Simple 4 Hour System

This is my 1st post here and I thought I will start off by sharing my system. It's pretty simple in approach and understanding.


Setup:

100 Simple Moving Average
Damiani Volatmeter
MACD - 15,26,9
4 hour chart - EURCHF

The 100 Simple Moving Average serves as a support/resistance line as it is known to be used by major banks and financial institutions, a self-fulfilling prophecy, so to say.

System Rules

Long: Take a long trade when price closes above 100 SMA and MACD histogram goes above 0 line.

Short: Take a short trade when price closes below the 100 SMA and MACD goes below 0.

Re-entry: When the price, once has given a long or short signal, retraces back to the 100 SMA, re-enter the direction you went the first time. It is recommended to do it the first 2 times the price hits the 100 SMA and keep a watch thereafter.

Retrace entry: When a bar is over 100 pips, wait for a retracement to occur towards the 100 SMA line and then enter. This will save you from unnecessary draw down.

Exit rule

Scaling: I personally take 3 positions per trade. I set my first TP to 40, 2nd TP to 70 and let the third position run with Stoploss at breakeven.

As an example, once my trade hits the first target, I moved the second position to breakeven and leave the third as it is. When the 2nd position is hit, I move the 3rd to breakeven, giving the trade enough room to breathe. I then look for the price to come back, to add to the position, if it is open. At times, when price comes back to the 100 SMA, I get stopped out at breakeven, giving me 100 pips on 2 positions.

This is a trend following system, and has it's bad days. To avoid getting trapped in a range, I use the Volatmeter indicator. It is, so far the best indicator I have seen that helps detect a ranging a trending market.

I will try and attach a couple snapshots of past trades, so the whole idea becomes clear.

Comments appreciated.

Good day

The blue box is the main entry and the yellow, you can see, is the re-entry.

This is the continuation of the first re-entry. Notice a second re-entry. There is a third box I have drawn. It is a false signal.

Note: I take only one position while trading re-entries.

Looks interesting. Thanks for sharing.

Are you using default setups for Damiani (10,60,1.4)?

Yes, I use the default settings. After much observation, I found it satisfying.

Thanks. I'll try forward testing it. Do you only trade this method on EUR/CHF, or have you found that otherpairs work too?

I trade the EURCHF only. It could be worth checking the other pairs. My reason for trading the eurchf is, it has a medium level volatility+ it does not get trapped between news, though it reacts mildly.

OK, thanks.

Hi Marketsniper,

Thanks for posting the system. Quick eyeball, nice looking system, like to do some testing, what do you use as a stoploss, maybe the 100sma.

Yellow

Thank you for sharing your ideas. I like the volatimeter. Would you mind sharing your thoughts on this indicator and let me know how I can find out more about it?

I understand Mr Damiani won 2nd prize in an EA competition last year?

Regards

MikeH

Looks good.

I have a few questions.

What do you use as a SL?

Do you use the MACD for reentry?

Do you reenter on a touch of the 100MA with no other confirmation?

Thank you

For Stoploss

1. Previous high/ low or what you call as support and resistance.
2. AutoPivot Indicator. I have attached it. I use only the weekly option in it and place my stop accordingly. I love this indicator. It works.

I have no idea where you can find more about it, but, I can tell you how I use it. When the white line crosses above the green, I have seen the market beginning a range or already entered into it. When the green crosses above the white, I have seen market getting into a trend, be it short term or long.

I have no knowledge of the competition.

I have mentioned the SL part in post #7. No, I do not use MACD for re-entry. I enter when it touches the 100 SMA. Here is an example.

I had a buy stop at 1.6506+4 spread, right at the 100 SMA. Trade was triggered and price went 2 pips below to 1.6504, and then went back up to 1.6542, 8 pips close to the price where I move my SL to BE. That is the high so far.

Hi

In your post 3 where the false signal (3rd box) took place, where was your stop?

Could you post a chart with the weekly pivots on it to clarify where your stop was.

My stop was at 1.6501, but I bailed out at 1.6474-80 as there was a reverse signal. The pivot indicator is dynamic and changes every week. So, I cannot show you, but my stop was above the previous high.

Hi Marketsniper

This looks like an excellent system. Already started to demo trade today. Will you please post more examples so that we can all learn from them. It will be much appreciated.

Just a quick question on the Volatmeter, do you always wait for the green to cross the grey before you trade or do you sometimes anticipate a cross and trade before they actually cross?

Yes, I do wait for the green to cross above white. I am conservative. I will post examples as they come.

By the way, I'm trying this on all the major currencies. It is such an easy system to follow and I like the signals. Will see how it goes. Looking forward to your examples.

The chart is for eur/gbp. This pair, as far my knowledge goes moves slower than a snail. Look at the places I have marked. Both trades were good for 30 pips. I say 30 pips, because thats how much it normally moves in a day. It isn't practical to expect more than that. Of course, exceptions exist. The sell trade triggered today.

I do not endorse this pair. The chart is for system example purpose only. Please do your own research.