Chart Setting for FTSE Daily Rolling charts

[broxieman]

I am fairly new to Day Trading the FTSE 100. I bought a system, which provides a daily wrap-up e-mail. The good parts of the system promo were shattered by the actual results the guy who sells the system gets on his trades. OK, he's honest about his gains/losses, but I didn't buy honesty. Anyhoo, moving on............

I am using Capital Spreads. I use their FTSE Daily Rolling chart. I have the candles set at 5 minutes and the MACD at 12-26-5. No other settings are suggested by the system guy. His point is that as soon as the histograms cross over (red-to-green or vice versa) then take the trade if the MACD is >.09 and if the candle above is the same colour of the switch. All fine and good. He aims at Profit of 12 points with a stop of -15 points.
His (and mine) results have been poor. So, I have tried to tinker with the MACD levels to have a concurrent chart of MACD 26-12-15 - this sometimes helps to confirm, or not confirm, the colour switch. I have also waited for the ensuing candle of the (new) switch to see if the momentum is real. I have also used No Stop and no Profit Level, and therefore sit and watch the chart, then either take a small (usually) profit on a Manual Close or sweat it out until I've had enough of a move away from me, so take the loss.

Clearly, I'm not developing a reliable strategy (either his or mine), although obviously I don't expect to get every one right (and I can only trade in the 0930-12.30 time zone, London time).

So, I am looking for comments or advice to be able to get a better handle on the market movement/momentums. The green-red switches are "trailing indicators" at best, and while a crystal ball would be useful, I don't reckon I'll get one.....so does anyone know of data/information/signals, whatever that I can get online, real-time to help me better read the signals on the FTSE. (I have also tried this guy's system on USD/JPY ; EUR/USD - to no better effect !!!!)
Thanks

 

[tomorton]

Hi broxieman - I'm a user of the system you describe. It has real problems as the individual loss is larger than the profit when the repective orders are triggered: this would not be a critical fault if the winners:losers ratio was very high, but its not. Using the developer's own e-mails and looking at the main signals 0800-1700 UK time, over a recent 5-week period, I found that a client would have made a significant loss, as the net losses would have easily outweighed the net gains. The failure rate of this signal is just too great, even though I know its a well-recognised legitimate signal used in the Forex markets etc.. Also, though I like a system that has mechanical exit points to eliminate subjectivity, irrationality, over-confidence etc., the system does not offer any opportunities to let a winner run, so although you never run a risk of a big single loss, you never run a risk of a big single gain either.

I am sure I will one day enhance this system and make money from it - but I don't see how it can work 'straight out of the box'.

 

[broxieman]

Thanks Tomorton,
I think we're talking about the same system. I have been very disappointed with the the guy's declared results. It doesn't stack up. So, in an effort to "improve" it, I have been doing is what I call the WAMC approach...."Watch and Manually Close". I too found this +12/-15 restrictive, so I reckoned that if I placed a stop at some level (sometimes 15, sometimes more or less), but did not enter a Profit Level, then as long as I could watch it, then I could grab an adequate profit and close. So if I made 15 points and was satisfied then I was still in the game, but could then decide to close manually. It's a dicey way of doing it, but the 27 point swing, given the quality of the signal methodology, was too stressful.

 

[tomorton]

Agree about the stress, this scalping just not for me, gone back to swing trading for the immediate future. Its nice to be able to close just half or third of position and run remainder once in profit and this can seriously increase gains: use 15pt trailing stop. But it might mean a larger initial position so you can split it down, and definitely demands even more manual attention.

This is not a bad signal - its not the failure rate that is the only problem, its the imbalance between each profit and loss target range, +12 on a winner, -15 on a loser. If you have only a 55% win rate, at 12pts both ways, over 100 trades you will take home +120pts. This is on total turnover of 100x12 = 1,200, so your profit on turnover is 10%: modest not bad fundamentals for some businesses. But if losses exceed gains by 3pts, a 55% win rate becomes a net loser. It just needs development.

 

[tomorton]

Continuing this logic of course, introducing a favourable imbalance by increasing your trade gain by 25% to +15 but keeping your losses at -12 more than doubles your total profit: (55x15)-(45x12) = +285.

One of us should get to work on this.......

 

[broxieman]

The Stop and Profit Levels can be adjusted through my WAMC approach and, in theory, raises the overall percentage winnings, but until we find a more plausible signalling system then we're merely playing percentages of win/lose, which while admirable, is a side show to the main event. Now, if only we had a crystal ball.
The Settings window on CapSpreads is intriguing. The only box used by this system is the MACD box, and even then, only one setting. I'm going to start playing with the Stochastic box on the basis that the Stochastic gives a heads-up, then the MACDs confirm it, then the candle colours and deoth further confirms. My uncertainty though is that I don't know what order to set these things at, far less in what sequence they really should be read. Moreover, are there any other boxes that should be ticked. And lastly, I can't seem to get running volumes on the FTSE, incl gainers/losers and so forth. There's much more to this that this system-in-a-box provides (or purports to achieve !!!).
Happy to keep chatting - presumkably through this facility - I've only started to use it today so don't know how to be more "private" if that's the right word.

 

[tomorton]

Indicators are seductive and it could be very tempting to keep tinkering parameter values until you have very successfully retro-engineered a signal to your chosen chart. Of course, you'd need a different set of indicator parameters for a different index..... and where does this all end?

The rational mind says that if you have an indicator A that is 80% successful, applying another 80% successful indicator B to the A signals will increase your combined accuracy. The superficial mental arithmetic suggests combined accuracy would rise to 96%, as indicator B filters the 20% of the A signals that will fail.

But this is of course a trap for the very inexperienced. Applying an infinite number of indicators will not make your win rate infinitely large, it will just make your signals translated into positions infinitely small. It is the management of the positions that will determine your long-term success - risk:reward, money management, stops etc.

 

[tomorton]

But don't scrap this signal - maybe it just needs development to reduce risk and demotion to a confirmation signal only.

 

[broxieman]

If I'm reading you correctly, you're saying that as long as one has a reasonable set-up plan and sticks with it rigidly, then the win/loss ratio will act in mathematical fashion. In other words, if one's set-up plan "typically" has a 60% win ratio, then run 10 trades and 6 will come home. (the 3 point win/lose gap needs to be factored as you said before, because even a 60% ratio may prove a losing strategy, assuming same size of bet is placed on each o the (above) 10 trades.
I've tried to run GBP 2 and GBP 3 trades while still in my infancy - some I've won, many I've lost....so I decided to trade down tot he GBP 1 or GBP 2 level to see if I could work out the best set-up plan, then if such a plan is found, then I will trade up. Losing money is clearly not the goal in the long run, but losing money in the short run, particularly at a quid at a time, is not an issue. I can easily keep going at low amounts until I work out the "ideal" system - FTSE 100 only (although I suspect the DAX Daily is very similar).

 

[tomorton]

Hi broxieman - Yes. I think people get hung up on win ratio, and drive themselves onwards looking for the 90% signal, discarding good TA in the quest for the Holy Grail. On paper you can even support a larger loss per trade than win per trade, though I find that is so emotionally discouraging that I would not accept it.

But say you have a 60% signal with +20 target, -20 stop. In very 10 signals you will net +40pts. Your total risk was 10x20 = 200pts, therefore your profit on turnover is 40/200 = 20%. On that basis, most businesses would be happy with a 20% ROCE.

Assuming the losers are never ever allowed beyond -20pts each, what you must plan for is an unlucky run of losers. Your money management should ensure that an unlucky (but statistically possible) run of say 20 consecutive losers with not a single winner does not wipe you out, or reduce your net gains to below lifestyle-supporting levels.

Its wise to trade on minimum stake until you have a consistent winning method. A normal Return in this game is Capital x Risk x Time. If anyone wants an abnormally large Return in abnormally short Time, they are either going to have to use abnormally large Capital (which they probably don't have, else why would they be trying to do this?) or take abnormally high Risk (which is possible, but statistically most people will fail).

 

[broxieman]

I hate this being inthe "public" domain, but here goes.............what size bet are you these days placing on the FTSE Daily Rolling...?

 

[broxieman]

Oh and, if I may............are you strictly following the MACD levels in the Settings, the MACD switching etc as per the "system", or have you developed other strategies/signals...?

 

[pseudo straddle]

But say you have a 60% signal with +20 target, -20 stop. In very 10 signals you will net +40pts. Your total risk was 10x20 = 200pts, therefore your profit on turnover is 40/200 = 20%.

.... and if the spread is 4 you net 0, is that right?

 

[broxieman]

I'm not sure I agree with the profit calculation.
Say I start with GBP100 and make 10 trades on a +20/-20 basis (ignoring the spread for this purpose).
I bet GBP 10 per trade and make 10 trades.
I win 6 out of 10 for 120 points and lose 4 for -80 points. Thus Net is 40 points. At GBP 10 per point I make GBP400. Thus I started with GBP100 and end up with GBP400.
Therefore if I can get a 60% successful strategy I'd be very happy at that. So, the key is how do we get the 60%...??

 

[Black Swan]

how much did you pay for this 'strategy' , I hope it's in the hundred quid range'? and surely you could argue other point to point strat. might/do work; stochastic being the obvious one?

Would it not be better for you to line up several indicators to get your entry signal; stoch, candle, cci, rsi and the macd? Relying on the one you're 'in to' you can see the main problem is in exiting, particularly in choppier market days...

sorry meant to add, why are you using 5 minute candle set up on that strategy when the historgrams hardly turn on a sixpence?

 

[broxieman]

I've started to look at a Scochastic window as well. I am setting it at 8-3-3...can someone advise on the numbers. I'm reading that the Scoch can give a heads-up of change, then the MACD confirms it. Any thots?
Also, what other Settings are people using to gauge the in and out signal. My simple theory onthe out is that if I am watching it, and reach an acceptable profit level, then I manually close and take the profit. Exiting too early ?? - in many cases yes, but if the profit is acceptable then I'd rather get out and walk away (i.e. not upset myself to see what I would have made if I'd stayed in !!!)
So, come on, someone give me the best Settings for FTSE 100 Daily. Thx

 

[Black Swan]

I've started to look at a Scochastic window as well. I am setting it at 8-3-3...can someone advise on the numbers. I'm reading that the Scoch can give a heads-up of change, then the MACD confirms it. Any thots?
Also, what other Settings are people using to gauge the in and out signal. My simple theory onthe out is that if I am watching it, and reach an acceptable profit level, then I manually close and take the profit. Exiting too early ?? - in many cases yes, but if the profit is acceptable then I'd rather get out and walk away (i.e. not upset myself to see what I would have made if I'd stayed in !!!)
So, come on, someone give me the best Settings for FTSE 100 Daily. Thx

how much did you pay and can I have a link to the supplier/snake oil salesman's site? TIA

 

[Splitlink]

I've started to look at a Scochastic window as well. I am setting it at 8-3-3...can someone advise on the numbers. I'm reading that the Scoch can give a heads-up of change, then the MACD confirms it. Any thots?
Also, what other Settings are people using to gauge the in and out signal. My simple theory onthe out is that if I am watching it, and reach an acceptable profit level, then I manually close and take the profit. Exiting too early ?? - in many cases yes, but if the profit is acceptable then I'd rather get out and walk away (i.e. not upset myself to see what I would have made if I'd stayed in !!!)
So, come on, someone give me the best Settings for FTSE 100 Daily. Thx

Come on, you say?

I don't suscribe to any of them unless they are price bar related. In other words, They have to be on the chart, itself, so that I can see where the current price is in relation to them. What I use are averages. Indicators based on averages are lagging. MACD indicator settings are used depending on the traders own favourite averages. He often uses low ones because he thinks that they are fastest. It is a momentum indicator, indicating the difference between the averages used. Anyone looking at an average can tell whether the momentum is increasing or decreasing at a glance. Indicators cannot be faster than the bar itself, so why use them? Some say "as a confirmation". If you are in a trade, why would you need to confirm that it is going right? The price above or below the average, on the chart itself, is perfectly capable of doing that.

Jack Schwager is very critical about indicators and he says about MACD. " Entering and exiting trades based solely on MACD line-signal crossovers results in frequent whipsaw losses. To make the best use of MACD, it is advisable to wait for crossovers preceded by divergence and confirmed by the subsequent price action of the market."

Split

 

[Black Swan]

Come on, you say?

I don't suscribe to any of them unless they are price bar related. In other words, They have to be on the chart, itself, so that I can see where the current price is in relation to them. What I use are averages. Indicators based on averages are lagging. MACD indicator settings are used depending on the traders own favourite averages. He often uses low ones because he thinks that they are fastest. It is a momentum indicator, indicating the difference between the averages used. Anyone looking at an average can tell whether the momentum is increasing or decreasing at a glance. Indicators cannot be faster than the bar itself, so why use them? Some say "as a confirmation". If you are in a trade, why would you need to confirm that it is going right? The price above or below the average, on the chart itself, is perfectly capable of doing that.

Jack Schlager is very critical about indicators and he says about MACD. " Entering and exiting trades based solely on MACD line-signal crossovers results in frequent whipsaw losses. To make the best use of MACD, it is advisable to wait for crossovers preceded by divergence and confirmed by the subsequent price action of the market."

Split

there's the concept right there that so many new to trading can't ge their heads around. oh and agreed, the thread poster would be better concentrating on MAs and EMAs to hunt for price action. I've yet to see a lazier strategy than buying on the 'colour swap' of the histrogram...and it isn't so barmy it'll work. Still love to know how these things get bought and who's got the nerve to flog 'em

 

[broxieman]

From Black Swan

Would it not be better for you to line up several indicators to get your entry signal; stoch, candle, cci, rsi and the macd? Relying on the one you're 'in to' you can see the main problem is in exiting, particularly in choppier market days...

sorry meant to add, why are you using 5 minute candle set up on that strategy when the historgrams hardly turn on a sixpence?

I'd welcome your suggestions on the Settings of the above Stoch, RSI etc.