Compilation of gg53's hints on Trading made REALLY simple topic
Compiled by simplex @ penguintraders.com
Trend: returns (1) for UpTrend, (-1) for DownTrend, (0) for NoTrend/Ranging, Consolidation. Peak: returns (1) for Peak, (0) for none. Trough: returns (1) for Trough, (0) for none. Logic: We go LONG if Trend is (1) and Trough is (1). We go SHORT if Trend is (-1) and Peak is (1). We sit on our hands if Trend is (0)…. http://penguintraders.com/forums/topic/trading-made-really-simple/#post-9287
The other factors are Volume and its direction, and Currency Strength and its direction. http://penguintraders.com/forums/topic/trading-made-really-simple/#post-9418
Another “hint” to Peak & Trough: Use 3 TF’s (such as D1, H4, H1). D1 (in this example) represents the TREND direction. Let’s assume it’s UP. Goto H4. H4 represents the Counter trend. It should be DOWN trend and start to point UP. Goto H1. H1 represents the exact entry. It should start to point UP. Add the early-warning Volume algo to the H4, H1. http://penguintraders.com/forums/topic/trading-made-really-simple/#post-9457
You can use TickVolume Above/Below “0” as good indication of “Trend”. http://penguintraders.com/forums/topic/trading-made-really-simple/#post-9477
gg53_compilation.odt 1 / 12 Finding Peak & Trough by Volume: In this case we are in a general Down-Trend, so we need to find Peaks to enter SHORT. The Volume_Oscillator, with a few enhancements, does a pretty good job. Minimal to zero LAG, Minimal to zero false signals. Bars are colored by the swing rule found in the “True Bars/Candles and Market Sentiment” thread. So for down-trend SHORT entry we are looking at the Green bars area.
http://penguintraders.com/forums/topic/trading-made-really-simple/#post-9495
gg53_compilation.odt 2 / 12 Here are the Troughs, accurate even on M1, Filtered by Colored bars per Swing rule. We are in an Up-Trend, so we look for Troughs in the Orange bars areas.
http://penguintraders.com/forums/topic/trading-made-really-simple/#post-9508
Ok, finished with my day job. May I ask which “swing rule” you use to color the bars? It’s not obvious for me. First I’ve thought you’re talking about this post: http://penguintraders.com/forums/topic/true-barscandles-and-market- sentiment/page/8/#post-9478. But if I compare your results with this rule I couldn’t end up with similar results as shown in post before your last post. That’s the one… Read again and/or set a parameter for how much “previous” is meaningfull.
Another “feature” of Downward swing: As long as bar/candle Low is lower than all the previous bars/candles High – the “river” will continue its South flow (or market sentiment is down). The opposite is true for Upward swing. http://penguintraders.com/forums/topic/trading-made-really-simple/page/2/#post-9529 http://penguintraders.com/forums/topic/true-barscandles-and-market-sentiment/page/8/#post-9478
Peaks & Troughs areas are auto-identified by an indicator. We enter Troughs area in UpTrend, and Peaks in DownTrend. Only things left right now is to PinPoint the desired entry point, and to identify the correct Trend. http://penguintraders.com/forums/topic/trading-made-really-simple/page/2/#post-9605 gg53_compilation.odt 3 / 12 Peaks & Troughs indicator is purely price range based. The ForexGT_VolumeOsc is just to pinpoint (when extended beyond the 80% range) the exact bar in that area for entry. Its Volume is plus or minus according to price median movement (up or down from previous). It is based on the relation of that Volume meaningfull average against actual Volume. Haven’t seen a Peak & Trough similiar indicator post yet (pics @post #9495 & #9508) http://penguintraders.com/forums/topic/trading-made-really-simple/page/3/#post-9750
Volume meanungfull average
No, it’s not in the database. “Meaningfull average” is being either adaptive average or relative to its TF. Using fixed “10” as an average (just an example) is not meaningfull if you are using M5 or M15. What is meaningfull about 50 minutes or 150 minutes? nada… If you think that 1 hour is meaningfull (just an example) then you should use 12 for M5 and 4 for M15 TF’s. That can be coded without any database, or look for an adaptive kind of MA. http://penguintraders.com/forums/topic/trading-made-really-simple/page/3/#post-9777
Just for clarification, G. Neither swing rule nor volume oscillator are involved in finding peak/trough and/or trend functions? Wrong. Swing rules are for identifying Peaks & Troughs (colored bars on chart) in my posts. Volume Oscillator is for pinpoint the recommended bar for entry in the Peak or Trough area. Trend rules not yet explained or defined. http://penguintraders.com/forums/topic/trading-made-really-simple/page/3/#post-9967
gg53_compilation.odt 4 / 12 Gr8! Hmm … any recommendations where to start. You mentioned that it should by done using volume, prize, multiple time frames and multiple currency pairs. That relates to TOTAL trading strategy. 1. Selecting the possible (higher probability) currency pair to trade: should be based on Currency- Strength indicator, preferably a scanner based on it. 2. Filtering suggested pairs by Trend strength. 3. Once currency pair is selected, find the retracement (“buy cheap…” – Peak or Trough) as entry. 4. Higher TF’s are the leading trend, entry TF should be opposite (retracement). 5. SL, TP & MM will be separate functions, which will be auto-fitted to currencies characteristics. 6. Each entry should be pending, i.e. either Buy/Sell Stop or Limit. Reason: let the market fullfill your expected direction/expectation. Never enter @market. http://penguintraders.com/forums/topic/trading-made-really-simple/page/3/#post-9980
I made some changes to the Volume Oscillator: Instead of contributing the whole “Volume” to up or down bar: I’m only contributing partial Volume according to the ratio of (Close-Open) / (High-Low). http://penguintraders.com/forums/topic/trading-made-really-simple/page/3/#post-9981
As far as I understood it, it’s based on highest high of previous x bars. But you’re right – especially under extreme market conditions one bar can create highest high and lowest low. As I haven’t further investigated this, I don’t know how to handle those candles … You’re right. We don’t use this system prior to announcements, and that’s when those things happening. In general, we stop trading at least 30 min. before announcement, and switch to “News Trading” Tactic, or wait at least 30 min. after that event. http://penguintraders.com/forums/topic/trading-made-really-simple/page/3/#post-10125
Peaks & Troughs are AREAS, which is good to watch and know. VolumeOsc is for Pinpoint the possible bar for entry. EURUSD is in UpTrend, so we look to enter @Troughs areas. VolumeOsc is Pinpointing the recommended bar. If you are already in a trade, it’s a good point to Scale-in, i.e. add another trade. http://penguintraders.com/forums/topic/trading-made-really-simple/page/3/#post-10137
gg53_compilation.odt 5 / 12 Yes, Gadi_TickVolume (or its more updated versions) can point the trend IN THE CURRENT TF, when it’s above or below “0”. But when trading, a lower TF can show down trend while in higher TF its just a pullback. So the question remains: what is the RELEVANT trend? http://penguintraders.com/forums/topic/trading-made-really-simple/page/4/#post-10220
My “logic” was that the volume is spread between Low & High, but its true contribution to the move is between Open & Close. http://penguintraders.com/forums/topic/trading-made-really-simple/page/4/#post-10240
Can someone please write a simple EA that places a Buy-Stop & Sell-Stop pending orders (no expiration): The order should be placed immediatly after Peak changes into Trough and Trough changes into Peak. The Buy-Stop is placed above the Peak & Trough Highest bar +extra pips as user parameter. The Sell-Stop is placed below the Peak & Trough Lowest bar +extra pips as user parameter. Add TP,SL & Trailing as user parameter. This will keep other members here happy with some pips… When the Trend Function finally defined, there will much more happy pips.. http://penguintraders.com/forums/topic/trading-made-really-simple/page/4/#post-10251
After some tests/trials: I prefer Buy-Limit @Close +xx, instead of the current Buy-Stop @High+xx. In cases where entry is in mid-bar, entry should be also a Buy-Limit instead of Buy-Stop. Vice versa for Shorts. Advantage: More pips. http://penguintraders.com/forums/topic/trading-made-really-simple/page/6/#post-10410
After some tests/trials: I prefer Buy-Limit @Close +xx, instead of the current Buy-Stop @High+xx. In cases where entry is in mid-bar, entry should be also a Buy-Limit instead of Buy-Stop. Vice versa for Shorts. Advantage: More pips. G. To open Buy-Limit trade, we need that current price would be below Buy-Limit price. So, the trade can’t be opened after the candle close: 1. Price must go above Buy-Limit open price.
gg53_compilation.odt 6 / 12 2. Then we can open buy-Limit order and wait while price comes back to it. Is this right?
http://penguintraders.com/forums/topic/trading-made-really-simple/page/8/#post-10536
That’s the idea… Buy-Limit CAN be opened after bar-close, if you open the Buy-Limit BELOW the Close… To get more pips, counting on the fact that price will travel down and back up again (in LONG position). BTW: if you know me, I “refuse” to recognize the bar “Close” term. There is no such thing… http://penguintraders.com/forums/topic/trading-made-really-simple/page/8/#post-10539
gg53_compilation.odt 7 / 12 On TakeProfit: While we wait for the skeleton of our EA to be finished (pre-conditions + Logic), lets discuss a much neglected topic of TakeProfit. Besides the TrailingStop, once a trade is entered, most EA’s are basically remains static with their SL & TP. BUT the market keeps changing. Here comes the concept of Dynamic/Adaptive TakeProfit target. Our initial TakeProfit is based on ATR, which is good measure of Volatility, but it lacks the DIRECTION and TRENDINESS, which might change during the trade. Here comes another indicator, the ADX, which tells us the underlying strength of the TREND. If we combine the two, the ATR & ADX, we can move our TakeProfit target dynamically and adapt to changing market conditions. Example: if we start with TakeProfit target as 1.5*ATR and the ADX is moving up, we can increase that target to 2*ATR, and reduce it to 1*ATR, or lower, if it’s declining. Initial suggestion to start “playing” with the “Adaptive TakeProfit” concept, are 20 day ATR (~120 on H4) and 18 day ADX (~108 on H4). Play with this concept and see dramatic effects on the outcome profits. Looking forward to see a FUNCTION that adds this feature to our skeleton EA. http://penguintraders.com/forums/topic/trading-made-really-simple/page/12/#post-10985
Peaks & Troughs are traded according to general market TREND. Building a successful EA requires: 1. Trade pre-conditions (not yet finished) 2. Money-Management (Risk, Lots, TP, SL, Trailing profit – not yet finished) 3. Trade Logic – defining Entry and Exit. This will be based on SEVERAL params, and NOT just variations on Price-Action (mostly Currency-Strength, Volume, Price-action, market Sentiment and TREND definition and its strength – which will ALL gives same signal). Peaks & Troughs are just price-action, and that’s the only part that is finished. 4. TREND & market sentiment are not yet defined, other params are already “hinted” in several of my other threads posts. 5. This is NOT a thread about Peak & Troughs alone, but on building a community EA, based on sound logic. Guidelines for Trend, Currency-Strength, Market Sentiment, etc. will be given after the prior tasks will be finished. http://penguintraders.com/forums/topic/trading-made-really-simple/page/13/#post-11119
gg53_compilation.odt 8 / 12 About User Market Sentiment:
Sometimes a user have his own idea about market direction or some fundemental knowledge or preference. In order to cater for that we need another User Parameter which can handle 3 states: Long only, Short Only, Both (LSB or 1,-1, 0). The EA logic should take that parameter into consideration and trade only in the prefered direction, if not equal “Both” (or “0”). Example: My current preferences are: short EURUSD, Long USDJPY, Long AUDUSD & NZDUSD (because of swap). EA’s Market sentiment Logic: The EA should contribute it’s own market sentiment by position and direction of Currency- Strength. Currency A should be above “0” and currency B should be below “0”. Another parameter to consider is Currency A pointing UP & Currency B is pointing down. So calling CS function should return “1” for BUY and “-1” for short.
But that’s not all… Using ClearMethod (simplex method of Multi TF) we look for at least 2 TF’s, current & one or two higher ones. For LONG trade entry we are looking for LONG in higher TF and Trough in current TF.
Even that is not all… The exact bar to enter, when both above conditions are met, is determined by the VolumeOsc (or VZO indicator). The above takes into consideration: Price Action (clearMethod), Currency Strength (CS), and Volume (VZO). http://penguintraders.com/forums/topic/trading-made-really-simple/page/14/#post-11421
gg53_compilation.odt 9 / 12 How to EA Logic: Now, after we have our SL, TP (?), Lots etc. and trading pre-conditions, we can implement the EA’s Logic itself. This will be done in much the same way – by using FUNCTION calls (CS=CurrencyStrength, CM=ClearMethod, VZO=VolumeZoneOscillator, mySentimet=UserParam preference or Neutral): //— LONG position (BUY) possibility if (CS()==1. && CM()==1. && VZO==1. && mySentiment==1.) { ticket=OrderSend(Symbol(),OP_BUY,Lots,….,Magic,0,Blue); [etc.] //— SHORT position (SELL) possibility if (CS()==-1. && CM()==-1. && VZO==-1. && mySentiment==-1.) { ticket=OrderSend(Symbol(),OP_SELL,Lots,….,Magic,0,Red); [etc.] using this method the EA can easily be modified by changing/adding/deleting conditions without rewriting the whole logic. http://penguintraders.com/forums/topic/trading-made-really-simple/page/14/#post-11463
gg53_compilation.odt 10 / 12 On Currency-Strength: Since we are going to use Currency-Strength as part confirmation for Entry/Exit, I’d like to share my view on the subject of Currency Market Share. I already introduced the USDx, which is the Dollar Index, based on US Trade basket of US trade partners currencies, and the way it’s calculated. I’m using the same calculation method to create my own FX USDx Index – but this one is more adapted to the Forex market. The Data: FX Market Share by Major Currency (%): USD: 87.0 -> 49.5465 EUR: 33.4 -> 19.0213 JPY: 23.0 -> 13.0985 GBP: 11.8 -> 6.7201 CHF: 8.6 -> 4.8977 CAD: 5.2 -> 2.9614 AUD: 4.6 -> 2.6197 NZD: 2.0 -> 1.139 ———————— Total %: 175.6 / 2 = 87.8 * 1.139 = 100% * Because two currencies are involved in each transaction, the sum of percentage share of individual currencies totals 200 percent. We devide the total by 2, and modify the result to 100% using a calculated factor of 1.139. Now we devide each currency % by 2 and multiply it by the factor to get its FX Majors market share. What you have after the “->” is the currency % share AFTER such calculation. FX Market Share by Major Currency pair (%): USD/EUR 24.1 USD/JPY 18.3 USD/GBP 8.8 USD/AUD 6.8 USD/CAD 3.7 USD/CHF 3.4 USD/NZD 1.5 EUR/JPY 2.8 EUR/GBP 1.9 EUR/CHF 1.3 ——————————————————————————————— Now you can create your own FX USDx , based on the same calculation method as in the original USDx, which is more adapted to Forex market Major currencies and pairs. http://penguintraders.com/forums/topic/trading-made-really-simple-coders-chat/page/4/#post-11195
gg53_compilation.odt 11 / 12 By watching the USDx indicator, you are looking on just one side of the coin. If one other currency (x) is much stronger compared to a rising USD – that will be the result. In those cases I still DON’T trade against a rising USD, and search for a weaker currency then currency (x), that is pointing down, to trade against currency (x). This way your trade will be safer, less risky, and yield more pips. There is no point in trading two strong currencies against one another. http://penguintraders.com/forums/topic/trading-made-really-simple-coders-chat/page/5/#post-11252
We can currently agree on few key elements of the EA’s Logic: Trend: ClearMethod: simplex latest version with current and 1 or 2 higher TF’s, Trend direction according to HTF, entries on areas of current TF in opposite to Trend direction. TVI (or TickVolume): (Optional) Trend direction defined by above/below zero, entries areas are in opposite direction. Exact bar for entry: VZO (or VolumeOsc): when above/below range, in opposite direction of Trend. Currency-Strength: Here we have a problem… This one should indicate strong/weak currencies (Sentiment) by their location above/below the “0” line. Comparing my ForexGT_Spaghetti with simplex CIX, I found that currencies location in relation to the “0” line are different. We need conclusion on this one. Attached is comparison (CIX is default params, USD majors even, Timeframe normalization) USD both in Green. http://penguintraders.com/forums/topic/trading-made-really-simple-coders-chat/page/6/#post-11464
If we decide to go with this logic: LONG with currency the first time it becomes the strongest, SHORT on all currencies that are below “0” and pointing down. This logic constantly produce 2-3 trades per such event (H4), mostly 2 events per day, Minimum 10 pips per trade. (Min. 40-60 pips per day) Above logic will produce different currencies results, if compared between indicators, regardless of each one “value”. http://penguintraders.com/forums/topic/trading-made-really-simple-coders-chat/page/6/#post-11469
gg53_compilation.odt 12 / 12