Hey, now. I'm back with another exclusive trading system. In this video,
you will learn how building a trading system around Ehlers indicators can make
you very nice and consistent profits.
And if you want to see my four ideas on how to optimize this system,
just be sure to stick around to the end. Of course,
if you want to see more content like this, just destroy that subscribe button.
Like.
I call the system Ehlers TrendCycle,
and like most trading systems it can be adapted to Forex, crypto, options,
stocks, indices,
or any instrument that has significant volume and market participants.
This strategy uses three free TradingView indicators.
As always links and settings to all indicators are listed in the description.
The first indicator is Ehlers Instantaneous Trend, or iTrend.
I am going to keep inputs at default and change the colors so we can see it more
clearly. This indicator will provide our triggers for entry.
The second free trading view indicator is another Ehlers study called the Simple
Cycle Indicator.
Inputs will be kept at default and I'm going to change the colors to make it
easier to see.
John Eller suggests this study compliments the iTrend indicator by providing
entry signals. However,
in this system we are going to use this oscillator to provide hidden divergence
for entry confirmation.
The next study to add on the chart are the ATR Bands set to two times the
ATR and colored in yellow.
The ATR tries to measure current market volatility. And in this strategy,
it will provide our stop loss level and calculate our exits.
Let's go over entry criteria and review some examples.
As always system rules and details are listed in the description below.
This chart is Euro versus the US Dollar four-hour candles.
The rules to enter along on Ehlers TrendCycle are; First,
the Ehlers Instantaneous Trend sell signal must change to a buy.
That is represented by a candle change from red to blue. Second,
the Ehlers simple cycle must produce hidden bullish divergence.
We can see here that price pulls back to make a higher low,
and the indicator creates a lower, low forming,
a bullish hidden divergence. Both these rules converge on this candle here.
This is our trigger candle. We place our stop at two times the ATR,
which is this yellow line below the trigger candle and target one-to-one for the
first half of our position. When one-to-one is hit,
we move our stop to break even,
and then target two to one for the remainder of our trade.
And the second half of this one stops out at break.
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I have one more long example.
The iTrend sell candle changes from red sell to a buy and blue.
We have bullish hidden divergence on the Simple Cycle.
There is a higher low on price and a lower low on the indicator.
This is our trigger candle. And remember to always wait for the candle to close.
We place our stop at two times the ATR and target one-to-one for the first half
of our trade. When target one is hit, we move the stop to break even,
and target two to one for the remainder.
And the second half of this one hits our two to one target.
Now we flip the shorts.
This is what I would test for shorts. First,
the Ehlers Instantaneous Trend buy signal must change to a sell.
This is represented by a blue candle, followed by a red one second.
The Ehlers simple cycle has to show hidden bearish divergence on the chart.
We are looking for a lower high on price and a higher high on the indicator.
Our criteria for entry are met or this trigger candle.
Place our stop at two times the ATR above the trigger candle and target
one-to-one for the first half of our position. When target one is hit,
the rest of the position is moved to break even.
And two to one is the next target.
And this one continues the trend to our target.
I'm going to show you one more quick short example.
The Ehlers iTrend changes from a blue to a red candle.
There is bearish hidden divergence on the Simple Cycle oscillator,
a lower high on price and a higher high on the Ehlers study.
We open a position on the close of this trigger candle.
The stop-loss level is placed at two times the ATR above the trigger candle and
target one is one-to-one. When target one is hit, move the stop to breakeven,
and two to one is the second target. And this one kills target two.
I'm going to give you some ideas on how we can make this system better along
with a Trader's Lending Score. And now it's time to do what I do.
If
you enjoy this content, please hit that like button. Remember,
this is just 100 tests on one instrument.
If you are thinking of using this system,
please do all the required testing and be sure to let our community know what
you discover.
This test was done on the most traded instrument in the world Euro versus the US
Dollar four-hour candles. It took about eight years to find the 100 setups.
57 hit target one, and of those 57,
34 went on to hit target two of two to one.
Most wins and losses in a row equally each other at six.
This system produced a 57% winning ratio for a 20% gain on
account risking 1% per trade on this dataset.
But I'm going to share four ideas on how to pump those numbers up.
So the equity curve here features a very nice impulsive trend to start followed
by a choppy uptrend, a big pullback,
and then trending upward looking at all the setups taken on the daily timeframe.
You can see how the daily trend creates those impulsive moves,
and then daily consolidation creates the choppiness to the account balance.
What score would you give this strategy? Let me know in the comments below.
I give this system a Trader's Landing score of seven,
because this is a profitable system with limited drawdown.
But I like it mostly because of the ways we can improve this strategy with these
optimization tips. Remember the enemy of great is good.
I have four ideas on how we can improve this system. First,
if you take this down to lower timeframes, make sure you add spread to the ATR.
Look at this chart where you see adding the spread to the ATR would have saved
this trade.
This is especially important on larger spread pairs and during the rollover.
Second, like in this video here,
adding the 200 Exponential Moving Average can do wonders for a trading system.
Look at this chart where if we only took longs above the 200 EMA,
this losing setup would have been filtered out,
and we would have gotten into a great setup right after. Third,
when looking at hidden divergence you must confirm market structure.
You cannot mistake a high here for a pullback and thus you cannot compare this
peak to this peak for hidden divergence purposes.
This setup is disqualified. Furthermore,
the Ehler simple cycle can be used for an additional filter.
Look at this chart where only taking signals when the oscillator crosses the
zero line produces great results and where it doesn't you can see
a stop for loss. Check out this playlist for more profitable systems.
And have a great day, because you deserve it.