Daylight Trading Strategy

Hi Laura,

Sure thing on the indicators, enjoyed the coding challenge.

The usual busy life and having isolated moments to trade. Now following the daylight approach to see for an opportunity to add to my current opportunities to trade.

Look forward to this thread building more skills for everyone.

Using Fast Moving Average To Enter Trends

Here is another way you can use the information contained on the charts to time entries. For these examples, I've used the hourly timeframe, a Smoothed 100 moving average and the aggressive settings. The principle should apply across timeframes and settings however.

When you decide you are in a directional trend (via the SMMA100, SMA200, MTF analysis, Barraka's dashboard or some other method), you wait for the fast moving average to travel to the 'wrong' side of the -50 line and back again. This provides your entry point. Below I've included some chart examples with manually added arrows to demonstrate those entry points.

No approach is perfect, and this is no exception, but for those struggling to pick a directional bias it might be of assistance. Please feel free to ask if any questions.

Tested USDGBP from 2016 - 2020. Trades taken on the 4hr timeframe. Trades were mechanically taken, with a number of rules to reduce losses. There wasn't a large number of trades but if it shows to be robust on a good number of pairs it might be promising.

Thank you for posting your test results on 4H timeframe.
You took a 5year testing period an got an average positive yearly "income" of about 500 dollars.
The profit factor was near 1.2.
From my expectation of trading forex I would say that isn`t really great.
It`s positive ..ok..ok.. better than other strategies.
Did you test other pairs as well or did you test the system on lower timeframes?
I know I have to invest the work myself to see the outcome but after some research and test
the results were not that great either.
I thought I`m doing the things wrong...but now we should trust in Laura`s experience.

This is the only pair I've tested over 5 years with a few rules to reduce losses. Each trade's risk is 1% of the capital that is approximately $100 risk per trade. Having carried out 275 trades the total return is of about 9% of the total investment (traded money not capital). If this result can be about the same on a good number of currency pairs, and assuming that about the same number of trades are taken on the other currency pairs. We can deduce that at least the number of trades taken will be 5x more. It is not much still, but the returns would have been 5x as much. Trading with a proprietary firm with a capital of 300K and banking half of 9% per year of the total traded money would be a nice extra money.

The trades where based on standard entries/system.

My rules for this test where:

Rule1:- R:R 1:1 (exits for me are a bit difficult to decide. If I had left the trades to run till the chart emas cross in the opposite direction I would have ridden some long trades but also lost more. This needs to be tested.)
Rule2:- Take a trade only when the candle closes on the green ema for long and vice versa for short. There must be daylight on both the W%R and the two chart emas. If there is no daylight on the %R wait up to 2 other candles from the first one that crossed the green ema. If there is no daylight on the close of the 3rd candle (counting the one after the cross) do not take the trade.
Rule3:- If the distance between the candle close and the green ema is larger than the 4hr ATR do not take the trade.

If anyone can suggest improvements on further test that I will take (when time permits) I would greatly appreciate it.

Again thank you Laura for sharing your success and inspiring us all.

Guys,

Got the MQL4 book out and trying to add an alert to the MA cross indi. Doesnt seem to be working just yet. Any assistance would be appreciated. I copied the alert from another working indi. compiles ok but no alerts yet.

double range = iATR(NULL,0,10,i);
double maFast = iMA(NULL,0,FasterMA,0,MAMode,MAPrice1,i);
double maSlow1 = iMA(NULL,0,SlowerMA,2,MAMode,MAPrice2,i);
double maSlow2 = iMA(NULL,0,SlowerMA,2,MAMode,MAPrice3,i);
CrossUp[i] = EMPTY_VALUE;
CrossDown[i] = EMPTY_VALUE;
State[i] = State[i+1];
if (maFast>maSlow1) State[i] = 1;
if (maFast<maSlow2) State[i] = -1;
if (State[i] != State[i+1])
if (State[i] == 1)
{ CrossUp[i] = Low[i] -range/2.0;
if(i == 1 && Time[1] != time_alert) myAlert("indicator", "Buy"); //Alert on next bar open
time_alert = Time[1];
}
else {CrossDown[i] = High[i]+range/2.0;
if(i == 1 && Time[1] != time_alert) myAlert("indicator", "Sell"); //Alert on next bar open
time_alert = Time[1];
}}
return(0);

EDIT: I think i might have solved it now. Wait for market open

Dax short I took this morning. Wanted to highlight this trade to show that it's beneficial to have a degree of flexibility in relation to how we trade Daylight.

I was trading 5m Aggressive mode and you'll see from the chart that the fast moving average was above the slow moving average. However, the slow moving average was below -50. A lower high had been made and support had been broken. I expected price to want to test Friday's Low (dotted line).

There was a shakeout attempt, taking out that lower high but, crucially, the overnight structure was not broken. This convinced me to stick with my position. Eventually banked 59 points when it started to form a base below Friday's Low.

Although I've tried to ensure Daylight assists you with your entries and exits, there is no denying the fact that an appreciation of price action, market structure and the overall context of an instrument will deliver better profits (once proficient) than a mechanical approach will.

Hope this helps.

Have just received a signal on EJ-H4 and placed a pending order at 131.750. I think all conditions have been met.
Edit: Pending order expired unfilled.

Having a go on UJ short H1 chart.

I noticed this trade too this morning on M15, paper trading only as not traded indices before, nice clean move down. I have found this system to give me extra confidence to enter trades but I don't always wait for the WPR if we have had a break and retest to the channel.

Many thanks for this strategy Laura.

I agree that if traded as a mechanical system it will produces little return or even BE overall, as shown by my test. I have no experience in reading the market structure, so I am doing these test to 1st help me learn a little, as I question myself why a market has moved in a particular direction or non at all, and secondly build confidence with this system. Your comments about why you entered a trade with relation to price structure are helpful. At least for me.

Hi 40PipsAlan, seems to be working just fine

Baz

The file I posted is the same as the original one boss. Just lacking print and push alerts for MA arrows, which I feel would be of benefit to tell me something is happening rather than keep monitoring the charts. My coding skills are pretty basic and this one is eluding me somewhat. It is still not working but
I have another MA alert indi which is similar with the arrow positions.

The WPR I use has arrows and alerts for the -50 cross, the alerts come a bit early but I trade 1 min charts so that suits me. The 5ssma arrows combine to give a good indication of a trade set up. I know Laura does not want loads of indicators cluttering up charts but as the WPR is already being used in the system so I thought it might be ok to mention it.

entered this as a bounce off of the S38 pivot & checked the 5 min daylight - kind of interesting.

@LauraT

Taking your DAX chart from this morning :

where did you know from that the first 3 arrows shown on the chart are misleading

and the 4th arrow is the right one to enter..( the 4th arrow does not have a higher probability than the others..) I don`t get the point..............

Please.. need your help.

Sorry for any confusion. Please ignore those arrows as they are something new I'm testing.

My entry was due to a break of support and bearish structure.

So based on your test, some of your assumptions are correct, but some are not. This is my opinion only and if you take it with a dollar bill to McDonalds you can get a cup of coffee.

Let me say first that your mechanical test is a really good first step. It gives you enough confidence in the bare bones of the system to spend more time working on learning the nuances of the system. Now, what should you do next? Why paper trade it of course (or very small lot if you like). You must demonstrate to yourself that you are capable of taking signals and adhering to the trading plan. (Discipline)
Once you can do these things to your satisfaction, you are ready to learn how to make money with this method.

Now, the reason some of your tests are not valid for me is that I simply would not take many of the trades that a mechanical system generates because of....wait for it.....Market Structure. This is where the rubber meets the road and the money is made. So what exactly are we talking about when I say market structure. Let me give you an example of a trade I am in and the decision process behind why I waited after the actual signal because of market structure.

I am short the EURCAD from a 4hr chart.

This first chart is the reason there have been no entries on this pair for a while......Sucker Soup


So why did I take this signal, but not when it first occurred.
This signal was just like the previous 7-10.....mixed in the soup...UNTIL it exited the green box to the downside with a sharp sell off.
I waited to see if it would retrace inside the channel, if not, oh well
I just so happens the top of the channel was in the same area as the bottom of the green box which should now act as resistance.



Maybe this will help someone a little bit

Market structure is a "BIG WORD"..nobody knows in advance if a trend will change and when this will happen orwhen does price
go to form a so called range.

Drawing a box in hindsight isn`t that difficult and putting a long term EMA on charts to see main direction is surely done
by most traders.
As you can see on your own charts you missed some nice opportunities and I think ...and that is only my personal view..
that this strategy proposed bys Laura was designed to be used as a daytrading approach.
Laura may correct me if I`m wrong.
Same problems occur when talking about "Price Action". There will be always a lot of "lonesome thinking" in individual decisions.
Take for example the Engulfing Patterns or Dojies etc.. It really matters where those patterns occur.
There are some researches about the success rate of those and the results are desillusioning.
The same is true for Fib`s and even for support and resistance.
This is the reason I like "mechanical or algorythmic " systems.
They take out all that stuff. Just my personal view.