MA crossover back testing - Eur/$ 5min

[Ninja]

I have been backtesting random samples for my ma cross over system and have tested worse case scenario as follows. No use of indicators, no clear trend, simple price close entry. If price closes above the 10 ma, buy, below it, sell. Take 50% profit at 10 pips with a trailing 10 pip left to run. Eur/$ 5 min chart. Looking at my worst sample of 10 trades this system gives you a 10 pip move (bank 50% profit) 8 out of 10 times and leaves the remaining 50% of your position to generate anything from breakeven to 50 additional pips. your 2 stopped trades cost you 12 points including spread. If you are trading $10 per pip this system will generate aproximately $300 for every 10 trades if followed very carefully. When candle crosses both 10 and 20 ema at same time very strong entry trigger. Your average pullback post entry is 5 pips.( Please note when this system enters you into a trend the above profit targets are smashed and your loss can never ever be greater than 12 pips including comms.)Naturally this is all variable however these are the stats when back testing on excell, hope it is usefull.

[#2]

Thanx for sharing that Ninja. How frequent do your entries come along? I.e. how long does it take in total to run a test of 10 samples?

[Ninja]

Vitorc, that was a worse case scenario.....my entries are always in the direction of the prevailing trend with RSI, Stochastic and Momentum support. This will still generate a number of entries daily and can be used on the GBP/$ pair as well. The key here is that this is a scalp trade hence I ring the cash register at 10 pips leaving the remainder of the position to be closed out by the market when it retraces more than 10 pips. This works in a trend and is a nightmare in consolidation....ensure you have a nice sloping MA before entering as a flat ma will simply whipsaw you. You need to enter all triggers even if you have been stopped out prior....for eg I was trading the Eur/$ this morning and got stopped out on 2 entries and my 3 rd entry delivered 30 points. You could always tweak your trailing stop to 15 pips but then extend your first profit target to 15pips as well....I avoid this as I am scalping however all systems ned to suit your style....mine is basically a modified version of Simon's lazy.Good Luck. PS: ensure you are trading a 1 or 2 pip spread or else this can get expensive. (Eur/$, Aud/$, Ftse and Dow all ofer very lean spreads, GBP/$ is typically 3 pips but is a great trending pair))

[#4]

Ja, pay careful advice to the tight spread advise. Scalping does not work in environments where spreads are far apart - unless you can enter into the bid/ask. So, for example, you can't create a successful scalping strategy on the TOPI using a broker that ties you into the spread, like Ideal, since you have a 30 pt spread on the bid and again on the ask - you need to move 60pts just to break even. Using DST, however, you can place your entry at market -and sell as well, so you are not locked in. i don't trade currencies, but if the brokers are offering you tight spreads, then scalp away folks!

[#5]

What broker do you use in the UK? I'm interested in FXCM and IG Markets but have heard bad things about both.

[SimonPB]

ideal have a 30 point spread on the ALSI futures ???

[Ninja]

I trade the DJI, FTSE, GBP/Euro, Eur/$ and AUD/$.....all trade between 1 and 3 pips on IG. I trade with IG and have had nothing but excellent service, the deal through charts are the bomb, free intraday technical analysis updated every 3 hrs or so.(If you use it....I trade the price only but can give you further support to your trend and supp/res analysis.) The alsi spread makes trading the jse very expensive.

[#8]

Thank you. Some comments on forex review sites diss IG and FXCM a lot about freezing some trades at critical moments and stealing points in their favor (ala bucket shop), but its probably a bunch of noobs looking to blame someone for their losing trades.

[Ninja]

Further tweaks.....When entering the trade your trigger is a close above/below the 10EMA.....this however needs to be a move from far enough above or below the ema that the 10/20 and 50 are seperated and you have some momentum behind you when the close happens. If a single bar can move from above to below the ma, you don't have much momentum and probably no clear trend. You need to have stoch crossover, rsi crossover, momentum heading in your dir and finally the linear regression moving back towards the 0 line in the direction of your trade. If these 4 indicators all point in the same direction and you close above/below the 10ema then your trigger is confirmed and you have a very very high probability trade on your hands.(note linear reg needs to point up from BELOW the 0 line on a long trade, pointing up above the line is a false confirmation as at this point prices will try and return back to the 0 line) The set up needs patience but will reward you with cash in your account. Once again, I am scalping the meat out of the middle of a short term trend so bank profits (50%) at 10 pips and let the 10 pip trailing stop which at this point has locked you in at break even drag your profits onwards till the market deceides it has paid you enough.

[SKALA]

Thanks for your info ninja. How much time a day do you sit and watch the charts? I become impatient when just watching and no trade develops, then tend to force it and as you know ----! Also often happens that just too late to catch the trade and most upsetting, the trade comes up few minutes after walking away from computer.

[#11]

Ja, its locked in, by that I mean you either enter at the bid or the ask - you can't influence the auction like with a share by placing your bid inbetween. The result is taht you are locked into the spread.

[Ninja]

Skaapie, what I mean is that if the trend turns against me the trade has already banked 50% of the profit and the remaining 50% is locked in at worse case scenario break even, I cannot lose a dime. Yes you pay the spread up front which on the ftse is half a point each way.....have to admit this doesn't keep me awake at night. If it was 20 or 30 points I wouldn't waste my time but these spreads are so tight they really don't worry me. Skala, you can set up alerts on your system to alert you when price is moving back towards the MA or else you need to keep an eye on the charts depending on where price is sitting. If you miss the entry you no longer a sclaper but a longer term trader......have done no analysis on a longer term system - hit your entry, its as simple as that.

[Ninja]

Skala, the 5 min candle at 5.15pm our time on the dji was a classic entry into a trade on the short side. I am still in the trade to see how much downside I can bank however have already banked 50% profit ay 11 pips and my stop now breakeven. If you wanted to you could have taken 100% profit at 18 pips which is a very nice little scalp. Hope this is usefull.

[Ninja]

OK, so we are out....as it was a cheeky counter trend trade we knew the 50ema would provide great support and thus this trade banked 11 pips at 50% and 25 pips at the 50 ema..thats a combined average of about 17 pips at $10 a pip the trade banks just over a grand.

[SKALA]

Hi ninja; been having chart problems with GT247 today. Thanks for the info.

[#16]

Yes about GT247. No good for any kind of scalping as the spread starts at 6 points. I designed an hour-bar system a while back that survived a 6-8 point spread on backtesting, but not on a 5 minute bar. Overseas account seems to be the way to go there.