Today's Signals 10/9/14

Current positions:
Short EUR/JPY 137.46 or higher
Short GBP/JPY 174.37
Buy USD/CHF .9508 or lower
Short GBP/USD 1.6161 or higher
Buy USD/JPY 107.99 or lower
Buy USD/CAD 1.1116 or lower

Closed Positions:
Buy EUR/AUD 1.4344 +42
Short EUR/USD 1.2613 -72
Short XAU/USD 1204.34 -86
Long USD/CHF .9614 -63
Long USD/CAD 1.1167 stopped breakeven
Short AUD/USD .8792 stopped breakeven
Short GBP/USD 1.6059 stopped breakeven


*Stops are based on the previous swing high or low prior to the signal and require an hourly close above or below this swing high or low; they are not based on a strict price.

Daily Signals 10/7/14

Current Positions:

Short EUR/USD 1.2613 or higher
Short GBP/USD 1.6039 or higher
Short AUD/USD .8738 or higher
Short XAU/USD 1204.34 or higher
Long USD/CHF .9614 or lower

Closed Positions:

Buy EUR/AUD 1.4400 stopped breakeven

*Stops are based on the previous swing high or low prior to the signal and require an hourly close above or below this swing high or low; they are not based on a strict price.

Today's Signals 10/6/14

Current Positions:
Buy EUR/AUD 1.4400 or lower

Closed Positions:
Buy USD/CAD 1.1107 +131
Short AUD/USD .8772 +78
Buy EUR/AUD 1.4418 stopped breakeven
Short EUR/USD +111
Short XAU/USD 1215.08 +218

*Stops are based on the previous swing high or low prior to the signal and require an hourly close above or below this swing high or low; they are not based on a strict price.

Today's Signals 10/2/14

New Positions:

Short EUR/USD 1.2629 or higher
Buy USD/CAD 1.1107 or lower
Short XAU/USD 1215.08 or higher
Short AUD/USD .8772 or higher
Buy EUR/AUD 1.4418 or lower

*Stops are based on the previous swing high or low prior to the signal and require an hourly close above or below this swing high or low; they are not based on a strict price.

Today's Signals 9/30/14

Current Positions:

Short EUR/JPY 138.82 +53 stop to breakeven

Closed Positions:
Buy GBP/USD 1.6247 stopped breakeven

New Signals 9/29/14

New Positions:

Buy GBP/USD 1.6247 or lower
Short EUR/JPY 138.82 or higher

Closed Positions:

Buy GBP/JPY 177.79 stopped breakeven
Buy EUR/JPY 138.94 stopped breakeven
Short XAU/USD 1221.67 +28

Today's Signals 9/23/14

Current Positions:

Short Eur/USD 1.2856 or higher
Short AUD/CAD .9797 or higher
Short XAU/USD 1227.72 or higher

Exited the following trades in the past 24 hours:

Long USD/CAD 1.0967 +56
Long EUR/AUD 1.4363+89
Long GBP/USD 1.6331 +27
Long EUR/JPY 140.08 -40






*Stops are always based on the previous swing high or low prior to the signal and require an hourly close above or below this swing high or low; they are not based on a strict price.

Weekly Meantrades

The past few weeks have been nothing short of frustrating. Automation with constant range bars on Metatrader 4 seems futile. With a single disconnect from the brokers server, the constant range bars are immediately scrambled and thus any reversal patterns are suspect. Somehow this had me thinking about how I can get this very decent system called meantrades running without a hitch. I came up with a version which uses 240 minute and 60 minute bars.

The only major difference (there is one minor variation however) between this system and the constant range bars version is that it is restricted to only 1 profitable trade a week. "Profitable trade" as in it will enter up to 2 unprofitable trades in the same direction per week. This is similar to the intraday meantrades which only takes two consecutive unprofitable intra-day trades in the same direction.

The results thus far are quite respectable. Considering the time invested versus return on capital, the weekly version of meantrades is a better deal for smoothing out the all important equity curve.

I realize these numbers probably seem absurdly high and I am just as skeptical as anyone else would be. But it's been backtested for several years and all trades are based on a closed bar basis so it is pretty hard to fudge the results.

Currently the XAU/USD weekly version of meantrades is running at 75% for the year with a total of 698 pips employing a trailing stop. With a fixed 100 pip target it's coming in at 871 pips. Let's say we are in June already, since we cannot take another trade until next week, that is a very tough return to beat of 145 pips per month trading no more than 1 winning trade per week.

The results for the EUR/USD market are also quite respectable. Coming in at 69% for the year trading only once a week the supertrend exit works out to 963 pips thus far while a fixed exit of 63 pips has yielded a return of 335 pips. Winning percentage is based on a total of 26 trades so far this year.

I initially set out on this discovery using the AUD/USD. My thinking was that somehow if I ever got around to getting meantrades automated I should probably try it out first on some less volatile pairs. I have never traded AUD/USD seriously as it seems rather dull market. In fact it's almost as profitable as any other market I looked at. The results came in as follows: 70% winners out of 27 trades taken. Most impressive are the drawdowns to achieve profitability. The market just seems to trend better than others when applying the lens of meantrades. Average losing trade was 67 pips while the average winning trade was 55 pips. This is the only serious issue for me trading less frequently. The average winner is normally larger than the average loser in a robust system. However when you are applying a trailing stop methodology for exits, the out sized returns of just a handful (or even a single yearly trade) can outpace the averages quite easily. As the Black Swan movement has attested to, the market does not reward those who seek the average return on equity as a benchmark, it obliterates them every few years with massive crashes and bubbles. I'm not a fund manager and I'm not seeking an average return so I will keep doing what I'm doing until something comes along which makes more sense.

For now, meantrades with trailing stops seems like the best way for me to trade these volatile and incredibly profitable markets for the foreseeable future.

Some of the inner workings for setting up the weekly meantrades method:

• The ratio levels need to be set off of the first 4 hour bar of the week or the second bar. This is slightly subjective in that I prefer to use the smaller of these two bars, unless it is just too small a range. In that case I will use the first 4 hour bar regardless of how large it is.

• Stops are usually an hourly close beyond the swing high of the trade entry. However in some cases this bar closes inside the Keltner bands (even though it is outside the highest high or lowest low for the trade setup). It is best not to take the loss until price has also violated the Keltner bands. There have been many cases where price makes a minor new high or low inside the Keltner bands only to reverse immediately. 

Here is the only trade currently open with Weekly meantrades. An EUR/USD short currently sitting at +110pips. Stops are already at break even since price has already touched the opposite Keltner band from where the trade originated (as per the original rules of meantrades).

Nesting

There are quirks to each persons trading which create undefinable edges. In my case I think there is a very subtle pattern in the signals created from meantrades setups. I define this as nesting.

No, not a birds nest. Although a tasty and very expensive Asian delicacy, it is not what I am referring to.

When I think of a meantrades setup, the idea of a coiled spring comes to mind. The idea of a rapidly expanded spring which snaps into action and has no control is a beautiful image once I am in a trade, as long as the spring is heading in its intended direction of course.

Specifically the nested signal is when price violates a keltner band and then returns for a reversal setup, however it has not yet closed below the median keltner line (which is actually just a 20 period sma). This type of setup has always appealed to me a very deep level but I never understood why.

After some consideration I realize now it creates a very subtle edge in my signals. It allows the signal to be created as close to the swing high level as possible.

Take two hypothetical signal examples from the meantrades setup, one with a nesting price point and one without.

As you can see from the first scenario, the ideal stop level is further away than preferred. By taking a trade without a nested price bar between the outer keltner band and median line, risk is increased. Over time this will eat away at profits and create doubt about the system, we want to avoid this at all costs. Even though you can easily scan through the charts and find quite a few huge winning trades which did not nest, it is the risk tolerance of each account which should be kept in mind first and foremost.

In the second photo we see an ideal nesting scenario, price retraces, tests the lows and then carries higher to successful target completion. Trades like this are why I am so confident in the potential for meantrades to remain robust and kind well into the future. All you need is momentum and retracements and the profits will come consistently week after week.

Meantrades OHLC a deeper understanding...

My objective with altering the Support and Resistance levels to OHLC with Meantrades is to refine an already useful concept. The less trade points we have an opportunity to trade, the more likely we are to execute according to plan. Of course the assumed premise is that the system has a positive expectancy.

Meantrades, regardless of how the support and resistance lines are formed, no matter what the time frame, has a positive expectancy. The only question in my mind has always been drawdowns. OHLC seems to create a more significant way to enter the market and reduce risk.

Yesterday there was 3 trades in 4 markets I follow. EURUSD went for a loss, Oil had a break even stop, as did YM index. With intervention both Oil went for 40 points as did the YM. The EURUSD loss was -37 pips. In the previous stop method of meantrades, the EURUSD trade would still be short and sitting on a drawdown of about 150 pips this morning. Nothing to panic about, but with volatility at an all time high, there will come a day in the not too distant future where the maximum negative excursion will be so large, no account size can handle it. I hate hard stops, but I hate margin calls even more.

OHLC will always be used with modified price bars. Originally I saw the value of constant range bars with their ability to remain in trends longer. These days, it is more about reducing risk. If you were to compare a stop loss on a time based price candle, there is no way to know truly how large it will get before its close. Fast markets create larger candles. With constant range bars, fast candles are always the same size. Compare these two losing trades to see what I mean:

I am using the 15 minute time frame in comparison. There is no exact way to compare the two charts. In my eyes 15 minutes seems to be the smallest time frame you can trade without seeing false signals all over the place. But then, some people see the market crystal clear on 5 minute charts. It doesn't really matter to me anymore, CRBs have eliminated any lack of clarity for me in the markets.

Here we can see with CRBs we reduced the stop loss not only in amount of pips but we were able to see that the market had violated its stop level much earlier than with the conventional time based chart.




To recap what Meantrades actually comprises:

• Keltner bands: 

We must have a Keltner band touch of the outer band in the opposite direction of the trend. We don't want to be trading support and resistance without a healthy amount of momentum in either direction. If a market is simply climbing the wall of worry, there is no place to be looking for reversals. It is much better to be with the trend at that point as it will eventually climax and present a better reversal trade opportunity at some later point.

2 possible Keltner band setups:

1. Market has a strong breakout outside the Keltner bands and then reverses.

2. Market trades outside the Keltner but has no thrust higher. This is a slightly lower percentage scenario than #1 but nonetheless still a statistically significant trade setup. Often this trade can turn into a creeping market where it never has any thrust higher but still takes out stops.