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iandekoker's 5 profit target trades

  • #1
  • First Post: Edited Nov 8, 2007 1:05pm Oct 21, 2007 3:42am | Edited Nov 8, 2007 1:05pm
Ok since a lot of people disagree with me on the 5 pip strategie let's put my theory to the test. This way you can see for yourself whether i am gambling or scalping or trade according to a precise workable plan.

1. We only trade when there is a trend.

2. Also we dont wanna enter on the beginning of the trend. We wanna wait
till the trend is underway before we get in. That way we will be in profits
right away. And within seconds you will close your trade with 5 pips
profit.

3. We need the following Indicators:

You can use this little trend catcher on any time frame from 3 minutes to daily charts. I will play it on the 5 minute and 15 minute time frames.

We need the ADX indicator and set to 7.

Draw two horizontal lines on the ADX. Set the parameters to 25 and 35 respectively. As we know the theory behind ADX is that the trend is strong once the ADX break above 35 level (some say 25, others 40, others 30). But since i am conservative trader only looking for A-grade trades i will use 35 level. Sometimes even 40 level. And ADX under 25 is ranging market, one in which you DO NOT wanna trade. We also know that the ADX doesn't show trend direction but trend strength. And i only wanna trade the strong trends. Afterall i only wanna make 5 pips not 100. So i dont care if i join later than most other traders. If you wanna get the direction the look at the DMI lines.

If you like me and only trade "A-grade" trades then you wait for the ADX to pull under the 25 level. ADX under 25 level tells me the market is not trending and in ranging mode. So at this point i am not interested in trading. As soon as the ADX breaks thru 25 and starts moving up towards the 35 level you begin to show interest cause you might have a A-grade trade coming up. Once ADX breaks above 35 horisontal line you want confirmation that a trend has indeed started. The confirmation comes when the candlestick in which the ADX broke thru the 35 level CLOSES and the ADX is still ABOVE the 35 level. I then enter a trade on the opening of the next candlestick.

If you want further visual confirmation that the trend has started then add two moving averages to your chart.

Simple Moving Average set to 4 and applied to close
Simple Moving Average set to 11 and applied to close

We all know the theory behind moving averages. Wait for 4SMA to cross up over the 11SMA then we are in uptrend. And when the 4SMA crosses under the 11SMA then we have a downtrend.

Ok so now you have a ADX that crossed above the 35 level. And you have two simple moving averages that have crossed. If 4 crossed above the 11 then we are looking to buy. If 4 crossed down thru 11 then we are looking to sell. You can even use the +DMI and -DMI on your ADX. We all know that once the +DMI crossed up over the -DMI then we are looking to buy and when the -DMI crossed up over the +DMI we are looking to sell. But to make sure you are trading a strong trend wait for the DMI to also cross above the 35 level. If it is the +DMI that crosses above the 35 level then we have a strong uptrend. If it is the -DMI that crosses above the 35 level then we have a strong downtrend.

4. I will aim for 5 pip profit

5. I will use a 20 pip stop loss

Trade signal:

1. First the sma has to cross.
2. Then wait for ADX to rise above the 35 level
3. Then enter the trade


Attached Thumbnailshttp://www.forexfactory.com/attachme...1&d=1192869744
  • #2
  • Edited Oct 22, 2007 2:53am Oct 21, 2007 8:50am | Edited Oct 22, 2007 2:53am
ADX is called "Average Directional Movement" in the MT4 set of indicators.

Attached is a template also.

I recently did an indicator and EA for a friend that was very close to your strategy, I'll look at tweaking them for this method.
Attached File(s)
File Type: tpl iandecoker.tpl   1 KB | 485 downloads
  • #3
  • Edited 9:29am Oct 21, 2007 9:02am | Edited 9:29am
iandecoker,

Thanks for sharing this method. I try not to get excited about anything having to do with trading, a little bit of enthusiasm is a dangerous thing in the market!

I guess what has me pumped is that, you're right in your other post -- it seems damn near every trade I've ever done has been 5 pips in the money at some point. And, I've always known that lowering my targets would improve my ratio of winning to losing trades. But, my losses have always been big enough, and frequent enough, that I had to keep my trades small and felt I couldn't afford to miss 20 - 30 pip (or larger) moves.

Rob
  • #4
  • Oct 21, 2007 10:49am Oct 21, 2007 10:49am
I've been working on the EA and see some troubles. How do you filter false signals?

Going by MA cross for trend, waiting for candle to close with ADX > 35, enter at open of next candle:

15M EUR/USD chart:

10/18 12:00 Long - Good
10/18 17.15 Short - Bad
10/18 18:15 Long - Good
10/18 21:45 Short - Good
10/19 00:45 Short - Bad
10/19 03:00 Long - Good
10/19 05:30 Long - Good
10/19 08:30 Short - Bad
10/19 12:15 Long - Good
10/19 13:30 Short - Good

Those are the last 10 trades that I see. Down 25 pips.
  • #5
  • Oct 21, 2007 12:49pm Oct 21, 2007 12:49pm
Quoting blueruby
I've been working on the EA and see some troubles. How do you filter false signals?

Going by MA cross for trend, waiting for candle to close with ADX > 35, enter at open of next candle:

15M EUR/USD chart:

10/18 12:00 Long - Good
10/18 17.15 Short - Bad
10/18 18:15 Long - Good
10/18 21:45 Short - Good
10/19 00:45 Short - Bad
10/19 03:00 Long - Good
10/19 05:30 Long - Good
10/19 08:30 Short - Bad
10/19 12:15 Long - Good
10/19 13:30 Short - Good

Those are the last 10 trades that I see. Down 25 pips.
The ADX needs to be above 35 AND the DMI also has to be above 35.
  • #6
  • Oct 21, 2007 1:06pm Oct 21, 2007 1:06pm
Quoting iandekoker
The ADX needs to be above 35 AND the DMI also has to be above 35.
isn't time of the day also important? i suppose you are not trading asian sessions are you?
  • #7
  • Oct 21, 2007 1:22pm Oct 21, 2007 1:22pm
Quoting iandekoker
The ADX needs to be above 35 AND the DMI also has to be above 35.
OK, we have different ADX settings. The trades you mentioned in the other post did not meet these criteria.

ADX 7 periods, applied to Close?
  • #8
  • Oct 21, 2007 5:21pm Oct 21, 2007 5:21pm
Quoting Orion602
isn't time of the day also important? i suppose you are not trading asian sessions are you?
yes time of day is also important. i dont trade asian sessions
  • #9
  • Oct 21, 2007 5:23pm Oct 21, 2007 5:23pm
Quoting blueruby
OK, we have different ADX settings. The trades you mentioned in the other post did not meet these criteria.

ADX 7 periods, applied to Close?
Yes adx 7 period applied to close
  • #10
  • Oct 22, 2007 12:22am Oct 22, 2007 12:22am
Here is my first trade of the week resulting in a 5 pip profit.
Attached Image (click to enlarge)
Click to Enlarge Name: gbp.gif Size: 42 KB
  • #11
  • Oct 22, 2007 12:49am Oct 22, 2007 12:49am
here is another 5 pip profit. ADX and DMI were above 35. Seems like good oppertunities present themselves when DMI is under 25 and then breaks thru 25 level heading towards 35 level and breaking above it.
  • #12
  • Oct 22, 2007 12:49am Oct 22, 2007 12:49am
oeps here is the chart
Attached Image (click to enlarge)
Click to Enlarge Name: gbp.gif Size: 15 KB
  • #13
  • Oct 22, 2007 1:05am Oct 22, 2007 1:05am
Nice going!

On the first chart, why did you not take the signal a few bars back from the one you took?

And, on the second chart, there were two previous signals that were not taken, and one more after the trade that was not taken.

The first 3 would have worked out to be 5 pips each, the last would have lost.

Also, my ADX values are nothing like yours --- +DMI has not gone above 35 since 3:25 GMT. Could you post your indicator?

Rob
  • #14
  • Oct 22, 2007 1:19am Oct 22, 2007 1:19am
Quoting blueruby
Nice going!

On the first chart, why did you not take the signal a few bars back from the one you took?

And, on the second chart, there were two previous signals that were not taken, and one more after the trade that was not taken.

The first 3 would have worked out to be 5 pips each, the last would have lost.

Also, my ADX values are nothing like yours --- +DMI has not gone above 35 since 3:25 GMT. Could you post your indicator?

Rob
Cause i just got up and was in the shower....otherwise i would have taken them...lol

I use ADX set to 7 applied to close
SMA of 4 and 11 both applied to close

I am currently looking at the following: DMI cross...then moves up to 25 level....then moves from 25 level up to 35 level and break 35 level.....so it seems to me that biggest move happens when DMI moves from 25 to the 35 level. Can anyone confirm this or is my imagination running away with me?
  • #15
  • Oct 22, 2007 1:26am Oct 22, 2007 1:26am
see what i mean on this chart???

SMA's havent crossed yet but DMI has moved above 25 level heading towards 35 level?
Attached Image (click to enlarge)
Click to Enlarge Name: gbp.gif Size: 17 KB
  • #16
  • Oct 22, 2007 1:47am Oct 22, 2007 1:47am
Quoting iandekoker
Can anyone confirm this or is my imagination running away with me?
First I need to get my indicator to look like yours. My settings are as you say, but the output does not correlate. Could you attach the actual mq4 file that you are using?

I manually backtested last night for a few hours, then accidently deleted most of my work, so I didn't get to create statistics... It appeared that MA cross was not relevant to results.

I do remember that on 9/11 there were 4 losers in a row, this would have been quite a hit, needing 16 winners to make up the loss.

Another thing I noticed, when a signal occurs, then DM goes back below 35 then back above, this is a VERY high probability trade. The second one ALWAYS profited, with very few exceptions.

The third setup during a given trend was not good odds, probably less than 50/50. Often the signal came when the move had exhausted.

I am working on an indicator which will help with manual backtest.

I did an EA, but for some reason it would not take the 5 pip profit in many places where it should have, so I've chucked it for now.
  • #17
  • Oct 22, 2007 2:06am Oct 22, 2007 2:06am
here was another 5 pip trade
Attached Image (click to enlarge)
Click to Enlarge Name: gbp.gif Size: 15 KB
  • #18
  • Oct 22, 2007 2:08am Oct 22, 2007 2:08am
oeps sorry it was suppose to read "white DMI crossed above 25 level and then moved to 35 level
  • #19
  • Oct 22, 2007 2:22am Oct 22, 2007 2:22am
Quoting blueruby
First I need to get my indicator to look like yours. My settings are as you say, but the output does not correlate. Could you attach the actual mq4 file that you are using?
Never mind, I got it. I didn't notice that you're trading pound and euro. That explains why my chart looks different!
  • #20
  • Oct 22, 2007 2:35am Oct 22, 2007 2:35am
Quoting blueruby
First I need to get my indicator to look like yours. My settings are as you say, but the output does not correlate. Could you attach the actual mq4 file that you are using?

I manually backtested last night for a few hours, then accidently deleted most of my work, so I didn't get to create statistics... It appeared that MA cross was not relevant to results.

I do remember that on 9/11 there were 4 losers in a row, this would have been quite a hit, needing 16 winners to make up the loss.

Another thing I noticed, when a signal occurs, then DM goes back below 35 then back above, this is a VERY high probability trade. The second one ALWAYS profited, with very few exceptions.

The third setup during a given trend was not good odds, probably less than 50/50. Often the signal came when the move had exhausted.

I am working on an indicator which will help with manual backtest.

I did an EA, but for some reason it would not take the 5 pip profit in many places where it should have, so I've chucked it for now.
i need a little help in locating the Indicators file in metatrader?
I managed to find the custom indicators file but ADX falls under Indicators and not custom indicators
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