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The idea that this thread has been created as "the best forex SYSTEM" is worthless. There is no "SYSTEM" posted anywhere on this thread.
Having said that, that doesn't mean that there is no value in this thread.
What I believe is trying to be said, and it's something I've mentioned many times in my posts, is that to be successful, you need to be a TRADER, not an indicator FOLLOWER.
You're not going to find a super combination of indicators that you can follow mechanically on short-term trades. And, if they do exist, they won't be found using MT, because you just can't get accurate backtests with it. Thus, you have to rely on the slow process of forward testing.
Dr4x posted about how he uses MA crosses to generate Setups, not entry signals. I refer to them as Setups, because in other posts he alludes to not neccessarily taking every cross. Thus, they're setups, not entry signals.
He then tells you to use that last swing high/low as the stoploss. This is great. Everybody seems to want to use a fix-pip stoploss. This makes no sense at all because it's just arbitrarily chosen. Using the swing highs/lows, you're taking into account market activity and S/R.
Last, he says to exit at the first sign of reversal. This is good and bad. Good in that it implies discretion, not some magical indicator that doesn't work. The bad thing is that, for trying to post a "system", it's like, "no shit!". Just about Every "system" posted on this forum, or any other forum for that matter, will generate good entry setups/signals. It's consistently exiting the damn trades profitably that is the hard part.
So, for all my rambling, I think what I'm trying to say is:
Whatever method you use to generate entry signals, continue using it, but instead of mechanically using them as entry signals, look at them as trading setups. A potentially good trade is presenting itself. Now, look and see what price and the market are actually doing. Check S/R, pivots, price activity and price patterns, etc. If your entry signal, based on lagging indicators, says go long, but the market is already turning down, don't mechanically take the trade. Use your head.
Base your stoploss on recent swings high/low (as stated by Dr4x). Have a reason for a stoploss value, not just some abitrary pip value. By the way, this should be calculated Before you take your trade, not after.
Based on your examination of the current market, determine a profit target. You may not be right, but you should at least have an idea of what you expect/want the market to do before entering a trade. Once you have your expected target, compare that to your stoploss value and determine your risk/reward value. If the value is acceptable to you, then, and only then, should you take the trade.
Exits: There is no magical exit. If you wait for an indicator to signal an exit, sometimes it will be great, and other times it will have given all your profits, and them some, back. Use indicators for exits in the same manner as for entry setups.... Let them guide/help you, but don't follow them mechanically.
Summary: Becoming a successful TRADER involves discretion. There's no getting around that.
This is all just my opinion, but maybe somebody will take something from it.
Say what you will, I actually applaud this thread, though I typically despise indicators. There is alot to be said for a simple 12/89 MA cross system, especially when applied to the 5M and 1M time frame with a few simple rules. I can easily see that its more effective than 99% of the garbage indicators out there. Its simple and effective. Use it in the right time frames along with S/R and MM and its fantastic. Check it out on the GBP from 8AM eastern through 2PM. It gives better signals than most of the byzantine "systems" out there with all their pretty lines and histograms that tell you ESSENTIALLY the same thing, yet less effectively. You just need some experience with price action to utilize it properly. Its a fantastic filter. Combine it with experience, candle patterns, and time-of-day trading, and its every bit as good if not MORE so than anything else out there. Thanks for the post, Dr-4X.
Do a web search for "Guppy+MMA". You will find a truckload of references. Darryl Guppy is an Aussie stock and trading guru, a wiz on tech analysis. I have several of his books in my TA library, he is worth a read.
why is it so difficult to create a profitable system?
Hi,
Im new to forex and this thread. Im trying to create a profitable trading system.
This is what I think I have to do, what do you think?
1) Need a LAGGING indicator to tell me that a new trend has formed.
2) Need indicator to measure strength of trend.
3) Need a NON-lagging indicator to tell us that the current trend is ending and new one is forming. When this happens we exit.
So in effect we just take middle part of the trend.
It is my belief that there is potential to profit from following a mechanical trading system religiously, (i.e no missed trades) but I personally have found after years of both backtesting and live (forward) testing of numourous machanical trading systems that your returns are likely to be rather lack lustre in nature with quite some volitility/fluctuations (and occasionally some stomach renching drawdowns periods) in your equity graph.
After looking over my trading results (both Live and demo) and findings to date, I've largely came to a conclusion similar to what keris2112 has outlined... That one needs to apply discretion in their trading and be able to make emprical decisions in order to achieve anything more than lack lustre trading results. Achieving the experience necessary for discretionary trading I believe will require a number of years of ACTIVE experience in the Forex Markets.
The idea that this thread has been created as "the best forex SYSTEM" is worthless. There is no "SYSTEM" posted anywhere on this thread.
Having said that, that doesn't mean that there is no value in this thread.
What I believe is trying to be said, and it's something I've mentioned many times in my posts, is that to be successful, you need to be a TRADER, not an indicator FOLLOWER.
You're not going to find a super combination of indicators that you can follow mechanically on short-term trades. And, if they do exist, they won't be found using MT, because you just can't get accurate backtests with it. Thus, you have to rely on the slow process of forward testing.
Dr4x posted about how he uses MA crosses to generate Setups, not entry signals. I refer to them as Setups, because in other posts he alludes to not neccessarily taking every cross. Thus, they're setups, not entry signals.
He then tells you to use that last swing high/low as the stoploss. This is great. Everybody seems to want to use a fix-pip stoploss. This makes no sense at all because it's just arbitrarily chosen. Using the swing highs/lows, you're taking into account market activity and S/R.
Last, he says to exit at the first sign of reversal. This is good and bad. Good in that it implies discretion, not some magical indicator that doesn't work. The bad thing is that, for trying to post a "system", it's like, "no shit!". Just about Every "system" posted on this forum, or any other forum for that matter, will generate good entry setups/signals. It's consistently exiting the damn trades profitably that is the hard part.
So, for all my rambling, I think what I'm trying to say is:
Whatever method you use to generate entry signals, continue using it, but instead of mechanically using them as entry signals, look at them as trading setups. A potentially good trade is presenting itself. Now, look and see what price and the market are actually doing. Check S/R, pivots, price activity and price patterns, etc. If your entry signal, based on lagging indicators, says go long, but the market is already turning down, don't mechanically take the trade. Use your head.
Base your stoploss on recent swings high/low (as stated by Dr4x). Have a reason for a stoploss value, not just some abitrary pip value. By the way, this should be calculated Before you take your trade, not after.
Based on your examination of the current market, determine a profit target. You may not be right, but you should at least have an idea of what you expect/want the market to do before entering a trade. Once you have your expected target, compare that to your stoploss value and determine your risk/reward value. If the value is acceptable to you, then, and only then, should you take the trade.
Exits: There is no magical exit. If you wait for an indicator to signal an exit, sometimes it will be great, and other times it will have given all your profits, and them some, back. Use indicators for exits in the same manner as for entry setups.... Let them guide/help you, but don't follow them mechanically.
Summary: Becoming a successful TRADER involves discretion. There's no getting around that.
This is all just my opinion, but maybe somebody will take something from it.
Keris
After 4 years (and lots of $$), I wholeheartedly agree Kerris.
It wasn't until I started NOTATING my EUR/USD charts in REAL TIME (using MT4 text) as the day progressed, that I SAW setups and not entry signals. A very important point!
What you end up with is your own "system" of pattern recognition. The entries come from THE SETUPTHAT CONTINUES TO CONFIRM ITSELF through price behavior ......and there is NO LAG with price behavior.....it IS what it IS.
Your entry (like he says) is discretionary....different setups (patterns) at critical points (session times!) in the day have more likely probabilities (or less likely) probabilites of occuring. That just takes experience to know whether to jump in or wait longer for more confirmation of pattern development.
Anyway, don't mean to ramble, but to sum up:
1. I agree with the above quote.
2. Start notating your charts.
I use eur/usd (only) for pattern recognition.
5 min chart.
DiNapoli MA settings. (3,7,25)
Bollinger Bands
Camarilla levels
MurreyMath levels
Fisher transform
Linear Mode
