Yet another 50 SMA trading strategy

I am trading this strategy now and it looks very promising and is completly mecanical on the entry.

I have to look for a good exit strategy.

Necessary indicator :

50 SMA for 15M (faster period on longer TF)
Fractal (i use support&resistance indicator which is a fractal based indicator because it's easier on the eye )

Rules :

You wait for the price to pierce the 50 SMA then you wait for a fractal to develop in the direction of the break. For those who dont know what a fracal is, it is simply put a 5 candles cluster that looks like this.
http://i.investopedia.com/inv/articl...ractals_1r.gif

To be more exhaustive, a fractal is for a up fractal , a candle between 4 lower candles (2 lower candle, an higher candles, 2 lower candles)

For example, if the price breaks the SMA to the upside, you will wait for an UP fractal to develop above the SMA. You should not consider DOWN fractal is they are above the SMA.

All you have to do now is to put a pending order on the fractal level in the direction of the break. Your SL should be a fixed figure based on ATR or more simply take the previous reversed fractal and make a proper risk calculation.

Sidenote : you should not take a fractal break if you missed the previous fractal break in the same direction. If you missed the trade, too bad for you. You can still use fib retracement or sexy stochastics to enter a trade you miss but do not use fractal break for this.

Take profit :
- minimum should be 2:1 hence if you have 2 losing trades and one 1 winning trade you are breakeven but this system can offer much more than 2:1.
- Other option is to move your SL with the fractal forming but you might get stopped out when the fractal is near the SMA. But i will largely reduce the loss on your losing trades.
- Last option is to move your SL until you can start to use the SMA50 on the next TF and when you are in a very big move you could go as far as the move goes.

Look at the screenshot below. It is of course a best situation but 9 winning trades in 10 trades (i just figured that i forgot one trade at the very end which could lead to loss) over 4 days is not a bad winning percentage, is it ?

All we need now is a good exit strategy.

Tell me what you think

Addition : if there is a fractal formation before a break of the SMA but one of the candle of the fractal formation is break the SMA, you have a valid formation for an entry.

SMA50 seems to be fine one 15M but looks too slow on longer TF. You should use shorted period on longer TF. For example on H1 you could use 20 or less.

I was going to play around with the idea of useing maybe anouther SMA to see when to exit and possibly a macd type indicator or both . Not sure what type of settings would be good as of yet . Im waiting to get out of work but more food for thought .........Thanks

i would use fib targets for exit lvls then again I would use fibs for entry as well haha....but this is a great SIMPLE idea... OR you could use a 5 SMA and exit when it closes on the oposite side of the trade...or 13...Ill check some stuff out for ya

Thanx melpheos

just to make Pic more clear for all ( i hope i understand it as melpheos explain it ) if not please melpheos let me know to correct it.

Great Idea Try a 5 EMA to exit out & screen for bad trades




The MT4 has Fractals on it
go to
indicators
Bill williams
Fractals

you have a 1.2.3 break system very strong!!!


cheers

TEB

you are doing a 1.2.3 break very stronge

In fact entry would rather be on the previous fractal

BTW, what do you use for your graphs ? Paint is OK for quick and dirty but i'd rather use a quick and clean software

Paint again on EURCHF

If someone can show me one week where this strategy makes more losses than win ? I have difficulties to find one ^^

On USDCHF, not a very good win rate ratio but still good risk/ratio with at least 2 to 1 for the winning trades. The small trade might have ended in BE.

What are the rules for TP and SL in your backtests?

I will be honest with you, i have just found out this strategy and found the win ratio is very high.

I think a set SL and set TP depending on the pair should give very good result.

For Euryen for instance setting a 30SL, move to BE when 30 pips is reached then moving the SL from fractal to fractal should be OK.

Or simply use fibonnaci extension.

The more difficult point in ANY strategy is the exit strategy.

For exit strategy i'd suggest that we just move the stoploss at the next support/resistance for buy/sell. Either use fractal or your S&R indicator would do you good. Or for those who are bold enough just put your TP 3 times than your risk as default. This strategy do requires many pips as risks.

Hi My friend .. for present picture I use SNAGit program .. it is woderfull ..

Melpheos, thanks for sharing the trading method.

I'm looking at two possible ways of exiting the trade:

1) Exit trade on the close of a bar that causes an uptick in the 60 CCI when it is below/above 100.

or,

2) Exit on bar close below/above 5 ema.


I'm also considering something using the Keltner channels as an exit.

I'll play around with the numbers and maybe something else will work better.

Thanks Melpheos for sharing this method.

I had a few questions regarding entries.

1. Do we enter the trade at or 1, 2 ,3 etc.. pips below or above fractual resistence/support?

2. Have you tried this method with shorter timeframes like 5 or 1min.?

3. Any certain currency pairs perform better or consistent with this method?

Thank you again

[quote=Fxcash;2660665]Thanks Melpheos for sharing this method.

I had a few questions regarding entries.

1. Do we enter the trade at or 1, 2 ,3 etc.. pips below or above fractual resistence/support?

2. Have you tried this method with shorter timeframes like 5 or 1min.?

3. Any certain currency pairs perform better or consistent with this method?

Thank you again[/quote

1m is to much signal and to past
5m may be ok but ithink i will on the 15m may be 2 or 3 pair to look for

what do u say?

I think in certain market conditons it would even work on the m1 timeframe too. Definitely will work in m5.

I would suggest entering 2-3 pips above the s/r to help avoid false breakouts, and on smaller tf's you would look for small scalps of 5-10 pips. You can always take another trade on the next breakout as price moves.

if in next MT5 thay wold add the option to trade from the chart like fxcm have
than trading on the 1m will be fan and ezy
rihte now it is bad choise being ther

Thanks for the input, i will have a look, it seems nice

CCI looks in your example a good exit point. I will look into it

1) I need to do more backtest on that topic but 5-10 pips depending on the pair should limit de risk of false break out.

2) i would not advise to go under 15 minutes because the number of false breakout can increase dramatically but it will depend on the pair. I could be ok on £Yen but horrible on €£

3) backtest required but yen pairs looks nice. But market condition changes so who knows.

FOR THOSE WHO WHANT THE 5 M

TRY THISE!

EUR USD 5M
1 LOT 12 SL TP 10
1 LOT MOVE TO BRAEK EVEN AND TARGET OPEN

GBP USD 5M
1 LOT 17 SL TP 15
1 LOT MOVE TO BREAK EVEN AND TARGET OPEN

THISE FOR THE 5M I WILL LOOK FOR 15M AS WELL AND SHER ME ST UP

Live trade but small lots

edit : closed at +5 pips... Tomorrow the US market is closed anyway.