Manually trading SAFT to see if its profitable

[alex_forex]

...
What I think I'll do is start documenting the rules I'm following into a PDF that I'll attach to the first post....

What a good idea

Your posts are useful and well explained, you helped me a lot to understand SAFT.
Thank you

[slipshod]

Well, I'm coming to understand SAFT myself the more I trade it, and although its simple it is far from easy.

I touched on this on Monday, and after today's experience I need to repeat it again - the biggest problem with this method is the false break. I don't know the ratio of false signals to true ones, but if the experience of this week is anything to go by then it is bad enough that it can indeed drain your account.

Let me show some examples. Here's AU, showing a false break that I traded long yesterday...

fb_au-1.png

That looks like a perfect setup, everything in the SAFT rules included my added CCI says to go for it ... and here's how it turned out:-

fb_au-2.png

Here's another from today - GBPJPY:-

fb_gj-1.png

Perhaps M15/M30 were too noisy - but here's one today from the H1 timeframe:-

fb_ac-1.png

Both of the signals in that chart are still valid even now, so what is a trader to do? Enter orders in both directions? Exit the first and enter the second? Ride out the first and ignore the second?

Today I've had four trades stop out at a loss due to false breaks, and one profit. I'm currently carrying another four trades in loss that are deciding whether or not they're going to stop me out. That is not a good ratio.

There's 2 sides to this problem. One is knowing how to distinguish a true break from a false one. Unfortunately my CCI idea doesn't seem to be helping at all with that, and if anyone has suggestions I'd love to hear them!

The other is managing the trade once you've entered. There's 2 basic options. Either exit immediately at the first sign of trouble (and weep when it then runs hard in the direction of the break) or be patient and ride it out.

The "be patient" strategy also has choices. Do you move your stop loss closer to the entry point at signs of danger (as I've been doing) to mitigate the loss, while making sure that if its hit then the likelihood is that your trade was indeed invalid. Do you leave your stop where it was?

Do you trade without a stop at all & just wait for the market to go your way, carrying the loss (or for non-USA traders, hedging?), or better still, double up your entries as you try to recover-trade your way out? To me that's lunacy, but there seems no shortage of grid-trading devotees who'd do it & eventually blow their accounts.

My thinking is that either the entry method delivers profits more often than not, or its not worth trading. So far, I'm either not doing it right or SAFT isn't up to scratch - and by all means don't rule out trader-error on my part! And yes I know yesterday after a good run I was talking about resisting the temptation to take this live. After today, I'm glad its still monopoly money

What prospective SAFT traders cannot do is ignore this issue and only report good trades. That's the kind of thing I see way too often on FF threads, and I cannot abide it.

Edit: While it may seem I've gone on an anti-SAFT rant here, the points I raise are true for pretty much every intraday method/system I've either invented or tried, and thats a helluva lot believe me. False signals outweigh good ones, leading to a drained account. Many use recovery to mask the pain until one day when it blows up spectacularly. I'll keep at it with SAFT for a while longer, but too many more days like today and I'll wrap it up. To understand what I mean, here's my progress since starting this trial...

saft20120822.png

I began this hoping it'd ease me back into trading profitably before I returned to live trades. I can't continue if it destroys my confidence instead of building it up

Edit #2: Make that 11 losses & 1 win for the day, 5 open trades right now with 3 more looking like false breaks in search of a stop loss.

[dakuki]

Very interesting. How would you do if you apply instead a 21 EMA to it?

[slipshod]

I'll look into it! I certainly can't continue to trade this the way I have, that's for sure

[slipshod]

I looked with the MAs as defined by Evaluator - an example chart below.

saft-ma-vs-trendline.png

In some circumstances you'd avoid false-breaks that trendlines fail on, but in a consolidation period you'd be whipsawed just as badly as the price & OBV oscillated across the MAs. You'd have to take the signals else you wouldn't be on board when the price broke out - there'd be no entry trigger other than the ones it provides within the consolidation.

MA signals are also often later than the trendline ones, so you're not getting into the trade as early.

All in all its hard to say which is best. The MA method is obviously easier especially if you don't like drawing trendlines, but it would also need a means of filtering out bad trades.

On the FF thread Eval has made it clear that you must use discretion when trading this method - you can't just enter mechanically like I've been doing. For instance, yesterday there was a big news event coming so the market held its breath waiting for it, hence the whipsaws & lack of direction until the news. Then we had another whipsaw the wrong way until finally the market settled on where it wanted to go. He also does not recommend trading in times of low liquidity - but I have to trade it now, sorry!

[slipshod]

And now for something completely different.

How about I compare typical EU price action (I'll use the hourly chart) with trendlines & standard OBV, with the same methods on a Renko chart (I chose 7 pips as a random guess for the bar size). First here's the H1 chart:-

eu-saft-standard.png

And here's Renko:-

eu-saft-renko.png

Edit: While I'm at it, here's a Constant Range Bar chart:

saft-eu-crb-10.png

Thoughts anyone?

[dakuki]

I trade both renko and timecharst. Why you using standard OBV on it and not the enhanced one you made?

It would make sense for volume to work better on price then time.

[slipshod]

For some reason on Renko the standard OBV seemed to work best. The CRB chart has the enhanced one - and in fact Gadi's is even better, and shouldn't crash with its divide-by-zero error as there's no chance of a zero-height bar.

I'm just experimenting here, as my intensive trading experiment hasn't turned out well & rather than pursuing the same unprofitable method I need to take a step back and think about what works & what doesn't.

Yes, as the SAFT method is all about trends is does make sense to use price-movement candles rather than time candles. We'll see how it goes I guess

Oh, one problem with both Renko and CRB charts - lines you draw on them may not stay in the same place for very long. Something about how they create their candles seems to mess up drawn objects :\

[dakuki]

When you apply the standard OBV do you apply it to Close or Median or Typical, etc?

[slipshod]

The default is applying it to the close. I'd never thought to use it with typical etc ...