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An Edge for an Edge (System Development)

  • #1
  • First Post: Edited 7:28pm Jun 18, 2015 6:58pm | Edited 7:28pm
Well ladies and gentlemen,

Let's start with an introduction as to what this thread will be about! Sharing. Yes Sharing! Before you leave read this entire post for sake of knowledge!
What is Shared will include not just esoteric philosophical talk because there are many other threads with that topic. We will primarily be sharing one's "Edges." Particularly Edges that have failed to develop into trading systems due to: Lack of Creativity or Lack of Access to Data

We as aspiring Traders can help each other combine Trading Edges to allow us to make better Trading Decisions wither automated or manual. This FF community that I like to call home currently has 337,000 members I'm sure there are many people that are close but struggling to push into profitable territory. Odds are someone on this website has information that could be useful in developing someone else's idea and vice versa!

Here we will be able to discuss the practical application of not-so-common Trading Edges

So why should you share something you believe might be helpful to someone else? : I highly doubt anyone with a successful edge would share it; but how many times have you been developing something that seemed to be ground breaking only to find key components fail due to a "missing edge," no matter how much you try you just can't develop an edge to make a decent system?

There are a few requirements to this Thread when posting an Edge:

1. If an edge/information provided by another trader increases your profitability you are obliged to share your knowledge with that individual at the minimum (I too would appreciate a PM and would love to work/program with like minded individuals! That's the reason I created this thread!)
2. "Edge's" must fit the following criteria:
- Statistically Sound, meaning something that has solid research backing it, and not the casual "I looked at a chart for 10 mins and saw a cool pattern that I think will be useful" <none of that type of talk please!
3. An Edge can also be defined as a not so common known fact about the Market

Philosophical Talk:
Try and keep posts reasonably concise and understandable (layman's terms). If you're going to be sharing a vast amount of knowledge there is no point if nobody but yourself understands it due to lack of clarity!

For those of you that are die hard lone wolves unable to share ideas, Goodluck this thread isn't for you! In my personal experience the most progress made was when I discussed and collaborate with creative individuals programmers, and successful/non-successful traders.
Let's develop potentially profitable idea's into concrete trading methods!
Thanks folks,
Rparm
A Positive Mind, and Positive Spirit lead to True Happiness
  • #2
  • Edited 11:48pm Jun 18, 2015 6:58pm | Edited 11:48pm
Here is a piece of information that I realized not too long ago when looking at a simple Indicator, I was unable to develop it into anything concrete but do believe it has some merit and with someone else's insight it could be valuable info.
The following information is currently being researched (I am checking all past occurrences and will post the exact percentage of an occurrence of 2 bars in a row in due time).

"Engulfing Bar's don't follow Engulfing Bars"


Engulfing Bars are very Rare (exact % being research) they occur when the prior Bar's High and Low is "Engulfed" by the Next(Current) Bar

I have NEVER *EDIT**VERY RARELY* seen the Bar immediately after an Engulfing Bar Exceed the High AND Then Drop below the Low of the Bar (Or Drop Below the Low and then Exceed the High) in other words and Engulfing Bar immediately after an Engulfing Bar

So what does this mean? Why do I find it significant? To me it means that when there is an Engulfing Bar if the next immediate Bar exceeds the high, it will NOT drop below the low of the Engulfing Bar! (Vice versa for Low - High)

See for yourself how many Engulfing Bars in a row can you spot with the attached indicator, None right? It is a good idea to assume that an Engulfing Bar will not be Engulfed by the Next Bar (% occurrence will be shared soon)

We can use this information and Open a Buy when the Engulfing Bar's high has been exceeded buy the immediate (Current) Bar, because we expect the current bar not to Engulf (drop below) the Low of the prior Bar, we can place a Stop Loss on the Bottom of the Engulfing Bar's Low (It won't be hit)

BUT, here is why I could not develop this idea. How to logically apply a Take Profit or a Trailing Stop? The above information tells us that price will not pass the High and then Fall down below the Low of an Engulf Bar, but it does not tell us how many pips price will likely travel past the High!

So what Creative, Logical Take Profit/ Trailing Stop method?

Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 11 KB
Attached File(s)
File Type: ex4 Engulfing Bar Alert v1.2_FGB.ex4   13 KB | 1,181 downloads
A Positive Mind, and Positive Spirit lead to True Happiness
  • #3
  • Jun 18, 2015 8:02pm Jun 18, 2015 8:02pm
Excellent, will try to contribute in the near future.
  • #4
  • Jun 18, 2015 8:24pm Jun 18, 2015 8:24pm
Quoting RBlackburn
Excellent, will try to contribute in the near future.
Thanks for the reply! I know the info I shared doesn't help me at all (yet) but it may be valuable for someone else

More "Edges" to come
A Positive Mind, and Positive Spirit lead to True Happiness
  • #5
  • Jun 18, 2015 8:26pm Jun 18, 2015 8:26pm
Quoting Rparm
Well ladies and gentlemen, Let's start with an introduction as to what this thread will be about! Sharing. Yes Sharing! Before you leave read this entire post for sake of knowledge! What is Shared will include not just esoteric philosophical talk because there are many other threads with that topic. We will primarily be sharing one's &quot;Edges.&quot; Particularly Edges that have failed to develop into trading systems due to: Lack of Creativity or Lack of Access to Data We as aspiring Traders can help each other combine Trading Edges to allow us...
Very interesting Rparm. Sharing and Creativity, my favourites. Thanks for opening such a thread, I'm in.
No guts, no glory
  • #6
  • Edited Jun 19, 2015 11:06am Jun 18, 2015 10:02pm | Edited Jun 19, 2015 11:06am
Quoting Rparm
Well ladies and gentlemen, Let's start with an introduction as to what this thread will be about! Sharing. Yes Sharing! Before you leave read this entire post for sake of knowledge! What is Shared will include not just esoteric philosophical talk because there are many other threads with that topic. We will primarily be sharing one's "Edges." Particularly Edges that have failed to develop into trading systems due to: Lack of Creativity or Lack of Access to Data We as aspiring Traders can help each other combine Trading Edges to allow us to make...
Great mate, subscribe ...
Good friends are more valuable than gold ...
  • #7
  • Jun 18, 2015 10:38pm Jun 18, 2015 10:38pm
i think i just find an exception, see the images below. probably the indicator has a bug and don't show sequential engulfing bars.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: bug1.png Size: 19 KB
Click to Enlarge Name: bug2.png Size: 18 KB
  • #8
  • Jun 18, 2015 10:52pm Jun 18, 2015 10:52pm
Thanks for the indicator, will add my ideas too in the near future.
Trade the Plan and Plan the Trade
  • #9
  • Edited 11:29pm Jun 18, 2015 11:19pm | Edited 11:29pm
Here's an EA i coded for your engulfing theory. It buys/sells above/below the high/low of an engulfing bar.
It has a 5pip TP and exits positions when opposite high/low is broken.

EDIT; EA removed, needs more work. Major flaw in backtesting logic
  • #10
  • Edited 11:47pm Jun 18, 2015 11:31pm | Edited 11:47pm
Quoting Tiago711
i think i just find an exception, see the images below. probably the indicator has a bug and don't show sequential engulfing bars. {image} {image}
Hey Tiago, you are right! When I said "Never" I should have said extremely rare, sorry about that. But thank you for clarifying that it does in fact fail from time to time.

RBlackburn, my man that was extremely quick! Thanks! I too will be sharing an EA within a couple of days that trys to "recover" in the event of a series of losses.

Thanks for the interest in this thread everyone, the more discussion and sharing of unique edges we get the better!
A Positive Mind, and Positive Spirit lead to True Happiness
  • #11
  • Jun 19, 2015 2:21am Jun 19, 2015 2:21am
Not every day is equal. Here are stats for the odds of making a high or low for any given week. Note that there is consistent odds for monday or friday being the high and/or low for any given week consistent across all the majors.

EUR/USD
Attached Image


GBP/USD
Attached Image


USD/JPY
Attached Image


USD/CAD
Attached Image


AUD/USD
Attached Image


NZD/USD
Attached Image



More to come along a similar theme.

With kind regards,
MK
  • #12
  • Jun 19, 2015 2:32am Jun 19, 2015 2:32am
Quoting MidKnight
Not every day is equal. Here are stats for the odds of making a high or low for any given week. Note that there is consistent odds for monday or friday being the high and/or low for any given week consistent across all the majors
......
  • #13
  • Jun 19, 2015 3:09am Jun 19, 2015 3:09am
Quoting MidKnight
Not every day is equal. Here are stats for the odds of making a high or low for any given week. Note that there is consistent odds for monday or friday being the high and/or low for any given week consistent across all the majors. EUR/USD {image} GBP/USD {image} USD/JPY {image} USD/CAD {image} AUD/USD {image} NZD/USD {image} More to come along a similar theme. With kind regards, MK
Hey MidKnight,

Just a quick question, I see you are using Python for creating Forex stats. Is there an advantage for that (a library, some pre-created classes, etc.), over say Matlab for example?
  • #14
  • Jun 19, 2015 3:20am Jun 19, 2015 3:20am
Quoting x1810
{quote} Hey MidKnight, Just a quick question, I see you are using Python for creating Forex stats. Is there an advantage for that (a library, some pre-created classes, etc.), over say Matlab for example?
Hello,

Yes, it is free This script uses the pandas library.
  • #15
  • Jun 19, 2015 4:00am Jun 19, 2015 4:00am
Quoting MidKnight
{quote} Hello, Yes, it is free This script uses the pandas library.
Cool! Nice plots too
Probably the best free alternative to Matlab, at least for time series analysis.
  • #16
  • Jun 19, 2015 5:32am Jun 19, 2015 5:32am
Trend week stats. Huge consistency across the majors.

EUR/USD
Attached Image


GBP/USD
Attached Image


USD/JPY
Attached Image


USD/CAD
Attached Image


AUD/USD
Attached Image


NZD/USD
Attached Image


* Note: Monday/Friday being High/Low of week is so high because some weeks it is both.

With kind regards,
MK
  • #17
  • Edited 1:06pm Jun 19, 2015 12:53pm | Edited 1:06pm
About engulfing bars ( consecutive sequential engulfing bars are rare but appear with regularity)----1-Engulfing bars are only one of many individual 2 bar constructions that have significant meaning to price action analysts. In a 4/5 bar analysis the position of the engulfing bar determines , in large measure, whether or not it modifies ( affects) the direction of the "action " bar.(the latest bar ,in point of time, the bar under analysis).It also can have impact, if it itself is the action bar , on other modifiers within the 4/5 set that are activated when an engulfing bar is the action bar. I could go on and site examples but this requires a detailed understanding of the minutiae of price action which holds little interest for most traders. I will be happy to respond to specific questions about engulfing bars or price action in general on this thread or by private message.
  • #18
  • Edited 1:52pm Jun 19, 2015 1:40pm | Edited 1:52pm
eyeball:
What is a 4/5 set? 4 or 5 bars with the last one being the engulfing bar? What modifiers are you referring to?
Maybe a chart would clarify your point.
  • #19
  • Jun 19, 2015 2:23pm Jun 19, 2015 2:23pm
Profitkeeper---In my system of PA any 5 consecutive bars can possibly determine the direction of the sixth,Whether or not any particular set of 5 qualifies as suitable for such determination and analysis depends upon on series of variables including, but not limited to, their respective closing prices , ranges, particular types of constructions (engulfing bars being one of several) and the relationship of the bars to certain standard metrics such as ema, sma,and Bollenger Bands. I have called it a 4/5 setup because the first 4 bars are separate ,in my mind , from the 5th and conclusions drawn from that first 4 can possibly be reversed by the 5th.Some constructions require only 3 bars, with a 4th modifier/reverser.Bear in mind that values are dynamic and change as prices advance or decline , particularly within an identifiable trend, Set-ups that work at certain price levels may be unresponsive to the same stimuli at significantly higher or lower prices .I hope this will be of some value to you
  • #20
  • Jun 19, 2015 4:11pm Jun 19, 2015 4:11pm
Thanks, a little clearer now. It sounds a little like Al Brooks but with added variables. If it works for you - great, but a little too complex for me.
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