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M5 Mean Reversion Strategy

  • #21
  • Jul 8, 2023 9:16pm Jul 8, 2023 9:16pm
Quoting Merka
Condition 1: Price must make a considerable distance from 200 EMA. Can you please quantify what you mean with "considerable"? At the moment this can be interpreted differently by each individual. Cheers
Depending on price action, the distance has different definition on different sessions. Low volatility session creates small distance where higher volatility creates higher's.

When all the conditions are met, we look at chart and observe the followings:
- is it a low volatility session? If yes, a small gap between price and 200ema is okay.
- is price bouncing between SR? If yes, 200ema can be overlooked.
- is there a news? If yes, will generate big distance.

Now with this said, why we want some distance? We need it so we don't jump in a position that is too close to 200 ema beacuse if so/ if mid bb is well below 200ema, price may retrace to 200 and rejects from there without retracing to mid BB.

Our goal is to take an entry that is most logical to retrace to our TP.

encryptedehs
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  • #22
  • Jul 8, 2023 9:34pm Jul 8, 2023 9:34pm
Quoting Navidh1991
{quote} So, in fact, you are saying that if all 4 positions lose, we should wait until all 4 positions reach the middle of their Bollinger band, only the TP of the first position, which has the most loss, can be closed in contact with EMA 200. I'm right?
That's correct!

Encryptedehs
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  • #23
  • Jul 8, 2023 9:38pm Jul 8, 2023 9:38pm
Quoting Navidh1991
Here is the result of backtesting 65 trades so far this backtesting will continue and i'll update you EURUSD M5 {image}
Nice work! Would like to see updates.

encryptedehs
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  • #24
  • Jul 8, 2023 11:41pm Jul 8, 2023 11:41pm
examples of entries

encryptedehs
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  • #25
  • Jul 9, 2023 2:56am Jul 9, 2023 2:56am
Hi if you are trading a 50k prop firm with a 3 % daily drawdown and a 6 % max drawdown what lot sizes would you use, thanks and wonderful straight forward system
  • #26
  • Jul 9, 2023 3:27am Jul 9, 2023 3:27am
Just to be perfectly clear we dont adjust our original TP levels even on the 4th or 5th entry .The reason I'm asking is because as you know the mid band will move from its original level.
  • #27
  • Jul 9, 2023 5:33am Jul 9, 2023 5:33am
Quoting Dino10
Just to be perfectly clear we dont adjust our original TP levels even on the 4th or 5th entry .The reason I'm asking is because as you know the mid band will move from its original level.
We don't.

encryptedehs
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  • #28
  • Jul 9, 2023 6:12am Jul 9, 2023 6:12am
Quoting Dino10
Hi if you are trading a 50k prop firm with a 3 % daily drawdown and a 6 % max drawdown what lot sizes would you use, thanks and wonderful straight forward system
Thank you and I am glad you like the system.

This is a subjective question. For gold pair I would recommend 1.25 lot size for a 50k ac. or you could rise it to a max 2.25 but not more than that. This is in consideration that xauusd pair has a daily atr 250 pips and a weekly atr 1300 pips.

Please feel free to do your own calculation. You can start off by doing the following of any particular pair:
- What was the biggest news event from last 6 moth to gauge the daily risk
- Max weekly move in pips

Once figured out, apply your desired lot size and see if in floating loss, what would be the % drawdown. Your limit is 3% per day - come up with a lot that won't cross 1.5%. now same way do a broader calculations on weekly atr. Make a worst case scenario where 1300 pips drop in an eye flick. if so, make sure it doesnt cross more than 3% of your account since your celling is 6% overall.

Now a backtest would confirm your idea and would let you know if you could rise the lot size a little more or not.

encryptedehs
Protect your capital
  • #29
  • Jul 9, 2023 9:31am Jul 9, 2023 9:31am
Quoting encryptedehs
{quote} Depending on price action, the distance has different definition on different sessions. Low volatility session creates small distance where higher volatility creates higher's. When all the conditions are met, we look at chart and observe the followings: - is it a low volatility session? If yes, a small gap between price and 200ema is okay. - is price bouncing between SR? If yes, 200ema can be overlooked. - is there a news? If yes, will generate big distance. Now with this said, why we want some distance? We need it so we don't jump in a...
Many thanks for sharing the strategy and your responses to inquiries have been fantastic, my little contribution to the issue of 200EMA is that 200EMA most times will support or resist price, and when price is far from it , it tends to attract price to itself, so if price is far below 200EMA and other conditions are met, it is a kind of buy trade that goes to profit most times and vise versa
  • #30
  • Jul 9, 2023 10:53am Jul 9, 2023 10:53am
Quoting dele5000
{quote} Many thanks for sharing the strategy and your responses to inquiries have been fantastic, my little contribution to the issue of 200EMA is that 200EMA most times will support or resist price, and when price is far from it , it tends to attract price to itself, so if price is far below 200EMA and other conditions are met, it is a kind of buy trade that goes to profit most times and vise versa
Thank you for your generous words. Please do contribute to this thread if you see any potentials.

Agree with you on 200ema. The greater the distance the higher the probability to retrace.

encryptedehs
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  • #31
  • Jul 9, 2023 1:10pm Jul 9, 2023 1:10pm
So are we only trading towards 200ema never against?
  • #32
  • Jul 9, 2023 2:33pm Jul 9, 2023 2:33pm
I swing trade hourly and am looking for scalping 5 min technique, I like mean reversion ideas. These DDs look a bit large, but not unusual for this technique. Subscribed.
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  • #33
  • Jul 9, 2023 5:50pm Jul 9, 2023 5:50pm
EURUSD M5
171 trades
2019.11.13 to 2020.06.02
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  • #34
  • Jul 9, 2023 9:34pm Jul 9, 2023 9:34pm
Quoting Dino10
So are we only trading towards 200ema never against?
That's correct.. we want our price to retrace to 200ema/mid BB/to a profitable area. and for this to happen, price first needs to go away from 200ema. The more the higher the propensity to retrace to its mean.

encryptedehs
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  • #35
  • Jul 9, 2023 9:37pm Jul 9, 2023 9:37pm
Quoting Navidh1991
EURUSD M5 171 trades 2019.11.13 to 2020.06.02 {image}
Wonderful work so far. could you attach the EA file so I can see the settings.

encryptedehs
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  • #36
  • Jul 9, 2023 9:38pm Jul 9, 2023 9:38pm
Quoting driven18
I swing trade hourly and am looking for scalping 5 min technique, I like mean reversion ideas. These DDs look a bit large, but not unusual for this technique. Subscribed. {image}
Thank you for your sub. Look forward to your inputs going forward.

encryptedehs
Protect your capital
  • #37
  • Jul 10, 2023 1:41am Jul 10, 2023 1:41am
Slow and steady
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  • #38
  • Jul 10, 2023 2:20am Jul 10, 2023 2:20am
Quoting encryptedehs
{quote} Wonderful work so far. could you attach the EA file so I can see the settings. encryptedehs
There is no EA. i backtest it manually
  • #39
  • Jul 10, 2023 3:33am Jul 10, 2023 3:33am
Interesting strategy, thanks encryptedehs.
How many trades can we expect on average per day trading only gold?
  • #40
  • Jul 10, 2023 3:39am Jul 10, 2023 3:39am
Quoting Mic_FX
Interesting strategy, thanks encryptedehs. How many trades can we expect on average per day trading only gold?
You're welcome.
3-8 trades per day on gold.

encryptedehs
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