02:41
fxhackers
This system has nothing to do with the normal trend following system.
1. The normal trend following system
The normal trend following system normally requires to follow the trend on a bigger frame and make a precise timing on a lower time frame. This is a basis of the classic trend following system.
The most common implementation is to have a moving average, oscillator and multi-time frame analysis. Normally people with basic knowledge should understand what I mean.
For example if we use the moving average and the oscillator on one time frame often the moving average has a larger time period to take into account the trend on the bigger frame, or if we have a moving average on a larger period and an oscillator on a lower generally the moving average has a shorter time period.
Traders are trying to make better those systems by two ways:
-they try to add more instruments, more moving averages and more oscillators on the same graphic. So we have a plethora of instruments of the same graph and we can be paralyzed to use them.
-they use a combination of the technical indicators with pattern recognition of the old school of technical analysis (classic patterns, Elliot waves, NEowaves, Wolf waves, Microwaves :) etc.).
This is the best the classical technical analysis can offer in fact.
On the other hand there are a few traders who are adaptive traders. They are not trying to predict anything. Their main concern is to read the market condition and adapt to it.
For example you have two systems a trend following system and a range system and the market is range bound.
According to you what will perform better? A trial of optimization of trend following system for range bound market or a unoptimized system for range.
This is an interesting question and for sure I do not have a precise answer, but I think that even an unoptimized system will work better when it operated in its conditions than to optimize an inappropriate system.
As a matter of fact that is the hype in the forex bots. System that are adaptive (they know when to stop, and they know haw to switch subsystems inside of them) can outperform the systems that cannot adapt to the environment.
The the key is to read the current market conditions and to observe any move that can cause their change.
For example recently what caused a change in the market conditions in the Euro/USD was the fact of a break-out in the short side during the beginning of the european session. That did not mean that the market had to correct to a Fibonacci ratio after the impluse, but the meaning was that the market had changed its state, the balance was perturbed. What happened after was a sharp counter-reaction. As a result many bears were trapped. The meaning of those phenomena is to warn us that the market state has changed. And the market dynamics has changed also.
2. Day trading trend following system or persistent movement following system
The persistent movement following system is different from the trend following system. The hype of this system is that we do not define it as trend is defined (as a higher high or a lower low as it is usually done.)
We define the daily persistent movement following system as a following the price time series when some conditions are met: market state of red zone in the FGDI in two critical levels: 15m and 30 m. time frame.
Those market conditions usually lead to a persistent movement. Take care the movement can reverse at any moment. Externally that can look as a trial for swings, trying to catch the bottom and the high, but in fact this is a persistent movement following system that can be used only at particular market conditions.
After that we need an optimized system of digital filters. Everyone has its choice. And we follow the signals.
Normally in the market there are cycles between anti-persistent periods (Blue FGDI) and persistent periods (Red FGDI). Sometimes that coincides with the change of the volatility sometimes not.
In fact in the Forex market in the day trading the patterns are the results in the cyclic activity of the volatility. When we have a low volatility the price time series usually forms the patterns. And when we have an acceleration in the volatility usually we have a break- out.
3. The Fractal Break-out as a signal
Often the beginning is after a fractal break-out. After the fractal break-out we follow the signals of our system.
Usually a trend is formed but this is not necessary. After the fractal break-out we have a correction. That is a good point of market entry. This is called by one of my favorite authors a Ross hook. We use this Ross hook with a Trader's Trick Entry (TTE). (make a Google search I will not explain it now, Joe Ross makes the best explanation anyway on his site there are some free resources like the Law of the Chart and a Presentation of the Ross Hook and the Trader's trick entry (TTE), I ask the reader to download them because I have some ideas for their Fractal Edition.
http://www.tradingeducators.com/ ).
The end of the system is when we observe that the market's fractal dimension goes back to the 1,5 level.
1. The normal trend following system
The normal trend following system normally requires to follow the trend on a bigger frame and make a precise timing on a lower time frame. This is a basis of the classic trend following system.
The most common implementation is to have a moving average, oscillator and multi-time frame analysis. Normally people with basic knowledge should understand what I mean.
For example if we use the moving average and the oscillator on one time frame often the moving average has a larger time period to take into account the trend on the bigger frame, or if we have a moving average on a larger period and an oscillator on a lower generally the moving average has a shorter time period.
Traders are trying to make better those systems by two ways:
-they try to add more instruments, more moving averages and more oscillators on the same graphic. So we have a plethora of instruments of the same graph and we can be paralyzed to use them.
-they use a combination of the technical indicators with pattern recognition of the old school of technical analysis (classic patterns, Elliot waves, NEowaves, Wolf waves, Microwaves :) etc.).
This is the best the classical technical analysis can offer in fact.
On the other hand there are a few traders who are adaptive traders. They are not trying to predict anything. Their main concern is to read the market condition and adapt to it.
For example you have two systems a trend following system and a range system and the market is range bound.
According to you what will perform better? A trial of optimization of trend following system for range bound market or a unoptimized system for range.
This is an interesting question and for sure I do not have a precise answer, but I think that even an unoptimized system will work better when it operated in its conditions than to optimize an inappropriate system.
As a matter of fact that is the hype in the forex bots. System that are adaptive (they know when to stop, and they know haw to switch subsystems inside of them) can outperform the systems that cannot adapt to the environment.
The the key is to read the current market conditions and to observe any move that can cause their change.
For example recently what caused a change in the market conditions in the Euro/USD was the fact of a break-out in the short side during the beginning of the european session. That did not mean that the market had to correct to a Fibonacci ratio after the impluse, but the meaning was that the market had changed its state, the balance was perturbed. What happened after was a sharp counter-reaction. As a result many bears were trapped. The meaning of those phenomena is to warn us that the market state has changed. And the market dynamics has changed also.
2. Day trading trend following system or persistent movement following system
The persistent movement following system is different from the trend following system. The hype of this system is that we do not define it as trend is defined (as a higher high or a lower low as it is usually done.)
We define the daily persistent movement following system as a following the price time series when some conditions are met: market state of red zone in the FGDI in two critical levels: 15m and 30 m. time frame.
Those market conditions usually lead to a persistent movement. Take care the movement can reverse at any moment. Externally that can look as a trial for swings, trying to catch the bottom and the high, but in fact this is a persistent movement following system that can be used only at particular market conditions.
After that we need an optimized system of digital filters. Everyone has its choice. And we follow the signals.
Normally in the market there are cycles between anti-persistent periods (Blue FGDI) and persistent periods (Red FGDI). Sometimes that coincides with the change of the volatility sometimes not.
In fact in the Forex market in the day trading the patterns are the results in the cyclic activity of the volatility. When we have a low volatility the price time series usually forms the patterns. And when we have an acceleration in the volatility usually we have a break- out.
3. The Fractal Break-out as a signal
Often the beginning is after a fractal break-out. After the fractal break-out we follow the signals of our system.
Usually a trend is formed but this is not necessary. After the fractal break-out we have a correction. That is a good point of market entry. This is called by one of my favorite authors a Ross hook. We use this Ross hook with a Trader's Trick Entry (TTE). (make a Google search I will not explain it now, Joe Ross makes the best explanation anyway on his site there are some free resources like the Law of the Chart and a Presentation of the Ross Hook and the Trader's trick entry (TTE), I ask the reader to download them because I have some ideas for their Fractal Edition.
http://www.tradingeducators.com/ ).
The end of the system is when we observe that the market's fractal dimension goes back to the 1,5 level.
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