First back testing...

[farmerjohn1324]

I read a "good" indicator combo online. The rules are...

1. Wait for price to close above middle Bollinger Band (20 ma).
2. Make sure RSI is above 50
3. Make sure OBV has been rising (although it doesn't exactly define parameters for this)
4. Set stop-loss at level of lower Bollinger Band at time of entry
5. Take-profit when price closes below lower Bollinger Band

I back tested the past 6 months for EUR/USD on daily charts. I would have back tested further, but it was obvious that it doesn't work.

Here are the results. There would have been 9 total trades.

1. Open 6/3, close 7/23. Loss of 93.5 pips.
2. Open 6/20, close 7/23. Loss of 139.8 pips.
3. Open 8/5, close 8/23. Loss of 169.9 pips.
4. Open 8/25, close 8/30. Loss of 104.8 pips.
5. Open 9/17, close 9/25. Loss of 112.3 pips.
6. Open 10/9, close 11/8. Gain of 35.4 pips.
7. Open 11/19, still open. Current gain of 145.6 pips.
8. Open 12/2, still open. Current gain of 147.6 pips.
9. Open 12/27, still open. Current gain of 47.9 pips.

TOTAL = loss of 243.8 pips.

I do have one question. Since the site I read doesn't exactly specify parameters, I don't know how to define "OBV has been going up." Going up for the last how many days? And how much does it have to have gone up?

 

[richDude]

you will never find 'what works' with back test... but you can find 'what doesn't work'.

 

[farmerjohn1324]

you will never find 'what works' with back test... but you can find 'what doesn't work'.

So then there's no way to prove a strategy?

Please explain.

 

[richDude]

So then there's no way to prove a strategy?

Please explain.

it will work temporarily for a while, then draw downs come, and you don't know if it's just draw down or the permanent death of the strategy.... usually the latter.

 

[farmerjohn1324]

it will work temporarily for a while, then draw downs come, and you don't know if it's just draw down or the permanent death of the strategy.... usually the latter.

If the strategy can die, then it wasn't a good strategy.

I'm starting to think there is no good strategy.

So then how do I know when to place trades?

Although I do KNOW FOR A FACT that fundamentals move markets. Not TA. So maybe I should stick to FA? I'm open to suggestions, just don't want to waste my time.

 

[richDude]

If the strategy can die, then it wasn't a good strategy.

I'm starting to think there is no good strategy.

So then how do I know when to place trades?

Although I do KNOW FOR A FACT that fundamentals move markets. Not TA. So maybe I should stick to FA? I'm open to suggestions, just don't want to waste my time.

a strategy that doesn't die is called the holy grail lol.

 

[dozu888]

If the strategy can die, then it wasn't a good strategy.

I'm starting to think there is no good strategy.

So then how do I know when to place trades?

Although I do KNOW FOR A FACT that fundamentals move markets. Not TA. So maybe I should stick to FA? I'm open to suggestions, just don't want to waste my time.

check my thread 'trading is easy'... you may get some ideas. basically you want to gauge sentiment and just go the opposite direction of the dumb money.

 

[Cuddles]

it will work temporarily for a while, then draw downs come, and you don't know if it's just draw down or the permanent death of the strategy.... usually the latter.

So draw downs have never happened in the past is your argument?

 

[tommcginnis]

2. Make sure RSI is above 50
3. Make sure OBV has been rising (although it doesn't exactly define parameters for this)
4. Set stop-loss at level of lower Bollinger Band at time of entry
5. Take-profit when price closes below lower Bollinger Band

Some issues:
2) RSI (of which I'm not a fan -- have never seen it work well) has much sequential content, and therefore its direction is as much or more important than its level. So, using 'level' only is using half of the RSI's available story.

3) On-Balance Volume -- how does one use that in a forex case, which lacks volume??

4) assuming you're going short, then the stop-loss should be set at level of upper Boll.Band.

[EDIT:] Otherwise, you've got:
middle BB: Entry
lower BB: stop-loss
below lower BB: take-profit

 

[farmerjohn1324]

Some issues:
2) RSI (of which I'm not a fan -- have never seen it work well) has much sequential content, and therefore its direction is as much or more important than its level. So, using 'level' only is using half of the RSI's available story.

3) On-Balance Volume -- how does one use that in a forex case, which lacks volume??

4) assuming you're going short, then the stop-loss should be set at level of upper Boll.Band.

2. RSI going up over what timeframe? If this is a daily chart, how many consecutive days should it have gone up before this?

4. I'm not going short.