Mechanical trend trading | Foreign exchange EA download - MT4/MT5 resources
Hi
I have some questions about this, so I've been looking for a mechanical way to trade trends using only trend lines.
It's true when they say put 10 chartists in a room and give them a chart and ask them to draw trend lines and you'll get 10 different answers.
This has always been subjective to me, so I've been thinking about writing a set of rules that, if followed, will give you a mechanical basis for charting trends, executing trades, and selecting potential TP and SL areas
We all know higher highs and lower lows..I focus more on when to draw the line..and when to stop
Ideally, a signal should offer a risk reward of 2:1 or 3:1 when it occurs, and nothing else will be considered.
The trend line will be drawn on the hourly chart and the stop loss will be taken from the hourly chart and executed on the 5 minute chart.
If and when I go back and the trend develops, I will only limit the posting to these 2 timeframes and only show the trendline on the 1 hour chart.
I have total respect for those who draw 1 hour 4 hour weekly and monthly trend lines every day, but to me this is a no-go zone. I want my trades to react to what happened in the past hour, not last week.
I know most books look for 3 touch points, but I look for 2, but that's a mechanical way.
For short term TP it is always the last swing low...my stop loss of 2/3 is also very small.
The chart below shows the GBPJPY 1 hour first contact point which is done mechanically and rules based and is highlighted at 1. After the (1) contact, I wait for the swing low (2) and return to my trendline.
The second chart now shows our 5 minute time frame.. it shows the contact points marked on the 1 hour time frame and it shows our potential TP line also marked from the 1 hour time frame.. and our entry point at the arrow.... From this I calculated the SL and marked it on the chart. When I was happy that it had good mechanical strike rate and acceptable RR, I posted the rules.
Point A is the second short, but we would enter at the top of the peak, with very little retracement due to the retracement of the trendline for rules-based reasons. As you can see, TP at B and SL at C are mechanically made based on the 1 hour chart and calculated based on the 3:1 RR
The end of this project should see a mechanical approach, pull up any 1 hour chart, draw trend lines according to the rules, then switch to 5 minute entries, learn your SL before handing over your TP.
Paulus
I have some questions about this, so I've been looking for a mechanical way to trade trends using only trend lines.
It's true when they say put 10 chartists in a room and give them a chart and ask them to draw trend lines and you'll get 10 different answers.
This has always been subjective to me, so I've been thinking about writing a set of rules that, if followed, will give you a mechanical basis for charting trends, executing trades, and selecting potential TP and SL areas
We all know higher highs and lower lows..I focus more on when to draw the line..and when to stop
Ideally, a signal should offer a risk reward of 2:1 or 3:1 when it occurs, and nothing else will be considered.
The trend line will be drawn on the hourly chart and the stop loss will be taken from the hourly chart and executed on the 5 minute chart.
If and when I go back and the trend develops, I will only limit the posting to these 2 timeframes and only show the trendline on the 1 hour chart.
I have total respect for those who draw 1 hour 4 hour weekly and monthly trend lines every day, but to me this is a no-go zone. I want my trades to react to what happened in the past hour, not last week.
I know most books look for 3 touch points, but I look for 2, but that's a mechanical way.
For short term TP it is always the last swing low...my stop loss of 2/3 is also very small.
The chart below shows the GBPJPY 1 hour first contact point which is done mechanically and rules based and is highlighted at 1. After the (1) contact, I wait for the swing low (2) and return to my trendline.
The second chart now shows our 5 minute time frame.. it shows the contact points marked on the 1 hour time frame and it shows our potential TP line also marked from the 1 hour time frame.. and our entry point at the arrow.... From this I calculated the SL and marked it on the chart. When I was happy that it had good mechanical strike rate and acceptable RR, I posted the rules.
Point A is the second short, but we would enter at the top of the peak, with very little retracement due to the retracement of the trendline for rules-based reasons. As you can see, TP at B and SL at C are mechanically made based on the 1 hour chart and calculated based on the 3:1 RR
The end of this project should see a mechanical approach, pull up any 1 hour chart, draw trend lines according to the rules, then switch to 5 minute entries, learn your SL before handing over your TP.
Paulus
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