Strategy "zigzag indicator - overbidding in favor"
In the next issue we will consider a trading strategy based on the ZigZag indicator, which is popular among traders. The tactics uses an unusual feature of this indicator redrawing, that is the factor which in 99% cases makes speculators refuse from the indicator. We will try to turn this disadvantage into an advantage. The rules of the strategy were provided by the member of traders forum andrewx3.
Rules of the trading strategy
So, the system we are considering is based on three indicators:
1. ZigZag_Pointer_alert — индикатор, отслеживающий глубину рынка, его дно и вершины. Это один из основных индикаторов системы. Именно по его сигналам мы ищем возможность для входа в рынок.
1. nonlagzigzag_v2 - indicator, which outlines the current High and Low prices.
2. Money Flow Index - Standard indicator in MT. Indicates overbought and oversold market.
Entry and exit rules:
Long position. Entry.
Expect a signal from the ZigZag_Pointer_alert indicator, as soon as the indicator has drawn an up arrow on the chart (green), we wait for the close of the candle. This candle is considered a signal candle. Expert размещает отложенный ордер BuyStop на 10 пунктов выше High сигнальной свечи, StopLoss — на 60 пунктов ниже Low сигнальной свечи, TakeProfit — 300 пунктов.
Short position. Entry.
Ожидаем сигнала от индикатора ZigZag_Pointer_alert, как только индикатор отрисовал стрелку вниз на графике (красная), ждем закрытия свечи. Эта свеча считается сигнальной. Эксперт размещает отложенный ордер SellStop на 10 пунктов ниже Low сигнальной свечи, StopLoss — на 60 пунктов выше High сигнальной свечи, TakeProfit — 300 пунктов.
If the next formed candle has a High above the High signal candle, it is now considered a signal candle.
Long position. Exit.
Exit the position in two steps.
Stage One. The examiner tracks the readings MFI (Money Flow Index) indicator, и как только на сформировавшейся свече MFI пересекает или хотя бы касается уровня 80, закрываем 50% лота. Стоп — в безубыток.
Second step. We close the second 50% orders either by TakeProfit or at the appearance of a new signal candle, which is earlier.
Short position. Exit.
Exit the position in two steps.
Stage One. Эксперт отслеживает показания индикатора MFI (Money Flow Index) и как только на сформировавшейся свече MFI пересекает или хотя бы касается уровня 20, закрываем 50% лота. Стоп — в безубыток.
Second Stage. The second 50% orders are closed either at TR or at the appearance of a new signal candle, which is earlier.
So, the rules are clear to everyone. We can proceed to the most interesting part - testing the profitability of the strategy.
Testing a trading strategy
For testing, we chose a one-hour chart of the standard EURUSD pair and cross-course GBPJPY. We will run it from January 1, 2009 till July 1 of the same year. At that time the market was especially turbulent, so the crisis environment will reveal to us all the strength (or weakness) of the Expert Advisor (see Figures 3 and 4).
The balance graphs all speak for themselves - the Expert Advisor worked very weakly during the testing period. Not a single pair has shown us results more or less suitable for the real market. Therefore, in the author's version we say "no" to the Expert Advisor.
Optimizing your trading strategy
Unfortunately, if we wanted to take our usual way of modernizing the EA by optimizing it, we faced a serious problem of lack of machine power. Because of pending orders used in the rules and indicators that are quite labor-intensive in their calculations, it takes on average 10-15 minutes to run the Expert Advisor once. In terms of standard optimization we obtain an average of 2500 hours or 104 days. That is why we suggest that if more powerful machines are available, the author of the strategy should share the optimization results with us and the participants in the discussion of the Expert Advisor on the forum.
Conclusions
Unfortunately, the technical aspects did not give us the opportunity to prove the performance of the strategy. In the author's form it is obviously too weak to work on real accounts. Nevertheless, the idea seems to be interesting enough, so we hope that the interested person andrewx3 will help the community of traders to find its strengths.
Description of the parameters of the obtained advisor
— SL – StopLoss.
— TP – TakeProfit.
— LOTS – объем сделки.
— mfperiod – период индикатора MFI.
— ExtDepth, ExtDeviation, ExtBackstep – настройки индикатора ZigZag_Pointer_alert.
— BBUSize – размер безубытка.