10.5 for monkeys

[zentauro67]

10.5 for monkeys is inspired in Nanningbob´s 10.5 system. This is a kind of dummies version, so simple that a child, a monkey or even a Texan senator could win some pips following the basic rules. If you find this system profitable, please consider to do a donation to http://www.compassion.com as Bob suggests in the first page from his thread.

10.5´s core idea (buy above 240 LWMA, sell below) is the most important rule to be followed. No CT is allowed.

Oscillators, CSS and weekly pivots have been removed. Heiken Ashi candles in combination with daily pivots do all the work trying to catch the swings.

This is a 4H system. Scalping variations in lower time frames will be welcome later. For now, I´m far of mastering this system (opening this thread just to learn), so I should prefer we focus in 4H.

ENTRY RULES

BUYING (PRICE IS ABOVE 240)

We enter in the first withe candle closing above the daily pivot. We keep the trade until a red candle closes.
We re-enter in the next withe candle (no need the pivot be crossed or re-crossed) and wait for the next red candle to exit.
Only exception: When 240 is just crossed we can enter in the second or (if you are an aggressive monkey) even in the third candle above the daily pivot.

All the trades must be done 'on the close' of the candles. Just check the charts every 4H to open and close positions.

STOP LOSS. 15 pips below the daily pivot. Just in case you can´t babysitter the chart and miss a red candle closing. (Maybe later we could have and EA closing positions when a color change happens and forget stop losses). If the candle crossing the pivot is a little bodied one you can give more room to the trade placing the SL 5 pips above/below the last swing H/L.

The opposite for SELLS.

Now, let´s see two examples. The first is a little bit tricky. It comes from a strong trend (240 is sloping nice). The result: 11 wins (some big moves caught) and 2 very small losses.

strong trend.jpg

The second example is taken from a range situation (240 is almost flat). The result is better than should be expected from a trend following system. 12 winners, 2 small losses, and a break even trade.

EURNZD RANGING.jpg

And that´s all. We could play it that way, as a mechanical system, where no discretion is needed, and for sure it should be profitable. At the end of the post you can find a template named “10.5 for monkeys” made with this purpose.

However, I have added three extra rules, trying to avoid losing trades in dangerous scenarios. I call them DTTT filters. (Don ´t Take This Trade). The alternative template, “10.5 for conservative monkeys”, tries to help in this task.

10.5 FOR CONSERVATIVE MONKEYS

DT1. THE 400 PIPS RULE
Never take a trade when the distance to 240 LMA is 400 pips or greater. The risk of a reversal is high. Applying this rule you´ll miss some big moves, but that´s the price for being conservative. No need to over milk the trend.

400 ma.jpg

DT2. DON´T BUY A STRONG RESISTANCE
Even if all the rules are met, we should avoid a trade it if it happens in the nearness of a very strong support/resistance zone. Yes, this could be ‘the good attempt’, price is about to breach the line and skyrocket… but honestly the odds are against you. To buy a triple or quadruple top before a breakout is just not a wise idea.

We´ll use the Slipshod´s S/R indicator to draw the strongest S/R zones in the chart. This is an impressive indi (only Baluda´s CSS is comparable in excellency) that we should be using here in a very limited way. It can show 10 different levels of S/R action: weak, untested, turncoat, verified and proven. We have muted 8 and left visible only 2, the proven S/R zones. These are very strong S/R zones that will appear as a purple box. Most of the time, the chart will be clean. The purple zones will appear rarely, in historic zones of big resistance.
If you have the possibility of opening a trade but the distance to the purple box is very short, you should better let it pass. The risk/reward is simply too low.

strong support.jpg

DT3. NEVER FIGHT A STRONG PATTERN
I have practiced harmonic trading for years and I have learned that some patterns should not be ignored. Some harmonic ratios produce patterns with a 70/75 % chances to succeed. As ‘reversal patterns’ they are warning us to leave the party and wait. This is a trend following system, so we don´t use the patterns to CT, just to avoid get caught in the climatic moves preceding a big reversal.
I have tried to simplify at maximum choosing an indicator (Korharmonics) that should not clutter the chart with lines, and muting the patterns that have less impact. I just left visible Gartleys, Butterflies, Bats and Crabs. You can set to ‘true’ other patterns in the settings if you like them. I personally use 5-0, ABCD, 2Drives, SHS, Triangle, etc, but it requires some practice and study. (If you are interested in harmonic trading, take a look to the ZUP series. The 135 version is, for me, the best). If you are not interested in harmonic patterns, just remove korharmonics from the template and ignore this rule.
This indicator will show only the strongest patterns from time to time. It could happen no pattern appear for months. When a pattern pops-up, you can see in the up-left corner the description of the pattern and its intent (bullish or bearish).
If you have the chance to take a trade that fights the intent of the pattern, you should better let it pass. It could seem a bit complicated for a monkey but the template is made in such a simple way that it is in fact very easy to catch the idea once you face it for the first time.

pattern warning.jpg

DT4. THE PORCUPINE AND THE ARROW

This is perhaps the most important of the 'Don´t Trade' rules. Most of failed trades in this system happen in Porcupine setups, so it ´s very important to understand what a porcupine is and get used, training your eyes, to spot them quickly in the chart.

A Porcupine is just the shape of an accumulation phase, a narrow range full of tension, where the price has not yet decided its way. This tension produces pin bars in both sides reminding a porcupine, and -bad for monkeys- the cross and re-cross of the daily pivot by little bodied candles which give wrong entry signals. Daily pivot is just a calculation from previous highs, lows and closes, so in this situation the daily pivot will be always placed in the middle of the porcupine, as an arrow pointing to his mouth.

PurplePorcupine_5-in_4C.jpg

In traditional chartism porcurpines are often found in converging triangles, wedges, rectangles, flags, etc. Heiken ashi helps in the task of spotting them easily. Little pin bars –doji style- changing colors in the nearness of the daily pivot are the typical porcupine trademark.

Imagen.jpg

Imagen 002.jpg

When you find such graceful shapes, avoid taking a little cross of the pivot as an entry signal. Wait for a full bodied candle breaking with strength the trendline formed by the porcupine (triangle or rectangle most of the time). We should be patient here and wait for the close of a clear breakout candle before entering.

breakout.jpg

In the zip file you can find the two templates (simple and conservative) and the indis.

10.5 for monkeys.rar

Greetings.

(I just reloaded de zip file. I deleted some chart objects from the conservative template I had missed.)

[piotrbir]

I am so impressed. Back tested a little, and ..... well.... are we all going to be reach? .
Thanks for posting the idea. Is it possible that something that simple is so powerful? I hope it is truth. Tomorrow I start serious testing.

[echoman]

Very interesting.

[Bunker]

Congrat for your new thread Zen !

The simplicity of this strategy makes it one of my favourite.

I’ll be following ...

Keep up the good work!

Bunks

[hammondnz]

I'm following with keen interest too!

Best regards

Graham

[zentauro67]

Waiting for the candle to close:

Imagen 001.jpg

As we are waiting for the closing it seems a good idea to zoom to 30 minutes just to see clearer where the 4H will close in relation to the daily pivot.

Imagen 002.jpg

[rebyte2]

I assume that i have shorted this correctly.

EDIT: I have placed a TP at 1.1350 as i see a possible triple bottom.

[zentauro67]

I assume that i have shorted this correctly.

Hi,

This is a perfect trade by the rules. The problem is the almost 3 hours remaining for the candle closing. For a safe play you should enter after the close. This is my first day trading this system, so, to be honest, I have not yet a clear and formed opinion about the perfect timing. (All my backtests are 'on the close')

I took my first trade some minutes ago (CADJPY) after the close of the 4H candle. In fact, taking trades on the close seems a bit annoying because limit us to open positions only 3 or 4 times by day (assuming you sleep 8 hours ) but this kind of discipline, once you get used, could help to a more relaxing way to trade.

Playing by the rules (on the 4H closings) you should only need to check the charts 3 or 4 times a day, open some trades if a daily pivot has been crossed, closing those trades where the color changed, etc. It takes even less time than original 10.5.

After my broker, my 4H candle closings happen 23h, 03, 06, 09, 12, 16 and 20 (I live in GMT+1) So, next step is to get used to check the charts at those moments and forget them the rest of the day.

[rebyte2]

Hi Zen

The only problem i have with CADJPY is it has now a series of LHs and LLs.

For me, it lacks a positive continuation pattern.

Good luck with your trade.

I like the simplicity of this strat but like all strats, there is always 'grey' areas that the trader has to agonize over.... do i take it or sit it out. No EA can do this.

Cheers

[nanningbob]

Zen you got my support good luck and happy teaching. We will have to call you the Zen Master.