Thread: EA using ATR and ADX

Just wanted to start a topic to see if anyone could create a Expert Advisor that uses the following indicators:
It would run on the M5 or M15 time frame, and could be used on any pair.

(I have used these indicators to trade manually, and they work great! It took me awhile to figure out what indicators yield the best results, and 99% of trades are closed within 20-30 mins, hitting the T/P value, and can be traded in any market conditions) Try this out yourself on a demo account. A while ago, I decided to risk a lot on this strategy, by setting my lot size to 2 on an account with $8k. I promptly made $500 when it hit the T/P.

I like that some EA's have a money management feature, I think that feature should be included on this EA. Lot size can be set manually if MM is off. The only inputs really needed by the user, is lot size and S/L (cause I'm sure people would feel safer having a S/L)

The Average Directional Movement Index Technical Indicator (ADX)
helps to determine if there is a price trend. It was developed and
described in detail by Welles Wilder in his book "New concepts in
technical trading systems".

The simplest trading method based on the system of directional
movement implies comparison of two direction indicators: the 14-period
+DI one and the 14-period -DI. To do this, one either puts the charts
of indicators one on top of the other, or +DI is subtracted from -DI.
W. Wilder recommends buying when +DI is higher than -DI, and selling
when +DI sinks lower than -DI.

To these simple commercial rules Wells Wilder added "a rule of points
of extremum". It is used to eliminate false signals and decrease the
number of deals. According to the principle of points of extremum, the
"point of extremum" is the point when +DI and -DI cross each other. If
+DI raises higher than -DI, this point will be the maximum price of
the day when they cross. If +DI is lower than -DI, this point will be
the minimum price of the day they cross.

The point of extremum is used then as the market entry level. Thus,
after the signal to buy (+DI is higher than -DI) one must wait till
the price has exceeded the point of extremum, and only then buy.
However, if the price fails to exceed the level of the point of
extremum, one should retain the short position.

Calculation:
ADX = SUM[(+DI-(-DI))/(+DI+(-DI)), N]/N

Where:
N — the number of periods used in the calculation. (usually a 14 period)

How this would work, is once the +DI and -DI value lines met(aka the cross/ point of extermum) then that would alert the EA that its 'almost time' to place a trade. (Maybe an alert could pop up to notify the trader that the lines have met?)Once +DI and -DI value lines met, then you have to wait to see what direction the market is going so you know what position to place.(if you trade manually using this, like I do) If +DI exceeds the -DI line by 10 points, then a buy position is created. If -DI exceeds the +DI line by ten points then a short position is created. If there is already a position open and the lines met again, but neither line exceeds the line by 10 points, then NO new position is created. (As its been my experience that the lines met, so I would place a order, but then the lines would retreat back and I would have a losing trade) SO IT IS VITAL THAT THE LINES EXCEED THE CROSS! (I've learned my lesson on this)This indicator is very useful in determining when to enter the market, and what position to take) Once a position is created then the following must occur to modify the order:


This other indicator (this one determines the T/P value, the current value shown on the ATR chart) when the order is place would be added to the price if it was a buy order, and subtracted if it was a sell order. For example, say I placed a buy position on the GBP/USD at 1.4245 (because the ADX had indicated to me it was the right time to place a buy order) and the ATR value was .0019 then that .0019 would be added to 1.4245 (since it was a buy order) and so your T/P limit would therefore be 1.4264. The reverse would be if ADX indicated it was time for a short order, so if you had placed a short order at 1.4245, your T/P limit would be 1.4226. (when I trade manually, I have to calculate this in my head) I've been thinking about what to use for a S/L value. I'm debating whether the user should enter it in through an external input, or to have the S/L be calculated based on the closing point of the opposing candlestick bar, and by opposing I mean that it would be the opposite of whatever position you took. So if you had a short postion, then the EA would calculate your S/L value by looking at the closing value on the closest candlestick bar that went up (buy). Or, not have a S/L at all because the T/P is within the trading volume of the pair at the time the order was initiated. I personally have had good results with these indicators without a S/L. Also, from reading a few forums, a S/L based on the accounts equity would be cool, if the user only wanted to lose 5% of his account equity per trade (if the position went against him/her), then the user would input 5 into the box, etc. There is an indicator that can be used when to exit the market, but I don't really understand how it works, that indicator is called the Parabolic SAR. If anyone knows how it works, pls let me know.

Average True Range
Average True Range Technical Indicator (ATR) is an indicator that shows volatility of the market. It was introduced by Welles Wilder in his book "New concepts in technical trading systems". This indicator has been used as a component of numerous other indicators and trading systems ever since.

Average True Range can often reach a high value at the bottom of the market after a sheer fall in prices occasioned by panic selling. Low values of the indicator are typical for the periods of sideways movement of long duration which happen at the top of the market and during consolidation. Average True Range can be interpreted according to the same principles as other volatility indicators. The principle of forecasting based on this indicator can be worded the following way: the higher the value of the indicator, the higher the probability of a trend change; the lower the indicator’s value, the weaker the trend’s movement is.

Calculation:
True Range is the greatest of the following three values:

difference between the current maximum and minimum (high and low);

difference between the previous closing price and the current maximum;

difference between the previous closing price and the current minimum.

The indicator of Average True Range is a moving average of values of the true range.


So using these two indicators, (possibly 3 with the Parabolic SAR) I think a person could create an awesome EA. Only problem is I have no idea how to program. I did have one semester of computer programming using Visual Basic, but that was years ago, and programming simple stuff. Is there anyone here who can help me turn my idea into reality? I would be willing to forward test this EA on a demo account I have if someone created this EA. What do you guys think? Any suggestions would be great!

I can code this for you. Please send me a private message so we can discuss the system further. I can't send you a message because I think you have the option off.

Originally Posted by jmca

I can code this for you. Please send me a private message so we can discuss the system further. I can't send you a message because I think you have the option off.

This guy is a genius! He had everything coded and operational when I was still sending him messages about my ideas on how to code it and what it should do. lol. I highly recommend him to anyone who needs an EA coded! I'm currently forward testing the EA on my demo account. I will post my results everyday here to show how its doing.

Alex,

I too, have been studying a lot of Wilder's work. I am fairly new to TSD and forex, and do not yet understand how to code. I simply have not had the time to get through Guru's study guide-- and lack the understanding. I do trade stocks and ETFs, etc. I am so glad you started this thread! I don't visit TSD as much as I should, but love it as a resource. I am almost through with Alexander Elder's book and have ordered the study guide. I am convinced that I can find a decent, consistent system using the indicators you mentioned, as well as some of Elders (or the ones the he writes about). I recently have become enamored with the accumulation/distribution indicator and am looking at it (for divergence) and others as potential 5 or 15 minute indicators. I am not as proficient with MT4, but am trying to spend more time with it.

Most recently, I have been demoing the TSD indicators (especially version 24) written by Mindogaus. I am convinced it is a good EA, but it is designed for longer time-frames. He put 4 options for indicators, OsMA or MACD and Force or WPR. I have changed them some (I am very poor at this) but maybe this gentleman (I am on post right now and cannot remember his screen name) can look at TSD v.24 for some ideas. I am especially impressed that the EA provides good initial stops, and will also move a stop based upon Elder's ideas. If there was another filter (maybe ATR or another of Wilder's indicators) built into that, I believe it would be awesome.

I have sometimes had a little luck just using it on EURUSD in 5M with 1M and 15M as its outsides. I used that because it is as close as I can get with MT4 to make the longer and shorter timeframes jibe with Elder's factor of 5 rule. I have not had much luck with other pairs, and it might be because of the spreads. It seems to stay pretty even, but occasionally will catch a big trade. Then it melts back down, but seems to be rising at a very slow rate, overall. It cannot be backtested accurately, and I occasionally tamper with the overall results because I have used the same demo account for practicing Elder's system. It works best in the US market and can get eaten up in a slow Asian session if you don't watch it. It handles volatility well (just with EURUSD, but like I say, when the market flatlines in an Asian session it just stops out a lot of small losses.

I am not trying to take this off-thread, but think it is at least interesting, if not relevant. It is the first EA I have demo-ed (and I have demo-ed a lot of different ones, both commercial and shared), that has not blown-up. NewDigital put all of these TSD indicators together, but I cannot remember how to get to it, exactly. I like the older version, but have not had time to look at all of the youngers. It has no inputs and the code must be changed, but this gentleman might be able to look at it and get some ideas. If a similar EA had more filter options with Wilder's indicators, maybe an ADX, ATR, or CCI, then I think you would be in good shape!

Thanks again for starting the thread; I am interested to see how you come out and may see (my company is being radically downsized and I have taken 3 pay cuts) if he can help me when I can pay him. I will remember him and thank you for the recommendation. Also, New Digital has ran them (TSDs) and did a great job putting them all in one place. You may might want to ask him about it.

Alex,

I use the parabolic SAR sometimes as a stop. There is an EA in the MT4 code-base that does this. I know I am not much help, but I am sure you can find it there. It is another of Wilder's indies that I really like and is most useful when I cannot baby-sit a trade.

I have renamed it-- so I could recognize it and don't feel good about sending it to you in that form, since I really made no modification to it and don't want to undermine the original coder. Just visit the MT4 codebase and punch-in "Parabolic SAR EA" or something like that and I am sure you can find it. If not, message me and I will help.

I have also tried one that actually trades, and is written by someone named Juki. It is also in the code-base, but has some problems. It will not work with other EAs and has a magic-number problem that I don't know how to fix. Nonetheless, about that EA, the other is great and if you are just looking for a babysitter, I would recommend it. I have only used it for manual trades and don' think it would work with an EA on the same chart. Hope this helps.

Look here. This might be what you are looking for.
http://www.tradingsystemforex.com/ex...t-advisor.html

Regards,
Jeff

Originally Posted by Chilibowl

Alex,

I use the parabolic SAR sometimes as a stop. There is an EA in the MT4 code-base that does this. I know I am not much help, but I am sure you can find it there. It is another of Wilder's indies that I really like and is most useful when I cannot baby-sit a trade.

I have renamed it-- so I could recognize it and don't feel good about sending it to you in that form, since I really made no modification to it and don't want to undermine the original coder. Just visit the MT4 codebase and punch-in "Parabolic SAR EA" or something like that and I am sure you can find it. If not, message me and I will help.

I have also tried one that actually trades, and is written by someone named Juki. It is also in the code-base, but has some problems. It will not work with other EAs and has a magic-number problem that I don't know how to fix. Nonetheless, about that EA, the other is great and if you are just looking for a babysitter, I would recommend it. I have only used it for manual trades and don' think it would work with an EA on the same chart. Hope this helps.

To be honest, I have not studied much of Welles Wilder's theories or strategies. However, I do think he was brilliant to develop the ADX indicator. Welles Wilder wrote that all market Trend-following systems typically make consistent profits in DIRECTIONAL markets but sustain consistent losses in NON-DIRECTIONAL markets. Because markets are typically non-directional 70+ percent of the time and directional 30- percent of the time the answer to consistently profitable trading would need to be the discovery of a way to define non-directional movement and translate this definition to a rating scale within known parameters. The ADX indicator is Wilder's solution to the problem stated above.

I've personally used the ADX indicator to trade manually, along with the ATR indicator, and I've always made money using them. I'm more interested in trading then coding Because I don't know how to code, but I can trade What is the Guru's study guide you mentioned? I have not looked at any of Elder's works, but I have heard of him from researching Wilder's works. I will check out some of Elder's works! I will also check out the EA you mentioned. If we are able to access the source code, it wouldn't be too hard to make the changes to include a filter/indicator by Wilder. I believe having an EA based on the ADX indicator can trade in any market conditions, as it determines when it is the right time to enter the market, regardless of volatile market conditions. Thats what the ATR is for, so the EA sets the T/P limit within the trading range of the market, so even if there is hardly any trading going on, (like the asian session) you still have a high chance of hitting the T/P. As most EA T/P limits are a fixed input from the user, which is where I think alot of EA's go wrong. Rather than basing the T/P limit on current market conditions of the pair. To me, the more automated the EA is by using indicators, etc. the better.

I have high hopes for this EA that the guy coded for me. Monday will be the first day of testing So far, its been working well on the limited testing I was able to do yesterday on it. The alert works like a charm and shows what pair of currency the cross occurred on. Theres even features in it that I didn't even think about, but I like them. The one trade it executed, yesterday ,the T/P limit was calculated exactly perfect to the ATR value! The trade didn't have much time to hit the T/P limit, as it was opened 20 mins before the markets closed. Its still open right now, so I look forward to see what happens monday

I'll check out the EA NewDigital created. My opinion about the CCI, I compared the CCI to the ADX, and found that the CCI has a good correlation to the ADX, just something to think about and compare. I will expirement manually trading with the CCI. I think the CCI and ADX both do the same job though, an indicator that helps you determine when to enter the market. Your welcome, I'm glad I started this thread too!

Originally Posted by azjeff

Look here. This might be what you are looking for.
SAR ADX Expert Advisor - Trading System Forex

Regards,
Jeff

Thank you for sharing! Those are really good results! over 1000% profit! looking at your time frame, it looks like your trades could be open for about 4-5 days before they close at a profit. What setting do you use on that EA?

Originally Posted by alexjbrandt

Just wanted to start a topic to see if anyone could create a Expert Advisor that uses the following indicators:
It would run on the M5 or M15 time frame, and could be used on any pair.

(I have used these indicators to trade manually, and they work great! It took me awhile to figure out what indicators yield the best results, and 99% of trades are closed within 20-30 mins, hitting the T/P value, and can be traded in any market conditions) Try this out yourself on a demo account. A while ago, I decided to risk a lot on this strategy, by setting my lot size to 2 on an account with $8k. I promptly made $500 when it hit the T/P.

I like that some EA's have a money management feature, I think that feature should be included on this EA. Lot size can be set manually if MM is off. The only inputs really needed by the user, is lot size and S/L (cause I'm sure people would feel safer having a S/L)

The Average Directional Movement Index Technical Indicator (ADX)
helps to determine if there is a price trend. It was developed and
described in detail by Welles Wilder in his book "New concepts in
technical trading systems".

The simplest trading method based on the system of directional
movement implies comparison of two direction indicators: the 14-period
+DI one and the 14-period -DI. To do this, one either puts the charts
of indicators one on top of the other, or +DI is subtracted from -DI.
W. Wilder recommends buying when +DI is higher than -DI, and selling
when +DI sinks lower than -DI.

To these simple commercial rules Wells Wilder added "a rule of points
of extremum". It is used to eliminate false signals and decrease the
number of deals. According to the principle of points of extremum, the
"point of extremum" is the point when +DI and -DI cross each other. If
+DI raises higher than -DI, this point will be the maximum price of
the day when they cross. If +DI is lower than -DI, this point will be
the minimum price of the day they cross.

The point of extremum is used then as the market entry level. Thus,
after the signal to buy (+DI is higher than -DI) one must wait till
the price has exceeded the point of extremum, and only then buy.
However, if the price fails to exceed the level of the point of
extremum, one should retain the short position.

Calculation:
ADX = SUM[(+DI-(-DI))/(+DI+(-DI)), N]/N

Where:
N — the number of periods used in the calculation. (usually a 14 period)

How this would work, is once the +DI and -DI value lines met(aka the cross/ point of extermum) then that would alert the EA that its 'almost time' to place a trade. (Maybe an alert could pop up to notify the trader that the lines have met?)Once +DI and -DI value lines met, then you have to wait to see what direction the market is going so you know what position to place.(if you trade manually using this, like I do) If +DI exceeds the -DI line by 10 points, then a buy position is created. If -DI exceeds the +DI line by ten points then a short position is created. If there is already a position open and the lines met again, but neither line exceeds the line by 10 points, then NO new position is created. (As its been my experience that the lines met, so I would place a order, but then the lines would retreat back and I would have a losing trade) SO IT IS VITAL THAT THE LINES EXCEED THE CROSS! (I've learned my lesson on this)This indicator is very useful in determining when to enter the market, and what position to take) Once a position is created then the following must occur to modify the order:


This other indicator (this one determines the T/P value, the current value shown on the ATR chart) when the order is place would be added to the price if it was a buy order, and subtracted if it was a sell order. For example, say I placed a buy position on the GBP/USD at 1.4245 (because the ADX had indicated to me it was the right time to place a buy order) and the ATR value was .0019 then that .0019 would be added to 1.4245 (since it was a buy order) and so your T/P limit would therefore be 1.4264. The reverse would be if ADX indicated it was time for a short order, so if you had placed a short order at 1.4245, your T/P limit would be 1.4226. (when I trade manually, I have to calculate this in my head) I've been thinking about what to use for a S/L value. I'm debating whether the user should enter it in through an external input, or to have the S/L be calculated based on the closing point of the opposing candlestick bar, and by opposing I mean that it would be the opposite of whatever position you took. So if you had a short postion, then the EA would calculate your S/L value by looking at the closing value on the closest candlestick bar that went up (buy). Or, not have a S/L at all because the T/P is within the trading volume of the pair at the time the order was initiated. I personally have had good results with these indicators without a S/L. Also, from reading a few forums, a S/L based on the accounts equity would be cool, if the user only wanted to lose 5% of his account equity per trade (if the position went against him/her), then the user would input 5 into the box, etc. There is an indicator that can be used when to exit the market, but I don't really understand how it works, that indicator is called the Parabolic SAR. If anyone knows how it works, pls let me know.

Average True Range
Average True Range Technical Indicator (ATR) is an indicator that shows volatility of the market. It was introduced by Welles Wilder in his book "New concepts in technical trading systems". This indicator has been used as a component of numerous other indicators and trading systems ever since.

Average True Range can often reach a high value at the bottom of the market after a sheer fall in prices occasioned by panic selling. Low values of the indicator are typical for the periods of sideways movement of long duration which happen at the top of the market and during consolidation. Average True Range can be interpreted according to the same principles as other volatility indicators. The principle of forecasting based on this indicator can be worded the following way: the higher the value of the indicator, the higher the probability of a trend change; the lower the indicator’s value, the weaker the trend’s movement is.

Calculation:
True Range is the greatest of the following three values:

difference between the current maximum and minimum (high and low);

difference between the previous closing price and the current maximum;

difference between the previous closing price and the current minimum.

The indicator of Average True Range is a moving average of values of the true range.


So using these two indicators, (possibly 3 with the Parabolic SAR) I think a person could create an awesome EA. Only problem is I have no idea how to program. I did have one semester of computer programming using Visual Basic, but that was years ago, and programming simple stuff. Is there anyone here who can help me turn my idea into reality? I would be willing to forward test this EA on a demo account I have if someone created this EA. What do you guys think? Any suggestions would be great!

but you can post chart showing what you described above?

Originally Posted by fxbs

but you can post chart showing what you described above?

Umm...a chart? What do you mean by a chart from my description, what is there to chart? Also, the gentleman who said he can code it, already coded it...I have it installed on my trading platform right now.