Forex System Update: SMA Crossover Pullback (Sept. 5-9, 2016)

Thank the universe for trailing stops! A bunch of open positions from the SMA Crossover Pullback system were still able to catch some gains even in quick reversals last week. If you’re wondering what I’m talking about, make sure you look at the trading rules and risk management adjustments first.

In my update last week, EUR/USD still had an open short position prior to the ECB statement and as I expected, price jumped after the announcement. Fortunately, the position was closed on a new crossover before it even hit the full stop. Whew! After this upward crossover, a stochastic pullback signal followed to open a new long position.

EUR/USD 1-hour Forex Chart

EUR/USD 1-hour Forex Chart

GBP/USD had a new crossover early in the week then a stochastic pullback signal didn’t materialize until Thursday. I’m a bit worried that price is starting to turn lower again, though.

GBP/USD 1-hour Forex Chart

GBP/USD 1-hour Forex Chart

AUD/USD’s short position which was open for nearly three weeks already eventually hit its trailing stop before price reversed. A new crossover took place afterwards but a pullback signal hasn’t been completed yet.

AUD/USD 1-hour Forex Chart

AUD/USD 1-hour Forex Chart

Lastly, the long position on EUR/JPY also reached its trailing stop when price turned lower. A downward crossover was seen late in the week, immediately followed by a pullback signal to short.

EUR/JPY 1-hour Forex Chart

EUR/JPY 1-hour Forex Chart

Trade Summary:

SMA Crossover Pullback Positions as of Sept. 9, 2016
Pair Position Entry SL PT Status P/L  (pips) P/L  (%)
AUD/USD Short .7690 .7840 .7390 Closed +50 +0.33
EUR/USD Short 1.1185 1.1335 1.0885 Closed -65 -0.43
EUR/JPY Long 114.00 112.50 117.00 Open +90 +0.60
GBP/USD Short 1.3340 1.3190 1.3640 Open
EUR/USD Long 1.1250 1.1100 1.1550 Open
EUR/JPY Short 115.15 116.65 112.15 Open

With that, the SMA Crossover Pullback system was able to squeeze out a 75-pip win or a 0.50% gain on the account, thanks to those risk management rules. The trailing stops on AUD/USD and EUR/JPY were hit while the new crossover rule trimmed losses for EUR/USD.

It looks like we’re in a bit of a range-bound environment for these pairs once more since traders are biting their nails ahead of the FOMC and BOJ decisions next week. I’ve got no robot nails to speak of so I guess I’ll just have to keep these metal fingers crossed that the current open positions would also fare well. Stay tuned for my updates!


Here are some books if you want to get deeper into building systems & algorithms. BabyPips.com receives a small credit from any purchases through the Amazon links above to help support the free content and features of our site…enjoy!

  • Thanks for publishing the system.

    I have created an Indicator for cTrader that prints signals for this system. The simplicity of the system makes it a good one to use for learning the cTrader API.

    I have a working version but have a couple of questions. Sorry if they have been asked before.

    1. Is it invalid to print a signal if the stochastic is already in the Overbought/Oversold range when a cross happens?

    2. Do both the %K and %D have to be in the Overbought/Oversold range before pulling back and triggering a signal

    • Wow, that sounds awesome! To answer your questions:
      1. No. The crossover and stochastic overbought/oversold can occur at the same time but the signal would still be valid if the move below/above the 75/25 level happens after the crossover.
      2. Yep!
      Hope this helps and keep us posted on your cTrader indicator! Were you able to run backtests using this?

      • Thanks for the answers.

        cTrader does have a back testing tool but I haven’t tried it yet. I will do so once I have manually verified it is matching the signals from your updates. It prints the signals historically so I can visually back test and it is almost there. It seemed to be missing a few opportunities but now I have the answer to question 1 I can fix that.

        • So I have converted my indicator to a cBot, the equivalent of an MT EA and run it through the back testing tool in cAlgo (the development tool for cTrader) over the same period covered by your blog posts.

          Sadly with the default SL, TP and Trailing Stop rule adjustments my cBot is not generating profits. When I try to match up the trades generated to your posts they don’t match so my logic must be wrong somewhere (although I have noticed the Stochastic indicators don’t match up)

          Is there an EA I can get hold of to compare code and make sure my logic is correct?

          • Hi Mike, thanks for taking the time to work on this system and clarify these details. To answer your questions:

            1. I look at the open of the next candle after all the signals line up for an entry, but this can be approximated by the previous candle close for coding purposes.
            2. For the exits such as profit targets or trailing stops, the hi/lo is taken into account and not just the close.

            Hope this helps and do keep us posted how it goes!

    • MICHAEL O’CALLAGHAN

      error

  • Oh, I guess that’s how we do it in the robot world! IMO, it doesn’t really matter what color you apply to which MA, as long as you’re clear on which parameters are represented.

  • MICHAEL O’CALLAGHAN

    Something I have done is adjust my stop losses once the price is closer to the target. At 50pts from target (+250) I’ve trimmed the trailing by 50pips to 100 and at 20pts from target (+280) trimmed it again by a further 50pips to 50. I’m not advocating such a change here as it defeats the purpose of a simple system. It just feels better if I am not faced with a 150 pip risk vs a 1-50 pip gain. I can’t be sure that this is beneficial in the long run though.

    • Ahh interesting… Yeah it does make sense to gradually adjust the stop that way to lock more profits in the bag, but it does seem much more complicated. But thanks for sharing this idea, maybe it’s something other readers here could try to implement as well! See you around!

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