Simple Trending System

Hi Everyone,

I'm sharing a simple trend following system for feedback and improvement. If the phrase "the trend is your friend (until it ends)" is an axiom, then why don't we "keep it short & simple" (KISS)? There are several complicated TA combinations that try to determine the "next trend or direction". Analysis of price action, even fundamentals analysis, is for the purpose of determining the "next trend or direction".

If you were to observe virtually any given major currency pair over the last few years, even over the last 6 to 12 months, it would be obvious that the pair moved a few thousand pips in a given direction. Sometimes it would move a couple thousand pips up, then retrace a few thousand pips down. In hindsight it is very easy to spot the direction of a trend.

This is the essesnce of the system I'm sharing:

Base your entries on the daily charts, with the 4H as confirmation. If today's chart had a higher high and a higher low than yesterday's chart, then enter long. If today's chart had a lower high and a lower low than yesterday's chart, then enter short. Have a 1:2 risk:reward ratio. SL = 2 x daily ATR; TP = 4 x daily ATR. A smaller SL will be victimized by whipsaws. Beyond the visual viewing of the daily & 4H charts, use your discretion (i.e. wait for a pull-back) to determine the preferred entry point.

Although this may seem very simplistic, it will give you the edge needed to be consistently profitable. As a matter of fact, even a 1:1 risk:reward ratio will be very profitable. Of course, proper MM is necessary with this system. No order s/b more than 3% - 5% of one's capital.

Your thoughts and feeback is appreciated...

Thanks,

Walt

How do you use 4H for confirmation?

please, can you post a chart for newbies like me (for a better view of your sight) and maybe an overview of your performance ?

thank you in advance & for to share !

PS:


good question !

The 4H indicates the latest direction, whether a continuation of the given daily trend or a reversal of the given daily trend. For example, the eurusd may have a range of 200 pips down for a given day. However, the last two 4H bars indicate a reversal of the downward trend. Although such an occurence would be also reflected in the daily chart, the 4H chart gives a more precise indication. Naturally, one may also utilize the 1H chart for even more granularity. However, I personally would not go any lower than the 1H chart.

Walt

Notice the trend for the eurusd... that's over 1100 pips in a given trend from October 26th until now...

http://www.forexfactory.com/attachme...1&d=1212531310

Are you used ATR(14) ?
What pair are you used ?

Thx for sharing

This applies to any pair. Currently I'm using eurjpy, eurusd, gbpjpy, gbpusd & usdjpy. Whether or not the ATR is (14) or (10) or someother timeframe is not that important.

One other thing I neglected to mention... I also use two EMAs with the 4H & the 1H timeframe to confirm the direction/trend. I will enter about once per day, as long as the higher highs/higher lows or lower highs/lower lows are evident.

Walt

hello..
im new trader ..

what is the meaning of ATR..?

thanks..

ATR stands for Average True Range.

It's calculated by taking the maximum of these three possibilities for each candle:

1. The current High less the current Low.
2. The absolute value of the current High less the previous Close.
3. The absolute value of the current Low less the previous Close.

Then averaging them together like you would a simple moving average.

I'm suprised & a bewildered that no one has any critique to offer on this strategy...

Take it easy Jones, I'm still demoing =-D

I mentioned that my current plan is to enter a trade each day if the higher highs/higher lows or the lower highs/lower lows from one day to the next are evident. However, upon further consideration, perhaps it would be best to enter once the currency pair trends about 50% of the daily range, as long as the fundamentals support the given direction.

Any thoughts...


Walt

This is actually very similar to a high/low system that Alexander Elder laid out in his book, Come into my trading room; which, as he explained, is a very common trading technique among stock and commodities traders as it conforms to the basic principle of the Dow theory.

See also: http://www.forexfactory.com/showthread.php?t=4675

Also: http://www.forexfactory.com/showthread.php?p=19734

Can't go wrong by trading tried and true.

How do u get the art value its a line.

http://stockcharts.com/school/doku.p...true_range_atr

thanks Mudd... I'll study the references... Do you currently trade such a system, and are you successful with it?

Thanks,

Walt

I typically trade short intraday trades on the 15 or 30 minute charts, using an intermediate trend following system. With the recent market uncertainty, it makes it difficult for most traders to comfortably hold positions post EOD.

I would be sorely afraid to intraday trade with these market conditions. However, based upon the fundamentals, it appears that the European & British economy is weakening, whereas much of the fundamentals for the U.S. economy is strengthening. Also, the decline of oil prices helps the US $ and typically hurts the euro. Consequently, I would assume that at least over the next week or two (perhaps longer), the eurousd, eurjpy, gbpusd and gbpjpy will drop; while the usdjpy should increase. Furthermore, the charts are currently reflecting this reality.

THE MILLION $$ QUESTION IS... how long will it last???? "Thus, until then I'll follow the trend"

Walt

What happened to this thread?

Has anyone apllied this method with any kind of success? If so, for how long and what kind of results?

Insider

I think it would be better if you involve the chart, so you can describe the "higher high /low from previous chart..." more clearly

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