MTF Trend-Pullback Trading

I have learned a lot about trading -- both systems and psychology -- from the forums on Forex Factory. I came to this site when I had already been trading for a while and was able to find lots and lots of gems that I could incorporate into my own approach.

I believe in the adage that "the trend is your friend", and I also know from experience that it is impossible to pick precise bottoms and tops (there were times when I got lucky). So more than "buy low, sell high" I subscribe to "buy strength, sell weakness". For that I look for a trending currency pair to then jump into the trend when its strength increases, and get out to the sidelines when it weakens -- a very classical multi-timeframe ("MTF") approach as I understand it.

To keep things simple I prefer using the same indicators on the trend and entry timeframes. I do, however, experiment with different settings of the respective indicators, because I want the trend timeframe slow and stable to avoid whipsaw, the entry/exit timeframe fast and nimble to give me lots of trading opportunities.

Through posts and private message exchanges I have tried to give back and help others with their questions and learning process, just as I have been helped before. Now it is time to post a description of my own trading system, in the hope to get feedback and ideas for improvement for myself, and that it helps other new and experienced traders with their own approach. This is an ongoing learning process for me, too. Writing things down in the attached PDF document was a good experience already. Things can always be improved, so I am excited to see what kind of feedback this generates.

I had meant to reserve the next post for indicators and a description of the system, plus screenshots etc., and to edit that post when updates become available, to make it always contain the latest version of everything.

Same with post #4 for screenshots of my current setup, and post #3 for older indicators and document versions which have been retired but could still be useful. Post #3 may not be complete at all times.

But... I just found out that posts can only be edited for a certain period of time before they turn "solid". The first post, apparently, stays editable, but I am not sure about this now.

As long as I can edit this first post, I will put relevant attachments in here, maybe in a ZIP archive if they exceed the maximum number of seven. I can (as of Mar-1) no longer access posts 2 through 4 for editing.

To pre-empt the inevitable request , I am not going to post my templates, only screenshots for reference and custom indicators. If you like what you see, please build you own template. It will help to become familiar with the indicators and their settings and make sure that you can make the system your own. It also leaves freedom to modify elements that do not fit your own style.

I invite discussion of live trades, on the other hand I am not going to post my own account statements or comment on how the system has performed for me (it is good enough to post it here ). My own performance is no reflection on how the system would perform for anybody else. Being momentum-based, there are no clear alerts or trading signals, performance depends on the sessions and pairs traded, and the timeframe chosen. So I will limit my own input to cover pair selection, general experience with timeframe and sessions and so on. I want to share ideas, not do the trading for somebody and then have to feel bad for the inevitable losses that will be incurred from time to time.

This being said, I trade this live (not demo), full-time for a living.

Good trading, everyone!

Jesper

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Attachments:

1. currently none, refer to posts #2 through #4.

Highlighted posts recommended for reading:

1. posts #14 and #15; selecting pairs for trading: http://www.forexfactory.com/showpost...8&postcount=14
2. post #22; by-the-book live trade example posted by HammerNail: http://www.forexfactory.com/showpost...5&postcount=22

This post will be updated with the latest indicators and documentation.

Where available I will post *.mq4 source files for the indicators as well; if you are technically savvy you can then customize and compile them with your own settings. To my best knowledge all indicators posted here are non-commercial and available for free in the public domain.

Indicators should be saved into
"c:/program files/MT4_Folder/experts/indicators/". For MT4_Folder substitute the path on your PC (could be anything like "Meta Trader Alpari UK", "FXCM Trader", etc.).

If you experience difficulties downloading any attachments (Internet Explorer sometimes acts up and downloads attachments as *.php files, which are then totally useless; Firefox and Safari do not seem to have that problem), download them from the paper clip next to the page count in the top-right corner instead of from the post.

Last update:
28-Feb-2010, minor typo etc. corrections in the PDF document.
27-Feb-2010, added PDF document describing the system and custom indicators.

This post holds retired but still valuable indicators and system documentation.

Last update:

Currently empty.

Screenshots only, I do not post my templates.

Last update:

27-Feb-2010, initial upload (trend, entry, exit charts).

Credit where credit is due!

1. Two of the indicators attached above on Feb-27, the Gann High/Low and the Heikin-Ashi Alert, are simple modifications of otherwise available indicators.
   1. The "!Gann HiLo" is based on the "Gann HiLo ActivatorV2"; I only modified the colors.
   2. The "Heikin_Ashi_Alert" is based on the "Heiken_Ashi_Ma_T3-1", originally from this thread: http://www.forexfactory.com/showthread.php?p=3505021 ; I disabled the pop-up alerts (and e-mail alerts in the process) to only see the arrows.

2. "J-H2L2BREAKOUT" was posted here: http://www.forexfactory.com/showthread.php?t=221894 ; I use it "as-is".
3. I do not remember where I found the custom MACD indicator, I think it was on some thread on ForexFactory. It is attached "as-is"; I find the ability to customize colors very convenient.

The original versions of the two modified indicators are attached to this post.

Jesper

Hi jesperweber

Thanks for posting your system. As a novice trader (demo still), I've been searching FF for a system that employs the larger TF's. While I've come across many, yours appears to be straightforward and easy to follow...a good fit for for my limited experience. Could you tell me the TF's you use most with the system (trend, entry/exit)? Once again, thank you for posting this.

For those of you who are interested, I want to list some of the resources that have helped me, so you can put my system into context.

If I try to name the book that has been the most eye-opening for me, it would be Gerald Loeb's "The Battle for Investment Survival". It is old, dating to 1957, but a really timeless piece. If you have not read it, do not wait!

I also agree a lot with Dr. Alexander Elder's approach of waiting for a trend to clearly form. I read "Entries & Exits" and enjoyed his commentary.

My first encounter with Heikin-Ashi in place of candle sticks and an MTF system was in a Japanese book by a Japanese trader, Nao's "FX Revolution!"; I do not think it is available in English, the Japanese title is: "南緒 著、ＦＸ革命！". He talks about using Heikin-Ashi and Bollinger Bands for trend confirmation across multiple timeframes, using H4 for trend and M5 for entry, with H2 and M30 serving for confirmation.

The "Synergy" approach by Dean Malone is close to what I do (but I do not like working with custom indicators so much, and also do not want to combine Heikin-Ashi with Moving Averages -- they are too close in nature for my liking). A free PDF presentation is available for download, for example here inside the ZIP archive:
http://www.forexfactory.com/showpost...93&postcount=3

Here on ForexFactory I would like to highlight three threads.

1. forexlion's "Indian Guru Trading Majors" and his previous threads; he trades price action with his own custom indicators on MTF (mostly H1/M1) trend-pullbacks and just generally makes a lot of sense:
   http://www.forexfactory.com/showthread.php?t=195377
2. wormboy's "The WoRmHoLe"; essentially indicator-free, very good analysis on support and resistance areas and a generously shared trading journal:
   http://www.forexfactory.com/showthread.php?t=156630
3. tonyb123's "HA T3-1 System"; so close to what I am doing, it felt deja-vu when I first saw his thread (my Heikin-Ashi Alert indicator comes originally from his postings, many thanks indeed!):
   http://www.forexfactory.com/showthread.php?t=218962

All three are fairly long threads but definitely worth a read to grasp the concepts. I listed them chronologically based on when I found them, not to rank them.

Finally, attached is one of the most concise list of things to avoid in trading that I have seen. I picked this up some time ago on this forum, but it was not posted by the author. I have no idea who deserves credit for this, but if I ever need new wallpaper for my trading room, this will be it...

Good trading to everybody!

Jesper

Hi...thanks for opening the thread...and your systematic approach and insightful sharing. Lots for me to learn and digest. i am sure many will benifit

Hi Ed,

Welcome to the thread! Feels good to see the first post by somebody joining So let's hope that many more a coming to form a good group. Please never hold back with feedback, questions and suggestions just because you might think you are still learning. Any input will help the group deepen our understanding and to become better at trading.

Jesper

Hi Jesper, Just wanted to stop by and give you support as you have done for me. I would love to post a link of your thread on my thread, so more traders can get over here. I know they will learn a lot!! I won't post it until I hear from you. Tonyb123.

Hi Jesper. I have read many of your postings across FF with admiration. You have a measured, insightful but engaging manner which does you credit. As does your method here outlined. It is clear with an obvious awareness of the role of each component. In fact I found myself exclaiming "Gann HiLo - how have you managed to evade me for so long".. :o)

I sympathise with your comment about the benefits of writing down the method for the pdf document. There is something valuable and enlightening about committing something to print with a view for others to read. It's a similar phenomena to getting a trading plan written down. Many people think they've got it sorted in their heads but the extra step of 'formalising' it to paper teases things out..

Anyway, good luck with your thread. I have built myself some charts based on your method and I'll be sure to let you know how I get on.

Tony,

Thanks a lot! I just pm'ed you back -- please never, ever hold back posting here. You will be a very valuable contributor to have.

Our approaches being so close to each other, let's share and take it to the next level!

Cheers,

Jesper

Hello,

Welcome and many thanks for your encouraging feedback! I am looking forward to your sharing your experiences with this trading approach.

Have a pip-filled week,

Jesper

Good Morning!

I am posting some screenshots of H4 charts this morning to illustrate how I select which pairs to trade and which to avoid. The screens are for USDJPY, AUDUSD & AUDJPY, GBPUSD & GBPJPY.

 

1. USDJPY is in a clear and pronounced down-trend. Heikin-Ashi has been pointing down for the past four candles and it is moving below the Gann resistance line. Facit: Short positions. Looking closely, the price line has been retracing upward a bit, so the next reversal potentially is a good entry.
2. AUDUSD is in a clear up-trend. Heikin-Ashi turned up on Feb-25 and Gann resistance has been broken three bars back. It is now well clear of Gann support. Facit: Long positions.
3. AUDJPY is trending up as well, but lagging behind AUDUSD. It is being held back by the downward movement on USDJPY (given that AUDUSD and USDJPY have much more volume than AUDJPY on its own, I look on the yen-cross as a composite of the major pairs and only trade it if both major pairs move in the same direction). Facit: No trades as entering on AUDUSD and USDJPY give better entries.
4. GBPUSD has been trending down since Feb-23, however, the Gann resistance has been denied. Facit: No trades until the Gann resistance is formed again or otherwise a clear trend emerges. The pair is currently consolidating and a reversal could happen from here.
5. GBPJPY has been trending down since Feb-18 and gives a clear signal on Heikin-Ashi and Gann; the MACD is red and below 0, confirming this. Facit: Short positions with some caution because of GBPUSD above, but the trend seems to be sufficiently strong.

The above explain the filter only; actual entry signals for a trend on H4 would be generated on M30 or M15 charts, which I am not showing in this post.

I am looking at many more pairs and also different timeframes; please take the above for illustration purposes only.


All the best,

Jesper

Here I am showing EURUSD on different timeframes (H1 -> M5).

The H1 chart is apparently in an uptrend, but looking carefully you will notice it is consolidating. Heikin-Ashi has flipped and the Gann support dot has disappeared. The (optional) Stochastics and MACD are still in positive territory, above 50 and above 0, respectively, but pointing down.

That alone would be reason enough not to take the long trade on the Heikin-Ashi arrow six candles back, followed by the Gann flipping five bars back. The Stochastic indicator does not support this reversal. Remember that Stochastics are not optional for the entry, they are a must-have condition. In the case shown, they are keeping us out of a fake signal that would have been voided just one candle later.

Jesper

Timber!!!

Here is a good example for when to add onto a winning position. I was in from the green cross top-left in the chart, the position has given me roughly 100 pips in profit, some of which I have locked in.

I could not add on when the MACD came back below 0 (10:35 server time) because my first position was not profitable yet. After the slight stall in momentum where the MACD turned blue, I added when downward momentum piced up again and MACD changed back to red (I took the screenshot after I made the trade on a different platform, so it advanced by one bar; the trade happened on the second-to-last, red MACD bar).

This is very clos to major psychological support at 1.5000, so I will set a stop for the second position that is tight enough to lock in some profit for the entire trade.

Jesper

Jesper. Ohh, WOW.....!!!!!

Just been scanning this thread and its content brielfy at this stage, errr yeah WOW.

Very nice work, I will be looking at this closely. Jus wanna jump on and say how good it all looks for now though. I WILL have questions, hope you dont mind..!

Cenzo

Hi Cenzo, welcome to the thread.

I sure won't mind your question, I WAN'T them. That is the whole idea of putting this out here, for everybody to pull it apart, look at the pieces and put something better back together...

Jesper

LOL.. never mind on the second, see that in the pdf now.
RE:

Do you have a time frame combination preference yourself
ie 4hr 15m

And do you wait for the trend candle to close before looking
at the entry chart for entry or if everything lines up
during the signal candle do you go ahead to the entry
chart?

thanks

Brian

Hi,

I generally prefer trading after the candle has closed for a more reliable signal. However, e.g. the Heikin-Ashi alert is a re-painting indicator, meaning it will show a signal on any direction flip, even if it happens mid-candle. So sometimes I make a decision to take a more aggressive entry without waiting for the close, when and if everything else looks good-to-go.

I use two timeframe combinations. The majors and important JPY crosses on H4 -> M15, minor pairs with less liquidity on H4 -> M30. I also have a monitor set up to watch EURUSD and GBPJPY only on H1 -> M5; not much correlation between the pairs and good liquidity throughout all sessions.

Trades on the H4 are bread-and-butter, trades on H1 are mostly for lunch money; on those I often put a trailed stop quickly when they go into profit, without trying to ride out the whole trend.

Cheers,
Jesper