Hi,
Vahid writes that forex system must be easy. Here is.
Easy and interesting, very interesting in my opinion.

Timeframe - 1hour

1) 5-period Exponential Moving Average - close
2) 12-period Exponential Moving Average - close
3) 21-period RSI
4) buy/ sell signals given by candlesticks - Bullish/Bearish Engulfing Pattern, Hammer, Inverted Hammer

Go long when:
1. EMA 5 crosses EMA 12 to the upside and RSI 21 is higher than 50.
2. You have confirming candlestick bullish pattern.

Go short when:
1. Enter short when EMA 5 crosses EMA 12 to the downside AND RSI 21 is less than 50.
2. You have confirming candlestick bearish pattern.

Stop loss - at the nearest resistance/support

Hi Any,

Thanks for sharing your system with us. Looks like a good and very easy to follow system. I am sure if one waits for the trade setup, he/she will be profitable at the end of the month.

Hi traderany,

You say this system is easy and interesting, very interesting.
It looks easy (simple) enough to follow.

If it's all right with you I have a few questions:

Please could you give us an idea of the number of trade setups from trading on this system you have had over say the last month and which pair(s) would you say work the most favourably on this system and during which sessions.
How wide in pips generally are your stop losses and target prices?

That's it, thanks in advance,
aquiagora

Hi aquiagora,
Now i`m using almost only Vahid`s signals. I`d like to know if his signals are as good and professional as his knowledge,
if so I`d like to be as good trader as hi is. At the moment I`m looking at EUR/USD and waiting for a long signal. EMA5/ has crossed EMA12, candlesticks has given signal too. I,m waiting for RSI, it must be above 50. Then I will take a long position. There is one problem, on the 4hour chart EUR/USD is few points below the Bollinger Middle Band.

I may close my position when EMA 5 crosses back below EMA 12 or RSI 21 < 50 or when price stalls at major resistance, trendline or when candlesticks give me a signal.

I see that RSI is above 50, I go long! 1.4914, SL- 14886, TP- 1.4942 (below the Bollinger Upper Band)

The diffrence between EMA5 and EMA12 must be more than 2 pips if no you do nothing there is no signal.
You can`t use this system if market is flat.
The best currency pairs: EUR/USD, GBP/USD, EUR/JPY. (I use EUR/USD)
This system was tested by a group of traders- it gave 80% profitable transactions and 18% rate of return per month
(I don`t know R/R rules).
You must remember that the time frame for this system is 1 hour. Is good to have a smartphone with Meta Trader for Mobiles (my broker give it to me) to check if there is no signal when you are out.
My favourable currency pair is EUR/USD with a few signals a week.
To feel comfortable with this system you should first test it and then you will know if it is worth to trade.

Best regards
Any

Hi Any


It seems to be so - look at the past performance reports.


So would I.


These things tend to be subjective and vary from individual to individual.

Have you programmed an alert signal?

Probably the best pair as it is the most liquid and only 2 pips spread.


That is good advice.

Thanks for that - your trade reached 1.4927 so far and could easily hit your TP of 1.4942 before long.
All the best,
aquiagora

Hi Any,

I have just carried out a form of backtest of your system for this month. It is not a real backtest as I do not have the "forextester" programme.
This of course made it easier than it should have been.

Please look at the attached table. It would be interesting to learn how it compares with your actual trades.

I intend to front test it next week.
Regards,
aquiagora

Hi All

As an exercise I am writing an indicator for this strategy.

Phase 1 - It draws arrows as per attached image is done.
Phase 2 - Modify code to hold arrows off until candle complete.
Phase 3 - Make it display and email an alert.
Phase 4 - Add highlighting of some candlestick patterns.

I've never done any MetaTrader programming before so this is as much about learning programming as it is trading the strategy. I'm happy to share this from Phase 2 onward if anyone is interested. I'll post it in the Programming Discussion area when its ready.

All the best

Michael

Hi Michael,

This looks good, Phase 3 would be a time saver and Phase 4 should highlight the better prospective trades.

Between times this coming week I am going to manually front test this system and then I should have a better idea how much more tesing is needed to evaluate how much of it is mechanical and how much is discretionary.

Good luck with your programme,
regards,
Kel

Hi aquiagora,

As we see one day one deal and almost every position with profit. We must remember that when market goes against us our loss may be only several pips - we use 1 hour time frame and our S/L is not far from our entry point, but our profits often about 100 pips. It would be fantastic to be able to take every signal the system gives. We must practice to be disciplined.

Best regards,
any

Hi Vahid,

Why do you say the bigger liquidity the less usefulness of 1 hour timeframe charts? Have you experienced any mistakes in your analysis as a result of bigger liquidity?

(Forex daily volume 3,200,000,000,000$ billion -GB, trillion US)

If I know the system we discuss gives almost the same results as two or three years ago.

Best regards,
Any

Hi Any,

Bear in mind that my backtest was not a proper backtest but it still gives an idea of the potential of this system. Keeping the s/l not far from the entry point or closing out before the RSI 50 is crossed keeps the losses small in relation to the potential gains.

Yesterday 23 Nov at 01:23 CET I opened a buy trade at 1.4895 on the bull candle when the EMA 5 crossed above the 12 and the RSI 50 was crossed. S/L was 1.4865 (30 pips) and as I could not babysit the trade I set a T/P of 1.4965, which was hit giving +70 pips.
This morning 24 Nov I was too late to enter a sell trade at 1.4937 on the close of the 06:00 candle when the RSI 50 was hit and instead entered late at 08:15 at 1.4905, S/L at 1.4950 and was stopped out at -45 pips. This was silly and an unnecessary loss really because if I had got up early enough the entry would have been 1.4937 and if babysitting the trade a manual exit at say 1.4900 on the turn back up at the European open would have given +37 pips (coulda, woulda, shoulda as they say).

I missed the chance of a buy trade at 13:00 at 1.4950 when the RSI 50 was crossed upward again. An exit on the close of the next candle, a doji would have given +25 pips.

Its early days but so far the system looks not bad at all - there is quite a lot of babysitting and discretionary exits required to get the best out of it.

If Michael can get the alerts going on his programme that should be a big help.
Regards,
aquiagora

Hi all

First attempt at the indicator is now available at
http://www.forexoma.com/forums/viewtopic.php?f=7&t=223

Can I suggest that we keep the discussion about its use and results here and only post stuff related to the indicator in the above thread?

All the best

Michael

Hi all,
I haven't responded to this topic yet, though I have been following it.

When I've had the time, I've played around with Excel spreadsheets and using the data history downloaded from MT4 backtested, various scenarios with EMA's, RSI's, signal crosses on MACD, breakouts etc etc.
What I have found out is that none of these work consistently. I know that robot analysis can be a lot more sophisticated than what I am able to achieve with Excel, but I believe that it is not likely that any system that relies on indicators etc alone will be successful.

What I like about this system is that it uses indicators to signal a possible trade, but requires the confirmation by interpreting the candlestick signals. It requires the additional input of one's own ability and judgment.
If Michael completes his project and fully automates it, it will be interesting to see how well it does. Well done Michael, for taking the time with this project.
Unfortunately, I don't have the time to investigate this system properly as it would mean trying to juggle with too many concepts at once.

I will keep up with this thread and Michaels project thread and wish you both success.
I look forward to updates from Any and Aquiagora on how this performs

Keith

Hi Michael,

Thanks - I downloaded it shortly after you posted it.

Hi All,
Now - back to trading with this system. I made only two live trades last week, which I posted on Tuesday, so not much front testing as I was unable to monitor the platform during the remainder of the week.
Anyway I did another of my backtests for the rest of the week and things are still looking good. I think though to make the best out of this system a good measure of monitoring and discretion is required. My impression is that to try and use it purely as a mechanical system would not optimise the results.
I attach a table showing last weeks front/backtesting and also the hourly chart for last week.

I plan to do more front testing this week.
Regars,
aquiagora

I have spent quite a bit of time looking at the charts with this indicator and have come to the conclusion that it has the potential to be part of a decent trading system.
In essence, this is a trend follower. It seeks to identify the trend reasonably early and then keep you in for as long as possible. This screenshot was taken this morning. It shows two typical signals and I chose to look at this pair because of Keiths trade posted in his thread.

The grey arrows are crosses of the EMAs with the RSI in the wrong area. The are not in the published version of the indicator yet.
I take the stop loss to be just beyond the higher of the highs of the indicated candle and the previous candle for sell signals, the lower of the lows of the indicated candle and the previous candle for buy signals
Signals generated by this indicator seem to behave in one of three ways.

1
Return fairly quickly and get stopped out - like the red arrow in the attached.

2
Return within 4-10 candles to very close to the stop and then turn in the desired direction.

3
keep going in the desired direction for many times the value of the initial stop.

To make this part of viable trading system requires-
Type 1 trades. Filter out as many of these as possible. I am looking at the charts to see if they have anything in common. Proximity to support/resistance lines and the chart being quite flat in general are two areas that are starting to show themselves but it is early days.

Type 2 trades have the potential to be winners or at least to get stopped out at break-even if the initial stop is set correctly. This is about looking at the level for the stops and also why do they return before heading in the desired direction?

Type 3 is the payoff. These are the trades that cover the many trades which get stopped out for a loss and then make the money. Managing these is about setting the target levels correctly and trailing stops to lock in profit without getting closed out too early.


All the best

Michael

Yes, so far it is looking that way. I take it you were looking only at the H1 timeframe - which pairs were you looking at?



Yes - I believe a fair amount of monitoring the platform and discretion is required to get the full benefit.



The grey arrows are a worthwhile addition. They offer the chance to have a better entry, especially when they are followed by a long candle before the blue/red arrow is triggered.
They can also be a guide for moving your stop loss towards break even.




Good observations. After some more investigation and front testing the overall picture should start to become clear.



This is not going to be easy I would say. As Any ponted out in one of his posts: "You can`t use this system if market is flat."
Generally, though of course not always, it seems after the NY session close through to an hour or two before the opening of the European session the market is flat. Significant news from Australia and Japan can affect it at times but there is no way the market is going to make it that straightforward for us.



Again monitoring the platform/discretion is required to be able to move the stop loss to break even.
The return before heading in the right direction must be something like the retesting that Vahid mentions so often in his reports.



For sure - it is ironic but the two trades I missed last week were just such trades and would have more than offset my losses. They did not even come near the stop loss levels. See my next post for last weeks front testing - just look at the two red arrows on the chart on Friday afternoon.

Setting the right target level is difficult but the resistance and support lines/levels as given in the daily reports could be a good guide for this. Bear in mind that in the reports these lines/levels are usually on the higher timeframes.
Setting the right trailing stop is not easy either and depending on your broker if you do not have an uninterrupted internet connection you could lose the trailing stop.


All the best

aquiagora

Hi All,

I attach here my last weeks front testing on the EURUSD.
The one good lesson is about the stop loss levels - I have been setting them too tight and by so doing did not give the system the best chance to work well.
The other lesson, if it can be called that, is that if you miss a good trade on one day it makes it more difficult to offset the losses and does not give the system a chance to show its worth.
I am repeating things here but it is becoming more evident that much monitoring of the platform and discretionary exits are required to optimise results. This is hardly surprising as the trading is on the one hour timeframe.

Regards,
aquiagora

Hi, again, Michael,

It is worth having a look at the 01 Dec buy trade with the CADCHF in the context of this system.
On the H1 chart below I have indicated the candle where we entered based on the retest as shown on the report's H4 chart.
Based on the EMA RSI system this was not a time to enter a trade. Even when the EMA 5 crossed below the EMA 12 the RSI only dropped to 53.8016.
It is interesting to see that the two blue arrows triggered on the 02 Dec gave false signals. As the price was flat, ranging within a 30 pip channel at this time, it was still not advisable to enter a buy trade, at least not until the range was broken upward.

For some reason the red arrow that should have been triggered at the 19:00 doji was not triggered. This would have been a good sell entry point, especially as the retest before had failed in the meantime.
In hindsight all very easy but there was a potential +70 pips (sell entry at 0.9543 - exit at 0.9473). The exit would have been made on a grey arrow (not on chart) when the EMA 5 crossed above the EMA 12.
What's more, the same grey arrow would have alerted us to the chance of a buy trade once the RSI crossed above the 50 level. If we had waited for the blue arrow the trade would still have been OK but 50 pips too late. There still would have been the chance of +80 pips (buy entry at 0.9547 - exit at 0.9627) - QED.

Before we start thinking its gonna be too easy, look at the false signal given by the red arrow on the 30 Nov.

What I am trying to say here is that this EMA RSI system could be used as a supplement to some of the trade analysis on the reports where another indicator could increase the probability of success - just a thought.

There is still some work to do on the EMA RSI system though.

Regards,
aquiagora

Hi again aquiagora

I'll try to respond more fully tomorrow night but its after 3am here so I need to get to bed soon!

While trawling through the net looking for some info on EMA RSI indicators I found this blog post.
http://forexsignalindicator.blogspot.com/2009/10/forex-trading-strategy-bagovino-method.html
He uses a much longer slow EMS (21 rather than 12). What is interesting is that if an EMS crossover occurs with the RSI on the wrong side (grey arrows in the new version I have just uploaded) he considers these confirmed if the RSI subsequently crosses to the correct side. I'd be interested in your opinion of that, or anyone else who is following the thread, especially traderany.

Good night for now

Michael

Hi,
EMA RSI hasn`t given us any signal for a few days (EUR/USD). The system only proves that it works properly.

Best regards,
Any