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Simple trend trading strategy development

  • #1
  • First Post: Edited 10:39am Mar 24, 2012 10:15am | Edited 10:39am
THIS IS A NEW STRATEGY IM WORKING ON TO WORK ALONG SIDE MY "BUY SELL LINE TRADING STRATEGY"

We are looking for a nice trending pair and ideally price action to form at a retrace point.. the longer a move continues without a retrace the weaker the signals get... A++ set ups are a nice zig zag trend

RULES

TREND

BELOW 50 SMA CAN ONLY SHORT
ABOVE 50 SMA CAN ONLY LONG

AVOID FLAT MA...

TIMEFRAME

H4 ONLY

PRICE ACTION SIGNAL

INSIDE BAR... CANDLES RANGE MUST BE COMPLETELY INSIDE THE HI-LOW RANGE OF THE PREVIOUS BAR (called the mother candle)

ENTRY

ENTER 1 PIP BELOW THE LOW OF THE MOTHER CANDLE (for shorts)
ENTER 1 PIP ABOVE THE HIGH OF THE MOTHER CANDLE (for longs)

STOP LOSS

1 PIP BELOW THE LOW OF THE MOTHER CANDLE (for longs)
1 PIP ABOVE THE HIGH OF THE MOTHER CANDLE (for shorts)

POSITION SIZING

A STOP LOSS HIT SHOULD EQUAL 2% OF ACCOUNT BALANCE FOR EVERY TRADE, ADJUST LOT SIZE ACCORDINGLY

TRADE MANAGEMENT

MOVE STOPS TO BREAK EVEN AT HALF RISK i.e if your stop is 80 pips at +40 you move to break even

TAKE PROFIT AT 1/1

if price is still moving strongly in your favour trail stops behind the high of the last closed H1 candle until stopped out.

INSTRUMENTS

ALL THE MAJORS, AVOID ANY OBVIOUSLY RANGING PAIRS, USE YOUR EYES AND THE 50 SMA.
tradewith60
  • #2
  • Mar 24, 2012 10:22am Mar 24, 2012 10:22am
TRADE EXAMPLE EU H4
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tradewith60
  • #3
  • Mar 24, 2012 10:30am Mar 24, 2012 10:30am
More trade examples on au h4

all valid trades marked
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tradewith60
  • #4
  • Mar 24, 2012 10:36am Mar 24, 2012 10:36am
n.b

this is very nearly a complete strategy, the only element that needs resolving is invalidating the set up.. I'm working on it and will post results in forward testing...

For now im thinking a long trade set up where price trades below the low of the mother candle will be the answer... Not 100% yet...

Input appreciated...
tradewith60
  • #5
  • Mar 24, 2012 11:03am Mar 24, 2012 11:03am
MORE.... NZ/YEN H4
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tradewith60
  • #6
  • Mar 24, 2012 11:36am Mar 24, 2012 11:36am
Quoting 60minuteman
MORE.... NZ/YEN H4
Hi 60,

It is official, you never sleep.......

I´m with you here too......see you on skype
  • #7
  • Mar 24, 2012 11:38am Mar 24, 2012 11:38am
Quoting Caillou
Hi 60,

It is official, you never sleep.......

I´m with you here too......see you on skype
I want all the pips
tradewith60
  • #8
  • Mar 24, 2012 4:12pm Mar 24, 2012 4:12pm
Hi 60MM,

First of all, congrats with your 'Buy Sell Line trading strategy' !
I'm really a fan of the strategy and having already some good results.

Also this idea looks very interresting.
Here are some charts where i searched for possible entry's.

The only thing i've changed is the entry.
I entry 1 pip above the high (for BUY) Or 1 pip Below the low(for SELL) of the inside bar (Confirmation candle) and not the mother candle...
I think there will be a lot more trades and bigger runs.
What you think ?
Looking forward to further testing ;-)
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  • #9
  • Mar 24, 2012 4:29pm Mar 24, 2012 4:29pm
More examples.
Also on the Daily chart it looks good...
With the Moneymanagement you descriped in post #1 i'm convinced this will work !
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  • #10
  • Mar 24, 2012 4:31pm Mar 24, 2012 4:31pm
Quoting Thibaut88
Hi 60MM,

First of all, congrats with your 'Buy Sell Line trading strategy' !
I'm really a fan of the strategy and having already some good results.

Also this idea looks very interresting.
Here are some charts where i searched for possible entry's.

The only thing i've changed is the entry.
I entry 1 pip above the high (for BUY) Or 1 pip Below the low(for SELL) of the inside bar (Confirmation candle) and not the mother candle...
I think there will be a lot more trades and bigger runs.
What you think ?
Looking forward to further...
yeah that was the other candidate for entry line, will have to forward test, i usually do 2 months trading in a demo account to try these things out, i find it gives more realistic results... will see how it goes this week..

what jumps out at me visually is the best trades are definately after a retrace, so probably need to be smart and sometimes patient rather than diving into every set up... again, results will tell. For now I will take every valid set up and journal the results
tradewith60
  • #11
  • Mar 25, 2012 6:59am Mar 25, 2012 6:59am
It's a classic trend following pattern. I like the idea of the opposite break invalidating the trade. That plus the 50 MA should provide a good filter. I'll be following along with you on Skype.

You could also use this same entry technique aligned with a longer term trend, such as the daily or weekly. Set them to break even and just let them run and run, possibly adding on to the positions at the next signal. That would make a good simple strategy for long term traders. I've been toying with running two strategies side by side. An intraday quick in and out and something to let me hold small positions for weeks on end (been reading the equity millipede thread recently). This may be the system to suit me, as it means I can run both off the same clean H4 charts.

Hmmm...ideas, ideas.

PB
  • #12
  • Mar 25, 2012 7:03am Mar 25, 2012 7:03am
Quoting 60minuteman
yeah that was the other candidate for entry line, will have to forward test, i usually do 2 months trading in a demo account to try these things out, i find it gives more realistic results... will see how it goes this week..

what jumps out at me visually is the best trades are definately after a retrace, so probably need to be smart and sometimes patient rather than diving into every set up... again, results will tell. For now I will take every valid set up and journal the results
I've noticed the best trades are often the first and second after a retrace. So the first one comes very close to the MA followed by another entry, say ten or fifteen bars later. After that price is often far away from the MA and likely to move back towards it, making the setup less likely to succeed.

PB
  • #13
  • Mar 25, 2012 7:32am Mar 25, 2012 7:32am
Quoting pixelboy
I've noticed the best trades are often the first and second after a retrace. So the first one comes very close to the MA followed by another entry, say ten or fifteen bars later. After that price is often far away from the MA and likely to move back towards it, making the setup less likely to succeed.

PB
yeah pixelboy, that first retrace after an impulse move is golden, and the equity millipede stuff to build positions is great too...

The idea of a daily and intra-day strat is something im working on too..
tradewith60
  • #14
  • Mar 25, 2012 10:45am Mar 25, 2012 10:45am
Quoting 60minuteman
yeah pixelboy, that first retrace after an impulse move is golden, and the equity millipede stuff to build positions is great too...

The idea of a daily and intra-day strat is something im working on too..
I think I'm going to test the following:

1. For each currency pair, define the weekly trend and use that as the long term direction. Nothing fancy in defining this. Just looking at the last twenty bars and seeing if it's up or down.

2. Use the three H4 price action signals to enter trades (engulfing bars, top and bottom quarter close plus the inside bars we have here)

3. Trade a 'large' lot size with a 1:1 R:R (breaking even at 50%). Large lot size meaning 0.5 to 1% risk.

4. If the signal is in the same direction as the long term trend, also open a much smaller position, say 0.1% risk with perhaps double the stop loss. This would be opened with no take profit and be allowed to run for a couple of hundred pips before the stop was moved the BE.

5. Keep adding to these positions and see how they go.

The hard thing with any trend trading is knowing when to exit. Maybe a break of the weekly trend line? Or after a certain % gain the stop could be trailed under the daily MA by a proportion of the ATR. I read a nice strategy recently which trailed the stop 50% of the ATR under the 10 period daily EMA.

PB

Edit: probably also sensible to incorporate a rule which says that a new position can't be added to a pair unless the previous position has already moved the BE.
  • #15
  • Mar 26, 2012 5:30pm Mar 26, 2012 5:30pm
60mm,
Here's an Inside Outside bar indicator.
Looks better with bar charts.
Attached File(s)
File Type: ex4 IB+OB.ex4   4 KB | 1,674 downloads
  • #16
  • Mar 26, 2012 5:47pm Mar 26, 2012 5:47pm
Quoting AlexC
60mm,
Here's an Inside Outside bar indicator.
Looks better with bar charts.
nice one... need a secretary to check all these bars
tradewith60
  • #17
  • Mar 26, 2012 6:01pm Mar 26, 2012 6:01pm
Quoting 60minuteman
nice one... need a secretary to check all these bars
If you zoom in though, you'll clearly see alot of opportunities.
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  • #18
  • Mar 26, 2012 6:03pm Mar 26, 2012 6:03pm
Quoting AlexC
If you zoom in though, you'll clearly see alot of opportunities.
thats cool, just re-inforces my thinking that you need to wait for the retrace and the signals to form there, they are the A+++ set ups
tradewith60
  • #19
  • Mar 26, 2012 7:00pm Mar 26, 2012 7:00pm
Very good indeed!
Keep up your good work and posting!
  • #20
  • Mar 26, 2012 7:11pm Mar 26, 2012 7:11pm
Quoting AlexC
60mm,
Here's an Inside Outside bar indicator.
Looks better with bar charts.
Hello Alex
I like very much your IB/OB indy.
Is it possible to turn this indy to candlestick?
Reason is I use Jpn candlestick only.
Sorry to say I have not been able to read bar charts
Happy Trading.
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