Linear Regression System | Foreign exchange indicator download- MT4/MT5 resources
Let me start by saying that I have been trading Forex for about 9 years now and I have tried everything! I've been making ends meet for a long time. I guess it's better than losing money, but like I said, for a long time, my trades didn't go up more than 30% or 30%. It's been too long, I've spent too much time here looking at forums. I don't contribute much, but you will occasionally find my username on these forums. I suspect that some of these readers may be thinking the same thing as me, and no doubt this has been said before.
I have realized that the only thing I really want to do is strictly follow my rules, because if I do that, I will know that Forex can be beat and my system is profitable. How do you know unless you follow the rules, and 9 years of experience tells me that following the rules is always not as easy as it sounds!
I developed a system that I thought had clear advantages and looked profitable. I figured if I exposed myself I'd be under more pressure to strictly follow my rules, and I honestly believe there's money to be made in this system and I want to share it.
The system is simple and uses only two indicators. The take profit rule requires a risk/reward of 1:2, and my backtesting shows it has a win rate of over 50%.
The first indicator I used was a linear regression channel set up in the following way.
Make MT4 charts as small as possible. Now zoom in twice and set the linear regression channel from the left side of the screen to the right side. Make sure any platform toolbars on the left, such as Market Watch or Navigator, are closed. You want the channel to extend across the entire screen. So on a 4 hour chart you will see just under 400 bars or candlesticks or about 2 months worth of data.
The regression channel is our trend filter. As prices rise, they change along with the chart. When you examine the chart, you will rescale the channel to extend forward to the current price and then rescale the back end to the back end of the chart. This will provide you with the latest trend direction determination. A set of completely flat channel lines is a clear sign that the market is flat, at least over the past 60 days.
At what point do you decide that you can accept the perspective of the channel to determine trend decisions, one way or the other, is really the only discretionary part of the system. Generally speaking, the steeper the angle of the channel, the better the opportunity for price to follow in your direction.
The second indicator is an entry trigger and involves the Stochastic Oscillator set to 28, 8, 8. In short, if the trend direction is up, then the entry trigger is when Stochastic crosses up below the 20 level, I mean below the Stochastic line or the indicator signal line. If the cross rises close to the 20 level, or the 80 level for selling, then I would consider it a valid signal. These are my rules. This is a legitimate trigger. You have to have some trigger to get in. I've seen this work well and got into it early. As opposed to shorts.
These entries should be able to create the edge that the market requires.
Money management. I only trade the 4 hour chart. As far as stops go, I find that the "last swing point" is often taken off, but just enough. There is no doubt that the big banks are accumulating and erasing near-round-number stops, swing lows and highs, etc. I always want good risk/reward because trying to win too often can kill your nerves and your account. I have determined and am testing that a 100 pip stop loss will allow you to make 200 pips in profit at the rate you need to make a profit. The 100 pips on the 4 hour chart are wide enough to avoid a normal stop search and allow price to move in the direction of the trend towards your price target. You'll find that it usually moves away from the last swing point that could be a potential "big money" target. It seems so. When I reach 50% profit, I move my stop loss to the breakeven point.
I've backtested on a lot of pairs and the following seem to be the best. Backtesting is not easy because you have to adjust your funnel as you go.
I trade EUR/USD, GBP/USD, AUD/USD, GBPJPY, AUDJPY, CADJPY, GBPCAD, AUDCAD. I use a 3% trade rate on each trade, but I highly recommend lowering your risk. I often see 6 or more currency pairs open at the same time, which exposes me to potentially greater risk than recommended.
I don't have any stats, percentages, etc. It's very simple. You may find various improvements associated with it, but remember that it is designed to provide a certain entry advantage, as well as more to gain than to lose with a good RR. That's all you really need in this market. The rest is psychology, good luck!
I don't have extensive experience with the system when I post this. The purpose of my post is to say that this simple manual system should be profitable based solely on its design principles, otherwise the market may just let you break even!
Below are some screenshots of current transactions.
I have realized that the only thing I really want to do is strictly follow my rules, because if I do that, I will know that Forex can be beat and my system is profitable. How do you know unless you follow the rules, and 9 years of experience tells me that following the rules is always not as easy as it sounds!
I developed a system that I thought had clear advantages and looked profitable. I figured if I exposed myself I'd be under more pressure to strictly follow my rules, and I honestly believe there's money to be made in this system and I want to share it.
The system is simple and uses only two indicators. The take profit rule requires a risk/reward of 1:2, and my backtesting shows it has a win rate of over 50%.
The first indicator I used was a linear regression channel set up in the following way.
Make MT4 charts as small as possible. Now zoom in twice and set the linear regression channel from the left side of the screen to the right side. Make sure any platform toolbars on the left, such as Market Watch or Navigator, are closed. You want the channel to extend across the entire screen. So on a 4 hour chart you will see just under 400 bars or candlesticks or about 2 months worth of data.
The regression channel is our trend filter. As prices rise, they change along with the chart. When you examine the chart, you will rescale the channel to extend forward to the current price and then rescale the back end to the back end of the chart. This will provide you with the latest trend direction determination. A set of completely flat channel lines is a clear sign that the market is flat, at least over the past 60 days.
At what point do you decide that you can accept the perspective of the channel to determine trend decisions, one way or the other, is really the only discretionary part of the system. Generally speaking, the steeper the angle of the channel, the better the opportunity for price to follow in your direction.
The second indicator is an entry trigger and involves the Stochastic Oscillator set to 28, 8, 8. In short, if the trend direction is up, then the entry trigger is when Stochastic crosses up below the 20 level, I mean below the Stochastic line or the indicator signal line. If the cross rises close to the 20 level, or the 80 level for selling, then I would consider it a valid signal. These are my rules. This is a legitimate trigger. You have to have some trigger to get in. I've seen this work well and got into it early. As opposed to shorts.
These entries should be able to create the edge that the market requires.
Money management. I only trade the 4 hour chart. As far as stops go, I find that the "last swing point" is often taken off, but just enough. There is no doubt that the big banks are accumulating and erasing near-round-number stops, swing lows and highs, etc. I always want good risk/reward because trying to win too often can kill your nerves and your account. I have determined and am testing that a 100 pip stop loss will allow you to make 200 pips in profit at the rate you need to make a profit. The 100 pips on the 4 hour chart are wide enough to avoid a normal stop search and allow price to move in the direction of the trend towards your price target. You'll find that it usually moves away from the last swing point that could be a potential "big money" target. It seems so. When I reach 50% profit, I move my stop loss to the breakeven point.
I've backtested on a lot of pairs and the following seem to be the best. Backtesting is not easy because you have to adjust your funnel as you go.
I trade EUR/USD, GBP/USD, AUD/USD, GBPJPY, AUDJPY, CADJPY, GBPCAD, AUDCAD. I use a 3% trade rate on each trade, but I highly recommend lowering your risk. I often see 6 or more currency pairs open at the same time, which exposes me to potentially greater risk than recommended.
I don't have any stats, percentages, etc. It's very simple. You may find various improvements associated with it, but remember that it is designed to provide a certain entry advantage, as well as more to gain than to lose with a good RR. That's all you really need in this market. The rest is psychology, good luck!
I don't have extensive experience with the system when I post this. The purpose of my post is to say that this simple manual system should be profitable based solely on its design principles, otherwise the market may just let you break even!
Below are some screenshots of current transactions.
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