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Variable indicator periods

stovedude

Active member
I would like to devote this thread to discuss indicator periods. Some people like one period, while others cling to other periods. I believe the real truth lies behind price action. This is basically the heart of the Holy Grail system that we all search for (don't ask me for it just yet until I find it first).

IMHO, you can't rely on just one period. In fact, the period must correspond with the number of candles since the last reversal. In other words, you determine your period with each new bar. This is a fairly simple process, but I would like input and criticism so we can figure out any and all tweaks to this new concept.

Now, we can use almost any indicator, but MA's and MACD's might be a little more difficult to tweak, but I'm sure we can figure those out as well. Some of my favorites are the stochastic and the CCI. These are fantastic for this strategy, except the CCI is a little more harder to tame.

I'll try to get together some examples on the next post so we can ponder this a little more if anybody is interested...
 

Has

Member
I would like to devote this thread to discuss indicator periods. Some people like one period, while others cling to other periods. I believe the real truth lies behind price action. This is basically the heart of the Holy Grail system that we all search for (don't ask me for it just yet until I find it first).

IMHO, you can't rely on just one period. In fact, the period must correspond with the number of candles since the last reversal. In other words, you determine your period with each new bar. This is a fairly simple process, but I would like input and criticism so we can figure out any and all tweaks to this new concept.

Now, we can use almost any indicator, but MA's and MACD's might be a little more difficult to tweak, but I'm sure we can figure those out as well. Some of my favorites are the stochastic and the CCI. These are fantastic for this strategy, except the CCI is a little more harder to tame.

I'll try to get together some examples on the next post so we can ponder this a little more if anybody is interested...
Yes please
 

radicaltour

Moderator
VIP Member
there was this guru who explained how his research lead to new and best settings for indicators. His pre-hyped videos were shared in our forum recently. Any information we can get on his product may add value to our endeavor in this area. :)
 

stovedude

Active member
Can you find that video for us? I don't seem to remember it, but I don't usually pay attention to some of that video stuff. Meanwhile, when I get home from work, I'll post some chart examples, and we can ponder on it this weekend. I think it will be very interesting for some of us.
 

stovedude

Active member
OK. Here we go. In the attached chart, I have chosen some recent moves from EU H1. The first vertical line will be our starting point. Let's say we used a good strategy with a fast stochastics and entered our short at 1.2886. Now keep in mind the fractal has not formed yet, but we will use this candle as our starting point. After our trade, we wait for the next bar to form, which we will call #2. At the open of this bar, we set our stochastics to 2,2,1 (so we can see the D period). A period of 2 will correspond to our candle #. Now keep in mind this low period will many times trigger trades on the initial retracements, but I will show how we can capitalize on those as well.
Now on bar #2, we do have a long signal (stoch over 20% - 20.48), but only at the very high (at the exact top in fact) of the bar. We will not take that because of several reasons:
1: There are several resistance levels too close to this.
2: The #1 bar is a classic reversal bar with no bottom wick, so the risk is higher.
3: According to my strategy, the breakeven point for a long is only 6 pips away, which is also a S/R level. Better to wait for the S/R break first.

Now the #2 bar continues down and retraces, causing some concern, but with the stoch at 2,2,1, we can buy at 1.2844 as it retraces (keep in mind we aren't implementing TP yet-we'll get to that later).
When bar #3 opens, we will keep our Stoch at 2, because we just entered a long trade. If we had stayed with our short, we would have changed the stoch to 3,2,1, but now the #2 bar will be the starting point of our long trade. Watching stoch 2, price goes up some more on bar #3, but our stoch is OB still and comes down to 1.2858 when it breaks below 80%, where we enter our short. Now here is the tricky part: instead of keeping our stoch at 2 again, we will now switch it to 3 instead, because not only has the fractal formed, but we now have 2 previous higher highs, and #3 has formed the third lowest high.
Anyway, as #3 goes down, we do briefly hit a couple long signals on stoch 3, but they are easily filtered out with a couple other checks I'll show later). As bar #4 opens, we change our stoch to 4,2,1 and continue, uneventful, to bar #5, where we go to stoch 5,2,1. This bar has a good retracement, and the stoch triggers a long around 1.2801. In the next few posts, we will explore the method of reducing our stoch period to get in the trade ealier near the reversals and also using the first retracement for a better price.
Tomorrow we'll analyze the next 3 bars (from the 2nd vertical line to the 3rd) and add a couple more simple indicators.

Now is the time for criticism, suggestions, and comments. This is both a trend following system and at times a counter-trend scalping system. It is a radical system, probably best done with an EA. Scalping can be done with a set TP or you can use tomorrow's indicator. Also, this will work on M15 and higher charts (lower ones can be used, but will need the other indicators and will mainly be from fractal to fractal).

Does anybody have any questions or suggestions for improvements so far, such as better indies or settings? I'm not a professor or professional trader, so I welcome all criticism.

Also, is there any better way to attach a regular sized image, rather than uploading to a photo sharing site and then back to the forum?
 

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stovedude

Active member
OK, to continue on, we bought at 1.2801 on bar #5, stoch 5. We then change to our default stoch 2 because we are expecting this bar to be the bottom, but we don't have a fractal or anything yet. Immediately, we notice that stoch 2 is already OB, and then bar #6 opens soon after, with the stoch still OB. The price goes up a little and then back down, with the stoch 2 breaking the 80% level at about 1.2802. If we stick with the basics, we would sell, losing a pip or two for spread, and ride it down (even if you didn't sell, you would be OK to put your SL at the Low of bar #5 - spread - 2 pips). Now the stoch does cross up and down the 80% level a few times before it finally goes down, but this retracement is quite common. How much will it retrace? Usually, it will retrace back to the MA channel that I use (attached below). In fact, this bar came within 1 pip of the channel, but the stoch did not go OS before it went back up. In this case, I propose to buy when price breaks the previous bar's channel. I believe that this is also a good filter for all trades. Another thing I noticed is that price will sometimes "seek out" higher TF MA channels. In this case, when price breaks the higher TF channel, and the current TF channel has not caught up yet, you can either take the trade when price reverses and moves back inside the higher TF channel line, or adjust your stoch back to the default of 2 and wait for it to confirm. Now when the current TF channel does catch up and it also breaks the higher TF channel, you can revert back to using the current TF channel again.

As an added note, I like to use the outside channel lines as confirmation that price will soon reverse. Sometimes it will not actually get there, so I also use the Gann HiLo (setting of 2), which will confirm also when price touches it. Another help is the Slope Direction Line (setting of 3,3,0). It gives some "boost" to the price and also filters some trades.

Anyway, moving on. If we use the current MA channel or Gann for the reversal confirmation, our last sell trade would be a couple pips higher, which would have got us a break even or better. As price went down to the low on bar 6, we didn't get an OS on stoch 2 (we stayed with 2 because our high on bar 6 broke the high of bar 5), so instead we buy at the previous bar's (#5) MA Channel low, at 1.2789 plus 1 pip = 1.2790. Price goes up and hits the upper channel and gives us a sell signal from stoch 2 at about 1.2813. Now here is another big decision. Which way will price go from here? (bar 6 looks risky with long wicks on both ends). Here is another good add-on to the system: either scale out some of your trade or go to BE (+ a couple of pips) when price hits the middle MA channel line (current TF) OR if it hits the middle Husky Price Channel line (setting of 3), because price really gravitates to these levels (please note also to check it with each bar, because it moves and price will also push these around alot, but this can be to our advantage). If we took the sell on bar 6, even though the middle channel was farther down, the next bar (#7) opens up, giving us only a 6 pip (minus spread) breathing space. I suggest taking the trade and catching those 4 pips or so, or at least BE. Actually, the middle line moves down a little and gives us 2 more pips as price hits it. Also, price makes another move up and down again for a double bottom, and gives the exact signals again. This time it would be profitable, but I don't suggest taking multiple signals per candle, because it usually will bite you when you're not looking.
Now of course, it's unsure where price will go, but it does go back up, so how to get back into the trade? I suggest we wait for price to go up. Now it does hit the upper channel, but another interesting thing happens. Our Gann line "flips" from above the bar to below (it can also flip back - so don't get too excited) and our stoch 2 goes OB about 1.2816. Now I wish I could see where the upper TF channel is at, but the backtester won't show the MTF. I suspect the H4 middle line is probably where price will go next (also keep in mind the upper TF channels will repaint - example: the H4 channel can repaint up to 4 bars back on the H1 chart - it is just the nature of MTF). Also note that for the sell coming up, we change the stoch to 3, because we are now on the 3rd bar going up. Now if you didn't take TP at a channel line, the stoch 3 will give us the sell signal at 1.2818 (if you used the previous bar's MA channel high, it would be 1.2822). I suggest taking this sell. Remember to either BE at the middle channel or scale out a little.
I'll stop this post here to see if anybody is still following or if I lost everyone. So far, without any tweaking, we haven't lost yet (if we stick to what we've built up so far). We've gained about 130-140 pips in 7 hours with very little DD and low risk (I think our SL should be the lowest low/highest high of the last 2 bars including the present one). I know that the lower TF's can be used effectively as well to bounce off the middle channel lines for more pips, but we don't want to introduce that right now.
:DI know what everybody's thinking: Stovedude, just build the EA and we will come... That's the purpose of this thread. If anybody can come up with improvements or suggestions to make it better, I'll try to throw that into the EA for us all.
 

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vadimt

Member
Hi Stovedude,

This is what Radicaltour was referring to when he mentioned about a post that talked about changing periods to get better ideas and more reliable signals.



As far as your thread.., i'd had one problem.., the image.., i could not see a clear pic of stochs at all.., all was blurred., hope u can post better images so that i know what i'm reading.:)
 

stovedude

Active member
Try this picture. Note that the stoch has already made its move during the course of the bar.
You must be registered for see images
 

stovedude

Active member
I guess I do remember those videos, but they were only previews :(. We're still waiting for the actual lessons to be available.
 

vadimt

Member
Hi Stovedude,

One suggestion, please use contrast colors.., like white background and dark colors for the indis or other way round.., i still am not able to make out the stochs:)
 

stovedude

Active member
I've been quiet for awhile, because I've been studying an indicator I made and I'm building a strategy based on it alone, without any other indies. If my suspicions are true, it could help us to determine peaks and valleys on almost any TF, but it appears that all TF's are equally important. It's hard to separate them, but I'm almost positive this could be very profitable, even on M1 (with 0 spread of course:D). Actually, looks like M15 would be the minimum TF with a low spread (no more than 2 pips). I'll get it put together for us to test. The EA will be very easy to make without all those extra indies.
 

Knez

Member
I've been quiet for awhile, because I've been studying an indicator I made and I'm building a strategy based on it alone, without any other indies. If my suspicions are true, it could help us to determine peaks and valleys on almost any TF, but it appears that all TF's are equally important. It's hard to separate them, but I'm almost positive this could be very profitable, even on M1 (with 0 spread of course:D). Actually, looks like M15 would be the minimum TF with a low spread (no more than 2 pips). I'll get it put together for us to test. The EA will be very easy to make without all those extra indies.

Stovedude,
Looking forward to that new indies of yours.
 

stovedude

Active member
I posted this before, and I see some interesting patterns. It is a MTF channel indicator I built, and I find when price is below/above your favorite TF and all the ones below it, you wait for the M1 channel to reverse, and then you have a high probability of a reversal, but don't expect it to go past the middle line. Put this indy in your folder, and the template on a M1 chart and watch how the different channel lows/highs start to group up for a reversal. I'm still watching, trying to get all the different rules together. Maybe somebody else can help watch and try to notice any special conditions. Channels going up and down are important to make an accurate prediction. The hardest thing is that the upper TF channels will move the current "step", so they will look different until the next step begins.
 

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