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 - indicator that tracks the depth of the market, its bottoms and tops. This is one of the main indicators of the system. It is by its signals that we look for an opportunity to enter the market.
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 places a pending order BuyStop 10 points above the High signal candlestick, StopLoss - 60 points below the Low signal candlestick, TakeProfit - 300 points.
Short position. Entry.
Expect a signal from the ZigZag_Pointer_alert indicator, as soon as the indicator has drawn a down arrow on the chart (red), we wait for the close of the candle. This candle is considered as a signal candle. The Expert Advisor places a pending SellStop order 10 points below the Low signal candle, StopLoss - 60 points above the High signal candle, and TakeProfit - 300 points.
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) indicatorAnd as soon as the MFI crosses or at least touches the level of 80, we close the 50% lot. Stop - at no loss.
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. Expert Advisor monitors the indicator readings MFI (Money Flow Index) and as soon as the formed candle MFI crosses or at least touches the level of 20, we close the 50% lot. Stop - at breakeven.
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 - transaction volume.
- mfperiod - period of the MFI indicator.
- ExtDepth, ExtDeviation, ExtBackstep - settings of the ZigZag_Pointer_alert indicator.
- BBUSize - Breakeven size.