How to identify and properly pay attention to weak spots in your trading system, if for example you don't know which part goes wrong (or all system). What's your approach in spotting the issues?
I have key moving averages from roughly three time frames (short-term, intermediate, and longer-term) which, in concert with their corresponding moving average envelopes, inform me as to what is happening at all times. For example, looking at AUDUSD from a monthly standpoint, I anticipated a reversal north, but the shorter-term trend conveyed that this was not happening, which was then confirmed by my longer-term trend lines as well. So I ended up selling the pair after being stopped out, as I indicated I would do in this screenshot I posted at another website… I exited the position early to lock in profits when the exchange rate began wavering, but had I remained in the trade, my original take-profit target would have eventually been hit after all... Five hours later, all of my trend lines suggested that USDJPY would support an intraday long position, so I posted this idea on the same website, as the image below shows. But after climbing a dozen pips of so, the short-term trend began to roll over, so I adjusted my take-profit target and stop loss accordingly to lock in a gain while I had the chance (a bird in the hand is better than two in the bush) which is why the above record indicates that my take-profit target was hit. Others on this Forum will swear I don’t have the slightest idea what I’m talking about—but from my point of view, the key to whatever success I’m able to realize is in selecting the best moving averages for interpreting what is genuinely going on with price action.
My little foray into the arena of swing trading has brought me all the way back down to trading off one-minute charts once more. All of my established settings remain the same. However, I added a simple moving average envelope at the one-minute level that I was not using previously. Though I have come full circle by again rejecting the option of engaging in anything other than scalping and intraday day trading, it was not all for naught. The experience opened my eyes to a realm of shorter-term price ranges I did not recognize previously that add clarity to the opportunities available when trading within this lower timeframe and a level of precision and certainty even greater than what I was enjoying before. I also now have a clearer view of the bigger picture, even while trading in what is kind of a minute environment by comparison.
I have combined the best elements from the sixty-minute and one-minute chart setups on a five-minute chart so I can hopefully spend less time flipping back and forth between the two extremes. If my skill at implementing the Numerical Price Prediction system is truly progressing as it appears to be, the days in which my average losses dwarfed my average profits might eventually become a distant memory. Instructions for use of 5-Minute Chart: The Red SMA (G) and Royal Blue SMA (H) convey the overall general intraday direction of price, with the Light Coral SMA (J) being the slightly lagging derivative of a moving average from the one-hour chart setup. The Black SMA (K) is more reflective of the day-to-day trend with its corresponding moving average envelope at X.XX% deviation approximating the typical daily price range. The core intraday trend (i.e., the price magnet) is represented by the Indigo SMAs (E) through (F). It also advises as to when one must exit a trade that appears to be going awry—when the situation has reached the point where it makes no sense to remain in the trade any longer. It is questionable as to whether the 2pt white SMAs (C) and (D) are even necessary, but their corresponding SMA Envelope at X.XX% deviation is used in conjunction with the SSSSSSSSSSSSSSS indicator along with SMA (A) and SMA (B) to identify precise entry levels as suggested by what is viewed as the absolute shortest trend line that is to be trusted. SMA Envelope (XXXX) at X.XX% deviation is the weekly price range and SMA (YYYY) comes as close as possible to tracking the weekly trend??? (It’s derived from SMA (WWW) on the one-hour chart, so technically, it should be the ZZZZ-period SMA.)
Note to Self: Your daily success rate can be very high, but only when and if you manage your positions closely.
Numerical Price Prediction uses four simple moving averages, whose parameters I believe are at this point set in stone, to interpret price action. The settings as they now stand are to all appearances as finely tuned as I’m likely to ever get them in terms of accurately conveying trend direction in multiple timeframes with maximum precision. Yet and still, I somehow found myself occasionally making incorrect judgments yesterday when forecasting the relatively short-term destinations of exchanged rates based on these moving averages. In looking for solutions to address the problem, I ended up returning to what I call “dynamic support and resistance envelopes.” By employing two modifications of the original indicator and using them in concert with the original indicator itself, I found I had my answer, making only a single wrong judgment after employing their use. I also found that these new envelopes rendered traditional simple moving average envelopes little more than a distraction, so I deleted the latter from my charts. (The four simple moving averages I use remain the same.) Instead of these “scalping envelopes” creating the wavelike indicators I would have expected, their appearance was, to me, more reminiscent of snakes. The innermost envelope tracks the fluctuating short-term waves, reversals, and price direction. The bold intermediate envelope tracks reversals and price direction from a slightly broader and longer-term viewpoint. The outer indicator—my original dynamic support and resistance envelope—identifies potential entry levels and take-profit targets. I believe this strategy is actually more profitable than a buy-and-hold approach in that entry levels are almost always behind take-profit levels, so that rather than lose money, my gains are instead partially duplicated.
I am too busy with a couple of opportunities I do not wish to forgo (and might possibly continue to be so for quite some time) to manage/monitor my trades. So out of necessity, I’ve had to once again try to adapt Numerical Price Prediction (NPP) to a longer time frame. It’s taken me about three days to work things out, but I’m hoping I might have done it successfully this time… On average, I’m anticipating it will mean being “stuck” in trades anywhere from 5 to 8 hours up to a day or even more (instead of a few minutes, or a couple of hours of the most). Even worse, it will require breaking a rule I have abided by for about the last five years or more, which is to never try to anticipate what the market is going to do. It is by interpreting what is going on at the moment, and nothing more, that I finally began to trade profitably. Nonetheless, necessity demands that I test whether or not NPP can equip me to predict beyond the immediate future and still maintain a success rate north of 80%. This strategy will be simple, but that will be of little comfort if is not also correct. I will primarily focus on entering trades when the daily and four-hour trends are aligned. If an asset is not trending day-to-day, as is currently the case with AUDUSD, I will simply trade reversals in the four-hour trend. If both trend lines are range bound (i.e. GBDUSD), I will try to enter positions as price bounces off dynamic support or resistance—and therein is the key. This strategy will only be successful if my trailing/dynamic support/resistance envelope indicators provide me with valid levels where the statistical probability of a given exchange rate being rejected (as suggested by historical data) truly is as high as the odds would seem to suggest...
EURGBP has been climbing ever since the middle of April. So I hope I am correct in interpreting its movements to suggest that it is now about ready to resume its climb higher rather than fall below its most recent support level somewhere around 0.8900.