Jem's Daily MACD Reversal Strategy

[Lifesys]

My trial day one, 8 failures of 10, down -240pip so far but today looks more promising. Still plagued by the different feed problem. Axi & Global Prime give different indications today.
eg EURNZD Axi is a day earlier on the MACD nrp mtf.mq4 indicator (as well as mine which is fed by that). Not looking at last color which is today, but the 2 either side of the week separator line if that is how Jeremy interprets it. I call this the 'Sunday_candle mess' & one can see why here.
GP MACD has bounced. Hardly an "exact science".
This might suggest for any auto on this strategy, a fix is required to avoid weekend moves on non-NY synched charts.
Also the 2 hours between GMT+2 & GMT at day change give entirely different results so I have to look at GP 2hours after open each day. [still waiting for GP to be NY-close Jeremy! ]

Jems_5MarGP.jpg

Jems_5MarAXI.jpg

[Jemook]

The "long runs and change color the least" is important. If you switch as soon as the MACD turns, you'll get whipsawed a lot. I'm experimenting with a couple of variants to reduce the switches: enter when MACD has been up/down for the last N candles, or when the market has moved X pips since the MACD turned. Both look promising but I'm still hammering out bugs.

In my testing I tried a wait for MACD to be up/down for the last 2 candles before entering and results weren't that good. I missed a lot of the move waiting for an extra day and still got chopped if price reversed. Still interested to hear about your testing!

[Jemook]

Hi Jem,

Nice one (again) !

Don't know if you noticed Phil's thread over on the automated system section (MACD STOCHASTIC FRACTAL MA5/25 DAILY EA), he is using a "fractal" filter and what he calls a "non-trendy zone" detection that could both be useful additions to your system. I know, the "not broken so don't fix it" thingy, but I am just trying to point out some potentially useful info which may make your creative mind tick and go "ahah" when reading it.

Wish you all the best, you deserve it.

Zyp

Cheers Zyp - I tried looking into it and couldn't find anything specific as it was mostly code and EA mumbo jumbo to me. If you want to point out exactly how I could be using some of Phil's work with what I do then by all means explain it to me

[Jemook]

Hi Jem,
I applied your strategy to my favourite pair EURJPY. I attach a chart where i added a LWMA 100 as an extra visual aid, and an overlayed MACD H4. Both can help to better evaluate the trend direction. Three situations:
1. Do nothing: price oscillates around LWMA100 and both MACD's are flat.
2. Enter:Both MACD's turn green, price crosses LWMA100 up
3.Exit:price spiked away from LWMA100,MACD H4 went red, and you are several hundreds of pips in the green.
Hope this helps to avoid frequent 30 pip losses.

Hey Ludo! Looks interesting, I will make a template and have a look

[Jemook]

Hi Jem,

For your money management the risk should not exceed 2% to 3% of your equity. This is a proven value for traders with a capital up to about 50.000 US.

Further I think you should lose the 30 pip loss and go for a volatility based stop loss. 30 pips for the EURUSD is something completely different as for the EURJPY. If you find that 30 pips work for you at this current time, than simply calculate what ATR value equals that 30 pips and use the ATR from this day on.

Hey Glabb. From what I've seen on losing days I can lose up to 2.5% so it's within the money management thresholds you described.

In regards to volatility based stop loss - my colleague is experimenting with an equity based 1% stop out placed at the low / high of the day before. Not enough conclusive results yet but will keep you posted. Feel free to experiment with ATR based stops and report back

[Jemook]

Looking at the profits for all pairs, xxxJPY pairs were consistently the most profitable. (Except USDJPY, for some reason.) So here's the result of trading with 3*ATR SL, 10*ATR PT (optional but it helps), reversing as soon as MACD changes color, and trading all 27 pairs (blue) or just xxxJPY pairs (red):

JPYonly.gif

So that starts to get interesting! If you trade only xxxJPY, you have 1/4 as many charts to follow, make 1/4 as many trades, and the profits are a lot more consistent. Except the last half of 2011, you do about as well as, or a lot better than, trading all 27 pairs. You could trade 4x bigger size and make a LOT more profit with about the same risk.

Great analysis as always. How do you filter for MACD instant colour change as sometimes it can flicker 20 times in a minute when it's right on the buzzer?

[Jemook]

My trial day one, 8 failures of 10, down -240pip so far but today looks more promising. Still plagued by the different feed problem. Axi & Global Prime give different indications today.
eg EURNZD Axi is a day earlier on the MACD nrp mtf.mq4 indicator (as well as mine which is fed by that). Not looking at last color which is today, but the 2 either side of the week separator line if that is how Jeremy interprets it. I call this the 'Sunday_candle mess' & one can see why here.
GP MACD has bounced. Hardly an "exact science".
This might suggest for any auto on this strategy, a fix is required to avoid weekend moves on non-NY synched charts.
Also the 2 hours between GMT+2 & GMT at day change give entirely different results so I have to look at GP 2hours after open each day. [still waiting for GP to be NY-close Jeremy! ]

Jems_5MarGP.jpg

Jems_5MarAXI.jpg

Yep definitely - I'd prefer to trade this on a no sunday candle broker. It really messes the MACD up. I do like waiting until 11am to trade instead of 9am though

Strategy is going through 5 negative days in a row now - just gotta wait for some of the open positions to kick into a nice trend

[garyfritz]

Great analysis as always. How do you filter for MACD instant colour change as sometimes it can flicker 20 times in a minute when it's right on the buzzer?

I didn't see flicker like that, because I was using TS historic data. I only looked at the MACD values as of the daily close.

But the simple answer is, don't LOOK before the buzzer. Not if you want to replicate the behavior I was testing.

If you're watching and you want to add some discretionary intelligence, you could say "Hm, it flickered a bunch before the close, which means it's just barely nudging the price level that flips the MACD. Do I think it'll keep going this direction? If so, reverse now. If not, maybe give it another day to prove itself."

[Lifesys]

Jemooks view to wait even a couple of hours - ie about JPY open has merit and save SL hit, avoiding the Sydney move which can reverse. Only turn on when 'dust has settled'.

AUDNZD.gif

The little "*" right tells me pair is ranging, 2 crossover reversals in 3 days. AUDNZD (4th from top of list), TMASlope is flat, ADX MTF is alternate colors so MACD cross?? I put it on BUY anyway to see.
A quick look at H1 chart can show ranging bounce problem where it might be better to wait for a H1, H4 breakout before taking D1 direction. Looking to reduce all the -30's.

Mine is only a grab live test but I want to know what can happen if we start this any time & rigidly follow rules, as I have done with other similar 'crossover' strategies.
From Monday, reached a -390 pip net low but have +198pip equity. So far today all 11 current pairs are positive and climbing : may breakeven today.

[Jemook]

Hey Lifesys, how are you doing with your trades mate?

If everyone gets the entry and concept I will only really post in this thread on Friday to show the past weeks results.

This week so lots and lots of stopouts which resulted in about 6% loss. If we look at the myfxbook screengrab you can see the steady 6% decline. Usually when the growth declines the equity still goes up but this week everything just got stopped and only now can we see the equity start to go up:

2013-03-08_0937.png

I have about 500 pips open and I lost 730 pips so far this week so hopefully we'll see the open pairs fly into more profit in the coming days!

2013-03-08_0927.png

Remember this strategy is like watching paint dry but good fun if you only want to spend 5 minutes max a day to set your trades. Will keep you posted.