Forex trading strategy #6 ("Key Simplicity")

Hi. I just want to share with other traders how I am using this system and ask a general question.
I have been trading this system with Australian based currencies, AUD/CAD, AUD/YEN etc., and it is doing very well. I took out the RSI 21 and use the CCI 14 instead. I ONLY trade this on the daily bar. I'm in USA Eastern time zone and the daily bar changes for me at 8:00pm. Perfect.
For the AUD pairs and crosses I use a fixed 100 pip stop loss and I shoot for 300 pips. I get out, no matter what, when the CCI crosses the zero line. Also, I peek at the monthly chart just to get the long term trend and I ONLY take trades with that trend.
The CCI will cross the zero line a little quicker then the 5 and 12 MVA crossovers on the price chart. This tends to preserve a few PIPs at the end of a run. I only enter after the CCI crosses zero and the MA's cross. If there's a pin bar or something like that I'm even happier.
Of course, if I get a run that's going beyond 300 PIPs I let it run and just move my stop loss up to lock in 150 PIPs. My win to loss ratio is pretty close to 1 win out of 3 and with the risk reward this is making money. Now for my question: I am wondering why this might be working so well on the Aussie and the Aud crosses. Perhaps it is a mixture of a commodity based currency that tends to trend, but without too many of those spikes we see on something like Cable. I'm not sure.
Also, I realize my set stop loss of 100 PIPs per trade is not very sophisticated, but it is a bit more than the usual Average Range of an Aussie based pair, and keeps me in the game. I am finding the Aussies on the daily charts usually will serve up an entry about twice a week. Right now (10/20/09) I have an AUD/CAD trade which is up around 180 pips in two and a half days. That's a bit atypical as the AUD seems to like the slow steady rise. If anyone has any comments about the AUD dollar and why it might work well with this type of system I'd be very pleased to hear some opinions. Also, if anyone has observations of the pros and cons of my fixed position stops (100 PIP per trade) I'de welcome that. It's working for me, but if there is a more sophisticated method I would look at that.
I have a day job and this method is just super. 15 minutes a night and that's it. Also, no emotion. Just let the trade go and the market will do what it will do. Oh, sometimes, after I know I'm going in, I'll wait a candle or two just see if there is a pull back and I get a slightly better price, but I always do set a buy stop or sell stop order so I'm in the trade in case it just starts running while I'm at work. Okay, I guess that's it. Funny that an totally unsophisticated trader (to say the least) can make profitable trades with this little system, but I have to say, it's pretty stable, predicable and easy. You'll lose two out three but if you just let it run until the CCI takes you out, you will average wins around 300 PIPs a whack and some go 600 and more!!

Best regards...

Eric A.

Hi,

I guess only persistent traders survive this ordeal, because the situation you've just described is familiar to me. When you're past the beginner mark, but still on the learning and searching curve, you'll get whacked by the market from time to time as you experiment with various studies and setups. The key moment is to keep on going.

Daily charts are often a number one choice for experienced traders. Manual S/R levels? Yes, they should be there. Don't forget to identify most obvious weekly and monthly S/R levels as well and transfer them onto daily charts.

When you get an arrow in response to EMA crossover with a custom indicator, I'm sure it makes it easier to take trades. I'd continue using it. What I'd like to add is probably one more indicator (possibly as a substitution to RSI) send earlier by one trader, it is CCI_Histogram.mq4.
This indicator is beautiful for identifying trends at a glance.

Namely, blue - uptrend, red - downtrend, gray - no man's land.

Now, what else can we pull out of it?
When you get an EMA cross and a signaling arrow, you can open 1 order.
Now, keep an eye on the chart and CCI afterward: often withing 4-6 candles price will retrace back, possibly pulling your first order into a negative territory for some time. If we watch CCI, its price bars also start to decline, this is the moment to prepare for a better entry opportunity or double on the first trade.
Basically the strategy would be to try to catch a breakout once CCI begins to rise again.

Also you can note, that when CCI just flipped from blue to red (or back), there is always a stripe of gray, AND there is always a pullback after gray bars, which will give you a great predictable entry opportunity.

Also, with any strategy, just remember to never rush in and always wait for a signaling candle to close before taking any trades.

Best regards,
Edward

Hi Edward:

Thanks a lot for having such a wonderful site and forums. I learned a lot. I tried many systems somehow i always end up confusing myself with a wrong time frame. At times 12 indicators give me signal and i enter and it still wacks me out. I have now thought of only using daily charts. I have tried, fibo, never works for me. Manual supports do work. I am sticking to your system for a while on demo and see. Hope it works. I use EMA crossover signal where i have set up ur EMA set ups which gives me signals with Arrows. If this works it is going to be very easy.Kindly throw some suggestions to a frustrated trader like me out of your experience. I will appreciate them. Thanks

Hi TAIWO,

This could suggest of possible "blackouts" from broker's live trading platform.
When you use demo, your EA runs smoothly and is able to take each and every signal. While in live mode you start having:
- order processing delays,
- freezing of prices for short moments, which are not directly noticeable to a trader, but may affect an EA which sees no changes in price and holds still; by the time price goes back live, the setup may no longer trigger an EA response,
- interruptions in platform connection with the same effect for EA: missing out on some entries, or even worse, some exits and waiting for a new chance to close a trade.

Some EAs are able to survive these small troubles while other EAs aren't that flexible.

Regards,
Edward

hi Taiwo... could you sharing your robot forex to me.. how to download it...
zul, malaysia.

hello,
am taiwo and a newbee to this forum. but i have a problem which i hope can be solved by anyone in this forum.
i just developed a system(robot) which works efficiently on demo account but any time i apply it to my live account -- my platform is ALPARI,UK---it starts entering trade inconsistently.
i would switch back to demo and it is working fine again.
i dont know what to do and i hope somebody will be available to help me out.
for now i have resolved to using it manually on----that is whenever it picks trade on my demo i go ahead to enter the same direction of trade manually on my live account, which is really working fine for me.
but i still hope i can be totally independent of the whole system, since every mini-second counts in forex.

thanks PALS
TAIWO ADEOYA
kentyay(at)yahoo.com
234-803-494-9479

There can be a bit of delay, of course.

Regards,
Edward

Hi,

In regards to the RSI being under or over the 50, does this have to occur pretty much at the same time as the EMA lines crossing or can there be a bit of a delay??

Regards

Hi Lanie,

Thank you for your feedback!
Absolutely, we can use the same settings for 4h chart.

Regards,
Edward

Hello Edward,

I'm Lanie, I enjoyed this site so much! Thanks for helping all of us especially beginners like me.

I just want to ask if we can use the same settings if we will trade using 4h chart?

thanks alot!

Lanie

Limit your risk by trading a smaller lot and yes, you can trade.

Regards,
Edward

Q: if I am late one-two days and EMA crossed already, but RSI is still below/above 50. Can I still trade or wait?
Thank you
BA

We put stops outside the previous swing high/low.

The filter here is RSI above and below 50.
Regarding additional filters, there could be many: Stochastic, CCI, ADX, another SMA etc etc.
every trader has own favorite indicators he understands and trust most. I invite you to simply try out some other Forex strategies at our website and then combine the methods and filters you like most.

During sideways activity RSI is one of the best indicators to trade with: we look at oversold/overbought zones.

If you wish to avoid sideways markets, use ADX indicator, where readings below 20 suggest absence of a trend; or try out recently recommended indicator: Choppiness index, the rules to which as well as downloading link you can find in the comments.

Best regards,
Edward

1. Which Pairs you most recomend for trade with this strategy ?
2. How we avoid Sideways movement ?
3. Can we add something filters e.q. SMA 150 By Closed ?

Need your answer. Thanks

For hourly charts you would most likely need an additional indicator to help identifying the main trend.
For this purpose you may try using 20 EMA or 30 EMA or 55 EMA at your choice.
Additional trading rule will then be set:
When price is above 20/30/50 EMA - it is an uptrend, therefore take only Buy signals and ignore all Sell signals.
When price is below 20/30/50 EMA - it is a downtrend, take only sell signals.

Regards,
Edward