The elusive holy grail trading system is still…. However, as always, the best ideas can come out of the worst ideas. So it always looking at varrious trading systems that you know deep down are not going to provide you with the greatest trading system in the world but maybe a few ideas that will help in your quest. It also always worth looking at such systems as a way of learning what not to do. Below is a chart with the xpMA indicator attached to a 1 minute Ftse index chart.
As you can see it is great at marking swings within a trend. The XP Moving Average is a normal moving average indicator which allows you to select different types of averages and also shows you which direction the moving average is pointing. But none the less is looks good when you have a play with the settings. So how can we avoid these sessions? The problem is if you start filtering bad trades you will naturally also filter out some good trades.
However, if you can find a balance you have a good chance of success or at least breaking even. Looking at the next 2 charts you can see the problems with moving average directional indicators. Choppy sessions lead to many false trades. However, applying the Parabolic SAR indicator you can cut out nearly half off them.
Naturally this will effect good trades as well. However, in my experience on the big swings one would rarely stay in a trade as long as a SAR would keep you in anyway. So it is unlikely to effect winning trades as much as it will benefit you from losing trades. Something like above can work to a degree. The best thing is to take a couple of days worth of charts.
Then add something like a SAR and recalculate. Then list the individual trades next to each other for both methods. You will have to put a zero in for trades not taken in the second system method. This will show you very quickly how effective adding a filter is.
Remember this is about finding away to reduce the losses and false trades rather than about increasing winners. You may have to install some of the advance indicators in order to get them to work on this indicator. Fill out the form below to signup to our newsletter and we'll drop you a line when new Indicators and Expert Advisors are added. And you can be sure to know you'll be the first to know when we have done a review of a new trading system. Please not we do not accept articles for marketing purposes and any trading concepts must be unique.More...