Trading Focal Points -- "A Leap Of Faith"... (Trading Focal Points -- "A Leap Of Faith")
If you are a one-tool person and don't like toolboxes, then stop here and go back to the forum overview (https://www.forexfactory.com/forums) - this post is not for you and you will not only waste your time, but also my time. If, on the other hand, you enjoy learning new things and are not afraid of learning something that is not only new but "alien" compared to how you currently trade, then keep reading. To be clear, I'm not pitching focus as the next holy grail. Here's another way to trade that you might find fun and entertaining to break up the boredom of staring at a screen endlessly.
I recently learned about focus from @parisboy in the PlanetX thread (https://www.forexfactory.com/thread/...tx-oscillators). @parisboy is a talented guy with a great sense of humor and an expert on envelopes, waves and cycles (https://www.forexfactory.com/thread/...s-waves-cycles?). I've known him for a few years and read his posts from time to time, though they usually fly over my head. My brain moves at an empirical pace, while @parisboy’s brain is more theoretical. However, during our recent involvement with the PlanetX theme, something started to get interesting. I asked a few questions, got great responses, and then more questions started coming. Then, at some point, a lightbulb went on. Focal points are very, very easy to trade, and they are colorful and visually pleasing. However, they don't work in the way you imagine - and that's the problem. If you've read the first few posts here and thought you got it, you definitely don't. You need to reread it until the light bulb goes on.
I have developed a new focus indicator which I will share and explain its use in the post below.
I should also emphasize early on that trading focus is highly discretionary - you need to use your brain's pattern recognition abilities. The Focal Point strategy is not suitable for automation - therefore, do not expect EAs to appear in the future.
Full disclosure: Focus is new to me and I have not traded them at the time of writing - I am an algorithmic trader. However, I plan to incorporate focus into my discretionary trading.
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Update: 2022-03-23 (taken from post #88)
This article contains an updated version of the R4M-FocalPoints-OnCharts indicator. With default settings, it detects focus pretty well - although I wouldn't claim it's perfect. As I mentioned above, not all focal points are created equal – at least visually. The SMA crossover rarely occurs at exactly one point - there is always a little horizontal or vertical offset. Your brain can easily spot a color pattern and ignore its flaws, but this isn't easy to do in code without very specific predefined rules (which don't exist yet). So, I came up with my own method and it seems to work. I'm excited to continue refining the detection algorithm. However, if you encounter detection errors or miss significant FP differences, it's okay to complain - as long as you provide a graph pointing out the difference and provide enough information for me to be able to reproduce it. If I can't reproduce the problem, then I can't fix it. Also, I'm not a mind reader.
Let me explain some of the functions of this indicator. In the image below, the bullish and bearish FP detected by the indicator are marked with blue and purple circles respectively. I view focus as a pair (i.e. a pair) of bullish focus and bearish focus. I'll call them FP1 and FP2. There will be a high or a low between FP1 and FP2. Highs will occur when FP1 is bullish and FP2 is bearish; lows will occur when FP1 is bearish and FP2 is bullish. Once FP2 is formed, indi has enough information to calculate the target price (yellow line). If the current price has not reached the guessed TargetPrice, the yellow line is solid and may still be valid. However, once the current price exceeds the guessed TargetPrice, it should no longer be considered and is drawn as a dotted line.
The updated version of the indicator includes two settings: "Crossover Type" and "Tolerance". These situations occur because, as mentioned above, not all focus is created equal, as explained below:
Crossover Types: There are 11 crossover types - 16x32, 16x64, 16x128, 16x32x64, 16x32x128, 16x64x128, 16x32x64x128, 32x64, 32x128, 32x64x128, 64x128. The default is 64x128 because I think that works best. But feel free to try other methods.
Tolerance: This is the "breathing room" required by the detection algorithm. The intersecting SMAs are very close to each other, but not at a precise point. This setting is the number of bars whose intersecting SMAs are considered to belong to the same FP. The lower the number, the more stringent it is. In the case of 64x128, the tolerance can be set to "1" since there is only one intersection. In the case of 16x32x64x128, if you use setting "1", you may not see any FP.
Below is an example of a bearish FP where the guessed target price may still be tradeable because the current price has not exceeded it yet.
Some more tips:
1. Notice the fractal channel you see in the background.
2. Pay attention to SMA(128).
3. Trade in the direction of SMA(128).
4. Perhaps it would be better to attach the indi to the chart twice - once with 64x128 and another with 16x128, each time using a "tolerance" of 1.
Don't force it - if the candidate setup isn't obvious and you feel compelled to ask @parisboy whether to trade, then that's your clue not to trade. When you understand this algorithm, you won't need to ask questions. If you feel the need to ask questions, it probably means you don't have your head straight yet. I think this is a highly discretionary strategy. The indicator I provide is just a tool - it cannot guide your hand to the "Buy/Sell" button. A tool is only as good as the craftsman who masters it.
############################################################################
Update: 2022-03-24 (taken from post #136)
This is a new indicator - R4M-GuppyPoints-OnChart. It is a new combination that combines the ideas behind Focus with Daryl Guppy's GMMA (Guppy Multiple Moving Average). The results are similar to FocalPoints, and while it may piss some people off, I actually think they're better. I'll explain why below...
GuppyPoints lacks the rich history and theory of FocalPoints, although it does have some similarities. As far as I know, FocalPoints relies on multiple SMA lines that differ by powers of two, while GuppyPoints relies on multiple EMA lines whose periods don't follow any specific pattern. I suspect they were selected through empirical observation—i.e., trial and error. GuppyPoints uses two sets of EMA lines - long and short. The period of the long group is 30, 35, 40, 45, 50, 60, and the period of the short group is 3, 7, 10, 12, 15. Plus, there's no backshift - which is a YUUUUGE benefit. Therefore, there is no extrapolation or expansion, since the line reflects the live data up to the current bar (Bar[0]). Additionally, from a programming perspective, the rules for detecting intersections are much simpler and do not require Tolerance or Intersection Type settings. All intersections are equal.
I'm not advocating using GuppyPoints instead of FocalPoints. I'm just sharing an observation - feel free to interpret it as you wish.
I recently learned about focus from @parisboy in the PlanetX thread (https://www.forexfactory.com/thread/...tx-oscillators). @parisboy is a talented guy with a great sense of humor and an expert on envelopes, waves and cycles (https://www.forexfactory.com/thread/...s-waves-cycles?). I've known him for a few years and read his posts from time to time, though they usually fly over my head. My brain moves at an empirical pace, while @parisboy’s brain is more theoretical. However, during our recent involvement with the PlanetX theme, something started to get interesting. I asked a few questions, got great responses, and then more questions started coming. Then, at some point, a lightbulb went on. Focal points are very, very easy to trade, and they are colorful and visually pleasing. However, they don't work in the way you imagine - and that's the problem. If you've read the first few posts here and thought you got it, you definitely don't. You need to reread it until the light bulb goes on.
I have developed a new focus indicator which I will share and explain its use in the post below.
I should also emphasize early on that trading focus is highly discretionary - you need to use your brain's pattern recognition abilities. The Focal Point strategy is not suitable for automation - therefore, do not expect EAs to appear in the future.
Full disclosure: Focus is new to me and I have not traded them at the time of writing - I am an algorithmic trader. However, I plan to incorporate focus into my discretionary trading.
############################################################################
Update: 2022-03-23 (taken from post #88)
This article contains an updated version of the R4M-FocalPoints-OnCharts indicator. With default settings, it detects focus pretty well - although I wouldn't claim it's perfect. As I mentioned above, not all focal points are created equal – at least visually. The SMA crossover rarely occurs at exactly one point - there is always a little horizontal or vertical offset. Your brain can easily spot a color pattern and ignore its flaws, but this isn't easy to do in code without very specific predefined rules (which don't exist yet). So, I came up with my own method and it seems to work. I'm excited to continue refining the detection algorithm. However, if you encounter detection errors or miss significant FP differences, it's okay to complain - as long as you provide a graph pointing out the difference and provide enough information for me to be able to reproduce it. If I can't reproduce the problem, then I can't fix it. Also, I'm not a mind reader.
Let me explain some of the functions of this indicator. In the image below, the bullish and bearish FP detected by the indicator are marked with blue and purple circles respectively. I view focus as a pair (i.e. a pair) of bullish focus and bearish focus. I'll call them FP1 and FP2. There will be a high or a low between FP1 and FP2. Highs will occur when FP1 is bullish and FP2 is bearish; lows will occur when FP1 is bearish and FP2 is bullish. Once FP2 is formed, indi has enough information to calculate the target price (yellow line). If the current price has not reached the guessed TargetPrice, the yellow line is solid and may still be valid. However, once the current price exceeds the guessed TargetPrice, it should no longer be considered and is drawn as a dotted line.
The updated version of the indicator includes two settings: "Crossover Type" and "Tolerance". These situations occur because, as mentioned above, not all focus is created equal, as explained below:
Crossover Types: There are 11 crossover types - 16x32, 16x64, 16x128, 16x32x64, 16x32x128, 16x64x128, 16x32x64x128, 32x64, 32x128, 32x64x128, 64x128. The default is 64x128 because I think that works best. But feel free to try other methods.
Tolerance: This is the "breathing room" required by the detection algorithm. The intersecting SMAs are very close to each other, but not at a precise point. This setting is the number of bars whose intersecting SMAs are considered to belong to the same FP. The lower the number, the more stringent it is. In the case of 64x128, the tolerance can be set to "1" since there is only one intersection. In the case of 16x32x64x128, if you use setting "1", you may not see any FP.
Below is an example of a bearish FP where the guessed target price may still be tradeable because the current price has not exceeded it yet.
Some more tips:
1. Notice the fractal channel you see in the background.
2. Pay attention to SMA(128).
3. Trade in the direction of SMA(128).
4. Perhaps it would be better to attach the indi to the chart twice - once with 64x128 and another with 16x128, each time using a "tolerance" of 1.
Don't force it - if the candidate setup isn't obvious and you feel compelled to ask @parisboy whether to trade, then that's your clue not to trade. When you understand this algorithm, you won't need to ask questions. If you feel the need to ask questions, it probably means you don't have your head straight yet. I think this is a highly discretionary strategy. The indicator I provide is just a tool - it cannot guide your hand to the "Buy/Sell" button. A tool is only as good as the craftsman who masters it.
############################################################################
Update: 2022-03-24 (taken from post #136)
This is a new indicator - R4M-GuppyPoints-OnChart. It is a new combination that combines the ideas behind Focus with Daryl Guppy's GMMA (Guppy Multiple Moving Average). The results are similar to FocalPoints, and while it may piss some people off, I actually think they're better. I'll explain why below...
GuppyPoints lacks the rich history and theory of FocalPoints, although it does have some similarities. As far as I know, FocalPoints relies on multiple SMA lines that differ by powers of two, while GuppyPoints relies on multiple EMA lines whose periods don't follow any specific pattern. I suspect they were selected through empirical observation—i.e., trial and error. GuppyPoints uses two sets of EMA lines - long and short. The period of the long group is 30, 35, 40, 45, 50, 60, and the period of the short group is 3, 7, 10, 12, 15. Plus, there's no backshift - which is a YUUUUGE benefit. Therefore, there is no extrapolation or expansion, since the line reflects the live data up to the current bar (Bar[0]). Additionally, from a programming perspective, the rules for detecting intersections are much simpler and do not require Tolerance or Intersection Type settings. All intersections are equal.
I'm not advocating using GuppyPoints instead of FocalPoints. I'm just sharing an observation - feel free to interpret it as you wish.
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