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  • Post #1
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  • First Post: May 1, 2010 9:44am May 1, 2010 9:44am
Greetings Fellow Traders,

For quite a while I have been trying to develop a system that will tell you when it is okay to make a reversal trade on the outer BB.

Finally, I came up with something pretty good.

The reason that I am posting my system is because I would like traders to help me find another indicator or price action that can corroborate my signals.

So far, just using the indicator that I have, the system works pretty well on the 1hr./4hr/Day Charts. Don't even bother with smaller time frames because there isn't enough in the trade and I love playing for BIG profits.

I went back 7 years on eur/usd, on the Daily Chart and this system produced only a handful of losses!

I am convinced that if someone can help me come up with another corroborating indicator or price action that works, this system can produce nice profits- YEAR IN YEAR OUT.

If anyone has an interest in helping me develop a corroborating indicator, I would be happy to share my system.

Any and all ideas are welcome.

-Happy Trading-
I'd be more inclined to share, if you posted your system. I do use BB as well, and if you post your system here, I'll add some of my insights as well. I doubt you have a BB system thats so good it needs to be kept top secret
Here's hoping you'll post it, and good luck!
Quoting dbeach777
I'd be more inclined to share, if you posted your system. I do use BB as well, and if you post your system here, I'll add some of my insights as well. I doubt you have a BB system thats so good it needs to be kept top secret
Here's hoping you'll post it, and good luck!
Hey dbeach,

I will PM you with my system because I really only want to share it with people who are interested in improving it by helping me develop a corroborating indicator. Hopefully, together we can improve it to the point where it spits out consistent money.
Quoting finally
Hey dbeach,

I will PM you with my system because I really only want to share it with people who are interested in improving it by helping me develop a corroborating indicator. Hopefully, together we can improve it to the point where it spits out consistent money.
If you're not going to put your system out, you're in the wrong forum.
You need to have this moved to Trading Discussion.
I never understood why people do this. Just explain the system outright, especially if you're in the starting stages. Geoff at the Simple 1H GU thread is a perfect example. He put up a system and scores of users have descended upon it and are trying to find ways to make it better.

SteveHopwood is doing something similar with his swing trading thread.

What makes this any different?
Quoting Ronald Raygun
I never understood why people do this. Just explain the system outright, especially if you're in the starting stages. Geoff at the Simple 1H GU thread is a perfect example. He put up a system and scores of users have descended upon it and are trying to find ways to make it better.

SteveHopwood is doing something similar with his swing trading thread.

What makes this any different?

Well there seems to be enough interest from people who are interested in making a good idea a winner, so on the next post I will explain the method that I have observed.
  • Post #7
  • Quote
  • Edited 11:52am May 1, 2010 11:39am | Edited 11:52am
Quoting finally
Well there seems to be enough interest from people who are interested in making a good idea a winner, so on the next post I will explain the method that I have observed.
This method is by no means a "Holy Grail" however; as I said on the opening post, I went back 7 years on eur/usd (Daily) and I observed only a handful of losers. Check out this chart.

I am convinced if we can create an effective corroborating indicator/price action pattern, this method can make consistent money.

Method:

1) BB 20/2

2) MACD 21/34/13

3) Pairs: I like eur/usd, eur/jpy,gbp/usd,gbp/jpy, aud/jpy because of their higher volatility.


Set-Up:

LONGS: If price touches bottom BB and MACD Histogram is above Zero, go long.

Opposite for shorts.

Profit Targets: Liquidate half the position at BB average and half the position at opposite Band.
If price reaches BB average, set stop to Break-even.

Stops: 5 pips above/below recent swing high/low or a fixed 20-25 pips- maybe more for Daily chart.


This appears to be a very simple and potentially very effective method and can probably produce profits as it is.

However, if we can find a corroborating indicator/price action pattern to filter out false signals, this method can be great.

Let's get the creative juices flowing and find that corroborating indicator/price action pattern.
Quite simply, I use Rsi period6 to determine Divergence. I prefer to take reversal trades with Divergence, but as important if not more, I look for chart patterns. The most powerful I feel is double tops and bottoms where price tried to make new highs/lows, (stop hunting) but was rejected. Those reversals are the most powerful. Reversal clusters will stand out too... Human nature wants to jump in at the first sign of a reversal but patience will reveal more, most of the time. I also use 3 moving averages, 10,20,60, and trade (with trend) a bounce off those moving averages, specifically powerful, Imo is ema60... trade away from it... of course some of this is still discretionary, and if a MA is flat lining price doesn't respect it as much. Taking profits, I believe its important to take at least half profits on a retrace to the middle BB, and re-evaluate your SL. Often this decision comes when price pauses at the middle band or plows through with momentum, and closes on opposite side. I also look for trendline breaks, then price retraces to trendline… those are often good trend reversal signals. Other more radical reversal entries include (on close) entries where a long candle closes far outside BB, but not when just previously BB was restricted, or when that candle also touches ema60. Use proper risk management.
Beware about trading a reversal when price is riding the outer band… wait for trendline break. Also beware trading reversals after a restricted BB. Things to note, often there are at least 2 legs down or up before a reversal. The 2nd leg may have a better chance of reversing.

Cheers!
Attached Image (click to enlarge)
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Did you even look at the system that was posted?

Quoting dbeach777
Quite simply, I use Rsi period6 to determine Divergence. I prefer to take reversal trades with Divergence, but as important if not more, I look for chart patterns. The most powerful I feel is double tops and bottoms where price tried to make new highs/lows, (stop hunting) but was rejected. Those reversals are the most powerful. Reversal clusters will stand out too... Human nature wants to jump in at the first sign of a reversal but patience will reveal more, most of the time. I also use 3 moving averages, 10,20,60, and trade (with trend) a bounce...
I've never seen a BB system that I would like to trade, until now. This is an excellent system, as is. I would not go adding indicators/price patterns to a system that is already clearly profitable. Nicely done!
Quoting Dreamliner
Did you even look at the system that was posted?
Dreamliner.....Touche....my sentiments EXACTLY...when I read that previous post all I could say was....WTF!!
Very useful system,

You can use it in combination with Stochastics settings 5/3/3.

when MACD is down only short trades and vice verca.
for end of day traders
when macd is down stoch is above 80 enter after close . stop at 1 atr or high of the bar. take profit at the first bar which is a winner
Attached Image
Hi Finally,

I have never really found a way to trade BB to my liking. But I do like what you have here it shows some promise.

In this chart I gather these would be losing trades I have highlighted with yellow arrows.?

Winning trades with the blue arrows?

Bluesteele

http://i496.photobucket.com/albums/r...nallybbsys.gif
The Best Loser Wins
I don't think you understand the system. Go long when price touches bottom of BB with MACD ABOVE zero, and vice versa.

Quoting bluesteele
Hi Finally,

I have never really found a way to trade BB to my liking. But I do like what you have here it shows some promise.

In this chart I gather these would be losing trades I have highlighted with yellow arrows.?

Winning trades with the blue arrows?

Bluesteele

http://i496.photobucket.com/albums/r...nallybbsys.gif
Quoting Dreamliner
I don't think you understand the system. Go long when price touches bottom of BB with MACD ABOVE zero, and vice versa.

TSK TSK My Bad..

My eyeballs missed the Histogram part

Thanks Dreamliner

Bluesteele
The Best Loser Wins
lol...it's happened to me a number of times

Quoting bluesteele
TSK TSK My Bad..

My eyeballs missed the Histogram part

Thanks Dreamliner

Bluesteele
Quoting Dreamliner
I've never seen a BB system that I would like to trade, until now. This is an excellent system, as is. I would not go adding indicators/price patterns to a system that is already clearly profitable. Nicely done!
Thanks Dreamliner.
I guess that I am sort of a perfectionist and am trying to develop the "Holy Grail".
It appears that this system can be profitable as is; however, I think it would be even better if there was a way to filter out the false signals (which appear to be fewer than more).

The r/r is favorable. I wonder if you have any suggestions for ideal stop placement or how to filter the false signals?

I am going to trade it live tomorrow night; I'll keep you posted.
Quoting finally
Stops: 5 pips above/below recent swing high/low or a fixed 20-25 pips- maybe more for Daily chart.

Sounds like it might be promising, nice work!

I'm not bashing but just trying to lend some thoughts on Stop-loss...

Can we give more definition to "recent" swing high/low?

20-25 pips, at least on EUR/USD, on a daily bar, MUST be way too tight of a stop. On inspection it might look good, but... on a big down day that creates that bar..... 25 pips is potentially only a few minutes. Just thinking of "bottompicking" and getting stopped out and overall drawdown.

Nice contribution, it should get some good attention and hopefully some good indicator recommendations.
Quoting Intu
Sounds like it might be promising, nice work!

I'm not bashing but just trying to lend some thoughts on Stop-loss...

Can we give more definition to "recent" swing high/low?...
Big potential for trading the Daily on eur/usd.
I don't know ideal stop placement here.
If there was a swing high/low before the set-up, you can use that as a stop-if there was not I think that you just have to use a fixed stop.
25 pips is probably a little too tight- 50 pips might be just about right.
Quoting dutchsignals
Very useful system,

You can use it in combination with Stochastics settings 5/3/3.

when MACD is down only short trades and vice verca.
for end of day traders
when macd is down stoch is above 80 enter after close . stop at 1 atr or high of the bar. take profit at the first bar which is a winner
I don't know how the stochs will help filter out the false signals with this system.

Actually, after looking at the charts, it appears that when you get a long set-up with this system and the stochs do not reach 20, you get a very good signal. Same for shorts. You can probably double your trade when this happens and I think that it is a good idea to keep the 5/3/3 stochs on the chart to look for this set-up.

I am still looking for ideas on how to filter out the false signals- any ideas anyone?
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