMMEND YOU TRADE LIKE THIS) and compounding the lot size based on the account size. USDJPY - 6 Years(2010-2015) - Spread = 2 Pips - Super Leveraged Trading with compounding lot size. {image}
What was your position size here, 2-3% of protfolio?

Shemski Jan 17, 2016 12:35pm | Post# 16

I am getting a sell sign on both EUR/USD and Gold. I like both of those signals and by using my suggested SL's, I would set them here:

EURUSD: 1.09945
Gold: 1098.26

I'll wait for spreads to thin out and take the trade a few hours after the open.

Sis.yphus Jan 17, 2016 12:38pm | Post# 17

I am getting a sell sign on both EUR/USD and Gold. I like both of those signals and by using my suggested SL's, I would set them here: EURUSD: 1.09945 Gold: 1098.26 I'll wait for spreads to thin out and take the trade a few hours after the open.
Good idea to wait for the spread to calm down. If you trade when the spreads are bad it will drastically change your results.

I would recommend testing the strategy using your SL and TP idea and then reporting back the results. I may check it out and test it my self a little later today if I have time.

Shemski Jan 17, 2016 12:50pm | Post# 18

1 Attachment(s)
{quote} Good idea to wait for the spread to calm down. If you trade when the spreads are bad it will drastically change your results. I would recommend testing the strategy using your SL and TP idea and then reporting back the results. I may check it out and test it my self a little later today if I have time.
Will do! But again, shorting EURUSD and Gold is still a great gamble.

Sidenote, you are def on to something, see attachment...
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Name: LOL.PNG
Size: 7 KB

Sis.yphus Jan 17, 2016 12:56pm | Post# 19

{quote} Will do! But again, shorting EURUSD and Gold is still a great gamble. Sidenote, you are def on to something, see attachment... {image}
Yeah a big thing to keep in mind though, is when trading a strictly technical system, you need to take every trade generated as they come to get the true results of the system. Cherry picking the trades as you go will lead to quite a bit of variance in your performance, which can be good or bad.

Sidenote: Haha thanks. The funny thing is though this thread will likely not get popular at all because it actually works but does not work good enough for most traders. Which then leads to the typical system hoping trader as they always are searching for something "better". These markets are already extremely brutal so sometimes it pays to just be good enough...

Shemski Jan 17, 2016 1:03pm | Post# 20

At the end of the day, if you expect, aim for or truely believe that you can make anything more than 10% a month you will not survive long. I'll take 6% YTD with low risk any day!

I'll try to keep this thread alive and if it does die out just PM me, maybe we can work things out by ourselves.

Let those dreamers dream and watch them feed the market.


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