So far I've been focusing on the Hourly time frame with this system because that time frame fits my schedule, although at some point I would like to use the 5 minute time frame more because I do like trading that time frame quite a bit. I've done some back testing on the hourly time frame and the results are in. Since September of last year, this system has only given 28 entry signals on the Eur/Usd and of the 28 entries, 16 were winners. The biggest winning trade was a whopping 1,461 pip trade and the largest loser was -253 pips. These results are pretty typical of trend following systems...you generally have one or two huge winners that make up for all the small losers. There was also a 56% draw down at one point, another typical attribute of a trend following system. Here's an excel chart of the equity curve in pips:
This system is showing some promise, at least enough to warrant some coding so that I can automate it and test it further. First, I'm getting the TLT v2 indicator coded which will break up market action into four categories and the candles on the chart will be colored to indicate what stage of the trend the price action is in. The four stages will be:Green=markup or uptrend
Blue=accumulation or neutral with an upward bias
Red=markdown or downtrend
yellow=distribution or neutral with a downward bias
Hopefully the indicator will be ready soon and then I'll use that indicator to have the automated strategy programmed. I've been putting in a lot of work into system development lately and hopefully it will pay off at some point. With my busy schedule as a practicing attorney, I think systems trading is my best shot at trading currencies because I don't get to be in front of my trading screen that much in the mornings...and the big trades seem to be in the morning.
So what does the new system say about the Eur/Usd right now? It's currently giving a yellow reading on the 1 hour time frame.
Here's a screen shot that shows the last 2 trades that the system made:
Not too shabby.TLT
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