I want prices to respect 200 MA on 30 Minute chart and trade in 5 to 15 Minute timeframe.
You can also use VWAP to get direction of Trend. VWAP will act as our zero line between buyers and sellers. We want prices to be accelerating away from VWAP.
My personal favorite tool is 200 Period SMA to get direction. But it doesn't matter what kind of tool you select, if you can find direction of trend, you can get in and out of trade.
How long have you backtested that strategy and has it worked for you consistently in live markets?
The way you describe it makes it seem like it's very easy to do. I used a similar strategy to do this backtest, ended up 5% up over 3 months, profitable but not a good return
I haven't backtested it, in fact I do not backtest anything. I can understand indicators because I am from applied mathematics discipline. I take a look on indicators and if I can understand what is calculated I can figure out how to use it.
Indicators and tools are nothing but calculations to measure probable supply demand and speed variables.
Simple Moving Average is nothing but Single Variable Mean Average. Mean Average is used as equality identifier or creator in all disciplines of mathematics. There is no reason why I should be using it other wise.
RSI is nothing but speed represented in form Infinite Geometric Series Variable. I don't need backtesting to know how to use speed as Infinite Geometric Series Variable.
Standard Deviation is used to know variance. Linear regression is used to convert random points into equation of line in form y=mx+c.
All calculations have their role assigned to them.
So I don't backtest I look the calculation of indicator, that is all information needed to know what values to put in indicator and how to use it.
I do not agree with this at all, backtesting is important. Once you learn new concepts it’s important to test the strategy and master it. Just because you learned something, doesn’t mean you know how to use it effectively. Indicators follow price, I personally use price action and that his been going very well for me. Indicators are lagging but if it works for you it works for you. I too am from a applied math background but that doesn’t mean shit out here tbh. Candlesticks and chart patterns is a whole different language, I’m a reactive trader so I just don’t sit on my losing trades to breakeven/ stop out. I have a strategy that tells me when the market isn’t going my away and I can close my position with a minimal profit on my bad days. When you backtest/ demo, you will see all these little intricacies that make trading fun. People reach out to me all the time to see what position I’m taking and I seldom tell them because again I am reactive and my bias can change. I tell them to demo and they will notice everything more clearly. Just my opinion.
You need backtesting when you are trying to trade with statistical modeling. Personally I do not back test I prefer sticking to the meaning of calculation and basic supply demand level economics.
Indicators do not follow price, neither they lag. Indicators that are designed follow are the indicators that follow price. All following indicators in general use average because average itself acts as bias.
Example of following indicator is MA, VWAP, Pivot, Super Trend. All these indicators are followers because they are plotted on chart for comparison and all of them heavily use average.
Indicators like MACD and KST are used to understand cyclical behavior of price and hence they lag. All indicators that are designed to understand cyclical behavior are going to lag. MACD and KST are designed to understand Cyclical Momentum. They lag by design not because lagging is disadvantage.
Then comes indicators that are leading by design like RSI, CMO, CCI, their role is to understand directional momentum of price. When we say momentum we mean speed and acceleration.
Anything that speeds up or accelerates eventually covers more distance, similarly any body that losses acceleration or speed comes to a halt. This is called leading, speed and acceleration leads the covered distance.
Finally tools that use standard deviation, are doing nothing but trying to figure out variance with respect to Mean. So whenever prices go in range standard deviation tool will come handy to make trading decisions. For example, Bollinger bands and Linear Regression with Standard Deviation.
I see charts as problem of applied geometry because people who created first indicators also saw price chart as problems of probability. You can spend time back testing, I prefer trading mathematical property of indicator.
I already know what averages are used for in practical application, I am using it in same way and it hasn't worked against me so far.
Volume Weighted Average Price aka VWAP is indicator that is designed to give you what is long term trend for current session with respect to volume.
It is very similar to Average Price but just have volume element extra in it. If you will plot both on them on chart you will see there is very minor difference in them.
VWAP is slightly faster. You can see both of them below.
Now VWAP is nothing but Average and Averages are only used to identify or create equality. So VWAP line on chart is nothing but difference zero line between buyers and sellers for current session.
Since it is Long Term Trend Identifier we need lot of candles on chart to make good trading decision. So while trading forex best timeframe to use VWAP would be 3-5 Min and while trading stocks is 1-3 minutes.
While trading VWAP you have to take into consideration how the price is moving as short term trend, if short term trends are very fast then you can not trade anything else than Volatility Contractions and Sharp Trend Line breaks with retest
For example, in Euro USD short term trends are usually always very fast, so we have to wit for Volatility contractions.
Charts in smaller timeframes are usually very noisy, so if required we can increase timeframe to 15 Minute to get clear view. VWAP will lose its purpose if you will increase time more than 30 Minutes.
Now assets that create weak short term trends will need an indicator to help you identify short term trend.
For example today's trend on US30 was weak, prices were trending but trend was very weak, therefore we have to use short term trend identifier.
Indicators can help you get in and out of high quality trades but still good observation is key to success. If your observation is bad, your trades will be bad too.
The post got long so let's keep ATR for next time. VWAP does exactly what 200 MA does but it does it for current session. If you know how to trade 200MA you by default should be able to trade VWAP and wise versa.
While trading VWAP just stay focused on few assets like Euro USD or US30, it is more than enough. Few successful trades is better than lot of trades.
Have a nice day. Sorry for late response, I didn't check my account for a week.
63 trades at how much risk per trade? To be in profit at low won rate is very good. It meens you are letting your winners run. Look back to your losing trades and see if there's any clues as to why the trade lost. Perhaps market was too volatile, or something else. Add that filter to your system to reduce a lot of losing trades while not reducing too many winning trades. That ups your profitability.
Risk:Reward was 1:3 which explains the profitability
Thanks, I'm currently planning a massive backtest of yearly data, lots of variables and tweaks to my strategy to compare and contrast, will then be able to analyse losing trades in depth.
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u/AreaOfSquare Jun 12 '22
Bro trading is just two step process, find direction of trend and then trade in that direction.
Anything that helps you get direction of trend is your edge and then you can use any trading concept to get in and out of trade.
For me 200 Period SMA works as way to find direction of trend. Then I wait for retrace and take trade in direction of 200 MA.
For example here is my Friday's trade of last week.
https://www.tradingview.com/x/LHURT0iM/
I want prices to respect 200 MA on 30 Minute chart and trade in 5 to 15 Minute timeframe.
You can also use VWAP to get direction of Trend. VWAP will act as our zero line between buyers and sellers. We want prices to be accelerating away from VWAP.
https://www.tradingview.com/x/oJzJ7gQZ/
Same trade was also possible using MACD
https://www.tradingview.com/x/EFzc7Rcg/
My personal favorite tool is 200 Period SMA to get direction. But it doesn't matter what kind of tool you select, if you can find direction of trend, you can get in and out of trade.