Daily Fibonacci Signals

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snailbeard
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Time traveller

Post by snailbeard »

Now that I am more familiar with JForex it is easy to time travel - running mini back-tests on different months in different years. I mostly view bars on H4, zooming out then scrolling back through time to view how volatility changes from period to period.

This week I discovered a very low volatility period in June and July 2014 (EURUSD). I thought it would be useful to know whether
a) trading should be turned off
b) stop-loss and take profit should be adjusted, and if so how?

After running various combinations of SLTP pairs I have found that in any period there are often a wide range of values that can return profits and a similar wide range of losing combinations. It is useful to known that a system is not dependent on tight and very specific combination of values. The 'optimum' values might produce the biggest return but the the method is not dependent on finding the optimum settings for each test period.

It is unlikely that we would ever know the optimum values for tomorrow, the week ahead or the month ahead.
However, if the volatility is not that different from the recent past then perhaps there is some hope of being in right ballpark.

In the following screenshot of a JForex three day back test I watched the visual progress of entries and exits because these were the worst days of a one month test in which the total returns were well over 100% in one month, (but only for the best combination of SLTP, so not likely to happen every month).

So the first 3 days resulted in 30 trades and the higher number of failures and caused a draw down of 1%:
EURUSD_visual_HT_01Jul14_03Jul14.png
Lets imagine for one moment that I have being running live for 3 days, reviewed the results and decided to switch to a different SLTP (more suitable for this narrow ranging: for example tp of 10 pips and a SL of 60 pips), that would result in the wrong combination going forward for the rest of the month, or at least until the next time I change parameters.

Therefore, looking backwards to guess the future is never going to be straight forward...
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snailbeard
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Follow the Money

Post by snailbeard »

I was looking for some example JForex code to help define and transfer some signals from a custom indicator to my experimental Dukascopy autotrader, when I came across an article about volume profiles.

This not the same as the common volume indicators which tell you about the amount or direction of volume.
The volume profile tells us about the ratio of buying to selling at different price levels and therefore the price at which the smart money market movers consider important.

I have found that combining the volume-profile and better-volume indicators in conjunction with the candle patterns is helpful in interpreting the intentions of the market movers. However, I haven't decided whether or not to use to modify my trading signals.

The following screenshot shows EURCAD (which I would not trade normally because of spread and swap issues,
but these are not an issue with all brokers, so I have been looking into it more carefully):
jforex_EURCAD_volClimax_volProfile_27Feb2020.png
The shaded zones show when each trading block opens and closes.
The Green/Red horizontal bars show buying/selling volume at a particular price range.
These can be cross-referenced against the better volume bars below.
The spread monitor at the bottom is just to remind us not to trade when the spread is high.
From the BetterVolume bars it is clear that there are 3 active trading periods
27Feb2010 EET 02:00 to 03:00; 08:00 to 11:00; 14:00 to 18:00
The early morning sentiment is for strongly Buying the Euro then there is a lull.
Just after 08:00 a significant sell followed by a significant buy, this could be an example of market movers pushing out smaller traders by triggering pending orders then pushing prices in the opposite direction as they want to take a large buy position without forcing the price up.
Since I get signals at around 9am and 12noon anyway, does the volume provide anything extra.
The volume profile is often an end of day tool because it does not have all the hours until the day is over.

Some traders are following a very simple strategy:
First: they find the red-dashed market movers price line
Second: they wait for price to return to the line or close to it
Third: They enter a trade away from the line in the same direction as the market mover.

I can see that this can work some of the time but I've only looked at a few examples, so perhaps other members here have more experience with it?

What I have noticed is that price might not return to the dashed line - so lost entry opportunities!
Lets say that that the dashed line means your stop loss can be say 10 pips on the other side of the line.
However, price can still reverse significantly sometimes, so how to balance the risk reward ratio?

On revisiting my ORFB (Open Reverse Forward Break) entry method and comparing it to the dashed-line method, I believe the ORFB provides better stop-loss to take-profit ratios.
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JonCodesBad
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Follow the Money

Post by JonCodesBad »

snailbeard » Thu Mar 12, 2020 2:53 pm wrote: I can see that this can work some of the time but I've only looked at a few examples, so perhaps other members here have more experience with it?
Yep, I even coded a volume profile indi as the free ones I found were rubish.

I tested a few trading methods and none gave good results, at best, slow crawlers with 5-10% returns annually.

There are far better indi's out there, and remember... VP is only a measure of tick quantity, nothing else.
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snailbeard
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Follow the money 2

Post by snailbeard »

Thanks to JonCodesBad for saving us from getting distracted by a new toy!

I was also thinking that the candle patterns relative to a group of moving averages provide the same information but also help us find the best entries.

One area which is often a headache for auto-traders is the tendency to continue to follow a trend when market movers are starting to take opposite positions.

Pull backs to a moving average support/resistance level often make good entry or re-entry points and this works really well during longer trends but when the market is more erratic auto-traders end up trading against the market movers.

In the following chart, the first half is quite straight forward with candles opening and closing consistently below a falling moving average:
eurcad_h4_market_mover_buying_reversal_17_18_19_Feb2020.png
We can also see that when price is pushed up to the falling SMA(20) that there is a new selling opportunity.
However, what is not obvious from the candles or BetterVolume indicator is the increased interest in buying.
Manual traders will be looking at D1, W1 and MN1 and they will have noticed that price has not been at these levels for a couple of years and that price is approaching super-support levels.

Successful traders do not want to be trading the wrong way when there is a bounce off super support.
Long term buy positions are being accumulated on the 17th before the reversal, or a market mover is creating a position to force price into super support in order to generate enough liquidity to fill their buying requirement.

We can see from the next two days that there is sufficient dumb trading to fill the buyer's order before the majority of traders also become aware of the reversal.

Since we retail traders only account for about 3% of the liquidity, does that mean there is a lot of dumb corporate finance going the wrong way?

Possibly our over active pension fund and investment fund managers?
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