Nb 1.0 trend trade system

Closed trades
Eur/aud +30
Eur/jpy -100
nzd/usd +32

Live Trades
aud/nzd +8
nzd/chf -17
Sells
aud/cad
aud/jpy
aud/usd
chf/jpy
eur/cad
eur/nzd
eur/jpy
eur/usd
gbp/cad
buys
usd/chf
usd/jpy
Totals for the day
-38
Totals for the week
+100

Rode the eur/aud for a win
rode the eur/jpy for a loss
auds and some euros look good as sells today
USD looks good as buys

Those of you concerned about where to place stop losses. If price is running below both lines 240 and 48 MA you can give your SL more room than if it is inbetween the 240 and 48 MA. also you can go with smaller tp between the lines. That i think can be clearly seen. I definitely hung in there too long with the Eur/jpy trades. I figure out some kind of rules later.

Hi,nanjingbob.
first,many thanks for your kind share.To me,the definetion of trend is excellent.
To show your respect,without your permission,I have translated your NB1.0 trading system into chinese.Here is the URL of article:http://my.fx678.com/thread-18832-1-1.html.
Many thanks & best regards.

Bob, you and Steve have both suggested not taking a trend trade if the 240MA and TMA are converging and indicating possible trend change, but not if they're miles apart. How close is too close? Should be different for each pair based on ATR or TMA or something. What's your opinion?

I will take any trade when price is below/above both. Once inside those lines then it is harder to decide exactly what price will do. If you take every trade visual backtesting shows you will win more than you will lose. What we need is more practice time inside those lines to get a better read of what to do. Basically I see two kinds of price action back to the 240MA:
1. a straight line back (thats the worst case scenario) or
2. a slow move to the 240 MA while price is ranging. The key will be if we can pick up any signals that separates one from the other.

If we can get a read even some of the time that will save us some SL.

Right now I am thinking tighter SL will solve some of the problem but I would like to see something better. I have an idea but wont be able to test it until this weekend.

Let me answer your question this way. Working on it. In theory if you follow the trend your winners should be bigger than your losers. If you can hit better than 60% then it is a slam dunk. However I hear your cry for more direction. I need to trade this and see how I react to live trading. It is always easier to trade backtesting but live trading creates the WHAT DO I DO NOW question. Now that I have traded this for almost two weeks my mind is a whirling again.

Most people who post ideas need to trade them for several days with many different currencies before posting the idea. You will see why it will or will not work.

This time, I only tested one stop loss. That is 1/2 the distance to the prior high/low swing. Instead, I played with two different ways to take profit.

First, is taking profit profit when price hits the opposite band. That's one of Bob's original recommendations.

The second way is to move to Break Even when you hit the opposite band, and then wait for price to come back to the original band. Let's take a long position as an example. You are in an uptrend. Price comes down to the lower band, and the 5 is close. You enter. It runs to the upper band, and you set break even. Now you let the trade run, and you exit either when you hit break even or when price next hits the LOWER band. I know this sounds crazy. You will always be giving up somewhere around 50-100 pips before you close the trade. But that's basically the way real trend following systems work.

So here are the results.

TP at opposite band:
272 Trades
112 Winners
41% Winners
.80 Expectancy

This is right in line with my results for EurUsd, and for EurJpy. Overall, these results are very consistent on these pairs, which for whatever reason seem very suited to this system.

TP when price comes back to the original band.
272 Trades
76 Winners
36 Break Even
Hard to say what the winning percentage is when there is Break even involved, but obviously, about 1/3 of the winning trades in the original sample now go for no profit at all. But:
.97 Expectancy

OK, so the difference between .97 expectancy and .80 expectancy can't be all that much, right? Not exactly. Using my benchmark of 2%/trade, over these two and a half years, a $10K stake would get you $574K using the normal take profit strategy. Letting the trades run, however, over the same period, the 10K stake would grow to $891K.

In other words, the .17 difference in expectancy, when compounded over these trades, results in a 35% difference in profitability. Again, there is a certain amount of fiction in this idea of trading. For one thing, you would have to pay the tax man twice trading this system, and that would take a huge cut off the potential profits (unless you had some other source to fund the 100K+ tax bill).

More central to the idea of trading, you would have to be willing to withstand big drawdowns to really follow the trend the way this test does. At one point, the equity drops for $235K to $181K. How many of you could keep your confidence in a system that quickly lost you $54,000, fully 23% of your capital? And then at the very end of the test, there is a drawdown from $1.071 million to $890K. Anyone think they could sit idly while losing $180K??? This drawdown is actually not as bad as the earlier one, in percentage terms, but I bet you it would feel worse.

I'm attaching a chart with three curves. The bottom one is with the regular take profit. The middle shows a strategy where half the position is closed at the regular point and the other half is allowed to run. The top curve is the pure "let it ride" strategy.

Hello,

Here is my current entry. Short AU. Stop loss and Take profit are on the chart. Will post result when it happens. Best of luck.

Short position triggered rather suddenly 3 hours ago after a spike from Oz employment news...

Same short as me...I was filled at 9945...SL is 9985; Current TP1 Target is 9855

HOWEVER...be careful with it because price is between the Daily Trend (Magenta Line on my chart) and Weekly Trend (240 SMA). Ideally you would want price to be below both (Like the short at 00:00 on 11.1.2011 on the chart.

I know people are calling it a Daily Trend, but a 48 MA on an hourly chart covers two days. By the way, same goes for the 240, which covers two weeks, not one. But that's just a quibble.

It's an interesting idea that trades are somehow less reliable when price is between the 48 and the 240. But I don't think anyone yet knows whether it is true. Also, its possible that there are more losers in that range, but that the winners are bigger. I think this is probably the next thing I'm going to test. It amuses me, however, to read people spouting these sorts of things as gospel truth, when they have no evidence, or almost no evidence, to support the claim.

A note on your stop loss and take profit on the AU trades: it looks OK, with about a 2:1 reward/risk ratio. I haven't tested this pair, so I don't have any feel for what the winning percentage is likely to be with that kind of stop. However, every pair I have tested shows that smaller stops will get you bigger profits, even though you lose more. If I were to take this trade, I would go with a stop of about 15 pips -- 20 tops. At 15 pips, I could get stopped out once, and then re-enter the trade if it still looked good, and still risk less than you are risking with the 40 stop.

Conversely, I also think you may be setting your sights too short with only an 80-90 take profit. I'm not as confident about that yet, but the whole idea of trend following is to let your winners run, and if you get your 80 pips, it will likely come in a two to three bar surge. That's not really following the trend.

thats exactly what i told in my last post about to let the winners run. the little difference what i do is stacking trades in the same direction. and take hedge positons. then i close only a part of my stacks. it is the same method that Mr. Graeme use in his equity millipede thread.

But it does not work with every pair. the balance between SL and weekly range has to be good. if you look at AUDJPY in the weekly chart from bottom to top it counts only 1500 pips. so you have to take 3 pip SL. it is impossible with this spread.

Can you post an image to clarify this? I'm really not grasping at all the logic behind this kind of method and i would like to understand exactly what are you meaning
It sound really interesting.

Good points well made. I use fractals to determine my stops and prefer to give the trade room rather than re-enter. Regarding targets, what unsaid was that Current TP1 is ... What that means is that I will start to scale out at the opposite band of TMA. I normally take a third off at the opposite bad. And then let the rest run

If you are risking 2% per trade only where does 23% DD comes from? Are you taking new trades while others are still open?

This trade resulted in a 39 pip loss this morning. Looking at the direction of the TMA, I see why the trade failed.

Out with a 50 pip hit/loss, unlike thedirtyserb, TMA direction was down/parallel for the short...

I took the same trade and have been stopped out for -40. Direction of TMA was parallel when I took the trade and any currency that can withstand such horrendous jobs numbers as the Aussie did earlier this morning is beyond the norms of the market. Right now there appears to be huge support for the Aussie despite structural weakness of the Aussies economy

I tried all of these trades today at one penny, stinking auds, but I used a tp of 60 and a SL of 40. I had 5 winners and 8 losers for -20 pips for the day. If the AUDS had gone in the right direction it would have been a great day, but they didnt. But I am intrigued by this formula When I take a lot of trades. I have seen that in reverse or ranging markets +60 seems to be a good number with most currencies. I use an MPTM to set my -40 and +60 on all my trades. Will try it again tomorrow but this time I will use SL -30 and TP +60 at 2 to 1 ratio and see what happens. For you trading purists remember I am at work all day and rely on EAs to handle my trades. I am not around to watch them like some of you do.

Closed trades
aud/nzd +60
nzd/chf +60
chf/jpy +60
eur/nzd +60
usd/chf +60
total +300

aud/cad -40
aud/jpy -40
aud/usd -40
eur/cad -40
eur/jpy -40
eur/usd -40
gbp/cad -40
usd/jpy -40
total -320

Totals for the day
-20
Totals for the week
+80

Bob, are you talking about the 240 and the 48? I meant the 240 and the TMA, as the TMA returns to the 240 indicating the possible trend reversal. If TMA is below 240 indicating DT, as the TMA gets closer to the 240 at what point do you wait or consider taking countertrend trades, expecting the trend to change to Up?