ADX, RSI & ATR strategy

mrwobbles · #1 (**permalink**) 03-01-2009, 02:00 AM

Hey I thought I'd share a strategy that has worked fairly well for me so far. Basically it uses a 14 period ADX and a 5 and 21 period RSI as its signals for entry. The system is based on the 1H GBPJPY but it might work with other pairs and time-frames.

Buy Signals

21 & 5 period RSI breaking thru 30 from below
ADX > 20 and rising & +DI rising above -DI
Close when 21 day RSI falls thru 70 having been above previously

Sell signals are just the opposite. There's also a weak buy/sell signal based on having a signal from the 5 day RSI confirmed by +/-DI signal but no signal from the 21 period RSI. ADX has to be above 20 and rising for all trades. This weak trade should be 1/2 the standard lot.

the ATR is used to set the stop loss which I set at 2-3 times the ATR value. This helps to keep you being stopped out of otherwise profitable trades. The last trade is half a lot and the green lines represent the stop losses for those trades. The first trade shows nicely how the ATR stop loss keeps us in a nice profitable trade. The entries are usually pretty accurate but the exits could do with some work. Any thoughts?

Attachment 79039

mudar · #2 (**permalink**) 03-01-2009, 02:05 PM

nice, simple.

how long are you using this system ?

aelimian · #3 (**permalink**) 03-01-2009, 02:34 PM

Quote:

Originally Posted by mrwobbles

Hey I thought I'd share a strategy that has worked fairly well for me so far. Basically it uses a 14 day ADX and a 5 and 21 day RSI as its signals for entry. The system is based on the 1H GBPJPY but it might work with other pairs and time-frames.

Buy Signals

21 & 5 day RSI breaking thru 30 from below
ADX > 20 and rising & +DI rising above -DI
Close when 21 day RSI falls thru 70 having been above previously

Sell signals are just the opposite. There's also a weak buy/sell signal based on having a signal from the 5 day RSI confirmed by +/-DI signal but no signal from the 21 day RSI. ADX has to be above 20 and rising for all trades. This weak trade should be 1/2 the standard lot.

the ATR is used to set the stop loss which I set at 2-3 times the ATR value. This helps to keep you being stopped out of otherwise profitable trades. The last trade is half a lot and the green lines represent the stop losses for those trades. The first trade shows nicely how the ATR stop loss keeps us in a nice profitable trade. The entries are usually pretty accurate but the exits could do with some work. Any thoughts?

Thank you for the system. How do you get the day RSI unto the hour chart? Do you have a MTF RSI? Also in the last trade described above the 5 day RSI did not come from below 30? Why did you decide to take the trade?

mrwobbles · #4 (**permalink**) 03-01-2009, 03:49 PM

The last trade was a weak buy, the blue line is the 5 day rsi and the yellow the 21 day RSI. If you look at 5 day RSI it dips down below 30 then pulls sharply back up, ADX is above 20 and starting to rise and at the same time +DI is increasing above -DI. This is easier to see if you go to the 30M and 15M charts, where it is already showing signs of recovery. I entered a buy risking 1% rather than the standard 2%. Before that ADX is falling or below 20-25 (my optimizations for the EA ive built show ADX should be somewhere between 18 and 26), both of which prevent me entering trades. This helps to eliminate whipsaw. If you notice ADX hovers around the 20 signal level. This makes me think that the market is about to enter a ranging period and I wont trade till it starts to show increasing trend strength.

Looking at the smaller time-frame charts is part of the filters, on the first and third trade ADX was falling on the 1H chart but rising on the 30M & 15M charts. This helped to identify a lot of false signals between the trades as well. This pic is the first results from a simple EA based on the above. It currently is using a stop and reverse strategy because its not closing the orders properly. Also I havent coded the part to check 30M and 15M time-frames yet, hence it enters a few trades incorrectly.

Attachment 79038

Linuxser · #5 (**permalink**) 03-02-2009, 01:47 AM

Please, upload the images to forum.

mrwobbles · #6 (**permalink**) 03-02-2009, 02:01 AM

Quote:

Originally Posted by Linuxser

Please, upload the images to forum.

How do I do that?

Linuxser · #7 (**permalink**) 03-02-2009, 02:04 AM

Quote:

Originally Posted by mrwobbles

How do I do that?

Please: How to take chart pictures(in MT4) and how to post/attach pictures in the forum

mrwobbles · #8 (**permalink**) 03-02-2009, 02:29 AM

The attach button doesnt seem to show on my reply. It should be right of the smilies icon and left of the undo icon right? Its not there.

Linuxser · #9 (**permalink**) 03-02-2009, 02:32 AM

Quote:

Originally Posted by mrwobbles

The attach button doesnt seem to show on my reply. It should be right of the smilies icon and left of the undo icon right? Its not there.

Do 6/7 posts on this thread and wait near 20 minutes

mrwobbles · #10 (**permalink**) 03-02-2009, 02:45 AM

Quote:

Originally Posted by mudar

nice, simple.

how long are you using this system ?

The last year I have been trading a variety of systems based on ADX and a variety of other indicators. I stumbled on this about October last year and having been trading it since.