Trend Runner

Hello all,

I have been a lurker on this forum for more than a few years. I have decided to give back to the FX community by sharing a trading method that has worked for me, finally, after 5 years of trying. I call it Trend Runner. Before I get into it I would like to first lay down some rules for this thread.

1 - I know the method is not perfect. No method is. If you have something to say about it, please make it constructive. Back up what you are saying.

2 - If you run into any issues or want to ask something, please include a chart pic and add notes. It just makes it easier to see what you are talking about.

3 – Please do not ask me about Eas because I do not believe in them.

4 – If you do not like the method, just leave. We are all here to learn not come down on each other.

5 – Do not be shy to ask questions about the method, but please, do not fill the thread with simple questions that have been answered a million times all over the web. If you do not know what time your broker closes it's candle, figure out, how am I supposed to know.

6- If you are brand new to forex, please learn the basics. I will not answer the basics here.

7- I know that everyone has there own way of trading. I have no issue with you making this system your own, but before you start adding indicators, just try it out the way it is.

OK, now that we have that out of the way lets get started.

TREND RUNNER

Trading Type : Swing Trading

Goal : To catch mid term swings in the direction of the over all trend.

Pairs : Any and all Forex pairs, metals, oils, stocks & CFD's. I use AUD/USD, EUR/JPY, EUR/USD, GBP/JPY, GBP/USD, USD/CAD, USD/CHF & XAU/USD (GOLD).

Time Frames : 4 Hour and above is recommended. I use 4 Hour.

My broker: Oanda.

Indicators: 200 SMA (Levels 50 & -50), Support & Resistance (Barry) & Super Trend. I will include I extra tool called Signal bars Daily. It is not an indicator. You will not base trades off it. It is a MTF tool that shows you the over all strength of each TF for the pair it is on. It also has the daily open, high low pip count and current spread.

Money Management: Everyone has their own risk tolerance. Here I will explain my management. I begin the new month the same way. I begin with my current balance as displayed in my account. To that I add the margin being held by my broker for any current open trades. Finally I add the value of any secured profit on any open trades that have not yet been realized but have been secured by stoploss.
As a note, if your current trade is against you, be sure to minus the full 2% that was @ risk.

I use this value until the end of the month no matter how many wins or losses I have that month. Why you may ask? My risk is always 2% of balance per trade. But that amount changes with each trade. If I risk 2% after a win & take a loss, it will wipe out more then 2 % of the original balance amount. If I then take a trade based on the after loss balance & use 2% & it is a profitable trade, the amount will be less then I would have made had that amount been based on the original monthly amount. Get it?

Now, because the goal of this method is to catch mid term trends, we need to let the trade breath. I use a static stoploss of 100 pips for each trade on the H4 TF. The beginning of any trade is the highest level of risk you will take when you trade. The goal of trading is to minimize losses and maximize gains.

Management of your trade is important. What I do is once my trade is +30 pips to the good, I move my stop to BE +3. I do that because that will at minimum cover my interest and leave me a bit of profit should the trade go against me. After that point, for every 10 points of movement, I will add another pip to my BE. If, by the time you check, the market has moved in your direction but has come back a little, you will still add 1 pip for every 10 PIPS IT HAS MOVED IN YOUR FAVOR. For example, If the market has moved 100 pips in your favor but is now around say 60 pips, you should have a a BE +10. That way no matter what happens, you will secure 10% of the over all move. There is more below in the explanation of indicators. Please be sure to read that.

I know the above is a bit much to take in and might be a bit confusing. Here are 2 examples that might help:

Example 1:
June 1st balance = $ 9500. Current margin held by broker $1500 for trade 1 & $1500 for trade 2. Trade 1 has 125 pips secured @ a value of $2 USD a pip. Value $250. Trade 2 has 75 pips secured @ a value of $2 USD per pip. Value $150.

Add it up. 9500 + 1500 + 1500 + 250 + 150 = 12900. This amount, $12900, is going to be the basis of all trades executed during the current month. So I work that out as :

$12900 X 0.02 = $258. Now with a fixed 100 pip stop I divide 258 / 100 = $2.58. If you use MT4 for your trade execution, you will use 0.25 lots per trade. Its always better to round down then up. If, like me, you execute off Oanda FXTrade platform, you will use ( roughly) 25,800 units.

Example 2:
June 1st balance = $ 9500. Current margin held by broker $1500 for trade 1 & $1500 for trade 2. Trade 1 has 125 pips secured @ a value of $2 USD a pip. Value $250. Trade 2 has -50 pips @ a value of $2 USD per pip. Value -$100.

Add it up. 9500 + 1500 + 1500 + 250 - 200 = 12900. This amount, $12550, is going to be the basis off all trades executed during the current month. So I work that out as :

$12550 X 0.02 = $251. Now with a fixed 100 pip stop I divide 251 / 100 = $2.51. If you use MT4 for your trade execution, you will use 0.25 lots per trade. Its always better to round down then up. If, like me, you execute off of Oanda FXTrade platform, you will use ( roughly) 25,100 units.

Indicators & What They Are Used For:

200 Simple Moving Average (Levels 50 & -50) -




The 200 SMA is the most widely used and accepted Moving Average across all markets. It is especially useful in long term trading. In this method I use the 200 SMA to show the over all trend in the current TF. When price is below the line, I look for only shorts. It helps if the line is also trending down but it is not necessary. If you take a short trade because price closes under, I mean the price, not just if it spikes through, and the 200 SMA is either long or flat, the risk of the trade is higher that it will fail. That does not mean do not trade, it just means the likely hood of failure is high.

Super Trend -



This indicator was developed by Olivier Seban and later on Recoded by Jason Robinson, This indicator has the huge advantage of working on all the time frames in all markets.It is based on average true range (ATR). Blue indicates a bullish trend and red indicates a bearish trend.

Super Trend indicator moving above or below the price depending on the trend developed. Olivier Seban repositioned based on the closing day, which has the main advantage to filter false signals that may occur when the trend slows or during periods without trend. I use it as a confirmation. If overall trend is down, then I will only take trades when this indicator is red and price is below the 200 SMA.

Support & Resistance (Barry) -



This is a basic support & resistance indicator based on fractals. This indicator REPAINTS until price actually is confirmed a few candles later. This indicator is used as future stoploss levels/profit secure levels.

Your completed chart should look like this if you use the included MT4 template:



In the next post I will get into how I trade this method & add the indicators and template.

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EVERYONE PLEASE READ

The S&R levels are used for new Stops/Profit protection. Sometimes, however, they do not show up for a long while which I personally do not mind if the market is just bouncing along. However, if my trades are in deep profit, I can adjust my stops with out waiting for the S&R to show up. You can see new levels of S&R even if you do not see the indi show up. It is a money management decision. If your ok with waiting for them great, if not adjust your trades as you wish.

This thread was started for the method, not the money management. I discussed my money management to give people an idea of what & how I control the trades. I have showed this method to a few colleagues. Some of them liked my MM method, some did not. One of them uses PSARs, I believe his settings are Step 0.02, Maximum 0.2. I actually liked that one but just stuck with mine because it works. He is comfortable with that, I am comfortable with mine. My buddy uses automated Trailing Stops. Some one else moves his stops to every S&R green & red. If it brakes and closes, he moves his stop.

You guys see what I am getting at? You must be disciplined but do not be so rigid that you lose money just because a line didn't show up on your chart. Come up with a MM method that works for you. Don't use mine if you do not believe in it. Make one that works for you, use some of the ones that my colleagues use. The bottom line is, we are here to make some money, lets go make it.

I want read and see what you guys are doing, post some charts and let me know what you guys are trading and what MM method you are using.

Another quick note about creating a MM scheme.

Please go live. Even if it's just a few cents a pip. If you dont, you will find yourself in a world of trouble if you can not handle how your MM works with real money VS demo.

Take care-


-ILZ

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EVERYONE PLEASE READ

OK, it seems that people are confused. I thought I explained it well but I guess not.

When to enter check list:

PRICE CLOSE ABOVE/BELOW 200 SMA?

YES - MOVE TO NEXT QUESTION

NO - STOP

PRICE CLOSE ABOVE/BELOW SUPERTREND? BLUE FOR LONG, RED FOR SHORT?

YES - MOVE TO NEXT QUESTION

NO - STOP

This seems to be the part that most who do not get it are confused with.

IF THERE IS A ESTABLISHED S&R INFRONT OF YOUR TRADE, LONG OR SHORT, PRICE MUST CLOSE AT LEAST 30 PIPS AWAY FROM THAT ESTABLISHED S&R.

IF THERE IS A ESTABLISHED S&R INFRONT OF YOUR TRADE, LONG OR SHORT, LESS THAT 30 PIPS AWAY, PRICE MUST BREAK AND CLOSE THAT ESTABLISHED S&R BY ANY AMOUNT.

Stop Adjustment:

ONCE PRICE MOVES 30 PIPS IN YOUR FAVOR, ANYTIME DURING OR AFTER INITIAL ENTRY CANDLE, MOVE STOP LOSS TO BE +3.

FOR EVERY 10 PIPS OF TOTAL MOVEMENT, NOT JUST CURRENT PRICE, MOVE BE +1.

MY INITIAL STOP IS 100 PIPS UNLESS THERE IS AN ESTABLISHED S&R THAT IS CLOSER THAN 100 PIPS.

YOUR STOP CAN BE WHAT EVER YOU WANT.

Closing trades:

IF PRICE CLOSES ACROSS SUPERTREND. DOES NOT MATTER ID SUPERTREND CHANGES COLOR OR NOT.

IF PRICE CLOSES ACROSS 200 SMA.

IF PRICE CLOSES ACROSS S&R IN OPPOSITE DIRECTION OF CURRENT TRADE.

That is all the basics. Every other nick knack question is answered throughout the thread. If you are not going to take the time it read all the answers people & myself graciously posted, that is on you.

But its really not that hard. The system is simple. Do not complicate it.

-ILZ

Now we will start with the basic method of entry. We will also get into advanced entry and exit methods a little later.

Long positions-

I enter long when -

1- price closes above ( IMPORTANT – PRICE MUST CLOSE ABOVE NOT JUST SPIKE THROUGH) the 200 SMA. It should clear the 50 level of the 200 SMA

2- Super Trend is Blue
Short positions-

I enter short when -

1- price closes below ( IMPORTANT – PRICE MUST CLOSE BELOW NOT JUST SPIKE THROUGH) the 200 SMA. It should clear the -50 level of the 200 SMA

2- Super Trend is Red

Stoploss-

I place a initial stoploss of 100 PIPs on all trades.

Managing Trades-

If/when price moves 30 pips in my direction, I move my sl to + 3. For every 10 pips price moves for me, I add 1 pip to BE. Once a new support/resistance line is confirmed (usually within 3 candles), I move my SL to that line + 3.

My exits are when price takes me out.

That's it for the basics. Here is a screen shot with some notes on how it would work for a long. This is a cherry picked screen shot. I will talk about not so perfect trades in a future post. Also find the indicators and my template.



-ILZ

Thanks for the share, but I have the usual question of STATS! Can you please give your average stats on wins/loss, risk/reward average per trade, and any other relevant info. pairs traded.. you know, that type of thing.

jt

Yes Statistics are important,

Something that could/might improve the system is ATR , every index/security has diffrent range, its not fair to give eurdollar and eurjpy the same 100 pip stop ,eurjpy is on steriods when it move .

If someone has a better understanding of ATR ,this would really help. its just something i noticed recently, i used always put a 30pip stop and 90 pip target, but I realized on the jpy pairs I would either get stopped out real quick or hit target real quick whereas on something like aususd it would take ages.

I personally am struggling to figure out how to read ATr on JPY pairs on mt4 . I met a seasoned long term trader who told me ,its totally unfair to give all trades equidistance stops and targets.

Swing trading is a forex trading strategy where a trading position is traded for medium or long period or attempt to catch bigger pips from bigger period. You have a good swing trading strategy I think. I can learn about swing trading system more from your trading system. Thanks for your shared.

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best indicators

Looks like your S/R is fractal based. So if resistance appears and the high of the next candle is lower @ close it's confirmed. Vice versa for support.

Hey juicyt,

The win/loss ratio is approx 85% over the last 24 months. Full disclosure, a "win" by my standard is ANY TRADE THAT ENDS IN PROFIT. So even if I get 1 pip to the good it is a win. In actuality a win/loss ratio is not a good way to judge a system. With the risk/reward and MY static stop and MY money management method, the percent of trades that achieve a R/R% = 1:1 or < is approx 45% over all pairs traded. The other 65% of the trades fall anywhere in between.

The % of trades the end in a loss over all is roughly 15%. Of those > 25% actually hit the full 2% risk amount (100 pips). Again these numbers are for the last 24 months.

The pairs I trade ( as mentioned above) are currently AUD/USD, EUR/JPY, EUR/USD, GBP/JPY, GBP/USD, USD/CAD, USD/CHF & XAU/USD (GOLD) through Oanda.

This method, in general, takes many small wins ( protecting capital) fair amount of double digit wins, a few large wins ( amounts in excess off 200 pips) and a rare massive win ( anything over 400 pips).

On the down side the losses are always kept to 100 pips ( 2%) but do not always get that far. There will be many small to average losses in the 30 to 60 pip range. Again this is over the last 24 months.

-ILZ

Hello ashtrader,

As mentioned before you can add anything you like, but might i suggest you try it as is to get the feeling of the system down. Then add anything that makes you more comfortable. As for ATR itself, the supertrend indicator is based on the ATR. If you feel you need to see the number then by all means. The 100 pip static stop is based on MY MM method. Your MM strategy is yours. While I do agree that a static stop is not always ideal, in my case it works for me.

The JPY pairs do tend to hustle in their movements, especially the GBP/JPY, but again, the 100 pip stop has worked for me. Just as it may go against you quickly, it may also get you to BE just as quickly.

If you like and if you do not already have one, I have attached a ATR indi that is adjustable. I do not use it for this method and it is not at all part of this method, but if it helps you in any way please feel free to use it.

-ILZ

hey pindang,

Thanks for the kind words. I hope it helps someone the way it has helped me. It is a lot less stressful checking the market a few times a day then sitting in front of my PC all day. I got into trading to help free me not become a slave to my PC. But then again, that's just me. Some people like the action. I like to get my action in other ways....

-ILZ

Hey Anusragger,

Yes as mentioned above, the Support And Resistance (Barry) is based on fractals and it REAPINTS. That is why I mentioned that I wait for it to be confirmed before I move my stop.

-ILZ

Now that we have the basics out of the way, let us get to the nitty gritty of how to trade this method. Lets do it by examples.

Scenario 1 -



As you see, price has moved from below the 200 SMA & closed above the 200 SMA. Supertrend is Blue, price broke and closed above an established resistance point. That is what I like to see. This is a perfect start to a long.

Scenario 2

Price has been above/below the 200 SMA I took a trade but now I'm out, how do I get back in?



If price is bouncing around between S/R, I wait for it to break and close above/below the current established S/R


Scenario 3

What if price is above SMA but below the Supertrend & Supertrend is Blue or vice versa? In this situation, I would wait until price closed above a blue supertrend before I take the trade. In the picture below we also have a established resistance point. Before I take this trade, price would need to close above both the supertrend and the resistance point.



Scenario 4

In this pic, we see why I like to wait for a break and close of s/r line. If the market is just ranging, its no good to me. This is a 3 week range.




These are the most common scenarios I have encountered. If you come up with any more, please include a pic shot and a brief explanation of what the problem is.

-ILZ

Thanks so much for sharing the system, indicators and template. Can you give an idea of the % you made trading this system over the last 24 months using your money management technique?

I have done some visual backtesting on EU from Jan 13, I spot a few winning trades but also a few problem trades.

Hey Ash,
You can use ATR to calculate a different stop for different pairs since they move in different amounts. You need to decide on the correct multiplier but when you get the number that you like, you can continue to use it. For example, put any ATR indicator on your chart. You will notice the # changes for each timeframe. So if you like to trade from the daily timeframe and the ATR shows 80, then you could use 160 for your stop (80x2=160). If it shows 120, then use 240 for the stop (120x2=240). If you find that is too small, take the ATR x 2.5 rather than 2 so if ATR is 80 then stop is 200 (80x2.5=200). If you trade more from 4 HR charts and ATR shows 30, then stop would be 60 (30x2=60). Your targets & stops should be placed from the same timeframe so if you use stop based on 4 HR chart, then pick target from 4 HR chart.

Since eurjpy is more volatile than eurusd, the ATR for ej might show 120 on daily where eu might show 80 so you can use the same multiplier & get a different stop based on how much each pair moves. EJ would have 240 pt. stop & EU would have 160 pt. stop. These are just examples so you need to decide on the best multiplier.

I would also suggest that after you get a stop based on the ATR & multiplier, you should check the chart to see how close it is to a swingpoint & you might want to move it a bit if it makes sense to get it just outside the nearest swingpoint or some support/resistance area.

Hope that helps.

hey pasopvirpo,

I am glad to share. That is what this site is for. Now, as for the visual back test you conducted, let us be realistic here. You only looked at less than 3 months on 1 pair. On the EUR/USD during the time you indicated I captured around 330 pips. This system is designed to take advantage of a portfolio of pairs. That way big swings will be magnified in the two currencies that move the most, USD & JPY. With my MM method that was a return of 6.6% (Compounding profits not included).

The over all average quarterly return, which is how I calculate it, over the last 8 quarters has been roughly 35% (Compounding profits not included).

The return for Q1 2013 is 67.3% (Compounding profits not included). The majority from the good mini trends of JPY pairs over the last quarter.

For the current month, April, my current realized return is about 35% all thanks to the massive moves of the JPY because of BOJ announcement of QE.

My current Open trades -

Long GBP/USD @ 1.52784. Current stop 1.54150. +136.6 secured

Short USD/CAD @ 1.01907. Current stop 1.01867. +4.0 secured

-ILZ

Ok,

Let us talk about exits. Apart from the nerve from the pulling the trigger on the live account, exits are the most difficult aspect of trading. In this method, people have mentioned that on more than a few occasions, I end up giving back a lot of pips for only a few. That is true. But anyone can say that when looking in hind site. When you trade live, you have no idea what is going to happen. What the market looks like in hind sight is not what it look likes live. I trade this the way that works for me and my lifestyle and still yields not to bad results. The object is to ride trends, if no trend exists then capturing a few pips in return for the opportunity to catch a trend is not a bad trade off. For me it is low maintenance and low stress.

Onward.

Exiting my trades is the most important part to me. It is also the part that creates the most doubt. The object of trading, despite what all that online hype claims, is to protect your capital while turning consistent profits. A pip gained is ALWAYS ALWAYS ALWAYS better than a pip lost. If anyone tells you different... Run... FAST.

However, when I see a trade up 150 pips and I secure 15 pips, I hate it when a few candles later I am taken out with 15 pips. But, I hate it more when I close a trade early then it moves a huge amount. FX trading is basically what I call S.W.A.G. (Scientific Wild Ass Guess). It is not so much gambling as some may lead you to believe. It is, however, known as speculation which is a fancy word for educated guessing.

So what do I do with exits. When price moves and taps my current SL, the market exits my trade for me. However there are situations where I close the trade myself.

One example is when price crosses and closes above/below the supertrend. Price is just not moving in the direction I want. I would rather get out and wait for a better signal.

Another example is if supertrend changes color. Again, trend is not moving in my direction. It is also telling me that a counter trend is developing.

Other than these 2, most times PA is what takes me out.

-ILZ

Hi Ilz, thank u for sharing your method. I am trying to organize a similar one on stocks, therefore I am very interested. I only have Supertrend and Emas, not Barry's S/R, so I normally keep an eye on basic S/Rs, like candles highs and lows and main S/R appearing on the chart.

Pls allow me to ask a question on your money management, as I have not understood what you do.

You use 100 pips as initial stop loss (ok), and when you have 30 pips in your favour you move to BE (ok), and then 1 pip up above this "winning" trailing stop every 10 more pips gained (ok)
I have not understood though what you do in between, that is: how do you move/manage your initial 100 pips stop, if the market does not give you the 30 pips. I see you do not always have 100 pips loss, so how do you avoid that?

thanks
G

Hi thanks so much, I trade a similar method, but your system just might simplfy things for me , I need to sort out money management etc

I like the attitude and the concept.

BUT: how can we avoid getting stuck into a non trending period? I have the feeling that ckecking S and R is not enough. You can go over a resistance and then slump back into congestion.

See for example attached immage: I use Supertrend and the 89EMA (= the green line), the two tell me - combined - which way to trade. But with this stock I'd have caught many bad trades in a row, and only in March 2012 I could have said "that stock was definitely not trending" and "we are now out of the congestion"!

are we waiting for long signals on ChJ and AJ?
Isthis valid entry on UCh?

MMM, I think I'll go back to drawing some trendlines...