Good complement to MACD?

[dewbpy]

I'm testing some forex strategies, currently looking at MACD crossovers on 1 hr charts..
Just on their own I can get around 500pips each month after spreads on the EUR/USD.

I can see that if I went live with it I'm going to get stopped out frequently when the market goes immediately against my position hitting my margin limit or stop then swinging back into what would be profit .

Can anyone recommend any indicators which can compliment the MACD signals, or should I look into something along the lines of delaying my entries to see what happens first? I've been playing round with MAs, RSI and Stochs but find they can just add to my false entry signals.

Thanks

Simon

 

[TheBramble]

...or should I look into something along the lines of delaying my entries to see what happens first?

...and then go back and get in before it happens? Don't we all wish!

Simon, this is a classic problem using MACD or any MA based indicator - they are laggers - they're great for telling you what's been happening recently.

I have one suggestion, and a question.

Suggestion: Widen your stops (and of course, reduce your trade size in parallel to maintain your existing risk profile). That will prevent you being stopped out so frequently, but only if your system has positive expectancy with these larger stops.

Question: You seem to be paper trading this system. Are you getting 500pips/month with your existing stop size and being stopped out as frequently as you say? If the answer is YES - they just carry on with your current system!

500pips/month should have you placing the order for that SunSeeker in no time.

 

[dewbpy]

Suggestion: Widen your stops (and of course, reduce your trade size in parallel to maintain your existing risk profile). That will prevent you being stopped out so frequently, but only if your system has positive expectancy with these larger stops.

Yes, I think that would be the smartest thing to do. I'm confident that after a month of wins and loses, I'll have more wins. Just have to adjust what I risk to stop me losing everything before I get going.

Question: You seem to be paper trading this system. Are you getting 500pips/month with your existing stop size and being stopped out as frequently as you say? If the answer is YES - they just carry on with your current system!

Yes, it is currently round 500pips, although when you backtest and paper trade you get all the trades all the time. As I won't be trading full time I was worried I was only going to catch all the loses and non of the winners - but I've altered my time frame to fix that so I should be ok

Thanks for your reply

Simon

 

[eddyjo]

Simon, Try using DMI/ADX.

 

[TheBramble]

dewbpy - I'm a little concerned for you. Unless you'll be live trading EXACTLY the way you're paper trading, you aren't necessarily going to get the same results.

You really need to paper trade the way you're going to really trade. Check your drawdown - especially with the wider stops - I have a feeling you're going to be surprised at the difference in statistics.

 

[dewbpy]

Thanks Eddyjo I'll take a look at DMI/ADX

dewbpy - I'm a little concerned for you. Unless you'll be live trading EXACTLY the way you're paper trading, you aren't necessarily going to get the same results.

You really need to paper trade the way you're going to really trade. Check your drawdown - especially with the wider stops - I have a feeling you're going to be surprised at the difference in statistics.

You're quite right Bramble, don't worry I don't want to lose any money in a hurry. I'm in no rush to start live trading so I'll be taking my time to be sure of what I'll be doing exactly when live.

Thanks for your advice

Simon