Advanced system #6 (Picking Tops and Bottoms)

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

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

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.

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,
This method has proven to work well from monthly to 1 minute time frame. There is no need to exclude smaller time frames I think.

When there is a trend change some losses may occur. That's normal.
How to spot a trend change? There is a popular method of finding divergence between the price on the chart and indicator's suggestions: MACD, Stochastic, CCI, RSI - any of those can be used to hunt for divergence.
We've covered basics of this topic here: http://forex-strategies-revealed.com/trading-system-divergence

Look also for some other resources on the Internet. The more you find, the better will be your chances to master this technique.

Regards,
Edward.

Hi Edward,

Thank you very much for sharing this strategy

I have been trying out This strategy, and I have some questions. When trend reverses (in any time frame) price does not bounce of 20SMA, I lost 20pips on a 15min time frame which was the only one that matched. Is there any way to predict trend reversing while using this method? Is this method safer to use on larger time frames, Since I have another trade still running with +36pips (daily chart).

I would hate to see the price go through 20sma on a long term trade, with a take profit of over 70pips and a similar stop loss.

hi Hanz,
MACD will most likely suggest too late exits here.
Anyway, keep testing, that's the only way to find winning approach.

Regards,
Edward.

Dear Ed,
just a small idea could we use the strategy in addition to MACD indiecator as a filter ( i mean if we chosse to enter buy we will not exit till the MACD lines cross over in the reverse direction) what do you think? is that could improve our exitpoint or not? i am still trying it

Hanz

you are the master Ed i just trying and once i found some thing i just discuss it with you
i am new in forex, and i really appreciate you support thanks again
Hanz

Hi Hanz,

There are two moments about Bollinger band trading.
If a candle touches but doesn't close outside the upper/lower band, then the price tend to reverse.

However, if we have a candle closed outside BB, this suggests trend continuation.

In either cases, you may try moving your stop half way the length of the candle (usually when it is very long) OR below(uptrend)/above(downtrend) the last candle that touched or broke BB.

Then if you haven't been stopped out with the next one, chase the price further adjusting your stop with each new price bar.

As about ADX going below 30, I would still recommend exiting, that's the way I saw it while testing and trading. Exceptions happen, and I would only appreciate your additional comments in case my theory about it was wrong.

Regards,
Edward.

Hi Ed
i notice some thing. for example when i enter buy and the candle touch the moving avarage exp 20 the deal goes right and i got 10 or 15 pip and the candle break the upper bollinger band which as i understand it is the exit signal but the price continu to go higher. it looks like that it stick with line of the bollinger band. i feel bad about this lost pips is there any other exiting signal?

Another thing some thimes i notice that when the ADX goes below 30 and it breaks the bollinger band line it still going in my deal direction.

waiting for your comment
Hanz

It is cool to determine trend with ADX