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4H Crossover (Swing Trading)

  • #21
  • Nov 6, 2010 1:49pm Nov 6, 2010 1:49pm
Quoting Alihuzaifa
I have a question on what basis have u chose 21 and 89 moving averages?

thanx.
Good question. I started using the 21 and 89 a long time ago. They are commonly used moving averages on the longer time frames and hence are respected by a lot of institutional traders (the 21 and 89 are part of the fib sequence - 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987....to infinity).

To be honest I haven't tested any other moving averages on this system. Any suggestions?
  • #22
  • Nov 6, 2010 1:55pm Nov 6, 2010 1:55pm
Quoting Olarion1975
very interesting system, thanks for sharing.

One question: why did you abandon the EURCHF and USDCHF pairs?

Cheers,
Oliver
I have been waiting for someone to notice that. Very astute!

I spent about a month hand back trading the system and found that the EURCHF and USDCHF have recently been the least successful (long ranging periods followed by extreme volatility). I really wanted to narrow the system down to 10 pairs and so I threw those two out.

My plan continues to be to trade this for 10 years and build retirement. Because of that long-term commitment the day will likely come when I add/subtract additional pairs. The thing I haven't decided yet, and would greatly appreciate any suggestions would be under what circumstances do I add or take away a pair?
  • #23
  • Nov 6, 2010 4:21pm Nov 6, 2010 4:21pm
sburtonhome,
can you estimate from your losing trades which percentage was same type sequent trades?
  • #24
  • Nov 6, 2010 6:17pm Nov 6, 2010 6:17pm
Hi again,

can you shortly explain when you use the 89 SMA as stop-loss and when to use the previous H/L? Is it depending on the pair?

Thanks.
  • #25
  • Nov 6, 2010 7:41pm Nov 6, 2010 7:41pm
SB,

Probably one of, if not, the best presented method I've seen on FF. Very simple mechanical system (in no way meant to trivialize the amount of work put in), and well presented actual results. Thanks for sharing.

Just to contribute something, here is an indicator that alerts and/or emails you when two MAs cross (MAs set by you). I didn't program the indicator, but found it on FF. Keep us posted on your results. I really like your long term focus!
Attached File(s)
File Type: mq4 2MA Crossover.mq4   8 KB | 1,083 downloads
  • #26
  • Nov 6, 2010 8:23pm Nov 6, 2010 8:23pm
Quoting dargane
SB,

Probably one of, if not, the best presented method I've seen on FF. Very simple mechanical system (in no way meant to trivialize the amount of work put in), and well presented actual results. Thanks for sharing.

Just to contribute something, here is an indicator that alerts and/or emails you when two MAs cross (MAs set by you). I didn't program the indicator, but found it on FF. Keep us posted on your results. I really like your long term focus!
Dargane, thank you very much for your kind words. Also a HUGE thanks for sharing your indicator. I have been looking for exactly that. It will help with my goal of not having to spend an enormous amount of time watching the charts.
  • #27
  • Nov 6, 2010 8:36pm Nov 6, 2010 8:36pm
Quoting Orest
sburtonhome,
can you estimate from your losing trades which percentage was same type sequent trades?
I don't entirely understand the question. Maybe this will help: what I have seen over the last two years is that 45% of all trades lose. The average losing trade loses 0.66% of the total amount risked.
  • #28
  • Nov 6, 2010 8:43pm Nov 6, 2010 8:43pm
Quoting Olarion1975
can you shortly explain when you use the 89 SMA as stop-loss and when to use the previous H/L? Is it depending on the pair?

Thanks.
I, personally, no matter the currency pair, always use the h/l of the previous substantial move as my SL. However, that SL is more of a safety net. In only about 1/3 trades does that SL actually get hit. More often, the exit comes on a new 21/89 cross.

The rule is while in a trade that has not hit either the SL or TP: "In the event of a 21/89 cross prior to taking profit or getting stopped out, close the position on the close of the candle where the cross occurs."
  • #29
  • Nov 6, 2010 10:05pm Nov 6, 2010 10:05pm
What I meant was - some systems don't allow to make two consecutive trades of the same type. Let's say your first trade was Long (successfull one), now your next signal is also Long. What's the probability that trend would still go in your direction? Longer the trend - less probabilty it will continue, right? Maybe it would be better just to skip this second trade all together and wait for the opposite signal? My question was can you check your losing trades and see if significant percentage of them were those "second consecutive" trades?

Quoting sburtonhome
I don't entirely understand the question. Maybe this will help: what I have seen over the last two years is that 45% of all trades lose. The average losing trade loses 0.66% of the total amount risked.
  • #30
  • Nov 6, 2010 10:50pm Nov 6, 2010 10:50pm
sburtonhome,

On the pullback, must the price touch one of the MA's or is the MACD the only thing your looking at in regards to the pullback.

Thx,
todd
  • #31
  • Nov 7, 2010 3:04am Nov 7, 2010 3:04am
Quoting Orest
What I meant was - some systems don't allow to make two consecutive trades of the same type. Let's say your first trade was Long (successfull one), now your next signal is also Long. What's the probability that trend would still go in your direction? Longer the trend - less probabilty it will continue, right? Maybe it would be better just to skip this second trade all together and wait for the opposite signal? My question was can you check your losing trades and see if significant percentage of them were those "second consecutive" trades?
Maybe the following criterion from post 1 will help you:

6. Long entry Take-Profit is placed at a distance equal to the number of pips as the stop-loss (example: 200 pip SL = 200 pip TP). Once TP has been triggered, no new entry until 21/89 short cross.
Regards
  • #32
  • Nov 7, 2010 5:12am Nov 7, 2010 5:12am
Quoting sburtonhome
I don't entirely understand the question. Maybe this will help: what I have seen over the last two years is that 45% of all trades lose. The average losing trade loses 0.66% of the total amount risked.
if 45% of trades lose with this system, then how would one make any substantial profit ?
  • #33
  • Nov 7, 2010 5:41am Nov 7, 2010 5:41am
Simple. Of 100 trades taken, 45 lose.

But if the reward of the winning trades is GREATER than the amount risked, your net total is positive.

Theoretically you can even have a positive yearly performance even if only 30% of all trades taken win.

As I say, because the gain of the winning trades is far greater than the amounts lost by the 70%.

Hope that helps.

This is why traders on small timeframes often do not substantially outperform swing or position traders. You can have lots of trades with only 1:1 Risk/Reward - plus think of the spread - or a few swing trades with 1:3 or more ( Patience required ).



_____________
michael
Be like water.
  • #34
  • Nov 7, 2010 7:58am Nov 7, 2010 7:58am
Quoting Orest
What I meant was - some systems don't allow to make two consecutive trades of the same type. Let's say your first trade was Long (successfull one), now your next signal is also Long. What's the probability that trend would still go in your direction? Longer the trend - less probabilty it will continue, right? Maybe it would be better just to skip this second trade all together and wait for the opposite signal? My question was can you check your losing trades and see if significant percentage of them were those "second consecutive" trades?
Ok, I see what your saying. I was probably not real clear in explaining this in my instructions but you do only take one trade in a given direction for every 21/89 cross. So there are no "second consecutive trades."
  • #35
  • Nov 7, 2010 8:01am Nov 7, 2010 8:01am
Quoting todd960960
sburtonhome,

On the pullback, must the price touch one of the MA's or is the MACD the only thing your looking at in regards to the pullback.

Thx,
todd
I personally use some discretion in this. What I am really looking for is the pullback and then a continuation signal of the change. However, 95% of the time price returns to either the 21 or the 89. The only time it doesn't is when there is a strong move, price gets very far away from the 21 or 89 and when the pullback occurs it doesn't quite reach the 21.
  • #36
  • Nov 7, 2010 8:30am Nov 7, 2010 8:30am
Great presentation and a good, simple approach. Thanks for sharing.
  • #37
  • Nov 7, 2010 10:07am Nov 7, 2010 10:07am
Thanks for sharing your system, very well thought out and documented.

I think you could add to the profitability of your system by taking additional trades after entering your initial position. When you have a good slope of both the 21 and 89 MAs, you could enter either on the pullbacks to the 21 or price closing above/below the 21 or use your MACD to enter in the direction of the slope.These could be closed for smaller profits or allowed to go the distance depending on how close they are to the 21/89 crossover.
  • #38
  • Nov 7, 2010 1:18pm Nov 7, 2010 1:18pm
Quoting Bankshot
Great presentation and a good, simple approach. Thanks for sharing.
Thanks Bankshot for joining the conversation. I created this plan because I was really look for a simple, non-time consuming way trading to build a retirement in 10 years rather than putting the money in a slow growth fund (IRA, 401k, CDs, t-bills, etc). I will keep you guys in the loop on how it progresses. I will also share in the coming days my specific plan to give you an idea as to how I hope to build the retirement using the basic principle of compounding.
  • #39
  • Nov 7, 2010 1:31pm Nov 7, 2010 1:31pm
Quoting chazbo 3071
Thanks for sharing your system, very well thought out and documented.

I think you could add to the profitability of your system by taking additional trades after entering your initial position. When you have a good slope of both the 21 and 89 MAs, you could enter either on the pullbacks to the 21 or price closing above/below the 21 or use your MACD to enter in the direction of the slope.These could be closed for smaller profits or allowed to go the distance depending on how close they are to the 21/89 crossover.
The magic question that I struggled with as the plan developed was, how do I get the most out of every move? Putting the TP equal to the SL distance results in leaving a lot of pips on the table in the case of the strong, sustained trends. However, what I also found is that those types of trends are rare and so widening my TP, adding to my position, or trailing the stop actually lessened the profitability of the system.

Interestingly enough, I started with the tp being equal to the sl but then decided to see if it were worthwhile to increase the tp. To do this, I measured every trend over the last 5 years across 12 pairs and input that data into a complex spreadsheet. I created a "tp multiplier" that allowed me to then test unlimited tp distances. With a few exemptions (eurusd and gbpusd), the tp = sl outperformed any other setup.

Keep in mind also, that my primary objective is to make my trading as non-time consuming as possible and so entering, setting a tp/sl, and forgetting about the trade until the next 21/89 really serves me well. However, for those of you with more time to commit to your charts, there is undoubtable a few wrinkles that can be added that would increase your profitablility.
  • #40
  • Nov 7, 2010 3:17pm Nov 7, 2010 3:17pm
Sorry for the "stupid" question:

Does anyone know of a charting tool that is free on the web where I can view 4H charts? Most sites only show hourly , then daily.

thanks!!!!
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