Diversified Trend Trading Approach

Here we go on H1.



You are probably getting the jist of long trades. We have some short trades now coming up.

GBPUSD has allowed for numerous short trades since 15 Jul 2014. Here is the current trade.

The Daily Chart. Note where the green dotted line is placed for a continuance of the trend.




Now onto H1 for the entry.

Almost closed out of the trade at 20 Nov 2014 at 14:00 but still alive to tell the tale.

Note that we haven't looked at a short before so I have defined R on this chart to get you familiar with where the stop is placed. It is the exact reverse process for a long trade.

Good old Aussie ASX200 is bearish at the moment.



Here is the H1 entry graph.

A dream run for the EURJPY thanks to quantitative easing in October in Japan. Here I was thinking I was on an average trend when it just took off.




and for the H1 entry....




Noe this is a rare exceptional trend. I am deep in profit with a 0.5 std dev channel in place.

Copernicus


Thanks very much for posting - looks interesting. Nice results - great Oct 2014

I have a couple of initial questions

1. you appear to trade 24 instruments - EURUSD;GBPUSD;USDCHF;USDCAD;AUDUSD;NZDUSD;USDSGD;USDJPY;EURJPY;CADJPY;AUDJPY;NZDJPY;GBPSGD;EURAUD;EURCAD;AUDCAD;NZDCAD
XAUUSD;XAGUSD
ASX;DJI;NIKKEI;FTSE;DAX
Why were these instruments selected, and some obvious ones left off the list? I notice the GBPJPY is missing for example

2. Would it be possible for you to share the indicators that you use, or are they not mt4 indicators?

Cheers

Here is the FTSE which has been bullish since 16 Oct 2014. I have had two bites at this cherry.



Here is the entry graph on this trade on H1. I survived a hair breadth almost touch of the std dev channel on 20 Nov 2014 at 14:00.

Hi pakeha

The simple reason is that these were a broad range available through my broker (IG Markets). I do stay away from futures with an expiry date. That is just personal preference.

The 24 I have selected are simply those I have back-tested. There is no reason apart from chart management reasons not to trade more such as the GBPJPY. The great results I have been getting since Jan 2013 have not assisted me to the extent that I really should be investigating correlations and relative strength of different pairs but to be honest the manual backtesting is back-breaking as it is. I am sure that some savvy traders out there can rustle up a more profitable selection if they put their mind to it.

Given that trade frequency is limited (about 0.5 trades per day) there is no real reason why you couldn't extend the range to include further instruments. Multiple screen trading and good systems will assist in this. The more the merrier from a diversification perspective.

In a nutshell if this strategy proves reliable and riguorous, then this will be the next stage of strategy development.


Sure Pakeha. IG Markets have the Donchian and standard deviation channel as standard in their advanced charting package (ProRealTime). MT4 has the standard deviation channel included as a standard inclusion but attached is a Donchian Channel indicator. Note that the settings I use are 40 period.

Update to USDJPY

Note that I have already dealt with this in an earlier post. This is where it sits currently on H1.

USDSGD

Two attacks at this cherry. Here is the latest.



....and for the entry.

I cannot find the Standard Deviation Channel under Indicators on MT4. There is one named Standard Deviation but it does not draw a channel like you did on your charts. It just draws any period of Std Deviation as a line on a separate indicator window. If anyone has Std. Dev. Channel indi for MT4 and post it here, I'd appreciate and we can all be on the same page and contribute.

Regards,
Blackeagle

Last one.....this has been exhausting. With future updates I will simply post trade actions undertaken.

NZDJPY





...and H1





Well that's the update over. Hopefully there are enough examples here for you to get the idea.

Happy trading :-)

I have two questions:

1- Do you have a rule indicating when a trend is confirmed on D1?

2- I found a couple of Std Dev. Channel indi for MT4 and they all have a look back period or Bar period option meaning you need to choose a number of period where channel will start and depending on the number, the slope of channel changes. Considering this, can you please explain more "Using a standard deviation channel (1.0 std dev's wide), define the trend from the low to the high."

Regards,
Blackeagle

Hi Blackeagle

Have a final check on your MT4 platform by selecting Insert - Channels - Standard Deviation. These sit underneath indicators as detailed in the screenshot below otherwise you will need help from an EA expert on this forum.



With regards to D1 entry, preferably most bars sit within the standard deviation channel. Consistency of trend is the key prior to entry. We therefore are avoiding volatile spikes of a small number of bars within the channel and looking for consistent bars that confirm a trend is in place. The standard deviation channel itself defines the trend slope, width and direction. If in doubt allow the trend to progress before entry. Trends of good momentum allow for a late entry and these are what we are after.

For me it s not a race to see if I can get into a trend. The key lies in being selective and making sure a confirmed trend along the entire length of the channel is staring you in the face. Also of course I am looking for price movements that clearly lie outside congestion periods signalling that a breakout from congestion has occurred. That is why I have those green horizontal lines on my chart watchlist of wait and see trades. A visual clue is provided that a breakout is about to emerge when the congestion channels are about to be tested.

Just on another aspect. Being exact on your trade entries is not critical as a lot of leeway is provided with a wide stop on this strategy. What is important however is the need for a confirmed trend to be in existence before entry.....so patience and selectivity is the key....not much help for an EA programmer but I hope you get the idea.

Unfortunately the D1 filter is the discretionary aspect of the system. The H1 technique is non-discretionary. What I would suggest is to use MT4 expert advisor (say MACD sample) and do a walk forward on a D1 timeframe over an extended period to hone your technique of visually looking for confirmed trends to emerge. I have been on this strategy for a long time now and the D1 entry is becoming second nature to me due to familiarity.

About being patient and sticking to the strategy. Note how close I was to closing out this trade. What we call a bees proverbial!!!!!! :-)

A bit of action following UK and Europe opening. A second bite at this cherry.

DJI



....and H1

...also in DAX (2nd bite on this as well)

D1



H1

A bit more to add Blackeagle.

The more I think about it the more I believe the rationale for using D1 as a primary filter is as follows. Typically you could employ this strategy on H1 alone but inevitably you become cocky in presuming a trend is in place with consecutively less bars of data. Using D1 as a trend filter means you have to confirm a trend on less bars of data with D1 to therefore ensure when you drill down into H1 that the trend is well established on that timeframe. In my opinion this method prevents the propensity to overtrade.

With regards to your second question the best way to consider where to place the commencement and end point of your standard deviation channel prior to entry is as follows:

1. Ideally we are talking here about new trend commencements as opposed to second bites at the cherry which I regularly do when I get knocked out of a primary trend that continues;

1. Simply look on a long trade for the lowest low of the trend and commence the standard deviation channel from this point. Then extend the channel to the bar immediately prior to entry. This prevents the channel repainting on the active bar: and

1. During a live trade (after entry) continue to extend the standard deviation channel to the highest high and stop there. Every time a new high is established wait until after the close of the bar and extend the standard deviation channel to the high. The converse rule is used for a short trade. During a trend this keeps you occupied but more importantly as the trend progresses you get more room to breath with the exit until of course you are deep in profit and you need to set the standard deviation channel to 0.5 width. All this does is narrow the channel around the bulk of the trend data points to confine the trend and assist in improving profits. Obviously this of course also reduces the probability of staying in the trend for extended periods but unlike the equity millipede approach or DIBS strategy, the intent of this strategy is to generate a regular income as opposed to shooting for infinite yield. I really admire those guys but cannot tolerate such drawdowns.

A busy night. Another trade entry on USDCAD.

D1



H1 Entry

Could have had a better entry on H1 with Donchian Breakout but so be it.........That's what happens when the alerts go off while you are scoffing some snacks and having a cuppa. :-(

Don't worry u will get another chance on the retest.