Here they are:
I have read that the ADX measures the strength of the trend. Since my system is a trend-following system, I believe it only makes sense to use an indicator that determines whether price is trending or not.
What I will do is apply the ADX indicator with a length of 18 (equivalent to 3 days) and use it as a “confirmation indicator.” If the ADX is higher than 25, it would mean that price is trending, which means that I could enter once price goes 20 pips beyond the high or low of the crossover candle.
The stop will still be placed 10 pips below the crossover candle for a long trade or 10 pips above for a short trade.
Makeover Option 2: Reduce 10 and 20 EMA to 5 and 10 EMA
Why? Looking at my past trades, I missed out on a ton of great moves. By shifting to the 5 and 10 exponential moving averages, I may be able to hop onto trends earlier. This may allow me to catch the beginning of trends that I can hopefully ride out and grab more pips! I just gotta be careful because it might end up with a lot of fake outs!
Makeover Option 3 (courtesy of tradecraft): Keep all indicators, but change entry timing
No major changes to the parameters of the indicators and the system rules. I’ll just tweak the entry timing so I can still take advantage of strong moves even when the stochastic is overdone during a crossover.
I don’t want to eliminate the Stochastic indicator completely because it did save me from taking some hits on my account. Instead, what I’ll do is include another rule so that I can still jump in a trend even if the Stochastic is overbought or oversold when the crossover occurs. Here goes…
If a downward crossover occurs and the stochastic is below 20 already, I will patiently wait for it to move out of the oversold area first. Once it does and while the 10EMA is still below the 20EMA, I will set a sell stop order 10 pips below the previous candle’s low.
On the other hand, if an upward crossover occurs and the stochastic is above 80 already, I will wait until the stochastic moves out of the overbought region. When its below 80 and the 10EMA is still above the 20EMA, I will set a buy stop order 10 pips above the previous candle’s high. In these scenarios, I will set my stop 10 pips above/below the previous candle’s high/low for short/long orders.
Makeover Option 4: Don’t change anything at all
I made a bit of profit last year on the HLHB system.. No reason to change anything at all.
So that’s it! Please help a lady out and help me decide what indicators I should style with my charts. Ooohhh, I just love mixing up fashion and forex!