Simple Trading System

2:1 H/L Breakout

The screenshot below shows the very simple system, and the template and indicators are attached.

1. Trade on any liquid instrument.
2. Choose a trigger time frame (1hr shown) - draw horizontal lines at the last obvious price swing Hi and Lo.
3. Await a candle close above/below the last swing Hi/Lo per step 1.
4. Sell/Buy that candle close so long as:

a. A trend exists on the next 2 time frames up...as determined by the 1hr trigger indicator (dots) that shows the 12/26/9 macd signal line's relationship to it's ma line.

These dots in decsending order must be;

Downtrend; red, red, green, red or red,red,red,red
Uptrend; green, green, red, green, or green, green, green, green

(ie showing that the next time frame's (4hr) macd signal line is crossed and pointing in direction of intended trend, and the next higher time frame above that (Daily's) is at least pointing in direction of intended trade, if not crossed below it's ma line too.

b. The market entry falls within the 20day average pip range.

Risk = max 2% of account, Risk:reward ratio 1:2, ie set an oco order -Stop above the opposite horizontal line, limit order twice the stop.

Trade across multi instruments (5 forex pairings for eg)

* A countdown indicator shows the time remaining until current candle close.
* Attached here too are sound alerts for cable, euro,swissy and yen that can be set at the horizontal lines.

33.33% strike rate (winning trades as a % of total) breaks even.

I intend to demo this system in January of the new year across 5 pairings and will report the results on this thread...feel free to play along.

Platform/charting = MT4.

Should be an interesting experiment and can do so without interfering with own trading. I have some reservations about it in that breakouts always seem to be selling low, buying high but I guess that's the nature of a breakout, so we'll see.

I hope to catch all signals that come along during my own trading sessions only.

As for stops,

Downtrend: I will trail at top of 1st retrace when foot of 2nd retrace is exceeded in with trend direction and so on, trailing one retrace but one behind (on retraces that occur outside the Lo break)...see eg below.

Conversely

Uptrend:I will trail at bottom of 1st retrace when top of 2nd retrace is exceeded in with trend direction (on retraces that occur outside the Hi break.)

System mechanical

Hi Traders ....

This chart is the result of many failed attempts with other trading systems and losses of funds.
I have tried many indicators and daytraded many times with total failure or at least I've made money but given it back.
WHY ? .... keep reading
I've accepted that my personality does not gel with short time frame trading.
I interfere all the time. In perfectly good trades as well
So after 3 years the most important thing I've realised is to get in when the trend changes and hold all according to your risk management rules and in your SL factor in some spiking too. The Market makers just can't help themselves to this easy money.
MOVING AVERAGES .....................
EMA 30 and 200 when they cross a major trend is about to occur especially preceeding an up or downtrend.
Nothing is for sure in this game but it keeps you out of the market and if you go in with a test parcel then it is the "safest bet".
Feel free to pick the eyes out of this post.
The cross between the moving averages is a true representation of the masses and that being on the right side of the market. Thats what trading is all about.Unfortunately this chart represent's whats already happened (hindsight trading) but what goes up MUST come down so if you like this system use it to get ready for the reversal. History will repeat itself.
Cheers

The two indicators cross twice around the period of 4 Mar, 1810, yet they go sideways till 9 Mar, 1610. Accordingly your theory is not working.

Hi Cryoplasm,
The system is based on the "cross" as the signal it is a basic and very old way to trade.
If price action goes sideways it doesn't matter as long as you are getting in as early as the cross up occurs for a long and a cross down for a short. The signal is the cross.
Pink line crossing through yellow for example as shown in my chart. Signal to go long.
30EMA and 200EMA.

I don't follow. The two MA cross twice but they don't go up or down, they only go sideways till several days later when they go long.

Hey bbmac how did you get on with this system?

Martin

cryoplasm said:

I don't follow. The two MA cross twice but they don't go up or down, they only go sideways till several days later when they go long.

Click to expand...

I don't use this kind of system, BUT
very long (daily based) MA x overs systems work.
this is "al times in the market" type of system.
whenever there's a x over, you either go long or short. there's no stops and no profit targets.

yes, when the underlying moves sideways, there will be some (even lots) of losing x overs. but one of these days, there will be the home run.
that home run covers the losses of the sideways movement and then some.
the other important elements of this kind of system is: a. diversification of underlyings b. proper money management (2% is kind of high).

I backtested some likes of this kind of system myself. it works. no one uses it because it's kinda outdated (there are better systems), and it's boring. it's a long term trend following system, that will drive you MAD if you're into the excitement of trading intra-daily.

bbmac said:

2:1 H/L Breakout

The screenshot below shows the very simple system, and the template and indicators are attached.

1. Trade on any liquid instrument.
2. Choose a trigger time frame (1hr shown) - draw horizontal lines at the last obvious price swing Hi and Lo.
3. Await a candle close above/below the last swing Hi/Lo per step 1.
4. Sell/Buy that candle close so long as:

a. A trend exists on the next 2 time frames up...as determined by the 1hr trigger indicator (dots) that shows the 12/26/9 macd signal line's relationship to it's ma line.

These dots in decsending order must be;

Downtrend; red, red, green, red or red,red,red,red
Uptrend; green, green, red, green, or green, green, green, green

(ie showing that the next time frame's (4hr) macd signal line is crossed and pointing in direction of intended trend, and the next higher time frame above that (Daily's) is at least pointing in direction of intended trade, if not crossed below it's ma line too.

b. The market entry falls within the 20day average pip range.

Risk = max 2% of account, Risk:reward ratio 1:2, ie set an oco order -Stop above the opposite horizontal line, limit order twice the stop.

Trade across multi instruments (5 forex pairings for eg)

* A countdown indicator shows the time remaining until current candle close.
* Attached here too are sound alerts for cable, euro,swissy and yen that can be set at the horizontal lines.

33.33% strike rate (winning trades as a % of total) breaks even.

I intend to demo this system in January of the new year across 5 pairings and will report the results on this thread...feel free to play along.

Platform/charting = MT4.

Click to expand...

Hello BBMAC are you still trading using this strategy . Please post some of your recent trades.

amnonco said:

I don't use this kind of system, BUT
very long (daily based) MA x overs systems work.
this is "al times in the market" type of system.
whenever there's a x over, you either go long or short. there's no stops and no profit targets.

yes, when the underlying moves sideways, there will be some (even lots) of losing x overs. but one of these days, there will be the home run.
that home run covers the losses of the sideways movement and then some.
the other important elements of this kind of system is: a. diversification of underlyings b. proper money management (2% is kind of high).

I backtested some likes of this kind of system myself. it works. no one uses it because it's kinda outdated (there are better systems), and it's boring. it's a long term trend following system, that will drive you MAD if you're into the excitement of trading intra-daily.

Click to expand...

did you test it on smaller time frames? You imply it won't work - or am I reading too much into what you mean?

Adamus said:

did you test it on smaller time frames? You imply it won't work - or am I reading too much into what you mean?

Click to expand...

you didn't read too much. I did imply it won't work on shorter time frames.
MA x over with shorter MAs (like 9, 16 or 14,21 that lots of people use) is not enough even on daily basis to decide real trend.
you should use long and very long (like 30 and 200 or 50 and 250).

and on less than daily candles, noise becomes an issue. on a daily timeframe, even the most surprising piece of data (e.g. NFP) doesn't affect the current long term trend. but on a hourly chart, the noise changes the MAs too much.

the shorter the time frame, the more noise appears on chart, more losing x overs.
however too long of a timeframe (monthly e.g) isn't too good as well, because most trends don't last long enough. daily or weekly are the best suited for this.

amnonco said:

I don't use this kind of system, BUT
very long (daily based) MA x overs systems work.
this is "al times in the market" type of system.
whenever there's a x over, you either go long or short. there's no stops and no profit targets.

yes, when the underlying moves sideways, there will be some (even lots) of losing x overs. but one of these days, there will be the home run.
that home run covers the losses of the sideways movement and then some.
the other important elements of this kind of system is: a. diversification of underlyings b. proper money management (2% is kind of high).

I backtested some likes of this kind of system myself. it works. no one uses it because it's kinda outdated (there are better systems), and it's boring. it's a long term trend following system, that will drive you MAD if you're into the excitement of trading intra-daily.

Click to expand...

MA crossovers without stops - only good in theory looking backwards at old charts.

These signals are always late. They can occur in opposite directions in rapid succession in a ranging market. Its bad enough there is no exit signal, even worse when there is no reverse signal.

Only good for corroboration of what you already see in the chart, no good for signals.

tomorton said:

MA crossovers without stops - only good in theory looking backwards at old charts.

These signals are always late. They can occur in opposite directions in rapid succession in a ranging market. Its bad enough there is no exit signal, even worse when there is no reverse signal.

Only good for corroboration of what you already see in the chart, no good for signals.

Click to expand...

common and mistaken belief.

Well, fair play to you amnonco if you can make this work consistently while keeping it as simple as you suggest. But the majority of players have at some point tried this and failed, including those who went on to be successful with better sytems. Its also the one system that academics have repeatedly studied and found wanting.

MA crossovers are useful, but not as signals: I simply don't believe that, if you are making profits consistently, your MA crossover system rules are as simple as you suggest. But this is a Forum, and you are entitled to prove you are right. The floor is yours.

tomorton said:

Well, fair play to you amnonco if you can make this work consistently while keeping it as simple as you suggest. But the majority of players have at some point tried this and failed, including those who went on to be successful with better sytems. Its also the one system that academics have repeatedly studied and found wanting.

MA crossovers are useful, but not as signals: I simply don't believe that, if you are making profits consistently, your MA crossover system rules are as simple as you suggest. But this is a Forum, and you are entitled to prove you are right. The floor is yours.

Click to expand...

1. please provide links to the academics you mentioned.
2. please choose the asset (stocks, futures etc.) to which you want me to provide proof

amnonco said:

1. please provide links to the academics you mentioned.
2. please choose the asset (stocks, futures etc.) to which you want me to provide proof

Click to expand...

You insisted the method works - so- you prove it.

Start with Barclays Bank

neil said:

You insisted the method works - so- you prove it.

Start with Barclays Bank

Click to expand...

next time provide the ticker (and I only have access to data for US based exchanges).
so Barclays PLC (ticker: BCS)

attached the chart (monthly from end of '96), with MAs of 3 & 10 (approx 60 & 200 on a daily chart).
here's the summary of the results (also attached):

Total Net Profit $41.35
Gross Profit $73.87
Gross Loss ($32.52)
Profit Factor 2.27

the calcs are based on 1 share. with no money management scheme whatsoever (which can obviuosly enhance results dramatically)

added: buy and hold for the period: ~$10 per share.

Can you explain a little about your chart? Its hard to read and is set up on an unfamiliar, monthly candlestick basis - why is that? Also, entry and exit points seem to be 1 to 2 months after the crossover points: am I reading this correctly?

simple? looks overly complicated to me!

tomorton said:

Can you explain a little about your chart? Its hard to read and is set up on an unfamiliar, monthly candlestick basis - why is that? Also, entry and exit points seem to be 1 to 2 months after the crossover points: am I reading this correctly?

Click to expand...

I attached the monthly chart because there is no way to show weekly/daily on 1 chart that will be readable enough.
you are right the entry is 1 month after because this is an EOD/W/M type of system, meaning only after the month ended you enter on the open of the next month.

using weekly and even daily data - the values of the MAs remain very similar. and the results stay pretty much the same. (of course on a weekly chart you should use 10,40 and on a daily chart 50,200). I added the weekly results - you can see it's even better - because of the percision in ececution. (weekly is more detailed than monthly without adding noise levels)

and mr. rothschild - what could be simpler than MA x overs?