This System Has Teeth

I've come up with a strategy that has some potential in my opinion. I'm looking for feed back and ideas so let's keep it positive folks. It does very well in my manual back testing. I have a request for an EA to Steve Hopwood but I know he's a busy man. Ok, I'll keep things as simple as possible.

- 4H chart (I like this TF)
- indicators- MACD (12,26,9) Apply to close and Stoch. (5,3,3) Price field set to close/close. I've been using the signal bar on the stoch.
- look for a buy trigger bar (will define what a trigger bar is below) when MACD histogram bar is above 0 with Stoch. value at 40 or less. Sell trigger bar when histogram is below 0 with Stoch at or above 60. So you're buying or selling at a pullback in price most of the time.
trigger bar defined- look for a candle with a higher high and higher low (for a buy trade) that is relatively short in total length with a body that is less than 1/2 the total length of the candle. It doesn't matter what color this candle is.. I use a 50 pips max. length for the more volatile pairs (GBP/JPY,GBP/CHF,EUR/AUD ect.) and 35pips for less volatile pairs. The shorter the candle the less risk you'll be taking in the trade.

Enter trade at 1 pip above trigger candle for a buy. If price doesn't break the high of the trigger candle within 3 candles, look for a new trigger candle. If histogram goes to opposite side of zero before the break of the high, don't trade. It's ok if Stoch moves above 40 (for buy) before you enter as long as it was at or below 40 at the close of the trigger candle. See charts below

Risk/Reward is a key. Set stop at low of trigger candle for a buy, high of trigger candle for a sell. Move stop to BE when 1:1 Risk /Reward is achieved. When 1:3 RR is achieved, set stop to 1:2 RR. When you reach 1:4 RR set stop to 1:3. When you reach 1:5 set stop to 1:4 ect.
Ok, now for an example. Will post more examples later.

I'm testing a modified entry method - post#49
Many thanks to Steve Hopwood. His EA is on post#65

One thing we may want to experiment with is the Stoch. filter. It filters out a lot of trades. A single level of 50 might work well. Take a sell when Stoch is above the 50 level and the opposite for a buy. Or we could say take the trade if Stoch had just recently retraced above or below the 40/60 levels.

Histogram below the 0 line. Stoch above the 60. Smallish candle length with small body. Lower high,lower low. Enter at break of this candle if it happens within three candles and it did for a profitable trade.

This a typo? higher high and a higher low instead?

thx,
todd

Thanks Todd,
I corrected my first post. Higher high, higher low.

Forgot to mention I'm applying the MACD to Close in the property settings and the Stoch is set to Close/Close in the price field setting. I added this to post #1.

Shouldn't be too hard to backtest this method. It leaves little room for discretion. How much back testing have you done?

Am I correct in that your trailing stop skips from BE at 1R to then lock in 2R only when you hit 3R? Other than that it looked like a 1R trailing stop.

Thanks, Tman nice and sweet starting to demo forward with less frisky pairs, EUR/GBP, EUR/JPY.
Why backtest so much when you can Demo forward?
Also like the 50 level on the Stoch if it works just as well it makes it simpler and more intuitive.

I'd like to add that this is a great Sys for a newbie, to train in the H4, follow to the T, check every 4 hours and if conditions are not present WALK AWAY and come back 4 hours later.
Also would be useful to add the time to next bar indy.
Good trading all!

Right. Skips to 1:3 locking in 1:2. I'm thinking once BE is locked in, you're giving the trade more room to run by waiting for 1:3. The EA would help decide if it was more profitable to lock in 1:1 at 1:2 or even to just take profit at a certain number of pips on a given pair.Would also show which pairs this strategy works best on. As for back testing, it took me all weekend to test about a dozen pairs for the last two months and I came up with a total of 731 pips over that period.

An EA would really cut down on time and effort on back testing. Plus we could fine tune the TP , Stoch levels ect.

In my modest opinion, go with this as it is for a while before the bell & whistles folks start filling up your screens with the little colored lines, etc. they love so much.

Thank you for sharing. http://www.forexfactory.com/images/icons/icon7.gif

thanks you for sharing...appreciate the simplicity...the fact u can bet a % of account size, the trailing stop...and the fact you can sleep...i will follow with interest...how much back research...results do you have???...did you do???? and how many trades accross 10 pairs does it generate weekly???

See post #5 for my back test results. You might see a dozen trades a week.

Something spiked this pair and got me but losses are smallish when you pick a small trigger candle. This one took 13 pips.

Edit: On second look I think the spike occurred before the break of the low. If that's the case, price moved to 1:1 and backed up for a BE trade. But going into this trade you knew the most you could loose was 13 pips.

Waiting for the break of the low of checked candle. If low isn't broken on next bar, I'll look for another trigger candle. Other conditions are met - Stoch. above 60 ( so you got your pullback), MACD is below 0 so trend is down. Trigger candle was small with small body. Lower low, lower high.

Sorry, here's the chart.

Last night this trade locked in at 1:3 and backed up to 1:2 for 86 pips.

GBP/CHF is a free trade now. Has reached 1:2 R/R