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MTF Channel Strategy

stovedude

Active member
Here is an interesting system I am building. It is mainly PA with a couple MA's and a stoch, but not what you would expect. I built an MTF Channel indicator and noticed that price tends to move between different TF channels, rather than just sticking to one TF. The truth behind it is just harmonics rather than obeying specific TF's, but this indicator seems to define these harmonics fairly well. I have included the indy and the template to be placed on an M1 chart. From there, you will notice how all the different TF's work together. When price crosses a channel line, it will either reverse or go to another channel line. At times, it will reverse in "no man's land", but we will explore that as well.
Now the important thing to remember, is that this indy is not perfect. In fact, it will repaint the higher TF's, due to its nature as an MTF indy. As each TF finishes its "step", it will no longer repaint, but the repainting is also to our advantage, because price pushes it up/down giving us a better entry. Another important thing is to always use confirmation and also to work on a TF that will accomodate the spread, because the M1 and M5 TF's are practically impossible (although if you had 0 spread you could profit 100%). Even M15 and M30 can be tight at times. I prefer the H1, but the lower TF's can get you back into action when your trade hits BE. The last important thing are the center lines. You should either go to BE or TP at the center line. This is the best feature of this strategy.
Now we will be building an EA for this as we progress with manual testing if anybody's interested, mainly because this crazy, aggressive strategy can trade 24H, and news and the occasional stophunt could very well put some pips in our bank.
As we progress, things should become more clear. Now this strategy is in its infancy, so I will need your comments, questions, additions, and criticism.
Now for confirmation: I usually use a fast stochastic (2,2,1) for each TF, and when a certain TF channel is touched or breached, I will use that TF stoch for confirmation of the reverse. I am still undecided on whether to use the next lower TF stoch instead, as that can usually get us in trouble.
For rules: the highest/lowest line that was touched/breached is usually the predominant channel, although sometimes several channel lines will be at the same level. You can use the highest TF channel, but remember to use the stoch or whatever you prefer for confirmation. Sometimes it will not leave the OB/OS level and will continue up/down to an even higher TF, which is even better.
SL: Very tight with the M1 chart. You can set it at the high/low +- 10 pips + spread.
TP: The safest TP is the center line of the TF channel you're working with. The best plan is to either place 2 trades, with one TP at center, and the other will go to BE with hopes to hit the other side, or until the next reversal signal, or to scale out half of one trade at the center.

Anyway, place the indy in your folder and attach the template. Also keep in mind that sometimes price will come within a pip or two of the line. That is valid, because usually the line was there before price drove it up/down a little. There are also many interesting aspects of the system that can also be used along with other systems.

One more important thing: if your entry is above/below the previous channel step, this is excellent confirmation. In other words, if the channel bottom is rising and price hits the bottom of the channel, or if the channel top is coming down and price hits the top channel, your probability increases.

Another good confirmation is a trend line break. As the channels flatten out in consolidation periods, it is a very good time to expect price to hit both sides of the channel, but when price decides to trend, your confirmation indicator (such as the stoch) will help save you from false reversal signals. Later, we'll discuss how to re-adjust your indicator period settings as the trade progresses in order to stay in a trade longer. But remember the #1 rule: DON'T EXPECT PRICE TO REACH THE OTHER SIDE OF THE CHANNEL!!! When price is trending, it may not even reach the center, but may bounce off a lower TF channel and continue on its path. Then, price will drag the channel up/down and make it look like price hit the center "after the fact", so don't be fooled by what you see in past history. That's why we need confirmation.
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If anybody's interested, we can explore this system and make a few improvements here and there. I believe it can be one of the better systems out there.
 

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stovedude

Active member
The EA has evolved into this strategy. If we can work on all necessary improvements, we will have a fantastic EA.
 

stovedude

Active member
I'm also going to try reworking the indicator to see if we can just get one channel on the chart, rather than all TF's. I'm curious to find the average of all TF's and plot it to see what happens. Right now, I'm using a LWMA 3 channel. It seems like 3 is the magic number for many things, so we'll call this the Trinity System.

Here is the indy. Both are needed, but only place the #MA_Channel on a M1 chart and leave the other in the folder. Meanwhile, I'll try to build a confirmation indy to go with these.
 

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stovedude

Active member
About the MA_Channel: set TimeFrameMax to 60 (1 hr) normally. When the channel narrows during slow market times, set to 240 (4 hr) for a wider trading range. To determine a narrow channel, check the difference between top or bottom from the center, and if it less than 10 pips or so (also figure in spread), try the wider channel. Our EA will have to switch too, because you can get killed by spread in a narrow channel.
 

stovedude

Active member
Well, I've been studying and watching this setup for awhile, and I think I have the perfect setup for this system and the EA. My first impression was that price would just bounce off the channel lines and hit the center, as long as the stochastic confirmed, but after studying and scratching my head, it seems that price will usually hit a channel line and rebound a little (not always to the center) and retrace back to continue the trend for a little while before finally reversing. Now, it appears that if price breaks any previous channel line (the previous "step" on the MTF), it will come back and visit that channel line again before finally reversing. When it hits the current "step", this is your signal for the trade, confirming it with your favorite indy (such as the stoch). This seems to work better if you have all the different TF channels together on the M1 chart, because it can do this on different TF's, but it's better to ignore the M1 and M5 channel (they're too tight for the spread) and sometimes the M15 can be too tight if its channel is too narrow.

Another important thing: if price touches a channel line that is rising up/coming down to meet the candle (in other words, you are already above/below the previous "step"), this will usually immediately reverse. It will sometimes "push" the line up/down, which marks the beginning of the end of consolidation. If it does push it farther, then do as before and wait for it to reverse and break the previous "step" again, reverse and hit the channel, and then reverse again to go even farther.

TP: This should always be at the center of the channel you're working with. You should place 2 trades for maximum profit. One will TP at center. The other will go to BE and let it go until the next trade signal or to the other channel side. Your preference.

SL: On M1 chart, it will be your high/low (you will see it clearly on the chart) + spread + 2 pips.

I hope some people can test this to see if changes/improvements are needed. It's very exciting to see price seek out a higher TF, hit it almost exactly (remember, it can miss by a pip or two and still be valid), and then reverse. I think this indicator is close to identifying cycle periods from all TF's, but it still needs something to be perfect. I'm going to change the MA Period to 1 to see if the rules still hold.

Download the indy and template on the first post. I made a few changes to them. I appreciate your comments/suggestions.
 
Well, I've been studying and watching this setup for awhile, and I think I have the perfect setup for this system and the EA. My first impression was that price would just bounce off the channel lines and hit the center, as long as the stochastic confirmed, but after studying and scratching my head, it seems that price will usually hit a channel line and rebound a little (not always to the center) and retrace back to continue the trend for a little while before finally reversing. Now, it appears that if price breaks any previous channel line (the previous "step" on the MTF), it will come back and visit that channel line again before finally reversing. When it hits the current "step", this is your signal for the trade, confirming it with your favorite indy (such as the stoch). This seems to work better if you have all the different TF channels together on the M1 chart, because it can do this on different TF's, but it's better to ignore the M1 and M5 channel (they're too tight for the spread) and sometimes the M15 can be too tight if its channel is too narrow.

Another important thing: if price touches a channel line that is rising up/coming down to meet the candle (in other words, you are already above/below the previous "step"), this will usually immediately reverse. It will sometimes "push" the line up/down, which marks the beginning of the end of consolidation. If it does push it farther, then do as before and wait for it to reverse and break the previous "step" again, reverse and hit the channel, and then reverse again to go even farther.

TP: This should always be at the center of the channel you're working with. You should place 2 trades for maximum profit. One will TP at center. The other will go to BE and let it go until the next trade signal or to the other channel side. Your preference.

SL: On M1 chart, it will be your high/low (you will see it clearly on the chart) + spread + 2 pips.

I hope some people can test this to see if changes/improvements are needed. It's very exciting to see price seek out a higher TF, hit it almost exactly (remember, it can miss by a pip or two and still be valid), and then reverse. I think this indicator is close to identifying cycle periods from all TF's, but it still needs something to be perfect. I'm going to change the MA Period to 1 to see if the rules still hold.

Download the indy and template on the first post. I made a few changes to them. I appreciate your comments/suggestions.
Can you pls post some example charts.... thanks
 

stovedude

Active member
Ok, here is the EU M1 chart with tons of examples, but I'll just choose the H1 and H4 examples. H1 is the purple channel, H4 is the yellow (D1 is the green). If you add the other TF channels, you will see a lot more examples. It can seem a little complicated at first, but will get more clearer as you study it. You can do this on any TF, except the M1 and M5 can get killed by the spread. Eventually, I will graduate this system past the MA concept to a PA channel instead (I have some good ideas for that already).

I tried to use just the examples where the lines stopped in their final position. They can and will move if price makes a lower low or higher high, but this actually works out as well.

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Tinojazz

Professional Trader Since 2007
VIP Member
Thanks Stove, i realy have a time today to test this and i am sure that will find great results somwhere.
 

stovedude

Active member
Thx Tino. It's good to see you here again. Some of the strategy has changed a little. I see when the 15m and 30m channels line up close together and when price breaks the H1 or higher channels, as soon as price reverses, the probability of success increases dramatically. I also notice that the more channels that line up together, the better the trade becomes. We still need to include the retracements, but sometimes this isn't necessary, so I try to watch the 15 and 30m channels. As always, the center line is best for TP and BE. My EA will trade all TF channels, except the 1 and 5, and will TP on each different TF level. After we test it, we can see which TF's are best. I would appreciate some more input from others as we watch the template at different times and sessions. I think a MA setting of 2 on all channels will work best.
 

saambasp

Member
hi SD,
can you post here your all your strategy indicators and tpl file and some examples in one zip file .i didnt see this thread sofar ,i accidentally seen today,
may be i can get some idea to improve
 
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