Newbie jdn74 trading plan...

Albeit I'm a newbie, I've noticed a correlation between a couple of very simple, standard indicators. It will tell me when to enter a trade and when to exit. I'd like to know what you think. If you can poke holes in it, then by all means do. I'm not saying its a "Holy Grail" but to me it seems like a good plan to stick by. There are times when it seems to fail. But it seems to me, more often than not, it works in my favor. Also, it seems more beneficiary to use a 15 minute window or greater in order to profit the best. I suppose you could zoom down to a 5 or 1 minute window in order to get a better idea on where to exit or enter. But for simplicity's sake, we'll stick with the 15 minute chart.

So here is the first screenshot. Can you tell me why I've chosen my entry and exit points based on these simple indicators? The arrows are buy/sell and the "X's" are close. I'm using pivot points, ADX, Stochs, and RSI. You'll have to contemplate what the green circles are for.

http://i90.photobucket.com/albums/k2.../awesome3a.gif

OK... the green circles are areas where we are watching for favorable entries, whether buying or selling. What do you suppose the red circles are for?

http://i90.photobucket.com/albums/k2.../awesome3b.gif

OK, the red circles are the actual entry points, whether buying or selling. What do you suppose the blue circles are for?

http://i90.photobucket.com/albums/k2.../awesome3c.gif

The blue circles are exit points.

This strategy is an alteration of an ebook I read called "FX Wizard," which seemed to be pretty popular in some circles. But it didn't seem efficient enough for me.

There are a few other things (or rules) you should observe:

1. For one, it doesn't really matter what Stochs says as far as overbought and oversold are concerned. Use RSI for that. Even then, the Stochs indicator is not a set in stone indicator for that as you can see in the first 3rd of this chart. When I tried this with the USD/JPY or anything less than a 15 min. chart, it seemed to be a factor. With the GBP/USD it didn't seem to matter, not saying that it won't ever. So observe it accordingly to your timeframe and/or currency pair to see if it is a factor.

2. As the FX Wizard states, don't ever make a trade if the blue, red, or black line in the ADX indicator is below 20, unless the blue or red line are above 20.

3. Often times if the blue and red line (DI+ and DI-) are separated (as shown in my diagram below) quite a bit (by 20 or greater) and Stochs are neck and neck during a trend, you can ride it out before your exit to make extra pips. Just make sure that the black ADX line is above 20. This isn't set in stone, but happens more often than not.

4. Sometimes if either DI+ or DI- rises above the black ADX line, you can ride out that buy or sell, regardless of whether or not the black ADX line is above 20 or not. Just make sure the DI lines are above 20.

5. Sometimes your closing spot in Stochs becomes your next watching area (compare the two previous posts and you'll find it).

6. Make sure to pay attention to your pivot points and trendlines. This will help to confirm or deny entires and exits.

So your basic rule is to watch for a potential opening in Stochs. When it is confirmed in ADX, you enter. Then you go back to Stochs to find your close. Confused? I hope not.

To explain it to a 3 year old, when the blue line goes above the red line
in Stochs, then wait for the blue line to go above the red line in ADX before you buy (as long as that blue line and black line are above 20). Then when the blue line starts to cross the red line in Stochs, close! You must pay attention to the chart in real time when this happens or else you may exit too late! The reverse is true if the red is above the blue.

You'll get a "feel" for it after close observation and may even refine the rules better than I have here. I'm sure I'm missing a few points, but you get the general idea.

http://i90.photobucket.com/albums/k2.../awesome3d.gif

OK, so poke some holes in it already! I'm ready to papertrade this simplistic model and see how I do.

I apologize if this has already been done.

Ciao!

I have went back and backtested this model and found it to work most of the time. If any of you have any refinements, please let me know. Its a weekend, so please test it yourself and let me know. Thanks in advance.

What role does the RSI play?

RSI is what I use to check an overbought or oversold condition. But again, its not set in stone as you can see on the first third of the chart. Sometimes its pretty useless. But I'll keep looking for patters and see if I can refine my rules a bit.

ADX can be tricky to work with.
The ADX line being over 20 doesn't always mean what it looks like it means.
It is slow to react.

If you're entering a long position, partly because the ADX is above 20, it could be above 20 because of a previous downtrend. Your long condition had nothing to do with it.

You might try requiring it to be above 20 and rising.

I will keep that in mind when I start to papertrade. Thanks.