Chart Basics (Trends)
Take profit and stop loss are also broker side thus protecting the account if the VPS shuts down or if the internet connection is lost.
Types of Trend
Figure 3 is an example of an uptrend. For this to remain an uptrend, each successive low must not fall below the previous lowest point or the trend, if it does, it is deemed a reversal. There are three types of trend: Some chartists consider that a sideways trend is actually not a trend on its own, but a lack of a well-defined trend in either direction.
Along with these three trend directions, there are three trend classifications that have to do with time duration in which the trend is taking place. A trend of any direction can be classified as either a long-term trend, an intermediate trend or a short-term trend. For forex trading, a long-term trend is composed of several intermediate trends. The short-term trends are components of both major and intermediate trends. Trendlines represent a charting technique, which a line is added to represent the trend in a currency pair.
Drawing a trendline is as simple as drawing a straight line that follows a general trend. Trendlines can also be used in identifying trend reversals. As you can see in Figure 5, an upward trendline is drawn at the lows of an upward trend.
Notice how the price is propped up by this level of support. You can now see how this trendline can be used by traders to estimate the point at which a currency pair will begin moving upwards.
Similarly, a downward trendline is drawn at the highs of the downward trend. This will indicate the resistance level that a currency pair experiences when price moves from a low to a high.
It is important to be able to understand and identify trends so that you can trade and profit from the general direction in which a currency pair is heading rather than lose money by acting against them. Now that you know a little about candlestick charts and trend, we can introduce you to one of the most popular chart patterns: It lurks in the market, patiently waiting for its trading time and it silently weaves a channel out of several Bollinger bands and some other arcane wizardry… When its trading session arrives, signals are calculated based on the current channel and the trigger is pulled one way or the other; pretty much like many other scalpers, the major difference being that the whole shebang comes out rather profitable.
As security measures, Forex Real Profit EA has some basic built-in news avoidance in the form of hardcoded future dates with news releases of major importance and it also has the aforementioned trend filter that is supposed to weed out trades against the underlying trend. This gives a calculated risk: However, most of the time, the EA will close its positions a lot before they reach the stop loss if the market is going against it, resulting in a risk: The author recommends running it on an ECN broker and for good reason.
There seems to be a trend in this sense: I have to confess: Speaking of which, there are two live accounts featured there and I am going to take the liberty to add their widgets here. If you want to experiment with optimization, you have everything you need: You can, of course, change the lot size manually or configure a risk and enable money management.
By default, the EA set files are configured with risk 3, which is a rather sensible value that I will use on the live forward test account. If you enable this setting, the EA will not attempt to open positions that would hedge existing trades controlled by other EAs. The last of the interesting parameters is a setting for the account free margin protection. This configures a threshold and Forex Real Profit EA will not open any additional trades if margin usage gets there.
I imagine this setting can get really handy with 1: To this end, two set files with different magic numbers are supplied for each pair. Naturally, I ran into some difficulties with backtesting this one because of the whole DST thing. I ran some 10 year backtests with the GMT setting file to get a vague first impression.
Call me Doubting Thomas if you will, but I did not stop there: Be prepared to add a lot of wear and tear to your mousewheel while scrolling down through this article. Just as a note, due to the large amount of backtests in this article, I will refrain from commenting each of them individually.
Seeing the charts next to each other like that, it quickly becomes apparent that the interval performs way better than , with the small exception of GBPCHF where it brought a little less profit. However, that exception just goes to confirm the rule: The drawdown was very low in all backtests, but it can be seen that everywhere except the GBPCHF backtests again the relative drawdown resulted from running Forex Real Profit EA on the GMT interval is higher than the drawdown on the interval.
The maximum observed was 7. So, to be able to properly do this, I proceeded to add DST capabilities to the script that exports the FXT files, resulting in an update that is now available for download on the tick data page. Please note that I used the normalized maximum spread, not the average, so the tests running with fixed spread and commission are really some kind of a worst case scenario.
In addition to the backtests with commission and fixed spread, I also ran the same backtests with the GO Markets average session spreads and without commission to see what the difference would be between ECN and non-ECN.
The first thing that I looked for and confirmed is that the GMT backtests are indeed yielding much better results than their GMT counterparts.