Advanced system #3 (Neat entry: RSI + Full Stochastic)

Dear Edward,

Tons of thanks for the excellent site. I have one question, on May 18, 2009 (page no:20) you said, you will publish one system/method after the testing, i just want to know you already published ? If yes please give us the link (i have gone thru
all the pages, but i didn't find).

Best Regards,
Mani.

Hi Haydel,

thanks a lot for a wonderful summary and improvements, and, of course, for sharing the Expert with us!

I hope many traders will benefit from your findings.

Thank you once again & happy trading!

Kind regards,
Edward

Dear friends,

I studied all the pages of this strategy and I found them very instructive. I was thinking that this strategy is so good that I wanted to create an EA to back test it and also to actually let de EA trade it. I’m not an expert on trading but I have a lot of experience programming and C/C++ is my preferred programming language. Good thing that MetaTrader programming language is almost C Language.

I found on page 33 an EA that was sent to Edward, I tested it with depressing results; definitely it is not at the height of this great strategy. It was created with an automated AE creator that is a great tool for simple strategies but it seems that it was not enough for this advanced strategy. So I started from scratch and created an EA as my contribution to this wonderful site.

I made all my testing using Daily charts with GBP/USD pair, so it is working well for that pair at that time frame. By observation I made some minor adjustments to the strategy to get better entries and exits. Please let me explain my findings:

1. When to open a position.

Thru the strategy pages you can see that the signals can be considered as check boxes, all of them should happen on a period of several days. This EA open positions only when the last signaling bar is closed and considering only 2 bars back.

2. What to do when the price is dancing around the SMA(150)

When the price was to close to the SMA(150) the EA was taking bad decisions resulting in more losing trades. On a User asked about that and Edward replied that he does not use a fixed limit. Later, EMA(9) was suggested on page 21, I tested it and it works but it delays the entries, some times dozens of pips, so I tested another possible solution. This is what this EA does: 1) once a day the EA calculates the Price Range Average of the last 150 days. That value will be the minimum distance between the current price and the SMA(150). 2) The EA does not open a new position until the price is that average away from SMA(150).

3. Selecting the nearest Swing High/Low.

Some times the nearest Swing High/Low is to close to the current price and the StopLoss gets hit before the action begins. Visually you can decide where to place the StopLoss but an EA is colder and needs more information to ‘decide’. So this is what this EA does: 1) again, once a day this EA calculates the Price Range Average of the last 150 days and divides the average by three. That value will be the minimum distance between the Swing High/Low and the current price to set the StopLoss. 2) if the nearest Swing High/Low is at a distance that is smaller than the value calculated on step 1, the EA will look for the next Swing High/Low until the criteria is meet.

Using that criteria the StopLoss gets hit fewer times resulting in more profit.

4. When to exit.

This EA only exit an open position using trailing stop setting the StopLoss to the previous bar High/Low, the trailing stop sequence is activated when one of two conditions are meet: 1) When both stochastic lines goes above 70 (for uptrend) / below 30 (for downtrend) and then go back to below 60 (for uptrend) / above 40 (for downtrend) at that point the trailing stop sequence is activated or 2) When both stochastic lines goes above 80 (for uptrend) / below 20 (for downtrend) at that point the trailing stop sequence is activated.

Using that rules for exits resulted in more profits on the four year period testing with historical data (Jan, 2006 – May 2010).

I’m sure that there is more polishing to do on this EA, sharing our findings will help us all.

Sorry for this long Post, FOREX trading is becoming my passion.

I almost forgot, here is my Metatrader EA: http://sites.google.com/site/fxpassion/eas/neat-entry

Happy trading,

__________
Haydel

Hi Deo,

I use this strategy exclusively for Forex trading, but think it can work for the other markets too.

RSI need to visit the overbought zone once, after which we stop looking at it and focus on other indicators to line up. Even if RSI makes a new re-visit or only attempts to - it has no relevance anymore.
(In your example, if the price made a new high, that would most likely be a very good invitation to short with some strong divergence emerging, although the earlier trade might be stopped out).

Great find about ADX & profit exits. It all falls into a place with profit expectations during good trends and when, the other time, there is not much to ask from a weak trend. I totally support your approach to picking targets with those combination of indicators.

As about your new system, I find it interesting and in theory it should even do some nice trades, but it contradicts my trading personality, as I'm not as aggressive as his system requires traders to be.
Yet, I'd like to highlight it on our site on a separate page, so that we could gather more opinions from traders.

Kind regards,
Edward

Hi Edward.
Since lots of people are also intered in position against trend which might earn some good trades, I would like to take you thru one system, just opposite of your system with some addition and modification.
If it make sense please let me know.

Name . Friend (Trend) Backstabbing system .
Requirement.
Down Trend (Price below SMA 150) for long entry.( Less better sucess than shorts in up trend)
Up Trend (Price above SMA 150) for Short entry.(better sucess for shorts in up trend)

Objective . Quick Profit taking with tight stop loss by trading anti trend.

Target.
1.Mid way of Bollinger band
2.Upper Bollinger band

Do exactly opposite for going short in up trend.

Setup.
4H chart
ADX (14,1) had made recent mountain of hight of at least 45 and just started down hill.
RSI(3) had touched and recovered from line at 10.
Stoch(6,3,3) had crossed below 20.
Price had just departed from lower Bollinger band.
Upper bollinger bad is at least 300 pip away
Stop loss 100 pip.

Regards,
Deo

Hi Edward,
Eureka !!! (at least for me who is new in treading)...
I have found a take Profit stategy based on ADX.
If ADX is (strong) rising from 18 then take profit using SAR.
If ADX is (Weak) below 18 or declining from higher level then take profit using RSI-Stoc.

Please , could you sprinkle some light of knowledge to bless your deciples ...
Regards,
Deo.

Hi Edward.
One more question. I was testing this strategy and came accross one situation where RSI did manage to visit above 80 and came down a bit, Stoc did its crossover above 70, price under 150 SMA, good signal for short, but at that instant RSI has started an up move again and stoc are alredy crossed and prepareing to make upside cross again. Should it be considered as false signal and exit before stoploss hit? Actuall price did make new high before giving another short signal, and that was true signal. Your thoughts please.
Regards,
Deo.

Thank you so much for this web site. I hope my suffering with trading will end with this stategy.
I have one question, Can I use this stategy for commodities and Stocks?
Regards,
Deo

Hi,

use the Slow Stochastic.

Regards,
Edward

hi Edward!

Im just setting up my graph to try out this strategy and I have four options for the stochastics: 1. stochastic oscillator 2. Stochastics (this one draws up three lines on the graph - fast %K, %K and %D) 3. Slow stochastics 4. fast stochastic.

Which one do i have to choose and set up?

Thank you in advance,

Regards

hi,

Your are a real trader!! hands off!! many guys will tell "I am just packaging this whole system in just $xxx only for people to get benefit with them.." --> y don they give for free if they really want to benefit with them?? its only u who gave all strategies for free.. (i think.. i din saw the whole site..)

i just learnt this strategy and checked it with charts about its accuracy.. i think its around 95%.. i am going to try it.. s there any other strategy by which we can open short term trades? like doing more trades a day for more income?

Hi,

To validate an uptrend signal, RSI should go below 20. That's it for RSI, and we switch to Stochastic, where we wait for a cross below 30.

We don't wait any longer for RSI or Stochastic to exit their oversold areas (above 20 and 30 respectively).

(... But more conservative traders may actually modify the rules to wait for Indicators to exit their oversold zones. This strategy doesn't require it).

Hope it answers your question.

Kind regards,
Edward

hey edward,

i just wanted you to clarify kindly, when you say Entry for uptrend: when the price is above 150 SMA look for RSI to plunge below 20. Then look at Stochastic - once the Stochastic lines crossover occur and it is (must be) below 30 - enter Long with a new price bar.
Do you mean that prices must cross below and then again above the rsi 20 and stoch 30 lines to validate an uptrend or do the rsi and stoch lines have to just cross below their respective lines to signal an entry? because the example chart highlights the whole area where rsi and stoch lines cross below and again above the 20 and 30 lines..?
(i browsed through the first 9 pages to see if this question had previously been asked so felt the need to ask)

thank you in advance

I am happy to see your success.

Regarding adjsting ur stop loss, when you see up 100 pips, do you adjust a trailing stoploss to the price when you bought or sold?

Thx.
-Tom

Thank you for a valuable feedback!

Happy trading!

Edward