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Looking on a naked chart, can you pick the best strategy?

  • #1
  • First Post: Edited Oct 17, 2017 6:38am Oct 1, 2017 7:45am | Edited Oct 17, 2017 6:38am
I would like to share with You some interesting idea I once developed myself and still using very often.

Try to take a look on a chart without any additional indicator - just pure candlesticks.
Probably it is hard even for experienced traders to tell what actually will happen in the future when seeing only the bars.

But let's take this more simple!. Looking on a chart. Are You able to guess which strategy worked best during the period You are looking at?
Starting from point A and finishing at B.

What was the best strategy to trade?

First take a look on a chart like this one
Attached Image (click to enlarge)
Click to Enlarge Name: eurusdih1.png Size: 54 KB

it is about 640 bars on EURUSD H1 chart.

To not to think too much let's try to pick 1 of 3 predefined simple strategies without any MM:

1. Bollinger band [15,1] - trades are taken around the BB (short when above, long when below)
2. Moving average [25, close] - long trades are taken when close above MA, short are taken when close below MA
3. RSI [15] - trades are taken around RSI 45 and 55. When last RSI closed below 45 go long, when last closed above 55 go short

Only those 3 for a beginning.
I'll show You how to simply have a nice insight into this without programming each EA and backtesting it in strategy tester.
The tool I would like to share with You has even greater power in some aspects, as it gives to a trader kind of a function F(x) in which F() is a general accumulative profitability of a strategy and x variable is the candle bars.

In my next post I'll show You what exactly is this tool.

Hope You will find it interesting as much as I did.
I'll appreciate Your opinions.

Regards!
Marek
Attached File(s)
File Type: ex4 srednia_zarabiajaca.ex4   7 KB | 547 downloads | Uploaded Oct 9, 2017 11:37am
File Type: ex4 Price_close_over_2MAS_trend.ex4   7 KB | 554 downloads | Uploaded Oct 12, 2017 9:15am
File Type: ex4 Marecki_Bollinger_basic_Trend.ex4   7 KB | 525 downloads | Uploaded Oct 13, 2017 2:06pm
File Type: ex4 Marecki_MACD_basic_trend.ex4   8 KB | 579 downloads | Uploaded Oct 13, 2017 2:06pm
File Type: ex4 Marecki_MACD_Rise_Fall_trend.ex4   7 KB | 539 downloads | Uploaded Oct 14, 2017 11:38am
File Type: ex4 Marecki_RSI_min_MAX_trend.ex4   8 KB | 535 downloads | Uploaded Oct 14, 2017 2:04pm
File Type: ex4 Marecki_Momentum_trend.ex4   7 KB | 568 downloads | Uploaded Oct 16, 2017 10:26am
File Type: ex4 Marecki_MAs_cross_trend.ex4   7 KB | 547 downloads | Uploaded Oct 16, 2017 10:30am
File Type: ex4 Marecki_Last_candle_direction_trend.ex4   8 KB | 534 downloads | Uploaded Oct 16, 2017 1:19pm
  • #2
  • Oct 1, 2017 10:21am Oct 1, 2017 10:21am
Hi there,

Let me show You first result, starting from point no.1

Bollinger band:
Attached Image (click to enlarge)
Click to Enlarge Name: eurusdih1_bb.png Size: 51 KB


bollinger made a positive result: 133 pips, however this number of pips after 640 bars does not make a big impression!
Also bollinger strategy changes direction of trades few times so it costs another pips.

Within those 640 bars there is 204 bars during which trader who would know when it is best to start and finish could make max 705 pips which is much better.
  • #3
  • Oct 1, 2017 12:20pm Oct 1, 2017 12:20pm
Second result:

Moving average:

Attached Image (click to enlarge)
Click to Enlarge Name: eurusdih1_2.png Size: 51 KB


Moving average has gained very similar result +137 pips, which is also not much after 640 bars, and few changes of direction.

Best result within total time period (640 bars) was 637 pips during 356 bars.
  • #4
  • Oct 1, 2017 12:31pm Oct 1, 2017 12:31pm
Third result given by RSI [15, min=45, max=55]

Attached Image (click to enlarge)
Click to Enlarge Name: eurusdih1_rsi.png Size: 53 KB


RSI gave the weakest result, around +67 pips which still is positive, but according to my experience such RSI strategy is likely to change direction the most often from those 3 strategies. Final result will be than much lower, if not negative.
RSI in its best time within 640 bars has gained 566 pips in 217 bars.
  • #5
  • Oct 1, 2017 12:52pm Oct 1, 2017 12:52pm
To give You some more curiosity, why not to check this for, let's say MACD strategy;

(5,15,25,close) trade +1 when the MACD has closed above 0, and -1 when the MACD has closed below 0.

AHH, very important. Those indicators are not repainting. Decision of direction change is always based on already closed bar (x+1).
Otherwise, if a decision was based on a x candle this would gave falsely optimistic result.


OK, let's get back to our MACD strategy:

Attached Image (click to enlarge)
Click to Enlarge Name: eurusdih1_macd.png Size: 54 KB


Quite poor but still positive. Around +8 pips at the end of the test. But, during the test it got better time. It was able to get 537 pips in a 105 bars which is one of the best results of above strategies.
  • #6
  • Edited 9:37pm Oct 1, 2017 9:26pm | Edited 9:37pm
OK, one more example: again MACD, this time some slower one (15,50,25,close):

Attached Image (click to enlarge)
Click to Enlarge Name: eurusdih1_macd2.png Size: 54 KB


This MACD has given probably the best result around +550 pips. This was also earning pips quite constantly comparing to other strategies above.
What is also important between start and finish it didn't have much more potential to earn, so if someone was consecutive in this strategy during this time he made probably the best choice.

So let's stop with more strategies for some time and let's try to analyze in next posts what we really got above, and what exactly we can read out of those charts.

BR!
  • #7
  • Oct 2, 2017 10:02am Oct 2, 2017 10:02am
Let's make some conclusions:

1. All of above strategies gave positive result!
Does it mean that every strategy after some specified time is profitable, so consistency is the key, as I often read on many threads?

Absolutely not! The only reason why those 3 or 4 strategies gave positive result is just luck. To be exact: lucky positioning of two vertical lines on the beginning of the thread. If we put it differently We would probably had most of them loosing, but not all.

2. Best result which is +550 pips were gained during 640 candles. This is average 0.8593 of the pip per 1 hour of a trading week.

Let's be honest. This is not the result a Rookie like me is looking for. Especially, that this doesn't include pips loosen on spread when changing direction.
Worst result is +8 pips after 640 trading hours. That is 0.0125 of a 0.0001 part of the price each trading hour .
Somebody could say that this is still PLUS 8 pips and if for somebody 1 pip means say 100$ than he is 800$ plus after 640 bars.
OK, but if for somebody 1 pip is 100$ than after first 398 hours he probably was -36000$ and was not sure if this strategy will gain some pips up.

3. If a trader would know (hah! ) when the strategy actually works, and when does not, he could make much better results in a much shorter periods.

If You have some questions up to now, or would like to check some other simple strategies, please write.
If what I am writing about is hard to understand please write - my english is....as it is, sorry.

Regards,
Marek
  • #8
  • Oct 2, 2017 12:10pm Oct 2, 2017 12:10pm
I believe that single image is often worth more than thousands of words.
So, let me post another image to this thread, I think some of You might find it interesting:

Attached Image (click to enlarge)
Click to Enlarge Name: eurusdih1.png Size: 63 KB


On this chart I put a results of another 2 strategies like the one in point (3), but changed the input parameters like I wrote on the chart.

Finally we have found a strategies, that gave negative result after 640 bars, so now have a proof, that not every strategy gives positive result after 640 pips.
I also divided the whole scope of 640 pips into parts: 1,2,3.
About every part We can tell quite well that the price (green chart) is mostly growing or it is mostly falling.
We can now check how during this parts was each strategy behaving, and how/when it changed during another part.
  • #9
  • Oct 2, 2017 12:42pm Oct 2, 2017 12:42pm
There should be one more remark about this way of strategy testing.
Once I wanted to compare if results seen on those charts are common with results given by a MT Strategy Tester, so I checked it for few of strategies and different timeframes.

The result was YES! This was more-less identical.

That would mean, that the idea lying behind this way of testing the strategies is proper.
  • #10
  • Oct 3, 2017 5:29pm Oct 3, 2017 5:29pm
In post #8 I put on a chart two very similar strategies results based on RSI. The only difference between them was the range of RSI around which trades were taken: 40-50 and 50-60.
This is to check if strategies based on very similar assumptions work the same under same market conditions.
Of course we could expect that it will not, because MT4 strategy tester also would give us different results, so the same should show the indicator.

In parts 1 and 2 of the chart from post #8 when one indicator is earning, the second one is loosing.
RSI 40-50: loosing when trend was slightly up; earning when trend was slightly down.
RSI 50-60: opposite

This is actually something we could expect, because when trend is slightly growing, the higher RSI the less likely it will go below 40 to give a condition of long trade.
When trend is slightly down, the same RSI will not likely go above 60 to give signal for sell. Strategy is then still on long trade and it keeps loosing.

There is also part 3 where both RSI strategies are loosing. This is strong trend, and in that condition (no matter if trend up or down) RSI oscillator strategy will give often bad results.
  • #11
  • Oct 4, 2017 8:14pm Oct 4, 2017 8:14pm
If you are trying to trade the swings on the 1HR chart, you need to use the 4HR chart. Also, can you post charts from this century in your explanations?
You cannot be extraordinary by being normal
  • #12
  • Oct 5, 2017 10:08am Oct 5, 2017 10:08am
Quoting dkrock
If you are trying to trade the swings on the 1HR chart, you need to use the 4HR chart. Also, can you post charts from this century in your explanations?
Hi dkrock!

What about posting more recent charts - hopefully I'll be able, yesterday I bought myself a new computer, because on my vista one I wasn't able to use neither mt4 nor metaeditor for some time. I will post more recent charts.

Also let me not agree with You about the necessity of looking on a 4H time frames when trading swings at 1H. I often do check higher TFs, but what I need I see on my 1Hchart. But I just do it as a good practice.
The other thing is that I do not trade 1H charts often, rather on 1W and 1Month charts.
But I do not want to talk about my trading.

I would like to introduce You guys more general idea, which is somehow hidden a little bit in a white indicators on charts I am posting in this thread.
This is kind of a tool, a set of tools, developed by me some time ago, to take a look on the forex market from "out of the box".
to not to do mess in this post, I will describe it in next post.

Cheers!
  • #13
  • Oct 7, 2017 4:13pm Oct 7, 2017 4:13pm
Quoting dkrock
If you are trying to trade the swings on the 1HR chart, you need to use the 4HR chart. Also, can you post charts from this century in your explanations?
Exactly those 4hr charts are for swing trading usually not day trading or scalping so if we are looking at the 4hr charts then it means we might be planning to trade on longer time frames i guess.
  • #14
  • Edited 10:25pm Oct 7, 2017 10:08pm | Edited 10:25pm
Quoting jollypk
{quote} Exactly those 4hr charts are for swing trading usually not day trading or scalping so if we are looking at the 4hr charts then it means we might be planning to trade on longer time frames i guess.
Just the opposite. If you want to swing trade the 1HR chart, you use the 4HR chart. When they agree, you enter. When they disagree, you exit. You determine a consistent range signal on the 4HR chart and then convert it to appear as a trend signal on the 1HR chart. This shows you entries, exits, and when to sit out. Additionally, you determine the trend signal on the 4HR chart and then when it trends, you ignore the 1HR chart and use the 4HR signal instead. You put all 4 signals on the same chart, 1HR range, 1HR trend, 4HR range, and 4HR trend; making is easy to see entries, exits, market direction, and momentum. Swing trading 101. If you are going to swing trade these time frames though, be aware you might need another person to help you cover all those hours.
You cannot be extraordinary by being normal
  • #15
  • Oct 8, 2017 9:27pm Oct 8, 2017 9:27pm
Quoting dkrock
{quote} Just the opposite. If you want to swing trade the 1HR chart, you use the 4HR chart. When they agree, you enter. When they disagree, you exit. You determine a consistent range signal on the 4HR chart and then convert it to appear as a trend signal on the 1HR chart. This shows you entries, exits, and when to sit out. Additionally, you determine the trend signal on the 4HR chart and then when it trends, you ignore the 1HR chart and use the 4HR signal instead. You put all 4 signals on the same chart, 1HR range, 1HR trend, 4HR range, and 4HR...
I'm just trying to visualize this. Would you mind posting a chart of what you mean?
regards, Bogus
FF journal: Peaks and Troffs
  • #16
  • Oct 9, 2017 11:08am Oct 9, 2017 11:08am
Quoting dkrock
{quote} Just the opposite. If you want to swing trade the 1HR chart, you use the 4HR chart. When they agree, you enter. When they disagree, you exit. You determine a consistent range signal on the 4HR chart and then convert it to appear as a trend signal on the 1HR chart. This shows you entries, exits, and when to sit out. Additionally, you determine the trend signal on the 4HR chart and then when it trends, you ignore the 1HR chart and use the 4HR signal instead. You put all 4 signals on the same chart, 1HR range, 1HR trend, 4HR range, and 4HR...
OK, I guess I see your point.
You confirm 1Hr trades with 4Hr chart. That seems to me to be quite rational.
When both trending -> go trend
When both ranging -> go range (if I of course get it correctly)

Personally after years of trading live I rather do the opposite (monthly trades I check with 1W and 1D charts; just to see how long I need to wait and what is gonna be before my desired move.)

But this is not the thing I wanted to share with you guys. Let me ones again start a new reply, to tell You about the indicators that are on the beginning of this thread. I think you might find it interesting to You.

Cheers!
  • #17
  • Edited Oct 10, 2017 12:49am Oct 9, 2017 11:29am | Edited Oct 10, 2017 12:49am
Ok, first I'll post here an indicator name "srednia_zarabiajaca" what in English would mean something like "moving average earning".
There is only one parameter in it, and that is MA1 (period).

This indicator is accumulatively calculating how the MA strategy is performing.

How it is working:
Strategy I am testing with this indicator is:
starting to "buy" if previous candle [X+1] has closed above our MA
and
starting to "sell" if previous candle [X+1] has closed below our MA

Strategy is not stopping "buying" or "selling" until opposite signal arrives.

indicator is accumulatively adding Close[X]-Close[X+1] when it is in "buy" period and substracting Close[X]-Close[X+1] when it is in "sell" period.

Attached File(s)
File Type: ex4 srednia_zarabiajaca.ex4   7 KB | 537 downloads
  • #18
  • Oct 12, 2017 3:45am Oct 12, 2017 3:45am
I seem, Price Action traders are comfortable with this kind of chart! But I need moving average indicator with fibo’s technical support! On the other hand, I am an active user of fundamental analysis, a naked chart is nothing to me.
  • #19
  • Oct 12, 2017 8:38am Oct 12, 2017 8:38am
Quoting GeorgeBaile
I seem, Price Action traders are comfortable with this kind of chart! But I need moving average indicator with fibo’s technical support! On the other hand, I am an active user of fundamental analysis, a naked chart is nothing to me.
Hi GeorgeBaile,

Actually this is only the first indicator published so far. This is just a beginning, because the moving average performance strategy (i.e. price action) is only one of hundreds that can be tested and observed this way.

Price action,
Counter trend,
Mixed trend,
Mixed indicator signals,
price levels and fibo
Many crazy trading ideas
All this can be tested by such indicators.

Till this time I have tested probably 100+ of them. And probably the best thing it gives to a person is not an answer to the question if this or that strategy works good.
I want this idea be clear to everybody so I will be publishing indicators one after another.
The best thing it gives is a kind of "out of the box" lesson of how the markets generally work. A nice insight. Personally I found it really revolutionary and yes, it became kind of a holy grail to me.

So I encourage You guys to follow this thread because the most interesting will be ahead.
Today I will post another indicator so You could again download and test by Your own.

Cheers!
  • #20
  • Oct 12, 2017 9:14am Oct 12, 2017 9:14am
So as I promised in previous post I am publishing for You guys new indicator that is checking performance of such a strategy:

It is a price action/trending strategy which starts to "buy" on X bar opening when previous bar (X+1) closed above two simple MAs (MA1 and MA2). It "buys" until the opposite signal, i.e. X+1 bar closes below MA1 and MA2.
Attached File(s)
File Type: ex4 Price_close_over_2MAS_trend.ex4   7 KB | 566 downloads


Ask if You have some questions concerning the indicator.

Regards!
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