I have been in FX for a littlle over two years, studied a million indicators that only brought frustration. So, finally a few months ago I decided not to rely on indicators, but support/resistance levels and fibonacci studies, and suddenly started making money consistently. The strategy was given to me by a friend, so please do not ask me for details. Enough of that...
During my quest for a profitable system, I stumbled accross ADX by Wilder many times, and from the first time I attached it to a chart, I knew there was sth special about it. I just never realized, until recently, that some crosses are better than others, that ADX is useless on a timeframe lower than 1 hour. So, in my spare time, I analysed some data on 1hr and 4 hr charts, and came to the conclusion that if certain conditions are met, adx rarely fails on a 4hr chart. I have done some backtests in visual mode as well as waching the market live on gbp/usd, eur/usd, usd/chf. I have scrolled through gbp/jpy and eur/jpy chart and I think this will work well too. I cannot really figure out when to exit a trade just based on adx alone....but I am open to suggestions. So, here it is, very simple:
Open a 4hr chart, attach adx, look for the following--long:di+/Di- cross below 20, adx greater than 20, enter when di+>20, s/l last significant bottom on 4 hr chart, you can take profit when adx reaches 50. I will give you some examples from today, 22/06/2007, short on swissy and long on euro. Please note that there was a false signal on swissy yesterday, but it was the first one this month, loss was around 30 pips, but profit is generally greater than 50. See attached images. I will address some problems in my next post, for now take a close look at the usd/chf chart. The vertical white dotted lines is where we should have entered. There are 4 entries.
ADX Signal Indicator
Will you please post your ADX Signal indicator, the one producing the arrows?
Ok, just want to piont out that in real time entries will not be as precise as it looks on a chart after the fact. Example, the four entries that you see on the swissy chart:
1. June 7 entry, I saw the entry during the 12:00 candle(time is CET-Alpari data) Price was 1.2229, still there was enough pips if you rode the trend. What ADX gives up in speed, it more than makes up in accuracy. By using 4hr chart, we isolate a lot of the noise, by using a loose stop, we prevent much of the whipsaw that happens during news releases.
2. June 15 entry, I saw the sell entry during the 12:00 candle, price was 1.2439.
3. June 21 entry, I saw the long entry during the 12:00 candle(perhaps it was too late to enter, price was 1.2420), so that was a false signal, price reversed the next day, I would've closed the trade at the opposite cross, which happened at 1.2394, so that is 26 pips loss excluding spread.
4. Today, I saw the short signal at a price of 1.2390, price is now 1.2291
I was going to post a eur/usd and gbp/usd chart but since the 3 pairs are correlated, you will see a similar picture.
use as you like
Now, I am just sharing an idea with everybody. If there is enough interest to develop it, I will help as much as I can. I personally think that this will be a fairly reliable way to trade. I will never try to sell you a system, signals, or an EA, or to give you paid classes based on this. Period!!! Any feedback is welcome.
The indicator with the arrows that you see on my chart is CPS, a commercial indicator from centralpips.com. For obvoius reasons, I cannot post it here...
Is it any good? Hmmm, I would say it is better than your average indicators that are freely available, but again it is just an indicator... At a price of $500, you decide whether it is worth it or not. ADX wins every time:-)
Thanks for the great post about using ADX!
I think the centralpips indicator repaints, though...I was one of the many they scammed....Central pips is a major scammer!!!!!!!!!!!!!!!!!
Do a search on any forum and you will find tons and tons of complaints.
Back to the point, though....I am eagerly wanting to try out your method.
ADX cross indicator
I am attaching an adx cross indicator that will give you a dot at every adx cross, even during the formation of a bar, which I prefer. I tryed to modify it so that it gives signals only when the following conditions are met:
di+ and di- have crossed bellow 20, at the same time adx>20, di+ reaches 20+ after the cross, adx is still>20--signal enter LONG;
di+ and di- have crossed bellow 20, at the same time adx>20, di- reaches 20+ after the cross, adx is still>20--signal enter SHORT;
If somebody can modify the indicator so that it gives a sound and pop-up alert, and an arrow when the above conditions are met, that would be great.
Rick, thanks for the feedback!
CPS is just like any other indicator. If we have a rapid price movement to the downside let's say, it will signal short, it will turn red and you will get a down arrow, later before the bar closes, price may go back up and now it will be blue, and the arrow will disapper, so the bar closes and the short signal is no longer there. But whatever the conditions were at the close of the bar, that is what you see on the chart, and respectively what stays on the chart, so I don't think it repaints. Anyway, I just use it as a visual aid, that is all. Same problem occurs with the adx cross indicator that I posted above. A dot may appear during the formation of the bar, and if the conditions changed later, you will not see it anymore. One thing is for certain, if di+ and di- crossed below 20, and subsequently one of them reached 21 with adx above 20, you will rarely be wrong about price direction...worse come to worse, you can exit at the opposite cross, loss is rarely more than 30 pips. This only applies for a 4 hr chart or greater, 1hr is ok, you will enter MUCH sooner, but you will also get MUCH more false signals...
So you have FOUND IT! Congratulations! I have not studied your trade setup but from the looks of it, it seems like a viable system. My suggestion is have PATIENCE, FOCUS, & DISCIPLINE. It took you "a little over two years and a million inidcators " and much "frustration, now please plan on devoting at least 6 months or more to make this one work to your expectation. Put in the required screen time to study it, plot on historical data, forward testing, etc.. Don't give up too soon and jump onto another system. You been through that loop, it seems. Persist! Persevere! Keep learning from you trade setups. You FOUND IT; STAY WITH IT!
"Sometimes a good idea just needs the chance to grow." from Mercury Mariner commercial
My best wishes to you!
I have MUCH, MUCH respect for you as a trader. I feel honoured that you commented in my thread. I also enjoy your endless creativity. You are something else...
In fact, I wanted to join your Google group a few months ago, and I was just going through your e-mail to see how I can do it--is this telepathy or what:-)
Anyway, as I said, and you also pointed out, this is just an idea that has not been fully tested, so we will see what comes out of it. I have a lot of patience, but I sometimes wish I had never gone into the Forex jungle. So far I have survived, we'll see what the future will bring me. Good luck to you and BEST WISHES!!!!
I am a HUGE BMW fan(hence the name "mpower") Z3 avatar reminds me of my M Coupe--gone but not forgotten!!!! The Ultimate Driving Machine:-)
ADX MPower Cross Alert indicator
MPower, your trade setup looks promising.
I have therefore modified the ADX Cross indicator by implementing your rules.
It will now also alert on every new crossing (optional setting) 1 alert per bar only.
The indicator will behave like before when you switch the MPowerCrossOnly setting to false (showing all ADX-di+/- crossings again)
Please check, especially after market re-opens on Sunday, because I also fixed something in the Bar sequence (It was reading non-existing bar: -1)