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4H 5EMA System

  • #1,401
  • Nov 21, 2008 10:50pm Nov 21, 2008 10:50pm
Quoting tonirai
Sterling and piptrees,
I think there's something wrong with what you guys said:

In that chart, we are short, and the last bar IS a setup bar to go long;
So Sunday at openning, we would enter short if it opens below the last candle's high;
We would enter long if it opens above that last candle's high.
(so roughly, the turning point is around the green line, not the red one).

Am I missing something?
Hi Tonirai,

Yes you are right, i was presuming that the market will head further south when I wrote that post. Again I shouldnt be so presumptous. But now that there is a set up for a long in the second last candle( like what Sterling mentioned in post #1395), I agree with you that we would go in with a long if the next candle on sunday opens above the high of the second last candle. Thanks for making this point!
  • #1,402
  • Nov 22, 2008 3:18am Nov 22, 2008 3:18am
Quoting stersuhr
I dont follow the 8H chart much, only what you post really but from the looks of things its seems to be a bit choppy. Its almost like once you finally get an entry the market is tired and turns around on you. I have yet to backtest the daily...Ill probably do that tonight.

-Sterling
I agree Sterling. I have done some backtesting to Jan 2008 and whilst the 8 hour TF seems to pick up the larger swings (which are less frequent), it is not consistently profitable on a monthly basis. Results I have are:

Jan -164
Feb +47
March +518
April -115
May -97
June -4
July -203
Aug +165
Sept +975
Oct +1736

Total for the year is +2858 with Nov and Dec still to come. The most profitable months seem to coincide with the GBP collapse starting in Aug. I will continue with the test till the end of the year and we will be able to compare with the 4hr, but needless to say there is a lot of ground to catch up over the next month or so and I am not optimistic. The 8 hour TF seems to miss most of the smaller, profitable trades due to retracements, that the 4 hour TF captures nicely (such as the last Buy trade just closed). That last trade was profitable for the 4hr but was a loss on the 8hr.
If there is ever any doubt then there is no doubt.
  • #1,403
  • Nov 22, 2008 10:53am Nov 22, 2008 10:53am
Quoting Kristo
...
April -115
May -97
June -4
July -203
...
Nice work. Unfortunately I do not like that it is a looser for 4 consecutive months and the bulk of the result is coming from some rare event. I mean I am not happy with the distribution and probability of the returns. I also have issues that this method might not work on other instruments. The risk is if the pattern of the GU changes.... This is the things I am trying to work on.
.
  • #1,404
  • Nov 22, 2008 12:16pm Nov 22, 2008 12:16pm
Not to be rude at all, but I think many people in this thread worry too much about how this method performs in other currency pairs. This system has, as Sterling said before, been "optimized" for GU. Yea, it is based on support resistance which is in every market. BUT the rules of this system have been tailored specifically for the GU. Going to another pair would mean changing the rules. The basic idea would be the same, but the EMA's could be different, the time frame might need to change ect. all to match the volatility and price action of the new currency pair. This is why it's utterly pointless to judge this system based on performance of other pairs.

Again I'm not trying to be negative or put any of you down, just throwing my observations out there. I think you're all great. Keep up all the good trading and discussion, and I hope everyone is making good pips with this system like I am
  • #1,405
  • Nov 22, 2008 12:18pm Nov 22, 2008 12:18pm
Quoting tonirai
Sterling and piptrees,
I think there's something wrong with what you guys said:

In that chart, we are short, and the last bar IS a setup bar to go long;
So Sunday at openning, we would enter short if it opens below the last candle's high;
We would enter long if it opens above that last candle's high.
(so roughly, the turning point is around the green line, not the red one).

Am I missing something?
I sad the second to last bar is a setup bar to go long....i dont understand what you missing, youll have to be more specific.

-Sterling
Founder of Day Trading Forex Live
  • #1,406
  • Nov 22, 2008 12:22pm Nov 22, 2008 12:22pm
Quoting bullrock
Nice work. Unfortunately I do not like that it is a looser for 4 consecutive months and the bulk of the result is coming from some rare event. I mean I am not happy with the distribution and probability of the returns. I also have issues that this method might not work on other instruments. The risk is if the pattern of the GU changes.... This is the things I am trying to work on.
Yeah im going to have to side with bullrock on this one. Its ok to have 1 maybe 2 loosing months in a year but 4 in a row is to much. I for my own mental well being need a system that comes back to positive territory fast and the 4H does that. I think there is a way to make it more profitable if someone really wanted to trade this on the 8H, I just havent put the effort into it as of yet. My first order of business is going to be working on the daily chart using this system.

-Sterling
Founder of Day Trading Forex Live
  • #1,407
  • Nov 22, 2008 12:23pm Nov 22, 2008 12:23pm
Quoting tlindle
Not to be rude at all, but I think many people in this thread worry too much about how this method performs in other currency pairs. This system has, as Sterling said before, been "optimized" for GU. Yea, it is based on support resistance which is in every market. BUT the rules of this system have been tailored specifically for the GU. Going to another pair would mean changing the rules. The basic idea would be the same, but the EMA's could be different, the time frame might need to change ect. all to match the volatility and price action...

Your exactly right!!!

-Sterling
Founder of Day Trading Forex Live
  • #1,408
  • Nov 22, 2008 12:30pm Nov 22, 2008 12:30pm
Quoting ziko123
thanks, I'm attaching the ea, i didn't implement the friday and 50% rules yet,
I don't feel comfortable trading this live as It lost money in eurusd, eurjpy, audusd, gbpjpy, usdjpy this month, I'm afraid these currencies can start making money using this ea any time and the gbpusd start losing money,
if you know the settings that are good for eurusd and usdjpy then please let us know

in the attached EA you can set the the pips past signal, EMA period, pips past stop,timeframe and spread ,also you can set trailing profit if you wish
First id like to say thank you for the EA, and the weekend issue im sure can be worked out. If the main mechanics of the EA are right the weekend issue should be no problem.

As far as the other pairs your right, for some reason the seem to be inconsistant and over time they are still profitable just not very much. Being that we know that we stict to the G/U. You seem to be a very warry person when it comes to new systems, and thats good. What I recommend is learn all the rules to the system fully. After you do that (you maybe have done that already) go and backtest the last 2 years. In the last 2 years we have seen EVERY type of market that can be throw at us. You will see that this system on the G/U is profitable in any market over the course of time. I think this will help you believe in this system more and take some of your very valid concerns away.

No could this system quit working? Well over the course of 6-12 months it could start to not make as many pips sure. As far as it just all of a sudden being a negative system thats not gonna happen. Take for example news. I started as a news trader, but over the last 6-12 months the same stratagies that were wildly profitable have begun to be break even. Its the same principal with this. Eventually it may start to be less profitable, but we WILL adjust to the market and adapt, using the same base system.

-Sterling
Founder of Day Trading Forex Live
  • #1,409
  • Nov 22, 2008 12:51pm Nov 22, 2008 12:51pm
Quoting tlindle
Not to be rude at all, but I think many people in this thread worry too much about how this method performs in other currency pairs. This system has, as Sterling said before, been "optimized" for GU. Yea, it is based on support resistance which is in every market. BUT the rules of this system have been tailored specifically for the GU. Going to another pair would mean changing the rules. The basic idea would be the same, but the EMA's could be different, the time frame might need to change ect. all to match the volatility and price action...
Ok. I accept that but that raises the issue of the GU behaving differently in the future thing. That might be the next week. At least when the EA is ready there will be the ability to scratch these concerns cause will be able to test for longer periods across timeframes.

Regards
BR
.
  • #1,410
  • Nov 22, 2008 2:05pm Nov 22, 2008 2:05pm
Quoting bullrock
Ok. I accept that but that raises the issue of the GU behaving differently in the future thing. That might be the next week. At least when the EA is ready there will be the ability to scratch these concerns cause will be able to test for longer periods across timeframes.

Regards
BR
I do agree with that partially. The market dosent just change over night. This is a world wide market and change takes time. As I've already said a few time, this system will need to be changed. The base of this system will never change, it is fundamentally sound. Small parts of it like the EMA #, taking profits, and other things like this might need to be changed. As far as this system now....it is very strong for the forseable future. I think we will be good for the next 6 months atleast. When something in this market starts to not be profitable it take at minimum 6 months from the first signs of decline. We have not seen the first signs of decline. If you backtest this system for the last 2 years you will see that with no change during that time this system still works. But if it does need change we will do that.

-Sterling
Founder of Day Trading Forex Live
  • #1,411
  • Nov 22, 2008 2:08pm Nov 22, 2008 2:08pm
Quoting stersuhr
First id like to say thank you for the EA, and the weekend issue im sure can be worked out. If the main mechanics of the EA are right the weekend issue should be no problem.

As far as the other pairs your right, for some reason the seem to be inconsistant and over time they are still profitable just not very much. Being that we know that we stict to the G/U. You seem to be a very warry person when it comes to new systems, and thats good. What I recommend is learn all the rules to the system fully. After you do that (you maybe have done that already)...

but what is the criteria that will make you decide that the system no longer work for gbp, is it 2 successive 1000 pips loss months for example ?
  • #1,412
  • Nov 22, 2008 2:14pm Nov 22, 2008 2:14pm
Quoting ziko123
but what is the criteria that will make you decide that the system no longer work for gbp, is it 2 successive 1000 pips loss months for example ?
Oh god no. Thats way to huge of a draw down. When things start to go downhill it starts slow. When this system has a 6 month average of +300 pips or less thats enough for me to start making it better. At that time I will start making small changes using the previous months to test on, and find the best combination of things Ive already mention. Also check your PM ziko.

-Sterling
Founder of Day Trading Forex Live
  • #1,413
  • Nov 22, 2008 2:18pm Nov 22, 2008 2:18pm
Quoting stersuhr
If you backtest this system for the last 2 years you will see that with no change during that time this system still works. But if it does need change we will do that.

-Sterling
I'm unable to find 1m historical data for gbp so that I can test last 2 years
  • #1,414
  • Nov 22, 2008 2:22pm Nov 22, 2008 2:22pm
Quoting ziko123
I'm unable to find 1m historical data for gbp so that I can test last 2 years
Why do you need 1M data for a 4H system, for the EA? An EA atleast on metatrader does not backtest as accuratly as doing it manually. If you take your time and do it a few times then average the results you will get the most accurate results. Yes this is more time consuming but also more accurate. And when it comes to real money im sure you will agree accuracy is the most important.

-Sterling
Founder of Day Trading Forex Live
  • #1,415
  • Nov 22, 2008 2:24pm Nov 22, 2008 2:24pm
Quoting stersuhr
I do agree with that partially. The market dosent just change over night. This is a world wide market and change takes time. As I've already said a few time, this system will need to be changed. The base of this system will never change, it is fundamentally sound. Small parts of it like the EMA #, taking profits, and other things like this might need to be changed. As far as this system now....it is very strong for the forseable future. I think we will be good for the next 6 months atleast. When something in this market starts to not be profitable...
Ok Sterling. Accept that. There is just this little thing that is always worried....

So if you remember a few posts back I have said the same thing that is the fundamentals are sound and relying on PA and market psychology. Or something like that? So I am completelt agree with that. I did not know the 6 months thing. So let us continue constructively. Figure out how to get rid of the whipsaws.

Regards
BR
.
  • #1,416
  • Nov 22, 2008 2:31pm Nov 22, 2008 2:31pm
Quoting stersuhr
Why do you need 1M data for a 4H system, for the EA? An EA atleast on metatrader does not backtest as accuratly as doing it manually. If you take your time and do it a few times then average the results you will get the most accurate results. Yes this is more time consuming but also more accurate. And when it comes to real money im sure you will agree accuracy is the most important.

-Sterling

thesting the EA with the H4 will no give you accurate results as the you don't know exactly what happened during the H4 bar, did the H4 bar break the previous bar high first and then reversed or did it break the previous bar low first then the high then the low again, look at the 16:00 bar on Nov 19 to understand what I mean
  • #1,417
  • Nov 22, 2008 2:32pm Nov 22, 2008 2:32pm
Quoting bullrock
Ok Sterling. Accept that. There is just this little thing that is always worried....

So if you remember a few posts back I have said the same thing that is the fundamentals are sound and relying on PA and market psychology. Or something like that? So I am completelt agree with that. I did not know the 6 months thing. So let us continue constructively. Figure out how to get rid of the whipsaws.

Regards
BR
Yeah im with you on that. Dont get the last post wrong I know you support this system. I do think there is a way to make this better and im all for working towards that. I just need the help of the room. No one person can test all the pairs and all the combinations on those pairs. I do think an EA will help but when you find the best combination on a EA I feel like a manual backtest will still be needed to confirm this.

-Sterling
Founder of Day Trading Forex Live
  • #1,418
  • Nov 22, 2008 2:35pm Nov 22, 2008 2:35pm
Quoting ziko123
thesting the EA with the H4 will no give you accurate results as the you don't know exactly what happened during the H4 bar, did the H4 bar break the previous bar high first and then reversed or did it break the previous bar low first then the high then the low again, look at the 16:00 bar on Nov 19 to understand what I mean
Im supposing your talking about testing with EA's? When I backtest and I see a bar I need to take a closer look at I go to the 15M chart and this is good enough to see weather it hit the low before going higher and vise versa. Could you just use 15M data for the EA backtest because thats good enough when you do a manual backtest?

-Sterling
Founder of Day Trading Forex Live
  • #1,419
  • Nov 22, 2008 3:00pm Nov 22, 2008 3:00pm
Quoting stersuhr
I sad the second to last bar is a setup bar to go long....i dont understand what you missing, youll have to be more specific.

-Sterling
Thanks for clarifying this sterling - so after a proper set up bar, even if the following bar breaks the ema by 5pips, it only counts as a new set up bar if it is higher (for a short trade) or lower (for a long trade) than the previous bar.
  • #1,420
  • Nov 22, 2008 6:56pm Nov 22, 2008 6:56pm
Quoting petersurrey
Thanks for clarifying this sterling - so after a proper set up bar, even if the following bar breaks the ema by 5pips, it only counts as a new set up bar if it is higher (for a short trade) or lower (for a long trade) than the previous bar.
Sterling was quoting me in that answer, and my doubt had nothing to do with what you're saying above (but anyway, you're right).


The question piptrees first posted (in which I disagreed with his & Sterling's view - and in which piptrees already agreed with my view) was if on Sunday openning, we would re-enter the previous short while gap is below the red line, and enter long if it is above it, on the chart he presented;

My view is that the last bar on the chart is a setup bar for a long, therefore we imagine our stoploss and buy stop on Sunday openning is above the last candle;
So on Sunday we would re-enter short if below its high (roughly around the green line), and enter long if above it... not the red line.

The chart was this one:
Attached Image (click to enlarge)
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