... but is it doable in reality ?

janbillian

janbillian

Guys and gals, this is one hell of a forum. I reside in Munich, Germany, and have too long not been active in this great forum. Back in 2006, I got a long-term investment idea via pm here - pre IPO "Invest in Mastercard, it is a company that profits from American's endless debt lust", the member wrote me. Didn't invest, obviously would have been a homerun. NYSE symbol is MA.

Now, I admire Tom Basso a lot, he was interviewed by Jack Schwager for vol. II of his market wizards series in 1991, "The new market wizards". I discovered him on FB in 2016, he's on track for his best year as a trader as trendfollowing has so far worked perfectly in stockindexes - COVID19 was so far "mana from heaven" for this trading approach. :thumbsup: If you haven't already checked out Tom's interview with M. Covel, I think it's worth your valuable time, can be found on YouTube !

Some of you are experienced, too, obviously - what your take on what I call a 2:1 setup or 3:0 setup? I use tradingview as my source, took Directional Movement (DMI) without the ADX line, I've colored it white & the Aroon indicator (thus two indicators) below the chart + the EMA34. Directional Movement & Aroon are basically momentum indicators, I take the crossover of the signal lines as a long or short signal, the bar must close above or below the EMA34 and the close should be near the EMA34 (difficult to quantify exactly in ticks or pips) - as the SL will be placed on the EMA34 level and the take profit should be 3 x SL .

Setup for entries ? Long if I have an "above" EMA34 close and one of the indicators has a signal line crossover, positive momentum crosses negative momentum. Vice versa for a short entry.

1NCtrS21


The DAX/GER30, timeframe 3H, the second signal (short entry) would have been a loser, the other two signals been winners. Not a "well chosen" example, just to illustrate the approach. See the dart's direction for the direction of the trade.

I'd be shooting for a 20% annualized return. Too ambitious in the eyes of experienced traders here, thus the thread's title ".... but is it doable" ?

It's basically a bet on momentum taking an underlying to levels beyond your entry, which is what trendfollowing is all about.

Feel free to contact me on Facebook, too, this is my profile there -> https://www.facebook.com/jan.billian
 
Almost anything is doable providing it worked in the past with a filter of turning off when conditions are not favorable.

More conditions you use reduces signals, whether that helps or hurts...less indicators the better. What I would add as conditions are when chart patterns that happen at extremes, trend signals stop or altered by limiting time to succeed.

I never found aroon to be useful
 
Thank you, Handle123, for the input. So far, the crossovers in the momentum indicator(s) (one may be actually enough) + EMA34 looked strong, but of course I'm open for further input !

This is the interview with Tom Basso I referred to, 76 minutes long ->
 
Run a back test to see if the strategy works historically or not. We can't help you with that.

Strategy can be that simple, but it doesn't mean that execution will be.

On the other hand you want to put in the bare minimum effort and harvest 20% annually. Yeah, good luck with that. You might need it.
 
Handle123 said:
More conditions you use reduces signals, whether that helps or hurts...less indicators the better.
More...

I don't agree with that. The oneliner "less is more" is not valid in reality, because that would mean you should just use 1 indicator. Or even no indicator as that is still less, so better...

You should use more than 1 indicator. Just be careful however that these different indicators are not based on the same principle. Because in that case they will always confirm each other. If they always confirm each other they are useless.

Having too many indicators is worthless too, so it is question to find the optimal combination of indicators and performance.

Like with every choice you have to make in life.
 
I don't have the capabilities to backtest, but virtusa does have a point . Thanks to all of you for the input. I actually might reduce it to two indicators - EMA34 crossing + DMI OR instead of "and" Aroon.
 
janbillian said:
I don't have the capabilities to backtest, but virtusa does have a point . Thanks to all of you for the input. I actually might reduce it to two indicators - EMA34 crossing + DMI OR instead of "and" Aroon.
More...

If you can manage the amount of information you can use several indicators. The problem starts if there is too much information. At that point you will no longer be able to see clear.
 
Yes, virtusa, without a doubt, also important is to stick to one timeframe and then trade the signals when they occur. 2 - 4 hours would be choice I believe, 12 - 24h leave too much on the table, see the DAX as of now.

EUR / NZD I would not trade anymore. Reason ? A clear uptrend on H4, but as I'd choose the EMA34 as the SL level, the SL would have to be put 75 pips below the long entry. And I want at least 2R trades - the profittarget should be 2 x the SL level or higher, such an upward move may not be in the cards.

wGWAqeyk
 
If you want confidence in the system, you need to back-test. Without the confidence your psyche will break after an inevitable string of losers and you will not be able to execute properly. And without consistent execution, there will be no consistent results.
 
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