Study agenda Thursday 8/28 five-hour timeblock

• Ongoing indicator research
  
  • review observations from all indicators now that I've slept on them (revisions / additions)
    
  • select indicators that will work well together for the study (simultaneous on chart)
  
  

  Indicators have been revised/updated on the Indicator research page

  
  
• Consider whether or not I want to (or can feasibly) include higher/lower timeframes during the study
  

  I now believe this is possible to some extent. The biggest challenge I think will be tracking the correct bar between timeframes during historical forward testing. However, both MT and FT allow you to place vertical bars on the chart, and this can be carried through all timeframes. I will need to think more on this to determine which timeframes I would want to cross-reference, and which indicators specifically I would look at.

  
  
• Mindmap a visualization of how the survey study will commence -- see what questions I may have
  

  The survey testing procedure mindmap is here

  
  
• Begin formal assembly of the survey
  

  The survey is a work-in-progress and the current revision is here

  
  
• Begin initial work on a new Mind Movie to specifically target this strategy development (move to next weeks agenda)
  
• Play with new MT games Suzanne found here and here
  
• Watch Wall Street Warriors season 2 episode 1

Study agenda Thursday 8/21 five-hour timeblock

• Ongoing indicator research
  
  • review observations from last week for each indicator (revisions / additions)
    
  • review a final set of indicators for consideration in the study:
    
    • volume (is it worthy? reliable? relevant? implications from broker?)
      
    • RSI
      
    • Stochastics
      
    • ZigZag
      
    • MACD
      
    • Parabolic SAR
      
    • Williams % Range
    
    
  • determine appropriate timeframes for each indicator and propose settings adjustments as needed
    
    • how will I know when an indicator's settings are right?
  
  

  Indicators have been revised/updated on the Indicator research page

  
  
• Consider whether or not I want to (or can feasibly) include higher/lower timeframes during the study (needs more research)
  
• Mindmap a visualization of how the survey study will commence -- see what questions I may have (move to next week agenda)
  
• Begin initial work on a new Mind Movie to specifically target this strategy development (move to next week agenda)
  
• Watch Wall Street Warriors season 1 episode 6

Indicator research

The following are technical indicators I'm researching as possible candidates for my survey. I'm looking for a balance of leading and lagging indicators. During the survey period, I will load up the chart with as many indicators as reasonably possible. This will enable me to gather the maximum amount of data possible during the study. When the data is compiled and developed into an actual trading strategy, I expect to narrow the indicators to a small handful at most.

The requirements for the indicators I've chosen as possible candidates are:

• it "makes sense" to me and is not overly complex
  
• it "plays nice" with other indicators
  
• it gives at least some objective indications
  
• it is available in both Forex Tester and MetaTrader

Lagging indicators

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• Envelopes
  

  Defines reasonable/normal price range. In theory, price extending beyond the envelope is at an extreme and will snap back.

• reference
  
• Clutter: two lines on primary chart window
  
• Settings: (default) Period 14, Shift 0, Smoothed SMA, Close, 0.10 Deviation
  
• Observations:
  
  
  
  • price bar just prior to entry bar is: fully inside envelope / fully outside upper envelope / fully outside lower envelope / straddling upper envelope / straddling lower envelope
    
  • close of price bar just prior to entry bar: inside envelope / outside envelope
    
  • last touch or cross of an envelope: # bars ago
    
  • distance of bands (pips) at entry
    
  • distance of banks (pips) at target
    

---

• Bill Williams' Fractals
  

  Attempts to detect minor tops and bottoms.

• reference
  
• Clutter: multiple tick arrows on primary chart window
  
• Settings: (default)(not adjustable)
  
• Would be easy to observe this on a higher timeframe (however may be timeframe irrelevant)
  
• Interesting observation: the incidence of two arrows pointing the same direction is somewhat rare. If you enter the market at the open of the bar following the second arrow in the opposite direction, then exit at open of the bar immediately following the next opposite arrow... it seems to catch the big moves.
  
• Observations:
  
  • last fractal was: up / down
    
  • # bars since last fractal
    
  • # fractal signals since last direction change

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• Exponential Moving Averages
  

  Attempt to detect change in trend. Does not work well in choppy markets.

• Clutter: two lines on primary chart window (note: consider using MA Crossover Signals instead to minimize clutter)
  
• Settings: EMA 13, 55
  
• Observations:
  
  • EMA lineup:
    
    • EMAs already lined-up (in support of trade direction) prior to move
      
    • EMAs crossed to line-up just-in-time before move began; # bars between cross and entry bar
      
    • upon breakout, no EMAs are lined-up
    
    
  • price relative to EMA 13: touch / closed through / candle entirely ahead of MA / candle entirely behind MA
    
  • price relative to EMA 55: touch / closed through / candle entirely ahead of MA / candle entirely behind MA
    

---

• Welles Wilder's Relative Strength Index (RSI)
  

  Attempt to determine relative overbought/oversold condition based on the lookback period.

• reference
  
• Clutter: none, on subwindow
  
• Settings: (default) 14, Close
  
• Observations:
  
  • current level: #
    
  • to reach current level, indicator has been trending: up / down / undetermined; for # bars
    

---

• ZigZag
  

  Highlights minor high/low points of past trend reversals. Current indication is subject to change.

• reference
  
• Clutter: single line with multiple segments overlayed on top of price chart
  
• Settings observation: increasing the depth reduces sensitivity to minor reversals
  
• Settings: Depth 6
  
• Observations:
  
  • last zigzag was: uptrend / downtrend
    
  • last zigzag occurred across # bars
    
  • where is current price relative to the last zigzag point? above / below / inside
    
  • previous zigzag tops (3 or more) are trending: up / down / undetermined
    
  • previous zigzag bottoms (3 or more) are trending: up / down / undetermined
    
  • # of previous zigzag tops trending same direction: none / #
    
  • # of previous zigzag bottoms trending same direction: none / #
    

---

• Welles Wilder's Parabolic SAR
  

  Trails price movement based on acceleration and provides indication of impending reversals.

• reference
  
• Clutter: small dots on primary chart window typically away from candles
  
• Settings: (default) StartPR 0.02, StepPR 0.02, EndPR 0.2
  
• Observations:
  
  • SAR direction change occurred # bars ago
    
    

---

Leading indicators

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• Bill Williams' Accelerator Oscillator (AC)
  

  Indicates the current driving force by color, and supposed to change before price. Zeroline indicates where driving force is at balance with acceleration.

• reference
  
• Clutter: none, on subwindow
  
• Settings: (default) 5, 34, 5, SimpleMA, Close
  
• Observations:
  
  • current color: green / red
    
  • current position: above zeroline / below zeroline
    
  • colors on currently forming mountain side: same / fluctuating / undetermined
    
  • mountain trend: upward / downward / undetermined
    
  • mountain trend continuation since cross over zeroline?
    
  • last extreme level was: same side zeroline / across zeroline
    
  • clearly defined mountain: yes / undetermined
    
  • current location on the mountain: before peak / after peak / undetermined
    
  • current total size of the mountain since zeroline
    
  • size of the mountain from zeroline to peak: # / undetermined
    
  • size of last mountain from zeroline to peak: # / undetermined
    
  • color on left side of mountain: same / fluctuating / undetermined
    
  • color on right side of mountain: same / fluctuating / undetermined
    
  • last mountain color on left side: green / red
    
  • last mountain color on right side: green / red
    
  
  

---

• Welles Wilder's Average Directional Movement Index (ADX)
  

  Measures strength of trend momentum. Indicates if there is a trend, and which direction is in control.

• reference
  
• Clutter: none, on subwindow
  
• Settings: for 15min chart using 28, Close
  
• Observations:
  
  • rising/falling lines crossed as move began
    
    
  • rising/falling lines are aligned in trade direction
    
  • rising line trend: up / down / undetermined
    
  • falling line trend: up / down / undetermined
    
  • ADX line trend: up / down / undetermined
    
  • ADX line clear trend reversal can be seen
    
  • current level of rising line: #
    
  • current level of falling line: #
    
  • current level of ADX line: #
    
  • current order is: ADX falling rising / ADX rising falling / falling ADX rising / falling rising ADX / rising falling ADX / rising ADX falling

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• Welles Wilder's Average True Range (ATR)
  

  Indicates relative volatility level over the lookback period.

• reference
  
• Clutter: none, on subwindow
  
• Settings: for 15min chart using 32, Close (based on past 8 hours)
  
• Observations:
  
  • since session open, relative level is: extreme low / low / high / extreme high / undetermined
    
  • recent trend is: rising / falling / sideways / undetermined
    
  • # bars since last shift in indicator trend: 10+ / 5-10 / 1-5 / undetermined
    

---

• Joseph Granville's On-Balance Volume (OBV)
  

  Relates volume to price change and attempts to detect smart money flow before price impact.

• reference1 reference2 reference3
  
• Clutter: none, on subwindow
  
• Settings: (default) Close (not adjustable)
  
• Observations:
  
  
  
  • trend: rising / falling / sideways / undetermined
    
  • sudden change in trend: rising / falling / (n/a)
    

---

• Pivot Points
  

  Levels of possible support and resistance for the upcoming day, based on previous day's High, Low and Close.

• reference
  
• Clutter: multiple horizontal lines on primary chart window
  
• Settings: (default) (not really adjustable)
  
• Interesting observation: initial directional price bias seems to be towards the nearest pivot level from the pivot point for that day (acts as a magnetic level). R1 and S1 are frequently NOT equidistant from PP.
  
• Observations:
  
  • what pivot level is price closest to? pivot / R1 / R2 / R3 / S1 / S2 / S3
    
  • (entry) this entry is a breakout through pivot level: (n/a) / pivot / R1 / R2 / R3 / S1 / S2 / S3
    
  • (target) this target is just inside pivot level (pre-breakout): (n/a) / pivot / R1 / R2 / R3 / S1 / S2 / S3
    
  • (target) this target is just beyond a pivot level (post-breakout): (n/a) / pivot / R1 / R2 / R3 / S1 / S2 / S3
    
  • last pivot level crossed today, and direction: (n/a) / pivot / R1 / R2 / R3 / S1 / S2 / S3 / upward / downward
    
  • second-to-last pivot level crossed today, and direction: (n/a) / pivot / R1 / R2 / R3 / S1 / S2 / S3 / upward / downward
    
  • so far today, price has touched # pivot levels
    
  • distance from pivot to first levels: pivot->R1 is closer / pivot->S1 is closer / about the same
    

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• Stochastic Oscillator
  

  Attempts to identify relative overbought/oversold condition based on the recent lookback period.

• reference
  
• Clutter: none, on subwindow
  
• Settings: %K20, %D6, Slowing 3, Apply to High/Low (check if MT supports High/Low or Close)
  
• Observations:
  
  • fast line crossed in support of entry/exit just prior
    
  • fast line cross between entry and exit
    
  • multiple crosses between 20 and 80 prior to exit
    
  • approximate level of cross was: #
    

---

• Bill Williams' Percent Range
  

  Attempts to identify overbought/oversold conditions. Anticipates impending reversals.

• reference
  
• Clutter: none, on subwindow
  
• Settings: (default) 14, Close
  
• Observations:
  
  • indicator level is approximately: #
    
  • indicator has touched extreme (0 or 100) and still above 20 or below 80
    

Study agenda Thursday 8/14 five-hour timeblock

• Ongoing indicator research
  
  • verify availability in both FT and MT4
    
  • classify as leading or lagging
    
  • synopsis of how it's supposed to work
    
  • clutter factor on chart with other indicators?
  
  

  Indicator research is on this page

  
  
• Assemble a preliminary research survey
  
  • Goals: methodical, unbiased, objective
    
  • Object: find clues that lead to a good entry or exit setup; store research data in a non-subjective way that can be extrapolated via math later on
    
  • Interested in: a) (entry) short burst moves (breakout); b) (entry) steady trending moves; c)(exit) definitive exits; d) (exit) loss of momentum clues
    
  • Include questions asked on all entries/targets
    
  • Include questions for each indicator separately
  
  

  The survey is being assembled on this page

  
  
• Mindmap the survey testing procedure, including how it leads to a trading strategy
  
  

  This mindmap is now located here

  
  
• Watch Wall Street Warriors season 1 episode 5

Study agenda Thursday 8/7 five-hour timeblock

• Study Van Tharp's high-expectancy/low-risk formula; write out how/where it will be applied to my strategy
  
  • reference 1
    
  • reference 2
  
  

  I think expectancy calculation is critical to an overall successful strategy. The correct time to apply this formula is after trade rules are written. Use historical testing to perform a minimum 30 trades (preferable 100-200) and then calculate the expectancy based on those trade outcomes. The expectancy figure tells whether or not a strategy could be profitable in the long run, and what the average take would be.

  
  
• Study equity crossover ideas; write out how/where it will be applied to my strategy
  
  • reference 1
  
  

  Equity Curve trading is a theory that says the trader should stop trading or reduce lots when the equity curve crosses above or below its moving average and to resume trading on a crossover in the opposite direction. It is unknown whether this would be useful or not for manual trading. One possible indication is that it could flag a trading strategy that no longer works. This needs more research. I think I would like to analyze the equity curve during each trade, and when the crossover below the MA occurs, switch to paper trading so the strategy could continue to be monitored. Upon a crossover above the MA, begin live trading again. My theory is that a failed strategy would continue to perform in a substandard way, thus keeping equity below the MA.

  
  
• Write out specific/formal survey (testing) procedure
  
  • reference 1
  
  

  Prerequisites: a) identify trading markets/hours to test; b) identify currenc(ies) to be tested; c) identify primary chart timeframe that will be studied; d) identify core strategy style: breakout, scalp, counter-trade, trend-following; Objectives: a) to observe how each indicator (or chart behavior) performs around a potential trade entry and exit; b) survey all stats for every trade; Post-analysis: after sufficient number of trades exist in the database, analyze database for indicator correlations which can then be used to solidify trade rules

  
  
• Research and identify a mind-mapping tool that will work for my purpose (web-based)
  
  • reference 1
  
  

  I've tentatively selected Mindomo as the best fit.

  
  
• R&D to locate classification of indicators: leading vs. trailing needed
  
  • reference 1
    
  • reference 2
    
  • weed out any that are not available in both FT and MT4
    
  • read-up on some and see if any look useful; start a list of those I'd like to survey
    
    • On-Balance Volume
      
    • Average Directional Index
      
    • ZigZag indicator
      
    • MACD
      
    • RSI
      
    • Stochastics
      
    • CCI
  
  
• Rob Booker / InterbankFX free webinar at 6pm (will watch the recorded video later)
  
  

My "Research Goals"

Focused, targeted research is key to building a winning strategy. These are specific goals I plan to accomplish during the research phase of my strategy.

• Identify timeframe I will trade (will multiple timeframes be studied as well?)
  
• Identify pairs I will trade
  
• Identify best times or markets for trade entry
  
• Identify best days for trades
  
• Identify the sweet-spot window of time successful setups can be in-trade (before forcing an exit)
  
• Identify conditions that could occur after setup, but before entry, that indicate setup no longer valid
  
• Classify the type of strategy (breakout, etc.)
  
• Identify specific patterns that occur in winning trades
  
• Be able to identify/calculate high-expectancy, low-risk trades vs. others (Van Tharp)
  
• Find a combination of indicators that complement and reinforce good trade setups
  
• Identify any criteria that might indicate trade setups will not work (ie, impending news or other connections)
  
• Develop an objective/unbiased method to collect data (with intention to assimilate later)
  
• Develop a protocol for assimilating data into something useful (ie, statistical significance)
  
• Notate my research procedures so they can be mechanically repeated for future strategy development

My "Steps to Success"

These are the steps I'm following on my journey to trading success.

1. Identify my trading objectives, goals and targets.
   
   • What would my ideal trading plan look like?
     

     My ideal trading plan is one that fits my schedule. I want to be able to study charts in advance of placing any trades, such as the evening hours after 9pm when kids are asleep. I would scan for any potential or ripe trades at that time, and setup alert triggers accordingly. I will also notate exact trade entry orders so that in the event I am entering the orders during middle of the night, there will be minimal thinking involved.

     
     
   • How would I keep my emotions in check during a trade?
     

     I will have a clearly defined strategy that dictates, mechanically, exactly what should be done in every situation. Therefore, there is no need to get emotional or even "watch" trades in progress. No changes to trade strategy will be made unless one of the exit criteria is reached.

     
     
   • What triggers would I have in place to deal with unanticipated activity or movements?
     

     All trades will have (at least) an emergency stop. This stop will come into play in the event of an extreme geopolitical event, such as bombing, terrorist activity, or similar affecting the markets. This stop is different than the discretionary stops that may be used as well.

     
     
   • What procedures would ensure that no single trade could ever cause massive damage?
     

     All trades will have an emergency stop in place. Additionally, discretionary stops may be used and moved on active trades as the trade develops. The discretionary stop represents the highest desired risk of the given trade. As such, the leverage on the trade itself will be based on this initial discretionary stop, and limited to a percentage of account equity. The discretionary stop may be tightened during the trade development, but never loosened.

     
     
   • What are some things I would/wouldn't do to improve my psychological stability?
     

     I will try to workout regularly (3+ times/week), and preferably before trading studies. Additionally, I will not study trades in the midst of other distractions such as children, television, or the dayjob.

   
   
2. Identify some ways that I will give back to the open community.
   

   I will maintain a public blog to share my travels. I will share any tools, worksheets or methods I develop that help me find or execute my trading strategies.

   
   
3. Identify the chart timeframes, pairs and markets I want to focus on in this round.
   

   Tentatively looking at trading 15min EURUSD, GBPUSD, USDCHF, USDJPY but will focus on one pair for initial studies.

   
   
4. Identify the indicators that I want to have available to me during research testing.
   
   • What is a specific reason for choosing each indicator?
     

     (indicators not selected yet)

     
     
   • Are any indicators closed-source?
     

     (hopefully not, as that would be against my Rules to Live By)

   
   
5. Create ground rules for strategy research project.
   
   • What protocol will be required for testing?
     
   • Is there a defined maximum time a trade can be held open?
     

     Yes, there needs to be a time stop. This should be answered during the study period. I expect to find good setups succeeding within a percentage of time. After that percentage, the likelihood of success would be less. Therefore, I should identify this sweet spot and plan to automatically close trades that are outside this window (free funds for other opportunities). Also, I believe that a short-term trade strategy is not valid if entry triggers are met but no followthru.

     
     
   • What criteria would indicate that it's time to take a loss?
     

     a) Discretionary stop reached; b) Time stop reached; c) Other criteria dictated by trade rules

     
     
   • What criteria would indicate that it's time to close at profit?
     

     a) Target reached; b) Time stop reached; c) Other criteria dictated by trade rules

   
   
6. Begin strategy research project on paper.
   
   • Review strategy research project and make adjustments periodically.
     

     (this is discussed further in the Research Goals section)

   
   
7. Gather all data from research project and attempt to assimilate into a trading strategy.
   
8. Write tentative trading rules that complement the above research findings.
   
9. Backtest the rules for a reasonable period, refining rules as necessary.
   
10. Forward test the rules for a reasonable period, refining rules as necessary.
    
11. Begin live trading on a micro account using the refined ruleset.
    
12. Review progress on an identified schedule.
    
    

My "Rules to Live By"

This is an official list of core beliefs and "rules" I will reference back to when in doubt. In other words, if I see myself getting sidetracked, or unsure if I should devote research time to a new idea that comes across my desk... hopefully this will serve to guide me:

---

These are core principles that drive my study and trading life. Before engaging in new activity, I need to make sure none of these rules are violated... as that would certainly be going against the grain.

Open-source software

• I'm a strong proponent, so investing in closed-source would be strongly contrary to my beliefs
  
• I will prefer open tools, indicators and systems before considering any closed-source purchase
  
• Tools or systems that I personally develop will be built on open principles
  
• I'm completely uncomfortable with closed-source robots
  
  • No way to fully understand their workings
    
  • No way to fix or improve them
    
  • Not a good prospect for long-term success

Collaborative development

• I believe that it is not possible to saturate forex market with any particular trading style
  
• I'm not afraid to share my secrets/ideas with others
  
• I believe others will contribute ideas that help me excel, and vice versa
  
• I believe in serendipity

Make my own trading decisions

• I strongly believe that allowing other people to manage my money is a dead-end road
  
• I believe that I must learn myself how to handle my own money if I am to excel in the long term
  
• I should develop my own trading strategies, even if it takes longer to excel as a result
  
• I believe that the best trading strategies would be personally discovered and developed by myself
  
• Any system that does not allow me complete understanding and control of trading decisions should be avoided
  
• Only a personally developed system could "fit me like a glove"