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The Daily Fozzy Method

  • #2,301
  • Jun 10, 2007 4:44am Jun 10, 2007 4:44am
Quoting willf
I am sure Beachbum will say how he came to these values but I suspect the SL is a percentage of the daily ATR and the TP is the full ATR.
Well, on most of the losers the SL was not the issue, but rather the cross just being a bad trade in general. Lots of multiple crosses back-to-back, each a losing trade. This is what concerns me.
  • #2,302
  • Jun 10, 2007 10:42am Jun 10, 2007 10:42am
JD.............

I can't read the dates on your chart (too small) so I will have to take some time and look at this comparison trade-by-trade. This may take me a few days to get but I don't want you to conclude I am ignoring your analysis. I'll work on it and post the details. Appreciate your input!

Quoting JoshDance
I tested 6/1/06 - 12/31/06. I used FXDD, and the AO_FozzySignalALL indicator, TP 60, SL 40. For this period on daily charts, I had 12 winners and 20 losers, for a -80 pip loss. Looking at the above quote, I think I see the problem. You have a cross on 1/25. So you don't open until 00:00 on 1/26, right? That 1/26 bar produced a max profit of 55 pips, so why do you call this a winner?

Is it possible that you're counting the DAY OF the cross as entry? If so, this is incorrect. We must enter the day after, to go by the close of the bar... I've attached my chart that shows a small period of only about 30 or 40 days where there are 7 winners and 12 losers. The bars indicate the day the trade was OPENED, and the red bars are losers, green winners. Notice how the bar comes AFTER the indicator signal. I don't see any way my testing can be incorrect, but I'd love for it to be somehow. There were only a couple of cases where a signal was not taken because we were already in a trade and TP or SL had not yet been hit. Almost all losers happened on the day the trade was taken, so Stop and Reverse was not an issue. Am I missing something big here?

A few sample trades:

cross at EOD 6/1, opened Long 6/2, TP 6/2
cross at EOD 6/6, opened Short 6/7, TP 6/7
cross at EOD 6/15, opened Long 6/16, SL 6/19
cross at EOD 6/23, opened Short 6/26, SL 6/26
cross at EOD 6/26, opened Long 6/27, SL 6/28

EDIT: first green bar on the chart below is 9/6, last green bar is 12/29, to give you a time frame.
  • #2,303
  • Jun 10, 2007 10:45am Jun 10, 2007 10:45am
Correct...................EUR/USD only. And although these values are close to ATR percentages (as pointed out by Byte) I actually selected them on a purely technical basis, using possible trade successes and losses and the corresponding values. HTH!

Quoting willf
I think the TP60 and SL40 was Beachbum's settings for EURUSD, not all pairs.

I am sure Beachbum will say how he came to these values but I suspect the SL is a percentage of the daily ATR and the TP is the full ATR.
  • #2,304
  • Jun 10, 2007 2:06pm Jun 10, 2007 2:06pm
Sorry mate

i was absolutely cream crackered when i wrote that ...

not on close at all, its 5sma high 5sma low this creates the price action channel and it works well ( in conjunction with other setup)

its worth reading the pdf i posted just to get an idea , i dont use it all as exxplained already ..

here it is again

cheers

Rye
Attached File(s)
File Type: pdf TDI_1[1].pdf   254 KB | 972 downloads
  • #2,305
  • Jun 10, 2007 2:43pm Jun 10, 2007 2:43pm
Quoting Artamon
This has been my biggest "problem" todate - moreso, the TP part of the equation. Throughout the forward test and since going live I have used the default values of the EA for TP1 and TP2 - 40/130. After a lot of testing they weren't far off the mark with the moves I'd expect to see, so I decided to use them. However, the issue has really been after locking in at 40...how to "let the profits run" without choking the trade with a tight Trailing stop or too wide that you give up all gains. Consequently, and for the time being, I have decided to exit my trades at 40 pips up or at a value close to the SL of the trade. This, however, has repercussions for the R:R - namely it's, at best, 1:1.

I believe a daily system must provide better figures than that or it just isn't worth doing.
Hi Art,

I fear that I am about to become the Patron Saint of the Trailing Stop. Nevertheless, I would recommend this as a possible remedy for your 1:1 problem. If you use a trailing stop as your initial stop, this means that you almost never take a full loss at the initial SL value. But you always get a "full" win at the TP level. This means that your R:R rises.

I'm not naive about the downside to trailing stops - namely, that price spikes can stop you out early on positions that would otherwise have been more profitable. But the more backtesting that I've been doing lately, the more convinced I'm becoming that a trailing stop is a good way to go.
  • #2,306
  • Jun 10, 2007 3:23pm Jun 10, 2007 3:23pm
Quoting JoshDance
Is it possible that you're counting the DAY OF the cross as entry? If so, this is incorrect. We must enter the day after, to go by the close of the bar... I've attached my chart that shows a small period of only about 30 or 40 days where there are 7 winners and 12 losers. The bars indicate the day the trade was OPENED, and the red bars are losers, green winners. Notice how the bar comes AFTER the indicator signal. I don't see any way my testing can be incorrect, but I'd love for it to be somehow. There were only a couple of cases where a signal was not taken because we were already in a trade and TP or SL had not yet been hit. Almost all losers happened on the day the trade was taken, so Stop and Reverse was not an issue. Am I missing something big here?
I don't think you're missing anything. I just sat down this afternoon and did a backtest on the last year's worth of EURUSD data. First I want to throw in one huge disclaimer: I am using trailing stops. This makes my (manual) backtesting extremely problematic. Unless you spend HUGE amounts of time to drop down to the minute-level data on every trade, it can be nearly impossible to figure out exactly where your trailing stops would have been taken out. That being said, you can do a pretty good job of figuring out where they probably would have been triggered and whenever there was any doubt, I used the most pessimistic scenario for my test results. I also assumed an initial SL of 50-pips, a first TP of 60 pips, and a second TP of 120 pips. This is what I got:

Wins: 24
Losses: 32
Pips: +1080

This was a very conservative approach, using only trades that gave a very clear cross of the RSI/MA. In reality, I like to trade any cross that I believe is clearly about to happen. In other words, if I see that the RSI is moving down towards the MA but it is still barely above it by the end of today's bar, I will still go short on the pair. I call this "jumping" the signal. If I add in crosses where I jump the signal, my results are as follows:

Wins: 29
Losses: 37
Pips: +1340

I also like to trade bounces off the RSI/MA. Just as I will trade a cross that neary happened, a bounce is a cross that nearly happened in two consecutive directions. If I add bounces to the results, my results are as follows:

Wins: 33
Losses: 42
Pips: +1690

Notice that I was not able to replicate the stellar winning percentage of Beach's backtests. However, I was able to confirm a pip total that is similar to his.

I believe that this just highlights what I have been trying to say in several of my earlier posts. Mainly that the fozzy method, in its simplest form, is a system that generates entries, but says very little about SLs, TPs, and exits. Any "system" that fails to address SLs, TPs, and exits, is only a partial system at best.

Of course, it would seem that many people in this thread have built fozzy into a full system. But keep in mind that everyone's individual application of SLs, TPs, and exits will have MASSIVE effects on the overall profitability of this system.

I used to believe that if you have a good system (i.e., entry points), using "bad" SLs/TPs/exits would only take an incredible profit and lower it to a smaller profit. I am now starting to think much differently about that equation. I am slowly becoming convinced that an entry point is just that - an entry point - and your overall profitability is massively impacted by your individual choice of SLs/TPs/exits.

To put this more bluntly, I honestly believe that the fozzy can be used to LOSE a lot of money -relatively fast - if you aren't using the "right" combination of SLs/TPs/exits. Conversely, it can also be tremendously effective/profitable with the "proper" combination of SLs/TPs/exits. The difference all lies in the application of the individual trader.

This reminds me very much of the famous words of Richard Dennis (the legendary commodities trader) who said that he could publish his system in the Chicago Tribune and most people still couldn't make any money with it.
  • #2,307
  • Jun 10, 2007 3:51pm Jun 10, 2007 3:51pm
Quoting Artamon
This has been my biggest "problem" todate - moreso, the TP part of the equation. Throughout the forward test and since going live I have used the default values of the EA for TP1 and TP2 - 40/130. After a lot of testing they weren't far off the mark with the moves I'd expect to see, so I decided to use them. However, the issue has really been after locking in at 40...how to "let the profits run" without choking the trade with a tight Trailing stop or too wide that you give up all gains. Consequently, and for the time being, I have decided to exit my trades at 40 pips up or at a value close to the SL of the trade. This, however, has repercussions for the R:R - namely it's, at best, 1:1.

I believe a daily system must provide better figures than that or it just isn't worth doing.
A few more thoughts on this:

I have noticed that many people seem to think of trading on the daily charts as being analogous to long-term trading. I firmly believe that just because you trade based on a daily chart, doesn't necessarily mean that you are a long-term trader. Long-term trading is based upon the duration of your open positions, not the duration of the bars on which you trade.

Why do I bother explaining this? Because letting profits run is most applicable when you are engaging in long-term trading. Yes, even for the shortest of trades, it is best if you grab as much of a price movement as possible. However, the closer your strategy comes to day trading, the more imperative it is that you lock in some level of profits whenever you can.

Is the fozzy method "day trading"? There are many different definitions of day trading, but I do believe that fozzy trading still generally qualifies as day trading. True, some day traders hold positions for mere minutes or hours, but just because you hold a position open for a handful of days doesn't exactly mean that you've risen above the category of day trading. And again, if you're day trading, you have to be able to lock in profits whenever you can.

Of course, we have all seen cases where a fozzy signals precedes a LONG run - sometimes lasting several weeks, in rare cases, more than a month. So is it possible to grab those long runs with the fozzy? I think so - but only AFTER you have locked in your short-term profits.

I have noticed that those who profess to grab long-term fozzy trends are those who tend to pile on with more units in their opening position. In other words, they close one unit with a relatively small profit, a second unit with a larger profit, and then, if they are lucky enough to be sitting on a true "runner", they allow a third unit to run for a long time until the trend has obviously exhausted itself. At this point, they are essentially playing with "house money".

Nevertheless, I do strongly believe that we are engaging in day trading here and, as such, it is imperative to lock up whatever profits we can whenever they present themselves if we are going to be profitable in the long term.
  • #2,308
  • Jun 10, 2007 4:54pm Jun 10, 2007 4:54pm
Thanks Rye, some interesting stuff in the pdf, will probably use the price channel and possibly the base line with fozzy method.
  • #2,309
  • Jun 10, 2007 5:47pm Jun 10, 2007 5:47pm
Did you also have a look at the modified HA, quite an interesting perspective ,although i dont like it on my charts permanently, i do flick back and forth to get a better idea of what is creating the price


this chart shows with mod HA,which shows an average price candle....

and the following is the same chart without mod HA(normal candles)


spot the difference in what its telling you.
Attached Image
  • #2,310
  • Jun 10, 2007 5:50pm Jun 10, 2007 5:50pm
less clear understanding of price direction emphasis ??
Attached Image
  • #2,311
  • Jun 10, 2007 6:18pm Jun 10, 2007 6:18pm
How you doing?

Hope your well...

just wanted to say thanks mate , for the method....

Rye
  • #2,312
  • Jun 10, 2007 6:21pm Jun 10, 2007 6:21pm
Hope you cleared up your confusion from friday....

had a good w/end,,,

and can still see....

Rye
  • #2,313
  • Jun 10, 2007 8:25pm Jun 10, 2007 8:25pm
Rye,

have you been playing with those charts again.....

Quoting Ryecatcher
Hope you cleared up your confusion from friday....

had a good w/end,,,

and can still see....

Rye
It's All About Attitude ...
  • #2,314
  • Jun 11, 2007 12:44am Jun 11, 2007 12:44am
Hi
I have some problems with chart I think

As I see on some peoples charts here there is RSI quite good line and MA is crossing it but mine RSI is visa verca RSI is red and it jumps near MA. WHY???
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  • #2,315
  • Jun 11, 2007 2:18am Jun 11, 2007 2:18am
Stace,

If i can correctly remember, when i set my charts up.....it was RSI (8), then bollinger band (20) off the first indictors data, then moving average (8) also off the first indicators data.

You will probly also notice that all 3 indicators will smooth them selves out some what if you change your chart to a daily time frame instead of a 4 hourly, as you have posted.

Unless any one else can correct me, i hope this helps.

Jese
  • #2,316
  • Jun 11, 2007 3:20am Jun 11, 2007 3:20am
you caught me with rsi down...

and my ma up ...

sorry...

have a good week

Rye
  • #2,317
  • Jun 11, 2007 3:23am Jun 11, 2007 3:23am
Yes i have the same settings like you but still strange
  • #2,318
  • Jun 11, 2007 3:34am Jun 11, 2007 3:34am
But you dont have the same set up as me.

Your charts shows your indicators as follows - RSI (8)=MA(8)=BANDS(20)

My chart indicators show - RSI(8)=BANDS(20)=MA(8)

This slight variation will effect your entry signals.
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  • #2,319
  • Jun 11, 2007 3:40am Jun 11, 2007 3:40am
JESE

I made like your and still RSI red is like MA
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  • #2,320
  • Jun 11, 2007 3:50am Jun 11, 2007 3:50am
The only difference between your chart and mine now is, My RSI is blue while yours is red.

And my Moving Average is red when yours is blue.
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