SwingRider - Simple, Low-Maintenance, Effective

The indicators are posted at the beginning of the thread - 2nd post, I believe.

DGC

Hi,

If at the close of the first bar above/below the swing line, the validator is negative, would you wait for the first bar on which it goes positive and then trade that bar? Or is the idea to only trade those first initial breaks of the line that are confirmed by the validator? That seems as if it will eliminate a lot of crosses. Now, that's not a bad thing, I know I can benefit from not overtrading.

R

Hi DGC!

I like your system...I am reviewing 5 MIN G/J chart, and I think this may work well with lower time frames as well.

Thanks for providing this...have you been trading it very long?

Bob in Wisconsin

If the SwingValidator is moving down when you get a signal, you should wait a few bars for the SV to turn up before trading. It's not necessary to abandon a swing just because the first bar that opens across the SwingLine is not validated. The swings we want will move far enough to provide profit even if we don't jump in right away.

I would, however, be cautious if more than three bars go by and still no validation... it would mean a rather weak swing with little or no market support, and may be the start of a consolidation period, which is useless for a swing trading strategy.

Also, if the first bar is very long (such as we sometimes see when news strikes) it could exhaust the swing before the SV gives the go ahead. In a case like that I would look for a pullback - often on the next bar - and then for the swing to resume its normal trajectory (with validation, of course).

I've been experimenting with various forms of the SwingLine indicator for more than a year, and I've been tweaking and tuning this particular system for a few weeks - demo trading only so far.

I'm trying to keep it simple and work with things the way they are rather than continually adjusting - it's just too easy to keep modifying and changing the system instead of learning how to make it work, which of course means tweaking and tuning my own trading behaviour!! I've stuck to the H1 timeframe for actually trading but I agree that other timeframes could be very profitable.

In particular, I've found the Yen crosses to be troublesome using 80, 80, 60 on the H1 TF (my default settings) so I'm considering using 60, 60, 45 for the GBPJPY and USDJPY and see how it goes. Going to a shorter timeframe in these markets is a perfectly reasonable approach, for those who like short-term trading... please let us know how it works for you..

Today was a good example of when market transition periods can confuse the normal trading patterns. There were a number of good looking signals from the SwingRider system, but less than half of them worked out well.

EURUSD: I took a modest (23 pip) profit in this one before the swing petered out and retraced to the prevailing trendline. It created a new higher high, but not by much, suggesting that a longer term downtrend may be forming in the near future.

GBPUSD: I bought the SwingLine breakthrough on this one, and it very quickly went south (with several of its friends) and I've spent the day watching it dither and hoping for a recovery. Currently I'm sitting at -17 pips; I don't see much hope for continuation of the up move, but I hope to keep losses small.

USDJPY: Here again I bought the upside breakout only to see it fail... I would have gotten in earlier had I used shorter periods on the indicators (as is the case with all the Yen crosses) so I'll tighten up to 60, 60, 45 from here on out. Meanwhile, today's wimpy swing created a lower high amid the prevailing uptrend, so we're seeing another sign of market momentum shifting.

USDCHF: Another winner (still running with a +40 pip stop loss in place) but also another failure swing, so market change is in the air.

AUDUSD: +22 pips and the up trendline is holding, but looking weaker. It may cross below the SwingLine within the next 8 to 10 hours, but there's so little room before it hits the TL that I wouldn't be too excited about taking the signal. On the other hand, the trend is weakening... more market ambiguity...

USDCAD: What a lackluster swing this was... very little movement before it started wandering sideways toward the trendline. Now it's sitting almost dead horizontal and right alongside the SwingLine.. if it stays there the SwingValidator will go flat too, showing classic consolidation. Stay out until real momentum appears. I bailed out at -8 pips.

GBPJPY: I gave this one a wide stop because of the risky look to the signal, and I ended up dropping all 100 pips of it.. OUCH! Keeping the trade size smaller really helped me here. Again, a touchy Yen cross, and again a market change apparent, as today gave a clear failure swing.

EURCHF: Same old story - weak swing, failure to set a new high, sideways movement, yada yada yada. -32 pips.

So, in addition to speeding up the indicators for the Yen crosses and keeping an eye on the trendlines for context, I am watching for turnarounds in most pairs over the next day or two... caution is advised, but not to much to take advantage of genuine quality signals when they do arrive. Calm always precedes a storm...

DGC

Hi DGC,
Very interesting! Thanks for sharing!

You're very welcome. Here's another contribution:

I've created an updated version of the SwingValidator that changes color to show whether it's validating an upswing (ForestGreen) or a downswing (Crimson). Also, I've taken to placing both the SwingValidator and the Early Warning indicators together in the same window, to create more space for the most important indicator, the price chart.

Here is a good example of a confused market - and why it's helpful to have colors in the SwingValidator...

In this chart we see that the price has broken the SwingLine according to the rules and the SwingValidator is moving up. This would seem to be a valid signal - but notice that the SV is validating a downswing (because it's red), not the upswing that we're seeing...

In addition, notice that the SV has been at a fairly low value since mid-yesterday relative to the typical values seen before that, and also that the SwingLine is very nearly horizontal and has been since mid-yesterday, with very little separation from the price line.

All these signs: SV showing short while price moving up, SV sitting near zero for several bars, SL moving sideways, price hanging close to SL - all indicate a confused and congested market. Under these conditions any signals should be viewed with skepticism. I would wait for a good movement of price away from the SL, attended by higher values in the SV, before I would risk money here.

DGC wrote: Also, I've taken to placing both the SwingValidator and the Early Warning indicators together in the same window, to create more space for the most important indicator, the price chart.

How do I do that?

First you need to open the Navigator window (Ctrl/N), then open the Custom Indicators section of the navigation tree. Drag and drop the Early Warning indicator to the window containing the SwingValidator indicator. That's all it takes!

DGC

Oh that's so simple! Thanks

Hi DGC!

Just discovered your thread. The indicators are great and the method outstanding.
If you don't mind, could you please make the EarlyWarning indicator period-adaptiv. It's very simple just put these lines into the code in front of the for-loop:

if (Period() == 5) iPeriod = 720;
if (Period() == 15) iPeriod = 240;
if (Period() == 30) iPeriod = 120;
if (Period() == 60) iPeriod = 60;

Best regards

What's the normal stop loss for this method?

Part of the value of this system is that the timing seems to work pretty well across TFs with the same period values. This way, each TF is seen in the context of its own bars. If you want to add the above code to your own version, please let us know how it works for you. See below for the source code.

DGC

I haven't tried to define a general stop loss because it's really a matter of personal preference and comfort level. Also, it would need to be determined individually for each currency pair, and should be adjusted to fit recent price action.

The only real advice I could give is to keep the stop fairly wide (usually wider than you really want to) and reduce the trade size accordingly. One of the most prevalent mistakes in trading is the tendency to set stops too close and end up losing money on what would ultimately have been a winning trade. Try to think of a stop loss as a seat belt... it can't keep you from having an accident (bad trade decision) and it's not supposed to keep you from being injured (losing money); it's purpose is to keep you alive (protect your account from bankruptcy) so you can heal from your injuries and continue on. Think about it...

DGC

Hi DGC, just a request, would it be possible to also change the color of the Earlywarning indicator, to say from Blue for an up move to Red for a down move. It would be better for visualisation.

tx

Hi DGC!

Thank you for the source code. I think that this indicator gives best (text-book) signals in case of trend change in 30 min TF, thus displaying a zero-line reject at a lower high in price from below zero (at a higher low in price from above zero).

Another idea: the "SignalLine" could be exchanged by "HMA" IMHO.

Best regards.

Looks like a great system you have here, DGC!
Desperate to test it.
Hijackxx

Yes, it is in fact a slimmed-down specialized version of the HMA. I gave it a new name so it wouldn't be confused with the standard version that's floating around out there. Because the parameter structure of the SwingLine differs from that of the HMA some other indicators and EAs that call the HMA could get confused if they called my version thinking it was the original. Mathematically, they are the same.

DGC