Great RSI + Full Stochastic Systems - page 2
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thank very much
welcome dude
Hello fellow traders, I am very much new to this forex world and wish to learn more by joining you all in Fxfisherman. English is not my mother tongue so excuse me for my grammer.
welcome to the club...
Hi,
I don't know why, but I always get back to that strategy. I am not using it right now, but it won't be long before I try it for real. Like most of you I suppose, I constantly look for new systems trying to find one I will be comfortable with. Some of them are not obvious to understand as they paint charts with a whole bunch of indicators I don't even know what they were built for.
The RSI + Stochastic strategy looks simple to me and each time I apply my template to a chart, I get the feeling that it is very profitable. Since the beginning of this year (first two months), backtesting manually the strategy with the proposed rules, the exit being when stochastic is crossing overbought/oversold area at the close of the candle, gave interesting results (see picture enclosed):
AUDUSD: + 332 pips
EURAUD: + 646 pips
EURGBP: + 180 pips
EURJPY: + 45 pips
GBPCHF: + 29 pips
GBPJPY: + 414 pips
GBPUSD: + 167 pips
USDCAD: + 194 pips
USDCHF: -339 pips
USDJPY: +224 pips
Total: + 1892 pips
With 21 trades, we have to substract around 100 pips for the spread.
January has generated a gain of 2566 pips whereas February gave a loss of 674 pips. In February, the first week was particularly bad with a total loss of 1278 pips. I don't know why it was so bad, but I am pretty sure the losses could have been minimized.
The system is proposing to set stop losses at the last swing high/low, but the stop loss can be less than that. If you look at the spreadsheet, many stop losses are bigger than the profits wich gives a poor risk to reward ratio. I would rather set a stop loss at between 100 and 150 pips depending on the currency pair. Just that, it could have been enough to make the whole month profitable (just barely).
Also, it is probably appropriate to consider using a trailing stop once Stochastic has reached overbought/oversold areas. In a few cases, it would have given more pips. Any way, I think I will be backtesting the whole year 2008. It's an easy set and forget setup that can potentially give enough for a living.
As I posted earlier, I would appreciate if somebody could post their results for this method and also their suggestions.
Thanks and regards.
Chamane
I just finished backtesting all pairs for the year 2008. I got excited in my previous post as January 2009 seems to have generated an exceptional yield. I would have cashed in 5645 pips in 2008 if I had traded according to the rules. So that makes 470 pips/month.
I was very conservative in the choice of entries. Many times price was zigzaging around the 150EMA and I did not take trades when that happened. Maybe I should use another filter like MACD histogram in a higher timeframe or simply get rid of the EMA, I don't know. Also, I added the Bollinger Squeeze indicator to weed out entries during a flat market. I might have lost some pips because of that but I avoided some losses as well.
A trailing stop when Stochastic crosses overbought/oversold areas is definitely a must. I saw a few situations where it could have added many hundreds of pips. Even if I was expecting more pips from the strategy for a whole year, the good news is that is seems to generate a regular positive result. A few losses once in a while, but many more wins.
Now I am going to test the method on 4 hr charts and see what happens.
Chamane
what the best RSI for MT4?
i mean the period, some trader like use 14, some 21,
i want to know what the best period to use in MT4?
what the best RSI for MT4? i mean the period, some trader like use 14, some 21, i want to know what the best period to use in MT4?
I don't really know. As you say, 14 and 21 are often used. It depends on the strategy. Here are a few readings about it:
TradingMarkets | How to use the 2-Period RSI
Relative Strength Index (RSI) - StockCharts.com
RSI in Forex Trading
Chamane
Hello,
can anybody tell me, which configuration do you use for RSI and Stoch?
RSI: open, close, high, low, median price, typical price, weighted price, previous indicators data or first indicators data?
Stoch: Low/High or Close/Close; Simple or Exponential or Smoothed or Linear Weighted.
MT4 has a lot of options.
Thanks in advance and thanks for the great trading idea !!!
Hello, can anybody tell me, which configuration do you use for RSI and Stoch? RSI: open, close, high, low, median price, typical price, weighted price, previous indicators data or first indicators data? Stoch: Low/High or Close/Close; Simple or Exponential or Smoothed or Linear Weighted. MT4 has a lot of options. Thanks in advance and thanks for the great trading idea !!!
Here are my settings:
RSI(14): close
Stochastic(6,3,3): Low/High - Simple
Chamane