Spud's MTF FIB Breakout System

I love it spud
I am trying to get simpler (the two step)
& man you are just a goin'
you are going for the tango & the ramba at the same time
& you are still in those high heels!!

HeeHee

TEB

This indicator will do that job for you:

Here are a collection of charts for every day traded in February 2007. I've added a few comments on each to help guide anyone interested.

February gained 800 pips...net. There were 17 trades, 8 resulted in pip gains, 6 were mainly spread losses or break even, and 2 actually lost a few pips. That's a 47% win percentage for 800 pips taken home. The big reason this wins pips so much is that it is extremely hard to lose pips. Actual losses from spread and lost trades was well under 100 pips....that's an 8:1 reward to risk ratio.

Thanks for the pics spud. This is the best webinar I've attended so far, and it's FREE? I can actually see myself trading live again soon (and mak'in pips 'ta boot')

Quick question, in my MT4 version I have Low/High and Close/Close as options in my parameters settings. I noticed in your first post that you stated you use High/Low, is this correct and if so do I need to acquire another SO to use?

I just modified the Stochastic indicator to display the K% line only. It also has an alert. You can turn the alert on or off. It'll alert only once per bar and not per second.
I don't know how to combine 2 stochs into one indicator. Maybe in the next version. Perhaps I can add in some arrows on the indicator window or on the chart in the next version. Feel free to edit the indicator to combine 2 stochs or add in an auto Fibo drawing.

The Alert messages are:
GBPJPY (H1): Stoch(5,3,3) FibBreakout? Buy Alert
GBPJPY (H1): Stoch(5,3,3) FibBreakout? Sell Alert
GBPJPY (H1): Stoch(14,3,3) FibBreakout? Buy Alert
GBPJPY (H1): Stoch(14,3,3) FibBreakout? Sell Alert

Edit:
See post #31 for new version:
http://www.forexfactory.com/showpost...1&postcount=31

Thanks Spud for a nice simple system to add to the armoury.Looking forward to your future enhancements.

Cheers mate

OK - here goes

I mostly trade g-yen and I utilize a MTF stochastic nearly identical to your methodology. As you stated in one of your forums the key is to be able to know the stochastic well.

Regarding fibs I have utlized them for many years and have come to realize some neat points that can make a lot of pips. My largest gain to date was 738 pips on 2 pairs in one day. This is unusual but the fibs were pointing the targets all the way.

I also lock in smaller pip profits (24 TP) when I do not have a clear fib analysis leading the way. The 24 pip TP came from much back testing the g-yen to optimize win/loss ratio and TP together.

I prefer long g-yen due to carry and will only take short g-yen if I am away from the dealer rollover sufficiently to profit from the short before I am forced to close out due to the negative interest on shorts.

I use the mt4 fib retracement tool and set the following levels:

LEVEL......Description

1.764.......176.4
1.618.......161.8
1.382.......138.2
1.236.......123.6
1..............100.0
0.764.........76.4
0.618.........61.8
0.5.............50.0
0.382.........38.2
0.236.........23.6
0..................0.0
-0.236......R23.6
-0.382......R38.2
-0.5..........R50.0
-0.618......R61.8
-0.764......R76.4
-1...........R100.0
-1.236.....R123.6
-1.382.....R138.2
-1.618.....R161.8
-1.764.....R176.4

R is used for retracement in the opposite direction of yesterdays high to low (or low to high) move. Note the invert of one another:
100-23.6 = 76.4
100-38.2 = 61.8

Some of the fib pointers I have learned are:
I always point and click the fib retracement tool at the high or low price from yesterday first then drag the tool backwards in time to your other swing high or swing low. Bear in mind this is backwards for those that have had formal fib training. But in the heat of battle I have found this to be the best way for me to profit over the years. Quick and easy fib drawing. The original purpose of the tool I use in mt4 for fibs is to measure retracements only, but properly applied you can use it for projections too.

Now for the cool tips (pictures to follow):
If price goes from 1 to 100 and then drops back to 76.4 – what fib would that be?
Answer = 76.4

Ok if price goes from 100 to 1 and then pulls back to 23.6 - what fib would that be?
Answer = 23.6

EASY –

I think you need to arrive at that answer by going through a lot of individual days and drawing the fibs to see the retrace and the extension - that is what has given me "nerves of steel" when it is trading time and the fib retraces and then shoots right to where I had the target. So how do I see the targets!!

The good news: the targets are based on the retracements we have already hit or are hitting today from yesterdays major move.

If price retraces to 23.6 then see how often price hits the 123.6 aggressive target or the next lower conservative target 100.0.

If price retraces to 61.8 then the aggressive extension would be 161.8 and the next lower conservative extension would be 138.2.

I look for price action (PA) to consolidate around the retracement points. When price goes to a retracement point and hangs out there I am simply waiting for the stochastic to give me the go signal. Quite often I am armed with the conservative and aggressive target well before the market finishes its course. And the wonderful part is the stochastic will start indicating the move is nearly over often where one of the 2 targets were located. Learning which target to take happens with practice. When price reaches the conservative target you must be comfortable with price action to know whether to close out or wait for the more aggressive target. All you have to do is keep the MM very, very, very low until you figure out how to make 25-50-100+ pips per day and you will be a pip making machine. Practice – Practice!

I draw fibs starting with monthly all the way down to M30 - obviously I only have to draw the larger time frames after multi day massive trend moves. I leave the big time frame fib on the H4 chart. In other words I draw the significant price swing fib on the monthly or weekly chart and then change the chart to H4 for the stochastic. Don’t forget to check “Ray” on the Fibo Properties Tab.

One last word: I am a student of statistics and have produced EA’s for no other purpose than to receive lots of backtest data. I can tell you the optimized pips for highest profit, lowest % drawdown, stop loss & trailing stop, etc. I know statistically when I can raise my leverage because I have reached my NORMAL consecutive losses. With MTF stochastic that is usually only 1 consecutive loss – rarely 2 in a row. But none of this would have been possible unless I began trading live early on with only pennies at stake. Even when I could bank roll larger amounts and greed kept telling me to go for it, I would go back to pennies. Eventually the results picked up and the stress was in check.

OK – Finally – SHOW ME THE MONEY – I mean Charts. I will be posting 3 charts – none of which were perfect fib days to point out how you should use the fib levels to protect your profit and keep moving that stop to a better price as each fib target is passed. Then on occasion you will remove the stop altogether because price is speeding up in the direction of your higher fib extensions. Literally at this point you should be sitting on the single click order close out and watching for the fast retrace at one of the fib extension levels like 161.8 or 176.4. That’s the fun part. On rare occasion I close out on a 161.8 or 176.4 only to watch the price keep going to the 261.8 extension. Amazing!

Best Regards ……………PiPr Pro

Chart # 2

Chart # 3

See post #26:

In version v. 1.1, I was able to combine the 2 stochs into 1 indicator. So for the new alerts, if both stochs cross over level 80, then we'll have a Buy alert. And vice versa for level 20.

Download v. 1.1 below:

Now you really have my juices flowing, thank you for your contribution.

Thanks mate

Hi Spud,

I like the twist on this strategy of combining a breakout with the stochs.

How do you deal with the timing issue regarding the b/o level and the stoch value? Would you take the break of a low if the current stoch was below 20 but the previous close was above?

Be interested to see how this works out.

Thanks for your efforts in your postings.

G-Man

I mentioned that there is a reason for the Fibonacci numbers. If you look at all the charts I posted you can see dozens of missed trade opportunities. There are ways to capture these opportunities, but the more we chase the more complicated this system will get. So, I am breaking this down into small pieces.....hopefully so you understand how it all works together. The first piece of the puzzle was MTF stochastics, a powerful tool but with a huge limitation.

The strongest reason to use Fib numbers is that like stochastics that run from 0-100, Fib provides us a scale for price from 0-100. The problem with stochastics is that they don't measure the scale of the price move. A stochastic that moves from 0-100 may only move the price 20 pips on a 1H scale one time and perhaps 100 pips the next. Where as the price moving from 0-100 on a Fib scale will tell you exactly how many pips there are to be had.

This is where MTF Stochastics and Fibonacci combine. Stochastic and price move together and we know from MTF stochastics that with multiple time frame stochastics moving together price moves with them.

The hi/lo of the previous day to create the Fib lines is arbitrary. There is no "special" reason to use this hi/lo other than it makes sense for our brains to work in specific time periods because our brains are programmed for this. You could argue that news is daily and thus catching the hi/lo of a day period reflects fundamentals in the day. However you want to slice your bread, I use the hi/lo of the previous day because it works....and that's the only reason that counts to me.

We need to make some changes to our charts.

The first is that we no longer use 80/20 on the stochastics as a level. They now become 76.4 and 23.6.....so our scale on stochastics now corresponds to our fib scale on price.

We use the 5,3,3 and 14,3,3 stochastics from 1H and 30M. On your desktop you want to have price and stochastics for 1H above your stochastic only 30M chart so that the day period lines up. (You'll see that on my next chart).

We are getting more complicated because we will now use both the 30M and 1H stochastics to identify more trade opportunities.

The chart below is from March 1st 2007.

The first thing to notice is that at the break at the first break at 100 we did not jump in. Honestly, it wouldn't matter if we did as our losses would be insignificant because we'd bail out soon after once the 1H stochs dived below 76.3 However, the 30M stochs are saying this is a no good trade because they are both falling.

More significant is a little later on where the "short entry" arrow is pointed. Notice price has crossed and closed below 100 on the Fib level after having been above it.

The 1H stochastics are at 38.2 (5,3,3) and 76.4 (14,3,3)....nice how that works out.

The 30M stochastics are at 38.2 (5,3,3) and 50 (14,3,3).....I'm not making this up!

What is also really important is that both sets of stochastics are moving down.

Now, just like our MTF stochastics where the stochastics love to move from 80 to 20 or 20 to 80.....so our price loves to move on the fib scale from 100 to 0 and 0 to 100.

The 4 most common moves of price and fib are (in no particular order):
1. Break 100
2. Break 0
3. Move from 100 to 0
4. Move from 0 to 100

The MTF stochastics nicely present us with which move price will make.

So as we move along the chart the stochs hit 23.6. In MTF stochastics this would be an exit (at 20).....but now that we have the Fib we now are going to stay in unless our 14,3,3 on the 1H rises above or hits 23.6.

You can use the 30M 14,3,3 rising above or hitting 23.6 as an exit...but in the long run...14,3,3 is much better.

Now..moving along..our price breaks 0 and our stochs are below 23.6...so now we either ride the break or enter a new trade for the break at 0.

As said we exit when the 14,3,3 hits or rises above 23.6. We don't have to be ultra picky on this...you can anticipate...you can wait until you see a definite cross....or you can exit a little earlier. We can use our MTF stochastic knowledge to try and find this moment....but the moment is around the 14,3,3 crossing 23.6!

200 pips to play with here...so lots of room if you don't get the entries and exits bang on.

here were my setups last nite - can't wait to study Spud's new info !!

Big Ben Strategy

Ok, so we made 200 pips following some pretty simple rules. Even if we missed the first entry and just went at the break, we would have had 50 pips.

So, let's move on to the next day. Well this is a no brainer for 450 pips. Heck just wait for these no brainers and we'd do well every month.

Price breaks 0, stochastics below 23.6 and a clear exit when the 1H 14,3,3 crosses 23.6.

I can't make this one any more complicated or clearer for entry and exit.

Well a nice weekend with 650 pips to party with. It must be Monday so will things get ugly?

Well if you had a bad hangover you might miss this early entry...it pretty much starts right at the open...we might get in on this a little late and reduce our pips a good deal...but if we stuck to the rules we'd be in right at the open.

Price breaks 0, both stochastics below 23.6 and the exit is again plain as day when the 14,3,3 crosses above 23.6. Take 375 pips.

So that was 3 days. With no tricks, no wishy washy entries and exits and 1025 pips to grab. If you went for 20 pips a day that would leave you a 1025:60 margin of error on your entries and exits....but we'd be pretty numb to miss 50% of these pips.

My next group of entries will concentrate on failures...so you can see what happens when things do go wrong.

First of all, thaks again Spudfyre for yet another great system.


I have been following yours and TEB's thread on MTF trading, which now are the backbone of my trading. As far as this one goes, I only have one question:
Do we enter as price breaks the barrier, or wait for the candle to close and enter at the open of the next?