A study of the trading strategy on the indicators LaGuerre, CCI and EMA
In this issue we will look at a strategy based on three indicators, a full description of which you can find in trading strategies on ForTrader.org. And we will only briefly outline the rules. So, this trading strategy was developed for the market and the currency pair EURUSD. It is scalping and all the main action takes place on the M5 timeframe between 10 p.m. and 6 a.m. GTM time. That is, in fact, another pipsing tactic for the night flat.
We use the following indicators for trading:
- Exponential Moving Average EMA (120) applied to Median Price (HL/2);
- Laguerre indicator to be set with levels 0, 0.1, 0.9, 1;
- CCI indicator (14) - with +5 and -5 levels.
Trading signals strategy:
Open a buy trade if the following conditions are met:
- the value of the EMA (120) of the candle in question, above the value of the EMA (120) of the previous candle, ie EMA (120) looks up;
- the Laguerre indicator value is zero;
- CCI indicator (14) is below the "-5" level.
Fig. 1. Trade signal to buy.
TakeProfit set at a distance of 10-15 points or use TrallingStop to rearrange the StopLoss in the profitable zone. StopLoss is equal to the profit - 10-15 points. The deal should be closed or StopLoss should be pulled closer to the current price, if the Laguerre indicator value becomes more than 0.9.
For sell trades, the situation is reversed (see Fig. 2):
Fig. 2. Trade signal to sell.
When reaching a profit of 5-7 pips, it is recommended to move StopLoss to breakeven levelTrallingStop from 1 point is good for this.
Research trade strategy
The rules of the trading strategy are clear, the Expert Advisor is written. Now it's time to test the author's tactics rules. For this purpose, as recommended, we take the currency pair EURUSD, timeframe M5. The study is conducted in the period from 2010 to February 2011 (see Fig. 3).
Fig. 3. Testing the trading strategy according to the author's rules. Download the report.
As can be seen, the results were unfavorable - the Expert Advisor has spent most of the time in the red and finished testing at the same place without making profit. As a result, we have lost 50% of the deposit during the year. Nevertheless, the strategy rules look interesting, so let us optimize all external parameters to get a more promising report.
Optimizing a trading Expert Advisor
As in the initial testing, EURUSD is used for optimization on a 5-minute chart. The optimization is performed from January to August 2010, forward test will take the rest of the interval until February 2011 (see Fig. 4).
Fig. 4. Optimization results and the final balance graph of the expert. Download the report
The balance graph obtained after the optimization of the Expert Advisor looks more promising. Although the number of deals has decreased significantly, the periods of drawdown of the Expert Advisor are practically not observed - the graph is steadily growing. As a result, our balance has increased by more than 4 times within a year.
To summarize
As is almost always the case in our research, the author's rules have proven to be capable of failing the trader who uses them. Nevertheless, the strategy itself looks curious, which we saw after optimization. I am sure there are more interesting parameters for the Expert Advisor and I suggest discussing them on the forum.
Download indicator | Download Expert | Discuss on forum | Sets for parameter optimization