General Trend direction - FX

ChattiFX

Member
66 4
Not sure that is the best title but I can't think of a better one... :-/

As part of my trading strategy I first define a general/overall direction to the pair. i.e. is it Bullish or Bearish. The way I do this is to use a Triangular Moving Average on a time-scale longer than the time-scale I get my signals from. So my strategy takes signals from a 5 minute chart but I use a TMA on a 4 hour chart to give me the general direction on whether to open on long signals or short signals.

Recently I have been looking at this and asking myself the question why I do this. Obviously there are times when the price is moving against the TMA trend or crossing back and forth... and of course these are the times I am losing money.

Just plotting a TMA60 on the 4hr of EUR/USD you can see that the last month and a bit this would have been fairly accurate but through Mar/Apr/May it would have been not so good as there were a number of false crossings and sideways movement...

Now this problem with MA's is nothing new I realise and this isn't meant to be a "please tell me the holy grail of trend indicators..."!!

What I am interested in is if people always filter to only trade long/short, whether through technical or fundamental analysis?

I will be running a test in the next week or so to see if applying my TMA does actually make a difference. I will be running my normal strategy alongside a demo account running exactly the same signals but no TMA filter to give direction, and I'll post some results once I have them.

I also adapt the value of the TMA manually to "best-fit" using S/R. Whilst this is lagging and obviously wouldn't make any sense for signals I think it helps for general direction but I'm going to do a bit of research on adaptive MA's as they are not something I've ever looked in to before and maybe they would offer something.

Anyway, like I said, I'm really interested in peoples views on how and if they take "bigger picture" view of the trend, and the type of method they use. No specifics just TA or FA, maybe which indicators you use etc... no need to give settings, I'm just interested in how people approach this very broad subject.

Cheers,

CFX
 
M

member275544

0 0
Anyway, like I said, I'm really interested in peoples views on how and if they take "bigger picture" view of the trend, and the type of method they use. No specifics just TA or FA, maybe which indicators you use etc... no need to give settings, I'm just interested in how people approach this very broad subject.

CFX
Hi Chatti, I always look at the higher time frame. Should I get a sell signal within my bullish higher time, I would normally use half my position size. When I'm with the trend, its full size, and then subsequent buy signals I add on at a reduced size.
My trend is defined by classic higher highs, higher lows. If I cant readily see higher highs higher lows, then it says straight away I could be flat, trend is changing/consolidating etc, thats when I stay away.
I only look for clear trends, there is always one available, so if i cant read the chart, i just leave it until that trend is definable and look for something else.
On top of this, I use P&F and that has a unique way of looking at the trend.
Hope this helps
 

ChattiFX

Member
66 4
Hi Chatti, I always look at the higher time frame. Should I get a sell signal within my bullish higher time, I would normally use half my position size. When I'm with the trend, its full size, and then subsequent buy signals I add on at a reduced size.
My trend is defined by classic higher highs, higher lows. If I cant readily see higher highs higher lows, then it says straight away I could be flat, trend is changing/consolidating etc, thats when I stay away.
I only look for clear trends, there is always one available, so if i cant read the chart, i just leave it until that trend is definable and look for something else.
On top of this, I use P&F and that has a unique way of looking at the trend.
Hope this helps

Thanks for the reply.

I should have said, when determining periods for TMA I use S&R AND higher highs lower lows ;-)

I've never looked at P&F, but will do a bit of reading up as I'm always keen to learn different methods.

Thanks again.

CFX
 

NVP

Legendary member
37,768 2,101
hey C,

most traders end up following the Trend on the higher TF (and/or higher MA setting) otherwise they would overtrade chasing the trades both up and down on the (lower) trading timeframe of their choice ....

nothing wrong with this and I suspect overall it probably tips in the favour of profitablity better than chasing trades up and down.....

but but but ......I will frequently take Trades against the higher trend if my systems tell me .....

remember markets move in cycles and are constantly moving up and down inside that longer term trend signal.........you can pick up a lot of pips/points on a 15m chart against the 4hr TF Trend that will only be seen to retrace marginally during this period ...........

take a look at any 4hr chart and say a small "fib" retrace of 23.6% .......that smallish retrace is worth a hell of a lot of Trading profits money at the 15m TF level !

all in all though - the important thing is to find a system that works for you and stick with it .......

N
 

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ChattiFX

Member
66 4
Thank you NVP, nice constructive reply as always :)

I did run a little experiment over the past two weeks, running my normal account and a demo without the higher timeframe...the results... well my normal account is a little up ~+7% and the demo is more than a little down ~-75%... fairly conclusive even if it was only over a 2 week period!!

So, I am doing some work now looking at improving my higher time frame filter as I'm not overly happy with it, I use a Triangular MA but I just can't get my head around it having no reference to the amount of volatility in the pair. So I am now looking at a combination of the Kaufman Adaptive MA, higher highs, lower lows (as suggested by Malaguti) and my eyes to determine the broader trend on a 4 hour chart.

So in practise... I check my 4 hour chart, then enter Long/Short/Neutral into my EA and let the signals open and close in line with that...

I'll post again in few weeks and update...

Cheers,

CFX
 

NVP

Legendary member
37,768 2,101
that Kaufman is a nice indicator ............good luck in your journey

N
 
 
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