Build A Waves Surfing Strategy ( Auto Trading ) - Chapter 3

Build A Waves Surfing Strategy ( Auto Trading ) - Chapter 3

12 May 2016, 14:39
Juan Fernandez
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1. Introduction

In previous chapters we prepared all things needed to implement the strategy. We made fast check of lead indicator for know if the base is good. We decided what roles we need in the strategy and we choose what tools I will use in every role.

For who have time trading know perfectly all theories have awesome look in the paper. Unfortunately the reality is always very different.

Before start with implementation I would like note this series of chapter don't try build profitable system ( even really being it). The main goal is learn to search new ways to resolve typical problems in auto systems when you reach end of path and seem strategy can't be improved. Because the big mistake is think a few basic rules can overpass an experienced trader. Market is dynamic and always is changing. Only think don't change are waves movement but even this have enough variations for convert good system in unusable in the time.

I want do other comment before start. Finally this series will be longer I told when I start it, because I want make deep explanation of every approach. That will help to make chapters less heavy for reading because will be shorter.

Now we are ready for first step.


2. The puzzle

Auto systems are like puzzles. You have some pieces and you have mix it in the right way. The only difference is in a puzzle you only have 1 way. In Forex you have many ways to reach same goal.

In last chapter we defined roles of those pieces. We have a Trend indicator for make the hard work. How I explained it, we will use high TF for it. After made a few tests with study version of Trend I decided H4 is a good timeframe for catch main waves using the most simple way. Only one MA.

After plot it in chart we have a picture like this. Don't looks bad. Before to start dreaming we will make a lot of money because seem Trend indicator make perfect signals we need be self-critical and analyze deeply if that look really is good as looks.

This settings had good results in long term when we test in study version but showed some problems in range areas too. We need improve that moments with new tool  


3. The support

As we saw in our Trend analysis, we have 2 problems to solve. The most serious is range areas. This place is where we have losses for late entries. The second problem is really a small issue typical of lagging indicators. We need long movement for minimize the time lead indicator need for show valid signal.

We need have some reference to consolidation zones for can split trading in 2 parts. Trend and swing. This will improve the delay when price want change direction. The ideal indicator is one can response fast to price changes. Fortunately we have one in our tools box. SnR ( Intra Support and Resistance)

The main idea is this tool show possible swing areas using fast method. Evident this early way can lead in some false signals. For that we will use high TF ( H4 ) and fibo levels included inside SnR. Fibo levels let us to play with breakout zones without have wait confirmation improving reaction speed in critical moments. 

It's time to plot SnR in chart. Seem we have defined good S/R area. Now it's the moment to decide what priorities will have Trend and SnR for can have optimal work together.

Range moment locked for SnR tool. We can show more information in histogram but that will be explained in other moment

 

We want when SnR paint a new zone in trend direction, Trend signal don't have effect creating a pause in main signal. This is easy to accomplish if we use same priority level for both tools. SnR always send opposite signal to zone created. This happens because S/R areas are possible places for swing and we want catch the swing earlier we can do. Then when new zone is create we will have a opposite signal neutralizing the Trend signal. In that moment EA will have neutral signal and will not close or open trades.

We choose same weight in both tools. Priority 1. For have valid signal we will need both signals show same direction. Really seem we are doing the work fine. But the question is if this theory will work like we want.

 

Priorities are fundamental in the strategy success. Priorities have some filters like Triggers. Even Triggers are used in this strategy, I will avoid go deep in all DashPIN features for make explanations more easier


4. Analysis

Its the moment to check how is working both indicators and if they are solving the problems or not. At first look seem are working as expected but we will make a deeper analysis for be sure. 

 

This is a good start. Seem the mix is doing the work filtering bad trades in range area. This kind of areas are where we had problems when test Trend settings in study version. We had many bad trades opened suffering small losses in everyone

Sometimes we get good surprises

Understanding all tool possibilities help to improve trading and save time testing it in demo accounts


After analyze better the data got it from tools seem we are in the right way. But even this good news we still are have much work to do.


5. Examples

Two examples of use priorities and possibilites of SnR and Trend. CADJPY show buy signal after breakout continuing the trend delayed when SnR did new resistance. EURJPY show opposite signals showing how SnR stop trend when find a consolidation zone avoiding open trades or close current before know new price direction

Examples of system working with all tools. Evidently we will need some chapters for arrive there 


5. Final words

In this chapter we start to build the system. But we have resolve many issues before have a solid system for trading without human help. In next chapter we will try resolved someone issues with current configuration before add new tool to the mix


6. Links

If you liked some tools you can take it here
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