Making Money on Trends

There are many different opportunities for Trends. Here is what I have discovered.

1) Entry on a slight reversal in a strong trend.

So the trend loses a bit of strength which provides an optimal time to enter and continue riding the trend. The example below is from AUDJPY –Mid March to Mid April 2011.

102613_1033_MakingMoney1.png

– Long trend is UP
– Short trend is DOWN
– CCI has crossed over minus100
– SSD indicates Not Overbought condition

Settings were:
– CCI(m30, 10)
– SSD (15,5,5,70,30)
– Trend (H1,50,No,50,1)
– RiskReward (1)
– Stop (100)
– Smart Stop (Yes 1.0)

2) A weak trend that hovering around the moving average

It’s clear from the picture that the trend is weak with the prices fluctuating around the moving average. This, in an almost reversion way, provides entry opportunities. Example below is taken from AUDJPY – January 2011.

Here the trend is down, and the CCI and SSD have very long periods to only pick up the peaks. The price must be on the opposite side of the long trend.

  • CCI (m30, 180)
  • SSD (50, 5, 5)
  • Long Trend (H3,100,Yes,50) is DOWN
  • RiskReward (1.5)
  • Stop(30)
  • Smart Stop (Yes – 1.0)

For this strategy to work, we have to successfully identify that a channel is forming, and identify the range and direction of the channel. With that we can try to predict zones to enter and take profit. In theory, this strategy may not even need a trend – could just be a mean reversion. It probably needs to be able to do this automatically each time a new channel is created and identify when the channel is broken…

This is one to look at more closely later.

3) Trend Pop

Here, even though the CCI and SSD indicators are giving us both oversold signals, we still see the trend is strong and enter the market anyway. Entry signal

  • when SSD.D crosses under SSD.K OR SSD crosses into oversold.
  • CCI must be oversold.
  • SSD.D or SSD.K must be oversold.
  • Prices must be on the right side of both the Mid and Long moving averages.

  • CCI (H2, 50)
  • SSD (H2, 15, 3, 3)
  • Midtrend (H2, 30, Yes, 30) is DOWN
  • Longtrend (H4, 50, Yes, 30) is DOWN
  • RiskReward (2)
  • Stop(60)
  • Smart Stop (Yes – 1.0)

Backtesting this strategy however didn’t show very good results across multiple timeframes. In a long running trend, the results were not too different from the first Trend strategy discussed above (entering in on dips in the trend). However, there were a lot more false signals with this strategy.

Going to shelve this one for now.

Posted in Indicators, Research, Strategies, Trend and tagged , , , , , , .

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