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EMA/RSI Trend Spotter system

  • #21
  • Jun 25, 2010 8:35am Jun 25, 2010 8:35am
Well, I got tired of watching the charts, so I set my trade to break even at 10 pips and went to bed. At its lowest, it hit 20 pips profit and then retraced back up to BE. I had a feeling that it wouldn't run just yet because it had been chopping on the M5 TF for some time. It has finally moved down nicely though in the early hours of the NY session. I did miss some good trades overnight, and this is why I feel an EA would be nice. This system will work, but if you can't watch the charts like a hawk (and I can't because I have a day job and a family), you miss most of the good moves.

-I've posted a couple of the missed moves overnight (Im on CDT in the U.S. btw)
Attached Image(s) (click to enlarge)
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  • #22
  • Jun 25, 2010 8:42am Jun 25, 2010 8:42am
Quoting flyer415
You have the fundamentals to a basic system here but there are major issues with the indicator itself.

I suggest that you step back and analyse your strategy first.

My understanding of the strategy:

long: Ema crossed up and RSI > 50
short: Ema crossed down and RSI < 50

This strategy can be found in numerous threads here and only the emas selected ever change.

An addition to the strategy might be:

Long: Higher timeframe RSI > 50 (for H4 trading use D1, for M15 use H1)
current timeframe RSI crosses 50
Emas are crossed up

Short is reverse....
Thanks for the suggestions. I know that EMA strategies are prevailent, but I also know if done right you can make great gains with these strategies. The point of this thread is 2 fold: 1) share the system and the indicator so that others can play around with it, and 2) get some suggetions to make it better, and a bonus reason is to see if we can't get it right, and develop and EA to go along with it. I appreciate your input and hope that others will continue to jump on board and tell me what they think.

-Maybe at some point we can talk a little more in depth your method of trading with EMA's = RSI
  • #23
  • Jun 25, 2010 8:59am Jun 25, 2010 8:59am
In reference to the repainting, I haven't personally seen any of it, and I have done spent some time with it. I practice alot in a strategy tester, and it never does it there as well. With that being said, this system is not perfect, and thats not the point. The point is to be profitable. Just like any other system, you will get false signals and you will have losses. The good news is, you should break even or take small losses, and every once in a while take your full stop loss, but all those scenarios will be covered if you stick to the rules and ride the break out trends. You are all free to add some rules and share with us if you see something that could improve the strategy. Thanks to those of you who are sharing. I hope you continue to do so!
  • #24
  • Jun 25, 2010 9:01am Jun 25, 2010 9:01am
sometimes it doesnt give you arrow signals. do you know as to why this is so? thanks
  • #25
  • Jun 25, 2010 9:02am Jun 25, 2010 9:02am
Quoting pdean123
Just happen to see this post. I have done extensive statistical studies using RSI and have found that overbought and oversold are myths. Certainly one can find instances of what appears to be such character but there is no scientific data that supports it. Further an MA or EMA at any position as a signal in combination with RSI will not give the trader anymore than a 50% chance to go long or short.

One possibility for RSI signals are divergences if a trader has statistical data as to when a divergence might occur. For example there were a combination...
Pdean123,

I would suggest the same with divergences (being myths that is). RSi and all other oscillator type indicators do nothing more then calculate the momentum of a trend based on calculations from price data. Note that it calculates momentum. So we know that momentum is slowing when the RSi value starts to decrease. It says nothing about price. In the case of a divergence price is continuing to go higher as the RSI starts to go lower or the momentum of the price data starts to decrease.

this is analogous to a car slowing but continuing to go in the same straight line. It is still moving in the same line or trend but at a reduced rate.

Momentum slowing as measured by RSI (or some other indicator) can slow for a lonnnngggg time before price actually reverses and is the reason why an indicator can remain in the mythical OB or OS regions.

the only thing that divergence really tells you is that momentum is slowing and therefore price velocity is slowing. tactical trading information from this could be to tighten your SL as an example. The trade may continue in its current trend or it may reverse. Tighten the SL allows you to keep more pips but if the trend continues then no harm.

As for the use of an ema..it is employed to show trend. You can do without it and merely use your eye and no harm. However, it suffices as a recognizable trigger point. The true trigger comes in the price action around the ema.

Again, use higher timeframe momentum as measured by something such as RSI, Stoc MACD, etc. Ensure lower timeframe momentum is in the same direction and then pull the trigger based on price action.
  • #26
  • Jun 25, 2010 11:29am Jun 25, 2010 11:29am
Quoting treadline
sometimes it doesnt give you arrow signals. do you know as to why this is so? thanks
It will do this from time to time, and I am not sure why exactly. Can any ciders explain this?
  • #27
  • Jun 25, 2010 3:48pm Jun 25, 2010 3:48pm
Ema cross signal.... 100-110


thanks techfan
Attached File(s)
File Type: mq4 EMA-Crossover_Signal.mq4   4 KB | 1,083 downloads
  • #28
  • Jun 25, 2010 4:27pm Jun 25, 2010 4:27pm
Quoting porfirio
Ema cross signal.... 100-110


thanks techfan

Thanks, I guess the coder took out the RSI and alert component? You said that this one does not repaint correct?

Lets try to figure out the optimal settings for this indicator

Thanks,
Ben
  • #29
  • Jun 25, 2010 4:46pm Jun 25, 2010 4:46pm
Seems to me that RSI helps in filtering trades. I guess that can be confirmed visually. It is nice though when the signal is plotted when RSI crosses too, makes it a little easier than confirming visually. Just a thought.

Ben
  • #30
  • Jun 25, 2010 4:53pm Jun 25, 2010 4:53pm
Sorry porforio. I didn't look at who posted the indicator. Another FF member is working on a modified version of the indie, and I thought it was him who posted the indicator. I just realized that it was you who posted, not him. Tha ks for your effort. I do still believe though (as I last stated) that RSI seems to be an important filter.
  • #31
  • Jun 25, 2010 5:28pm Jun 25, 2010 5:28pm
Techfan

Try this Sidus indy, it might help with your system
Attached File(s)
File Type: mq4 sidus_v3.mq4   4 KB | 1,078 downloads
  • #32
  • Jun 25, 2010 5:32pm Jun 25, 2010 5:32pm
I use something similar to this method on XXXJPY pairs being...

BUY

EMA(5) 15M > EMA(8) 15M && RSI(21) M15 > 50 && RSI(21) H01 > 50 && RSI(21) H04 > 50.

SELL

EMA(5) 15M < EMA(8) 15M && RSI(21) M15 < 50 && RSI(21) H01 < 50 && RSI(21) H04 < 50.

You need to be careful with HIGH impact economic news as it can be a real killer to this method.

Scoobs.
  • #33
  • Jun 25, 2010 9:55pm Jun 25, 2010 9:55pm
Just having a look at this and would like to offer a couple of thoughts.

1 If the larger ema was 120 instead of 110 then the crossover is by and large in the same area but is more clearly seen and defined. This may reduce intrabar painting issues and work better in ranging markets?

2 to strengthen the entry criteria you could wait for the cross and the rsi and then enter if and only if :

long: a bullish bar forms above the ma's and then breaks long
short: same idea, bearish bar.

This would need to happen on the first bar formed following the ema/rsi signal.

So in other words, only enter with PA confirmation.

This makes the EA a bit more complex but it would filter out some losing signals. A simple optional higher timeframe trend filter would also be a useful addition to it.

It would be interesting if an EA can be coded so that proper testing of it as a mechanical method can happen, wish I knew how.
All that matters is winning the week
  • #34
  • Edited 10:25pm Jun 25, 2010 10:06pm | Edited 10:25pm
instead of using an indicator to show the RSI arrows I suggest that you use a candle colouring idea. Look for an indicator called "rsi candles". make them blue if rsi > 50 and red if rsi < 50. now you have both the rsi concept and price action information in the candle itself. If you look at my previous post with the chart you will see that I have 6 different candle colours on it....Red, tomato, Blue, dodger blue, white, black.

So again using H4 as an example. Look at D1 RSI value..if greater then 50 then only want Longs on H4. Now on H4 we are looking for a blue up candle (with good price action such as Bullish outside bar even better) and the ema cross.

This is not what i do but i am explaining a concept.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: 2010-06-25_Daily_EU_April_2010.png Size: 80 KB
Click to Enlarge Name: 2010-06-25_Eu_H4_Short_trades.png Size: 97 KB
  • #35
  • Jun 25, 2010 10:16pm Jun 25, 2010 10:16pm
This is an example signal posted on the first page - as I understand it this is not a valid signal as the emas have not crossed at this point? Are the arrows simply marking the rsi <> 50?
Attached Image (click to enlarge)
Click to Enlarge Name: no signal.gif Size: 14 KB
All that matters is winning the week
  • #36
  • Jun 25, 2010 10:43pm Jun 25, 2010 10:43pm
The EMAs that you see on screen are the 100 and 110, which Techfan put on the charts to use as a trailing stop. As a default, the indicator uses the 5, 12, and 21 period EMAs for making its trading decisions. Thus it likely is a valid trade; there is just no way to verify it unless you also add those EMAs (and the RSI 50) to your chart.

Scott

Quoting lindsayf
This is an example signal posted on the first page - as I understand it this is not a valid signal as the emas have not crossed at this point? Are the arrows simply marking the rsi <> 50?
Prices are never too high to begin buying or too low to begin selling.
  • #37
  • Jun 25, 2010 11:15pm Jun 25, 2010 11:15pm
Quoting lindsayf
This is an example signal posted on the first page - as I understand it this is not a valid signal as the emas have not crossed at this point? Are the arrows simply marking the rsi <> 50?
Lindsay, that is a good question. I don't understand fully the interworkings of the Indicator as I found it elsewhere and am now attempting to develop a profitable strategy. Eagle FX is currently trying to get it recoded to get some of the bugs fixed, and I am not sure how long that will take. (To make a short answer long... LOL)

Although it seems to plot before the crossover happens, for some reason, it is able to get in early. I will also try with the 120 EMA as you have suggested.

-Also, this is a question for flyer, Where can we get the RSI Bars?

With all that being said, I believe there are enough good trading minds here at FF to make this into an iron clad system.

LET THE WINNERS RUN, CUT THE LOSSES SHORT!
  • #38
  • Edited Jun 26, 2010 8:07am Jun 25, 2010 11:25pm | Edited Jun 26, 2010 8:07am
I requested a programmer friend of mine to review the indicator from post #1 and he said it repaints:

"The original one scans signal from right to left, and plot arrow 3 bars to the left (giving an early sign impression) after signal confirmed. That's why its signal looks perfect."

He revised it so it should not repaint. All I have done with it so far is attach to a chart and noticed not nearly as many signals as with the original one - so, if you desire more signals, will have to adjust the settings. If anyone comes up with better settings, please post in the thread.
Attached File(s)
File Type: mq4 EMA_Cross_RSI_Trend_Spotter_v2.mq4   3 KB | 1,668 downloads
  • #39
  • Jun 25, 2010 11:28pm Jun 25, 2010 11:28pm
Hi..seems like thehenryfam has the answer to it - I hadnt realised that the entry signal was not based on the 100/110 but that it was just used as a trailing stop.

So entry signal is based on some algorithm based on smaller emas along with the rsi, and the it has a very loose trailing stop to allow for catching runners. Simple in concept and probably be able to make it work depending on some entry confirmation ( like I suggested in an earlier post) and good MM. Maybe a coder will come along and take a look. If that can happen Id like to help with testing.
All that matters is winning the week
  • #40
  • Jun 26, 2010 12:07am Jun 26, 2010 12:07am
Quoting techfan1128

-Also, this is a question for flyer, Where can we get the RSI Bars?

see http://www.forexfactory.com/showpost...60&postcount=2
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