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Call it a Hybrid: Using EAs for Entry on backstop exits

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Michael Maggi
1404
Michael Maggi 2016.02.03 16:23 

After a decade of lurking I thought I would contribute a short description of my personal trading system.

First, I trade anything that moves and have a very diverse style on the weeks and months I am home and I pair back the breath of the trading when I am working and have poor connections.

I am a trend follower.

I believe in RENKO to determinate trend.  All speculation aside, RENKO will tell you what the price direction is doing with a minimum of noise.  I have a couple of RENKO robots and some other trend following systems on various timeframes M30 to M4H.  Some are moving average crossover and some are other. 

I use the EAs for entry signals with a minimum position.  I open a selection of markets, sometimes wider and sometimes more narrow but always balanced with at least 1 index, 1 energy, and 2 pairs.

I watch the markets most of the time but usually I am also doing something else: work, movie, eating, and sometimes I am just not looking.  If I am not comfortable not looking I cut my positions and then not look.

After entering I use the gross profit and a red light or green light to take more positions.  Typically my follow up is x5 or x10 but I have gone to x20 for each additional entry.  Like Battlestar Galactica and NASA I only add to a Green Board: a red number is a stoplight.  I hold any position that has a single red number. If it gets two red numbers I consider reducing my position.

My out is by watching RENKO even if the trade is initiated by a different type chart.  This keeps me in trades until the actual price goes against me. One brick counter trend and I cut my position, two bricks and I slash my position more, by three bricks I am out.

I also never carry more than one red number in a position because I try to space out my additional lots with some space. This varies by commodity and by RENKO bars.  Every bar is a good guideline but I am mindful that many trades only go for 5 bars so I am cautious when adding after 5 bars in any direction (my bars are not too small.)

My brick size is adjusted for every market separately.  I decide on the brick size by comparing the number of bricks before a true reversal.  Example:  If I have 5 pips per brink that results in a lot of 2 and 3 bar reversals—which I hate—because they produce charts full of whipsaws.  I raise the pips per brick until I get a reasonable number of 1 brick reversals with good long trends more often.  I think this produces some tradable charts that are hidden by trying to scalp above everything else.

This means you have to use minimum lots to start and watch your overall position and money management.  The more constantly you watch the more margin you can use IF you have a green board.

With this system you last position is always a loser until the reversal. This is why the last minimum position is the backstop and my additional positions area multiple rather than just more lot.

Remember on 1 brick reversals I have banked some profit. Two brick reversals I bank much more but I always leave my minimum order in—not my first order, but usually the system adds a position as some point so I keep a position with a high cost.  I am only interested in adding when the last little guy turns green again.

Overall this means that the EA does NOT have to be profitable to be traded profitably because you start with the minimum and then only add to profitable positions.  Some people worry here about chasing trades but I like to make it compounding profits.  You do have to be careful about raising your average cost too high, especially with larger secondary lots to a smaller initial lot.  But think of the P&L as the “indicator” and NOT the EA ruling the trade at this point.

Never add to a losing position. Do not hedge. Do not open trades in both directions—wait until you have a real idea a trade is working and you want to get onboard.

If anything looks bad, get out.  If you are too distracted, get out.  If you can’t sleep during the weekend with open trades, stop adding to trades Friday at 10 am and then close trades all day.

Some miscellaneous points:

  1. Expecting any EA to make you rich is a pipe dream.  Did a diet pill every make you lose weight?  You have to do it yourself. You can use them as tools but they make poor trading decisions overall.

  2. Don’t fear the exotics for small positions if they are making good charts. The AUDNZD is remarkable for making long trending moves which RENKO picks up that others ignore. But pick your own longshots for fun and stimulation, and keep the big money on the big winners.

  3. Keep track: A performance report can be selected and pasted into an Excel sheet and with a little tweaking you can sort everything by market and EA and see who makes what on a weekly or monthly basis.

  4. MT4 System Testing and demos do not work for me.  I don’t believe they give good results and I think too much promotion bias or fake their results.  After briefly checking out an EA I test it with real money.  Since I am real serious about that I pay close attention.

  5. Check out trading psychology videos on YouTube. A search will give you lots of choices. They are a bit on the mystical and touchie-feelie side sometimes but they have some very good observations about human trading psychology.

This is what I do…. I am interested in feedback and discussions with others interested in this approach. 

Good luck with what you do.

Francis Dogbe
9501
Francis Dogbe 2016.02.03 22:01  
i think it will better to show illustrations instead to better depict what have to share with us...:)
Tomas Rodriguez Doherty
8493
Tomas Rodriguez Doherty 2016.02.04 06:33  
I think it is very interesting.  Your method sounds great.  If you catch a trend then it will be very profitable.  
Michael Maggi
1404
Michael Maggi 2016.02.28 18:34  

https://charts.mql5.com/10/353/spx500-m6-forex-capital-markets.png

.

This is a revisión since I have discarded the Renko EAs I was using to use MOI from the Marketplace to place manual orders.  I am trying to get an EA written that would be my system automated but I am not sure it can be done on an online chart. 

The Laguerre moving average line from the Market is a new addition with a gamma of .55 and filters set to 8.  This gives a smoother line to a Renko chart.

Michael Maggi
1404
Michael Maggi 2016.04.28 19:49  
I am staying with SPX500 since my trading is limited from Bolivia where I am working now.  I am refining my trading style with SPX500 because it has good trading cycles day and night.  My profile page has some details about the trading and if you are interested in discussing Renko, Laguerra, and the pros and cons of semi-manual trading I am always available to chat.
Vitor Oliveira
315
Vitor Oliveira 2016.08.14 13:34  

Dear Michael,

Interesting! I have no experience in Renko charts, but as a trend follower, I often work with the Heikin-Ashi charts. After some visual analysis, easily we found out very simple but effective patterns. As the charts are not Picasso drawings, they are usually cleaned of gibberish. I usually use the Hull moving average as a top-down analysis (from W1 to H1) and the limits are defined by linear Regression Channel or the resistances and supports when such are absolutely clear. Using the Commodity Channel Index as oscillator on H4 / H8 / D1 time frames is common (MT5 is now my platform). As for the charts is all. Additionally, a simple matrix of sentiment analysis that I developed over the years is used as a filter (subjective, of course).

On the other hand, Martingale strategies are out of the question, however, Hedging is used in certain market conditions (a small divergence with you).  

Kind regards, 

Michael Maggi
1404
Michael Maggi 2016.08.17 17:14  
Francis Dogbe:
i think it will better to show illustrations instead to better depict what have to share with us...:)

There are a lot of charts on my profile page if you are interested.

Michael Maggi
1404
Michael Maggi 2016.08.17 17:15  
Calm Waters Trading:

Dear Michael,

Interesting! I have no experience in Renko charts, but as a trend follower, I often work with the Heikin-Ashi charts. After some visual analysis, easily we found out very simple but effective patterns. As the charts are not Picasso drawings, they are usually cleaned of gibberish. I usually use the Hull moving average as a top-down analysis (from W1 to H1) and the limits are defined by linear Regression Channel or the resistances and supports when such are absolutely clear. Using the Commodity Channel Index as oscillator on H4 / H8 / D1 time frames is common (MT5 is now my platform). As for the charts is all. Additionally, a simple matrix of sentiment analysis that I developed over the years is used as a filter (subjective, of course).

On the other hand, Martingale strategies are out of the question, however, Hedging is used in certain market conditions (a small divergence with you).  

Kind regards, 

I am using H-A now as a confirmation with Renko charts that actually helps keep in trades that have more left to their trends. I will post some on my profile page very soon.
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