GU Intraday System

Hi to all my friends out there trying to learn to trade intraday.

INTRODUCTION

Going to purchase expert advisors from vendors without knowing the strategy that was built in the EA is like building a house without foundation. That is why many of them are percieved not to work because the working strategy is not understood. So I believe it is important that we are on the same page of the manual system before building an EA.

MY SYSTEM

I have developed a system which caughts the intraday swings of GU on the 30 min chart (can work on other pairs but works best on GU).

Now in creating the system, we must understand that the market ranges 70% of the time between support and resistance levels. Until there is a fundamental driver to move price to the next level, where new support and resistance zones are formed.

The second thing we must understand that a lot of traders use pivot points as supports and resistance, stops and exits. This we must include in our system.

We must also use an indicator to identify the markets turning points as it moves from support to resistance and back. Consequently, the Gann period 5 and SMA 5 would be quite approipate

We need an oscillator to identify over bought and over sold conditons where the market is likely to turn so we borrow swingman trix and a stoch set at 833 (actually the swingman trix is similar to the stoch and gives the arrow when the stoch crosses 50)

It is also important for us to know the Average Daily Range so we know when price has done its daily range and due for a retracement.

System Update 25/5/2010

Due to current market conditions we have adopted a 7sma and 7 gann setting for the 30min tf, which has proved very profitable. If you miss the initial entry, you can wait for price to pullback between the gann and sma to enter the prevailing trend or use the 5 min chart accordingly.

System Update 23/6/2010

The System has been consistent with the 7 sma&gann,trix and pivot points on the 30min tf

System Update 23/11/2010

The system is traded using the 8sma and 8 gann with the QQE indicator to filter trades on either the 15 or 30 min tf. Happy trading

System Update 23/11/2011

While the core of the system has proved robust intraday, the system has been adapted to the daily charts (Gann 8, SMA 8) and has been very successful with less intraday stress.

We must give credit to Cobra (THV4) and Swingman for using there indicators. Our chart should look like this below

THE TRADING SYSTEM

Buy Signal

price closes above gann and 5sma, stoch pointing upwards better when breaking above 20 and moving upwards. ADR indicator is green showing market has increasing ATR(good volatility) and swingman trix showing arrow up or increasing momentum to the upside.

Sell Signal

Opposite of buy signal

Risk Management and Targets

Enter with 2 minilots

First take profit target 40-50 pips or if you buy at pivot level target next pivot level.

Second take profit level when stoch reaches overbought or oversold and price is at major support or resistance level or has moved for example from Daily Pivot to R2 level. Of course if price closes below gann in an uptrend then you are out.

Stop Loss level. If going long the low of the candle stick that precedes the signal candle(the candle that closes above gann to give the buy signal)

TRADING TIMES

Works best from London open to 1100 gmt.

ADDITIONAL INFORMATION

This is the basic system there are other nuances to consider just like trading of the lower tf in the direction of the 30 min trend, buying of retracement, counter trend strategies when price bounces of support and resistance levels etc. But for now the basic strat is profitable. Finally do not risk more than 2% of your capital in a trade. Particularly becos if price hits my stop loss and gives a reverse signal I double on the signal(also part of the advanced strat.

Now the indicators and templates, before I discuss what the EA should have for my friend KijKij. You can use any pivot indy or get the THV pivots and THV info panel from Cobra's thread (THV)

Now for the EA Development we use the following parameters

GU 15 min TF

Indicators

Gannhilo set to 7 (The core of the system) (best suited for the 15 min chart)
MTF Gannhilo set 5 (60 min tf) as trade filter(should be optional)
Stoch 833

Buy Signal

Price closes above gann and stoch is rising
(take trade if gann 5 on 60 min tf is bullish-optional function)

Sell Signal

Price closes below gann and stoch is falling
(take trade if gann 5 on 60 min tf is bearish-optional function)

variable tgt and stop loss


But EA must close trade on price closing below Gann hilo after buy signal
or price closing above gann after a sell signal.

Risk management variable must be included.

Spread filter also.

Trade Time option (system best suited from 0700gmt to 1200gmt)

The system is best suited for the GU 15 min chart
with a take profit of 40 pips and emergency stop loss of 100 pips.

EA must be ready to close trade and take opposite signal. (This reduces your sl to something like 28-30 pips on opposite signal.

Additonal Features

The user input interface should in addition to the features already outlined for the GU setting contain the following
:
1. Gann setting variable. (determine the gann period you want the ea to use)
2. Time Frame Variable (determine the time frame the ea to trade)
3. Upper Time frame trend (determine the upper time frame to be used as a trend filter using the gann)
3a. Upper Time Frame Gann Setting (Gann setting for the upper time frame filter)

4. ATR (10) Percentage Stop Loss (eg. ATR 1.5 would mean the EA would set a stop 1.5 times the ATR (10) of the time frame is being traded.

5. ATR(10) Percentage Take Profit(the same as above)

6. partial close feature variable (to close half the position at a half close tgt and auto move stop to break even)

7. Partial close target variable( set the no of pips for partial close and percentage

8. Final Profit and Stop Loss( must have variable to use the partial take profit setting)

9. A feature should be included to either use the ATR feature or set manual tp or stop loss. However the overiding signal is if the ea gets an opposite signal. It will automatically close the position.

10. Time Delay Variable before taking the oppposite signal.

11 Risk Setting

12 Spread filter

13. Slippage filter

14. Trade Time Variable

Thanks okehiedon, well explanation.

I will try to code EA for your system. Just keep posting with your live trade images so that I can understand the system more.

In continuation of the trading system. I think it is appropiate we first understand the currency pair we trade, its characteristics, behavioural patterns and movement.

So we trade the system on the pound dollar usually referred to as cable.

I will like to start with a short story. There was this big time, very succesful speculator in the market who trades large orders capable of moving the market. He hired a technical analyst as part of his team since he was a fundamentalist.

So on a particular pair the tech was showing him the areas of supports and resistance and price projections with all the familiar technical stuff. He told the speculator to buy at a certain level which was quite a major support. Well the man asked him 'you sure I should buy here' the young man said yes. Okay to the horror of the young man the speculator gave a large sell order at that support level, price raced down as that order went through protective stop orders and the old speculator rubbed his hands as he took profit and then reversed the orders to go long with a grin on his face and smiling to the young tech.

Ladies and Gentlemen that story depicts the trading behaviour of the market makers that trade cable. Now let us take a look at an example on the 1 march 2010. Price had got to the physcological support zone between 1.5000 and 1.49655. where all the analyst where speaking of a reversal citing soveriegn buy orders at that level. It was also a point where GU had done its average daily range. I had just placed my long order at that point with a 50 pip stop loss expecting a bounce, no sooner had I completed that order, what happened next would better be imagined than experienced, the market tanked an additonal 176 pips in 15 min before reversing. Why so fast, somebody pushed the market and cleared all those protective stops thus triggering the massive down movement.

So the lesson learnt is that as much as possible do not place limit orders at support and resistance levels, cable has the tendency to over reach itself due to activities of market makers and stop hunters. Infact the last trade I posted with the system is a clear example. Wait for that reversal pattern and then follow on, do not anticipate price action. This is the basis for the formation of the system.

2. The london open is the best time to trade cable where there is momentum and volatility, infact you can hardly go wrong if you do not have a percieved notion of where price is going but follow the market makers as the lead price.

Understanding when to trade and what moves the market is sin qua non to be succesful at this biz

The 2am EDT (7 am GMT) German Dax futures market sets the ball rolling as it usually determines the trend on the euro open and could lead to a strong trend if the numbers are very strong or weak during london open.

At 10:30am GMT in London telephone bids at the gold and oil fixings take place, which sets the morning clearing prices for bullion and crude dealers that are then adjusted at 3.30pm GMT local time. At 11am GMT each day in London the British Bankers Association set the inter-bank LIBOR rates, something that sets the tone for lending rates between financial market participants. This adjustments tend to have large impact on cable price movement.

Of course the US open and the London fix are other good times to trade cable, though the euro is a better prospect and moves better when the US market is open and the 11am EDT European market close.

Now we must also understand that at the end of the U.S. session the pattern is for Asian markets to try and initially reverse U.S. trade direction, although the lack of volume tends to soon allow pairs to find and hold support areas. The European markets tend to move in the same direction as Asian trade


More often than not US traders usually reverse london trades if their has been a substantial movement.

I will be back later in the day to answer any questions. Please go ahead and post your doubts,contributions and comments

Okay lets get back to understanding the intricacies of the system with regards to the pair we trade.

I need to say this before now, I usually place limit orders at areas where I expect price to reverse, but after experiencing the over reaching effect of market makers and stop hunters around those levels, I needed to have an edge to help me around those areas, that is why I developed the system with the gann and 5 sma which helps visually to see what is happening around those areas.

The 5 sma provides an opportunity to enter on the retrace to it, when price breaks below the gann when going short or above the gann when going long. Watch what happens when price retraces to the area between the gann and the sma, provides good entry opportunities . Also I usually use the mtf stoch set to 60 min on the 30 min tf.


The gann actually helps you see the turning points and combined with understanding of candle stick reversal patterns and support and resistance levels you can enter a trade with the highest probability to succeed. Look at all those pin bars and engulfing patterns confirmed by the signals by the system in the chart below. This is the potential of the system

Remeber the basic system trades on the 30 min time frame. Gives a good visual presentation of the intraday swings.

However, I usually use the 15m tf to get early entries in some circumstances. Particularly if price has moved so fast in a partiuclar direction, comes of a strong support or resistance levels., You could get an earlier entry by using the 15 tf.

For those who think that the 30m chart is too slow for them, I suggest you can use the gann 7 and sma 7 on the 15 tf. This is another good option particularly during the london open.But beware there could be lot of false signals later during the day. The 30m tf reduces these fakes and you would caught some part of the cake as price moves on its way. As the say half bread is better than none

Now as I said earlier on the system tries to confirm when the market actually turns at support and resistance levels.

It is important to note that apart from those distinct levels you get on the 4 hr chart, the next important levels are yesterday's high and low and todays open, watch also how price reacts off the pivot levels. Why the work so well is because most traders that trade cable use them for price projection and stop loss. (Actually I have a system with fibs, yesterdays highs, lows and open)

You will normally see that in a uptrend or down trend price pauses at those levels before continuing or reversing, infact they act as bus stations where people get of and some come on.

Look at the chart below and see what I mean

Okay this morning at london open price was somewhat flat and we had that obvious gap, clearly market sentiment was bearish, based on the goldman issue and the fear of a hung parliament in the UK, I waited for price to pull back between the gann 5 and 5 sma and showed a continuation of the bearish trend below the 5sma and Support 3 and shorted at 1.5234. Chart attached

Yea the problem with this trade is the divergence showing with the trix. Also I had the RSI on this template I used they all tell the same story. The core of the system is the gann and 5 sma with the pivots, you can use any oscillator to confirm

Taken profits after price hits 1.5200 round number, pysch support after observing some stalling. The low was 1.5190(our 40 pips). Remeber the libor rates and crude and oil price fixing could reverse price at 1100 gmt, so we are out at 30 pips profit (price stalled before getting to our 1.5186 profit tgt).

One thing we can see clearly is that the gann 5 give us a perspective of the present momentum, you could have shorted that pair by going down to the 5 min in the direction of the 30 min gann, an mtf strategy.

So now I wait till the US open to see what happens. 30 pips in the kitty, could have been more if not for the fear of the presence of the gap which usually gets filled.

Now I want to discuss the stop and target of that last trade. According to the system our stop would have been above the candle before the signal candle that closes below the gann, however, that occured during the gap so we placed our emergency stop above present price action at 1.5267 that was some 33 pips and within our risk management. Our profit target was calculated using the Average Daily Range indy which gave us 47 pips at the time of entry, which came to 1.5183 and also a strong support area(that is why I used 1.5186). Well price got to 1.5190 and stalled so I got out at 1.5200.

Great explanations.

I am following with interest.

Okay we had the swing up and a buy signal which ran up 77 pips while I was distracted doing other things (how we need an ea that can trade this system properly).I have highlighted the entry with the vertical line. Price above gann and 5 sma, trix up arrow and stoch rising. Showing the potential of the system.

Presently I am looking for short opportunites