Relative Strength Basket Trading System

Hello Eddie. In your post #1473 it's the indicator in the middle pane "JPY-Strong".

Regards
Max

OK..... My set up (in full)

Eddie

I take 500 pips on demo SELL JPY pairs per 10 min. crazy things

Thanks Govna!

maybe i miss something..but can you tell me what "steve's law" is?

LOL - don't take this seriously, it is a bit tongue in cheek........



Steve (who posts on here) came up with the correct (as far as I know) observation that that little red and white line keeps going up and down. Because of where I am "stuck" I need it to come down..... so I have knick named it "Steve's Law".......

Kind of like what goes up must come down!

This is currently a bad/mistaken trade that I know I should never have taken, but hey we all make mistakes.

Eddie

gotcha

For Important news, trade only after 15 minutes, pip can be made only from pullbacks or we should be fast enough to trade as soon as the number is published

The market was ranging all the day and the only movemnet so far is after NFP

It is better not to trade in raging market

The entry for theses tow trades was supposed to be “by the book”(with the exception of the 10-point difference!), unfortunately, I was dead wrong! Those were devastating. A sharp, continuous reverse occurred. Any comments are welcome.

Jeff - that is exactly why I introduced the 10 point rule.

It is so tempting to get in when all looks good but the difference in numbers is say 7 number (51 & 58).

As you will see from above I am in a bad trade for not following my own rule.. the reverse cost me 900 pips on the basket. This is slowly recovery but I was £3 away from a margin call at one point!

If it gets to 10 (maybe 9 with judgement) then it almost never reverses in a way that you cant close out some profit and finish ahead. Less than this can be risky.

Others may tell you that's not true - they simply haven't had it happen to them yet..... it is near impossible to second guess the market. If it were we would all be rich!

All you can do is look at the power behind the move and +10 difference seems significant.


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The trade I am referring to is almost back to the line but is devalued - so I need it to fall all the way to "0" to possibly break even......

I am tempted to hedge now, but the difference isn't +10 and that would be insult to injury......



Eddie

In addition to the 10-point rule, I think that above 90% (approaching or at Steve’s resistance) the entry can be very risky since the market might be in an oversold condition and a reverse (at any time) is due.
Jeff

Agreed.

Rule could well be "as passes the 50% line AND +10 AND above all others" but that's a very sterile approach.

trade coming back but almost a the bottom and a devaluation in the amount still leaving me -£26 (was -£96 at one point).

Eddie

Steve's Law came good although I had to hold my breath for 986 pip DD (£96.00)

.... days like this.....

Eddie

Just closed with my stop loss of +£11.00

Eddie

I've just spent a week going through this thread. It's totally brilliant. On my first attempt I just made 22% in about an hour. 45 trades, 5 loses, 1 break even.

What was I thinking calculating all the relative strengths by hand????

I don't think I've had so much fun in weeks.

Total Kudos to all you shining lights !!!!!!!!!

Strategy:

1. Waited for strong separation on RS_GROUP_JPY_V1.0
2. Confirmation with all arrows on KG_TREND_MTF_MULTIPAIRS_JPY
3. Double confirmation from HIGHEST_LOWEST_INDEX_V1.0
4. Trigger Entry with KG_JPY_BASKET_LONG/SHORT
5. Exit trades manually when they show a decent profit.
6. If they have retraced, be happy with breakeven or small wins.

Edit: On thinking about it again, i think the first "rule" needs some consideration. Although RS_GROUP_JPY_V1.0 did show strong separation, it was also under 50%. I'm not sure at this point whether the separation (acceleration?) is any more important than it's absolute value.

Edit2. And the brokers are going to make a fortune on spreads with so many trades.

Hey KG......

I work during the day, I will definietely get you some more detailed explanations and some charts for visuals over the weekend my friend.

See you soon

First of all, what got me looking at this is the theory that you take every trade when jpy stregth chart crosses the smoothing line I guess you could call it for lack of a better word. Trading in this manor is crazy IMHO. I took a look at that and I almost gave this system nay another look, and indeed left with no thoughts of returning when I happened to see something fuzzy. I look for fuz

My thought is just looking at the jpy for currency strength is not correct. Why...because when jpy is bullish, jpy strength is bearish. Which is opposite the USD which when USD is bullish, USD strength is bullish. Okay, this does not tell you anything until you put up the currency strength chart for both pairs.

So do that.....overlay the stregth chart for USD and the one for the JPY and get rid of the smoothing lines. Now you have an indicator with 2 lines. One, USD and the other JPY.

Okay...now if the JPY strength chart is going up, that means the the JPY is getting weaker. If at the same time the USD strength chart is going up, that means that the USD is getting stronger. What this tells me is that the USD and the JPY are fighting for position, and you don't know who is going to win. So now you have USDJPY pair doesn't know which way it is going to go because both are in a battle for dominace. To me this is not the time to make a trade, because ultimately now you don't know which one will win and when it will win.

So instead of making a trade here you continue to watch the USD and JPY strength indicators and all of sudden the most recent bar closes and the JPY strength chart is up and the USD strength chart is down. This tells you that USD is Weak and JPY is Weak....where is it likely that USDJPY will go.....my bet would be down. You just put the odds in your favor that you will make a winning trade. Or at least you will get some positive pips. Works the opposite way as well.

Are you starting to see the correlation here and why it is important to look at both pairs...unless you want to sit at your computer and take line cross after line cross? I sure don't.

Now...this still may need quite a bit of refining here because some times the trade will go opposite the USD direction, leading me to believe that you could use this bar as in "inside bar" and place a trade in eiter direction, but for sure the majority of the time it will go in the direction that you expect.

I will continue to monitor the situation and have up a special chart that shows this expicitetly and will do some forward testing and things like that to try to get some other rules together, but I think that you will see that all major trends start with both the JPY and USD giving either stregth or weakness at the same time...now it is just time to capitalize on the situation.

Hope this is helpful and I would love to hear any other thoughts on the matter.

damonl

P.S. I put both indicators on my gpyjpy chart and make my trades on that because it moves the most. If you were doing a basket I would open all basket trades when the entry for gbpjpy was triggered. But, once again, i would leave out chfjpy and cadjpy becaause the main pair is usdcad and usdchf, which would likely move with usdjpy. You would trade jpy crossings where the base pair has the USD as the denominator, unless you know something I don't......bottoms up...it's the weekend

Hehe. I have finally had a Law named after me. This has never happened before.

Eddie, I am so glad this trade worked out for you in the end. Granted, it is only a tiny account but none of us enjoy a margin call. Phew.

To latecomers to this tread, Eddie's joking reference to Steve's law is this: for the last two weeks the strength of the JPY has waxed and waned between two clear points on KG's KG RS GROUP indi. Look at the picture and the window one up from the bottom of the screen - the one with the single white wavy line in it.

This is merely the indi with all the other currencies blacked out, to make reading easier. The two yellow lines mark off the top and bottom of the range. Put most simply, going 'weak' at the top of the range (buying xxxJPY) or 'strong' at the bottom (ie selling xxxJPY) has been a guaranteed trade.

This sounds easy and has worked well so far, but the fly in the ointment is that JPY will break out of its range sooner or later. At some point, those of us blindly following Steve's Law will find ourselves with a basket being rapidly left behind by a currency rapidly moving in the 'wrong' direction'.

Or does it? What I mean by this question follows in a separate post. I am only just beginning to grapple with this.

In my last post, I wrote this:

"At some point, those of us blindly following Steve's Law will find ourselves with a basket being rapidly left behind by a currency rapidly moving in the 'wrong' direction'.

Or does it?"

Every day this week, I have followed the xxxJPY range highlighted by KG's KG RS JPY Group indi, expecting the range to be broken as some stage. This has not happened. OK, no reason it should not happen, just that it hasn't yet.

I would have been happy to accept this were it not for the performance of the long-term demo account I started last week. The point of the account is to take out a 'strong' (ie sell xxxJPY) basket in the direction of the longer term JPY movement and leave it alone to see what happens.

The demo started with $50,000. Trades are 1 lot IBFX mini - $1 per pip.

At the start of this week, the account was +$1,700 at the bottom of the range, +$2,700 at the top. By the end of the week, the bottom of the range is +$2,400 whilst the top is +$3,400 - an increase in profitability of $700.

So the profit has increased but the KG GROUP range remains the same. This confirms the indi is accurately reflecting the strength of JPY whilst not being swayed by actual market prices. Brilliant.

Surely it can't be as simple as buying xxxJPY at the top of the range and selling at the bottom?

Can it?

(I am not a rule maker, but this is my second of the day!)

Many people have PM me today about the "10 day rule". So in a nut shell I no longer trade unless the two numbers on the RS_Group have a difference of at least 10.

I have also started pulling out of winning baskets when it reduces to under 5. This may sound over simple but in conjunction with Steve's Law this has saved me from several bad trades - and one I got into by accident that nearly resulted in a margin call.......

So the 10 point is shown here:

Eddie