Advanced system #6 (Picking Tops and Bottoms)

Hi Edward

Thanks for your quick response...of course more questions arise:

wouldnt it be safer to trade de candle thats going back to the 20SMA rather that trading the candle that it is supposed to bounce, which sometimes forgets about the rule and goes right through the 20SMA? Eg. I got a long bear candle far away from the 20sma and well into the trend (not the first candle), should i trade it's rebounce?

Last one: why does the larger time frame more important than the others? I have actually traded some smaller time frames 5M 15M, while larger ones were still over ADX 30, going for a small amount of pips 10, and tight stops and so far...so good. Am in for some disappointment?

Thank you so much for your help. You sure have a long term investment in Karma for sharing all this knowledge.

Chelo

Hi Chelo,

If you trade a candle different from the one we expect to bounce from 20 EMA, then you are already looking at a different system. Just test it and tell us how it works, I haven't done that before.

Well, on any time frame 20 EMA itself represents a good flexible moving trend line. That's why you found it working well even when larger time frames suggest a strong trend (ADX over 30).

If your objectives are firmly set to small amount of pips and tight stop loss there is no way you could be hurt by the market. Again, by trading in such way you have already adjusted the system to your needs, which is good.

Why larger time frames are more important than smaller ones? Simply because when on a larger time frame we have an indication of a strong trend (we see it when ADX goes above 30) the chances are high that during market correction (pullback towards 20 EMA) the price will obey larger time frame limits.

Kind regards,
Edward.

Thanks again. I'll keep on testtrading the candle which is further away from the 20sma, on its way back...I'll post my results.

Thank you
Chelo

i have tested this system and i realized sometimes price dips down the 20 sma and still recovers thereby triggering my trade, my stop loss , and then turns around to confirm my analysis. The market had beaten me again.
I have tested different filters and so far i have decided to follow the parabolic SAR shortly after price tests the 20 sma and remain in the trade no matter what, and it seems the market is beginning to respect my position
I would be grateful if you can suggest better filters.
i also found the 62 EMA works almost i similar manner, you can try it

I tried to get better filters on this system, but so far yours (SAR and 62 EMA) are the most accurate. I like what I see on the chart with those additional tools. Thanks a lot for this idea!
In case I find additional filters, I will gladly publish the rules here.

Happy and profitable trading!
Edward.

Hi Edward, (the example is a bearish trend) What if the price in the higher time frames like 1 hour, 30 minutes, and 15 minutes touched and bounced the 20 ema but in the 5 minute timeframe the price crossed over the 2 ema's. Is it still a valid sell signal in the upper time frames?

Hi buangcla,

Yes, it is a valid signal.
The only filter here is ADX. With this indicator we are trying to pick the highest time frame with ADX being above 30. Then we stick to that time frame and ignore all smaller ones. E.g. if we stopped at 30 min time frame, smaller ones (15, 10, 5 min) are no longer in focus until, of course, situation changes and we need to switch to a new (higher or lower) time frame.

Regards,
Edward.

Hi Edward, What is considered over 30 in ADX? Should it be well over or even the ADX crosses by a little, is also considered over 30?