B.A.T. Guerrilla Trading System

[expiated]

I have established his journal primarily as a relatively permanent record—or at least one that I will not myself lose or destroy in a fire or whatnot—documenting that it was today, Thursday, April 5, 2018, that marked (quite possibly) a personally historic day among my trading experiences.

Consequently, I am not sure how many additional entries I will be posting…but the following does not really fit my Multiple Simple Moving Average Envelope thread (since it uses the underlying principles in a different way) nor does it seem appropriate for my 1.8% thread, to which I should now be able to return, having just completed this temporary detour that I took to address certain “issues” I was having.

The entry acknowledges modifications to an approach based on a couple of contentions strongly refuted by other traders (within this forum) who are far more knowledgeable and experienced than I, but from which they have nonetheless been unable to dissuade me—the notion that there are specific moving averages which reflect the actual direction of price far better than all others, and there are general limits beyond which price is typically unwilling to deviate from these key moving averages.

The “issue” I was having before was that while I had settled on what I believed to be the best longer-term moving averages, I found myself vacillating between a handful of moving averages at the intraday level, with price sometimes moving in a direction on a short-term basis other than I would have expected based on my indicators.

In the last two weeks I have worked diligently on resolving this problem, and as of today, settled on my final two moving averages, one to reflect the longer-term intraday trend, and the other to reflect the shorter-term intraday trend. There was one losing trade among those recorded in the last 24 hours, but it was that trade which helped me to arrive at the shorter-term intraday trend. (I was already using the longer-term intraday trend, but it turned out that I needed greater precision to trade with an adequate amount of accuracy to avoid such losses.)

 

[Saltynuts]

I wish I could understand your system expiated. What MAs whose are, your particular buy and sell signals, etc. Don't see that info - maybe I'm just dense.

 

[expiated]

I wish I could understand your system expiated. What MAs whose are, your particular buy and sell signals, etc.

There are various ways the chart can be used, because it’s all about interpreting the relationships between price, moving averages, average price range, typical price patterns, and market structure.

As luck would have it, I just got through designing a simpler chart configuration built on the same basic ideas. (The red line is squiggly because some of my indicators are drawn based on a sampling of data taken at regular intervals to conserve memory.)

When the orange oscillator is in the upper half of the channel, the market is bullish. When it is in the lower half of the channel, the market is bearish. This means it is a good idea to enter a long or short position when the dark oscillator forms a point on the opposite side of the panel, as appropriate. For example, I have circled what one might argue are good opportunities to enter long positions. Note that a particularly good time to do so is when the orange oscillator is rising!

Bear in mind that I am an intraday trader who uses a guerrilla trading style for scalping the market, so five pips of profit per trade is acceptable to me, and anything more than that is "icing on the cake" (and can more than likely be accomplished when, once again, the orange oscillator is rising).

Since I just finished this version of my system today, I have only written one rule for it so far, which is do not enter ANY position until the Heiken Ashi candlesticks reverse their color.

The thin moving average on the above chart is the only one that is standard. The other three (one cannot be seen from this distance because it is hidden by the candlesticks) I coded myself. It’s taken me from November of 2015 until this morning to get ALL of the settings for the "retail" (non-proprietary) moving averages I use set in stone (if indeed they are) so I hesitate to mention these parameters in public in that I regard this information as intellectual property.

Oh! Rule #2 is if you do not set your take-profit target at 5 pips, then lock in your gains when the Heiken Ashi candlesticks revert back of the color they were before you entered the trade.

 

[expiated]

What MAs whose are, your particular buy and sell signals, etc. Don't see that info...

The above choppy (purple) and squiggly (black) moving averages are ones I designed myself to sort of filter out insignificant fluctuations in price and identify support and resistance price levels WITHOUT REPAINTING the way that the zigzag indicator does!

 

[traider]

2 problems:

You are potentially curve fitting.
Broker loves you unless you have hft comms and spreads, 5 pips profit target makes your broker $$$ they will love you to the moon

 

[expiated]

2 problems:

You are potentially curve fitting.
Broker loves you unless you have hft comms and spreads, 5 pips profit target makes your broker $$$ they will love you to the moon

Curve-fitting (as defined by investopedia) is an impossibility with my system…

curve-fitting: applying too many rules to achieve back-test results that show higher profits; when the results of a back-test in one time-period shows profitability, but collapses when the same system and settings are applied to a different time-period

First of all, I do not do back-testing. All I care about is does the system work here and now—consistently and reliably—and is it based on observable, common-sense, self-evident principles; because if it is, I’m not worried that the system will stop working in the future.

Second, I use so few rules that I can summarize them in one short sentence: Enter positions when there are pullbacks in sharply trending markets.

Third, as I wrote in my never-to-be-published book explaining my system, the idea of applying the same settings to different time periods has always struck me as being downright counter-intuitive. I regard myself as sort of an Aristarchus of Samos or Nicolaus Copernicus of Forex trading—believing that I have identified specific moving averages that do the absolute best job of accurately conveying the precise direction of price in a given timeframe, though everyone tells me that this is impossible to do. (I identified the final three “game changing” moving averages this morning!!!)

So if, for example, I believed that SMA (3) did the absolute best job of tracking the long-term trend on a one-hour chart (which I don’t) it would make absolutely no sense whatsoever for me to plot SMA (3) on a one-minute chart. Common sense would dictate that I plot SMA (180) instead! When applying the same system to a different time frame, the settings MUST be adjusted accordingly or OF COURSE it won’t work. It would be extremely foolish of me to expect otherwise. (If this contention has any validity, God willing, I should have a near perfect record going forward.)

If my broker loves me to the moon…good for them. We can BOTH make money! I don’t care, so long as they provide me with the means to grow a pocket full of spare dollars into a sizable fortune, they can make as much money off me as they like.

 

[traider]

What makes you pick the magic numbers that you did? The answer to that will tell whether you are curve fitting.

 

[expiated]

I can see no possible way this approach to Forex trading (the chart setup) might continue to be refined beyond what I did last night and this morning. It is essentially a bundle of three key simple moving averages, their corresponding simple moving average envelopes, and a related proprietary oscillator.

The system was designed in the spirit of meteorology, which collects precise, up-to-date, quantitative information or data about the current state of the atmosphere (such as air pressure/temperature, cloud location, wind direction/velocity, and humidity) at a given place and time, and interprets it by running complex computer models (in the form of physics equations) on supercomputers to make accurate weather and climate predictions.

Similarly, I interpret precise, up-to-date information on trend, market structure, average price range, historical support/resistance levels, and repetitive price patterns to make accurate predictions regarding the most probable trajectory of foreign currency exchange rates in the not-too-distant future.

While I do not believe I can refine my charts to a greater degree than I already have, I do see room for improvement when it comes to the forecast models I use to interpret them, and that is what I will be focusing on as I go back to trading my live Forex and binary option accounts.

 

[expiated]

In my previous post I wrote that I did not see how the chart setup I was using at that time could be refined any further, so I would be concentrating on improving the forecast model I’d be using to interpret it. As it turns out, I did indeed work on the forecast model, and what I once called my Multiple Simple Moving Average Envelope Trading Strategy, and then called my B.A.T. Guerrilla Trading System, I will, in its final permutation, be calling the Numerical Price Prediction Forex Trading Strategy.

Though I am still exploring some of the more nuanced aspects of its application, the core set of guidelines for implementing its methodology are pretty well established at this point, enough so that its use is becoming somewhat routine and its results relatively consistent…

However, the chart setup changed a bit as well, with my current favorite taking the form reproduced here:

Again, the squiggly brown line in the lower panel is due to using only a sampling of data taken at regular intervals to generate the indicator (in order to conserve memory.)

 

[expiated]

I established this journal primarily as a relatively permanent record documenting that on Thursday, April 5, 2018, I made modifications to an approach based on a couple of contentions strongly refuted by other traders (within this forum) who are far more knowledgeable and experienced than I, but from which they have nonetheless been unable to dissuade me—the notion that there are specific moving averages which reflect the actual direction of price far better than all others, and there are general limits beyond which price is typically unwilling to deviate from these key moving averages.

Here, almost a year after posting the above entry, I am no longer making modifications to my setups. I'm also not inclined to refer to my approach as a guerrilla trading system any longer in that seeking 5-pip gains has more or less become a rarity for me, with 10 to 30 pips now being more the norm, though I know many refer to this as scalping as well.

In fact, I don't even know if what I'm doing now should really be called a system. It's more like I look at the various trend lines and envelopes and do whatever they seem to suggest makes the most sense given the immediate situation. It might be to go against the trend if rates are at the extreme edges of typical price ranges, enter during pullbacks in what appear to be obvious trends, or get in at what looks to be the ground floor of a brand new trajectory.

Now, with everything so settled, it just so happens that I don't really have much time trade...

However, when things get back to normal, I trust the developments which took place during this "time off" will pay added dividends in terms of performance once I can give the kind of attention to interpreting price action that is required when trading my live account, God willing.