Forex holy grail strategy games

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This is a very simple trade setup that works with any instrument stocks, forex, commodities, cryptocurrency , etc. And, just to prove to you that you can find an edge outside of the price action trading strategies, the Holy Grail trading system uses two technical indicators. In theory, the stronger the trend is the higher the ADX reading will be. So, the ADX is a non-directional indicator or a strong trend indicator.

Here is how the ADX works: If the ADX is moving higher and higher and at the same time the price is moving upwards, then it signals a strong bullish trend. On the other hand, if the ADX is moving higher and higher and at the same time the price is moving downward, then it signals a strong bearish trend.

The Holy Grail trading system is designed to capture the first retracement after a strong trend upwards or downwards was established. As a general rule, the first pullback in a bullish or bearish trend is the most profitable trade setup. Secondly, the outcome of this trading setup is very predictable, in the sense that the two following possible trading scenarios have the highest probability to happen: A retest of the previous swing high low.

The profit margins in this scenario depend on how far the pullback has gone. Secondly, the prevailing trend resumes and a new continuation leg to the upside downside begins. An ADX reading above the 30 levels is enough to signal that a strong trend is underway. If we wait too long and the ADX reaches higher reading, the trend may be overextended and we might be late to the party.

The ADX reading above 30 is a good way to formulate the presence of a strong trend and filter weak versus strong trends. See the Tesla stock chart below: The second trading rules seek to frame the retracement in price pullback. Learn more about forex pullback indicator strategies here. We wait for the first retracement to the period EMA. Keep in mind; we want to monitor the first retracement to the exponential moving average, not the second or the third.

It makes sense for the ADX to follow the lead of the price action and turn down. The ADX must hold above the 30 levels to confirm that the prevailing trend is strong enough to sustain its momentum. A break of that candle high will trigger our buy order. Learn how to master candlestick trading in our best candlestick PDF guide. There is no room for interpretation here. The first trading advantage that comes with this approach is that you can better quantify the risk.

Keep in mind that we must hold above the period EMA in order for the Holy Grail signal to remain valid. In other words, you place the SL below the swing low left behind by the pullback. Secondly, the forex take profit stop loss has two approaches: First, trail the stop loss below the period EMA and ride the trend. Secondly, you can look to take profits at the most recent swing high.

The Holy Grail sell signals work the same but in reverse. Here is a chart example: The Holy Grail trading strategy helps you quantify the risk within an already established trend. Using it along with the ADX indicator, we have a nice trading system with systematic entries. Quantifying--and managing--risk is one of the most important things a trader can do. All trades carry at least some degree of risk. Will you be diversified and uncorrelated enough in order to keep losing streak risk to a minimum?

One final danger is worth a mention. It is natural to try to filter entries. However it is very problematic to distinguish entries that are likely to reach a ratio of Furthermore, missing just one of these winners will set back your overall expectancy, unless the method used will also filter out at least 25 losing trades at the same time. These are some questions to ponder and investigate. Spend some time back testing. The holy grail has been placed in your hands!

If the most volatile instruments are traded in this style, it is possible to be nicely profitable over time without having to really make any analysis or decisions. Despite that, this path has some serious pitfalls that must be avoided intelligently. Back to the Data We can begin by taking a look at the historical data showing how entries upon next bar breaks of H4 engulfing candles performed on the most volatile instruments from to , a three year period, depending upon the reward to risk multiples that might have been selected as targets for trade exits: This table contains two immediately useful pieces of information.

Firstly, we would have taken a total of 2, trades. Secondly, the positive expectancy per trade rises dramatically until a reward to risk ratio of is reached, after which it rises very slowly before falling off a cliff at above This data is not shown in the above table, but of those 2, trades taken, only were winners. These numbers would put a severe strain on any kind of money management strategy, as the probability of suffering enormous losing streaks would be extremely high.

It is more likely than not there was a streak of between and consecutive losing trades during that three year period. Selective Entries Our problem is that we are currently set to enter a very large number of trades, the vast majority of which will be losers. If we can find a way to enter significantly less trades without suffering a proportionate fall in the expectancy per trade, we can worry less about the strain of likely losing streaks. The danger here is that when profit rests upon a relatively small number of winning trades, you have to be very careful not to cut yourself out of many of those.

Fortunately, using the historical data from to , there seems to be a relatively simple filter which does the job. To win large trades, a trend has to be present. In an uptrend, the price pulls back within the trend making a major low, and then resumes its original direction. By only taking engulfing candles in such an uptrend that make a low lower than the previous 4 candles, or that directly follow such a candle, we are able to filter out a lot of the losing trades, without sacrificing too many of the winning trades.

Here is a table of the performance over the same three year period using this entry filter: It can be seen that overall, the total number of trades is reduced by slightly more than one third, but the winning trades tend to be reduced by a smaller percentage, resulting in rises in the expectancies from to The probable consecutive losing streak is reduced to somewhere between 80 and 90 trades, which is also an improvement.

It is noticeable that this filter had a strongly negative effect upon the Gold trades. Other entry filters that could improve performance would include entering only after engulfing candles with relatively small ranges, as the total positive distance required to be a winner is shorter. Time of day and trend filters can also be applied, although these can be pretty risky.

For example, Gold tends to short well before the London open and long well after the London close. The Yen pairs tend to perform well following the first candle representing the initial few hours of the Tokyo session. Bounces off major support or resistance levels can also be the origins of good trades, although it is surprising how many of the best resumptions within trends begin ahead of these levels. Selective Exits So far, we have only looked a methodology that exits at a fixed R multiple.

This could be refined by setting a target based upon an average volatility or number of pips, so that trades with larger risks can be exited at smaller R multiples. Additionally, there is the question of raising stop losses to break even and beyond. We have no hard data, but it is likely that moving the stop loss to break even somewhere between two days and one week after entry, or after the trade has moved a certain favourable distance, would enhance the results.

Caution is required here as there are often retests of entry zones in long-term position trading using an H4 chart. Of course, should the instrument being traded in an uptrend fail to make a major higher high a little way short of the desired target, it would make sense to exit at that point and take the profit.

Money Management It is vital to use robust and intelligent money management techniques to minimise the risk of catastrophic loss. As a losing streak of 80 consecutive trades was probably during the three year period, risking a percentage of capital rather than an absolute amount based upon the starting capital is essential.

Always bear in mind that the more of your account you lose, the harder it becomes to make it back. A more appropriate risk per trade would be something like 0. It all depends upon your individual risk tolerance and tolerance of account draw down. One final warning: when you are trading correlated pairs, as in this example where three of the four instruments are Yen crosses, an additional defensive measure can be taken of reducing the total risk when taking multiple trades at the same time in the same direction.

This will be especially important where all the trades are long Yen. In fact, a careful study might show that the best trades are the ones that set up on all three of the Yen pairs simultaneously, or at least that this situation produces an enhanced statistical edge. Trading in this systematic way requires careful study of historical data, without curve fitting. Before trying this with real money, test rigorously and be honest in answering your own questions, and be sure to study thoroughly and carefully.

Today I am going to write a concluding piece to this series, and provide a refined statistical analysis of comparative entry techniques.