HLHB Weekly Update – August 19, 2011

EUR/USD 4-Hour Chart

What the heck. For the third straight week, the forward-testing of the new trial system “HLHB Trend-Catcher” was an epic fail.

As you can see from the chart, the supposedly profitable long signal early in the week was invalid. Even though the EMAs crossed over and the RSI was above 50, the ADX had a value below 20. This meant that I couldn’t take it!

Maybe I’m going about this the wrong way. I think I should test my system on a lower time frame, specifically the 1-hour chart. After all, one of my Twitter friends, @LewisPosner1, back-tested it already and showed positive results. If you want to see the results as well as the code HLHB Trend-Catcher EA, just head on over to his blog. Don’t forget to thank him for his work though!

Should I forward-test the HLHB Trend-Catcher on the 1-hour instead? Or should I just keep on forward-testing it in the 4-hour timeframe?

I’m also thinking that maybe one reason why my new system hasn’t really generated any profitable setup is because EUR/USD seems to be consolidating. If I remember correctly, Big Pippin pointed out in his Daily Chart Art earlier this week, that there’s a triangle in the 4-hour timeframe.

Maybe if a new theme emerges that would dictate market sentiment we’ll see more action on the pair, and hopefully more profitable setups from my system. Correct me if I’m wrong, but it seemed like there wasn’t any major event that rocked the markets. Sure, German Chancellor Merkel and French President Sarkozy’s meeting sparked risk appetite while Morgan Stanley’s downward revision to its outlook on global economic growth and disappointing reports from the U.S. triggered risk aversion. However, none of them seemed to have left a lasting effect on the markets.

Anyway, back to my dilemma, let me know what you think. Pretty please with candy sprinkles and kisses on top? Hit me up with your thoughts on Facebook or Twitter (@LoonieAdventure)! Or if you like, you can also write in the comment box below.

Thanks a lot guys! I really appreciate all the feedback. I haven’t really had the time to respond because I’ve been doing double shifts at the coffee shop for the past few weeks. But rest assured, I am reading each and every one of them. Just keep your suggestions coming!

Much love,

Huck

  • Ilya Gruntal

    + Japaneese candles for pure win.

  • Alexstan2008

    Hi Huck,

    I Totally agree with Gruntal. I have been developing and programming strategies, and backtesting them and runnning forward tests for over a year, and up to now, I havent found a single one that consistently works, and believe me, I have probably tried over a hundred ideas combining all sort of indicators, like the ones you are using. All those indicators will be lagging, late in the action, and your system will kill you during sideways markets.

    I have found very few things that actually work consistently. Probably one of them is Autochartist, but only trading the patterns with a quality of 7 or higher. Chart patterns do definitely have a predictive/leading power.

    Also, paralell and inverse analysis, which you can read about here http://knol.google.com/k/paral
    That concept is really powerful.

    Last but not least, support and resistance levels, both horizontal and diagonal in trend channels. If I were to use an indicator, the only thing I would use is MACD and only to detect Divergences, I wouldnt use it for anything else. And I would use no other indicator at all.

    Hope this helps,
    Good luck in your trading

  • Ilya Gruntal

    Sigh… no wonder it’s an epic fail.

    I’m a coder myself, my job is to create trading strategies and automate it. For a long time now i’m very much sure that no indicator must be used in a solid trading system. You’re using averages crossover plus rsi plus adx… jeez, really…It looks more like a gambling to me.All of those will never tell you what is trully happening…It simply doesn’t work. And never will, too much of a lag.You’ve got price and volume (tho volume is a different story at forex, right).Build up support and resistance levels (you can use so called fractals, or zig-zag function with different % change), get the trend lines (simple math). You need nothing else but these and a risk management system itself.Please, Huck… Get over it.

    p.s. i hope i wasn’t too harsh on ya, best of wishes. ;)

  • Gulzaar88

    Hi Huck – a few thoughts:

    1) Draw trendlines on the RSI indicator as well – you will be surprised how effective they are

    2) If you want to turn it into an EA, use Bollinger Bands(20,2) and filter out signals too close to to the upper or lower band

    3) Use a longer term(200) EMA to guage trend direction – don’t trade against it, and if the 200 EMA is flat, don’t trade at all.

    Hope this helps

  • Shawn

    1. keep 4 hour
    2. eur is consolidating now. this sort of system is for trending markets. 
    3. your rsi is too low. set it at 65 for longs, 30 for shorts with a 25 pip confirmation beyond the prev candle. this allows you to miss out on losers more
    4. i wouldnt use the adx. just sma and rsi

  • Alexstan2008

    Hi Huck,

    I Totally agree with Gruntal. I have been developing and programming strategies, and backtesting them and runnning forward tests for over a year, and up to now, I havent found a single one that consistently works, and believe me, I have probably tried over a hundred ideas combining all sort of indicators, like the ones you are using. All those indicators will be lagging, late in the action, and your system will kill you during sideways markets.

    I have found very few things that actually work consistently. Probably one of them is Autochartist, but only trading the patterns with a quality of 7 or higher. Chart patterns do definitely have a predictive/leading power.

    Also, paralell and inverse analysis, which you can read about here http://knol.google.com/k/paral
    That concept is really powerful.

    Last but not least, support and resistance levels, both horizontal and diagonal in trend channels. If I were to use an indicator, the only thing I would use is MACD and only to detect Divergences, I wouldnt use it for anything else. And I would use no other indicator at all.

    Hope this helps,
    Good luck in your trading

  • Craig_FX

    Trading on the surface seems so simple. I mean the price can really only move either up or down. The more I get into it, the more there really is to learn! I would agree with the other members that there is no 100% system. Perhaps using a one hour chart will help with not lagging too much.  @6f40cefa6d267e34e30d7f97aee8ea49:disqus  ‘s idea of using the RSI set for 65 for longs and 30 for short could possibly be of use too. Good Luck Huck 

  • Rnrstephan Inc

    When catching a trend and using it’s momentum stick with daily charts. Only use 4 hour and 1 hour charts set yourself up for the best possible position. I like to use 200 SMA to find reliable trends. i use 20,2 bollinger bands to find my highs and lows. To get a confirmation i use Slow stochastic 14,3 or 15,5. I’m currently back testing this it, and seems to be pretty solid.