Hello This is Mark from TradInformed.com and welcome to this video on a SuperTrend Forex Trading
Strategy
Now in this video i'm going to have a look at how we can Use the SuperTrend indicator to trade the EUR/USD
and I'm going to also look at how we can take a basic strategy and
refine It and tweak It so that It fits in with our own trading beliefs and
techniques
so firstly, the basic strategy
I've got a chart of the EUR/USD in front of me and
the first thing I am using Is a filter and that is this blue line here
which is one of my favorite trading indicators It's a Linear Regression line and it's set to 50 periods
Now if this line, this Linear Regression line, is pointing upwards then i only want to enter long trades
If it Is pointing downwards I only want to enter short trades
So we can see we have also got the SuperTrend. Now the SuperTrend I'm actually going to use in reverse
so that if our Linear Regression line Is pointing upwards I want the SuperTrend
to have Reversed. To have gone negative. At which point i'm going to enter a long trade
We can see we've got an example here on this day here, which is the 22nd of September.
Linear Regression pointing upwards SuperTrend reversed, so we would enter long at the close of this bar
Now we've got an entry system. We also need a way to get out of the trades and i'm going to use
another
indicator that I'm.
I like to use quite a lot and that is Bollinger Bands and so
I'm going to use a, for long trades close, above the Bollinger Bands to signal our exit
So we entered at this point here and
we can see that the trade moved in our favor. And we were able to exit at this point here
This is the 11th of October so there is the basic
trading strategy. But I said
I'm going to look at a Way that we can really refine It, make it our own
So the way i'm going to do that
Is to have a look at how the strategy has performed in the past. Now i think
you have to know, for any trading strategy, How it's done in the past. If it has been a
losing strategy in the past, there really isn't much chance that it's going to become a winning strategy in the future.
It doesn't of course follow that a winning strategy in the past
will be winning, but it's got a better chance than one that has been a losing strategy
so here we go. This is a TradInformed Back Test Model
The Back Test Model is built entirely in Excel, which has the advantage that anybody can go in there, they can alter it and
They can refine It and optimize it to meet their own standards.
So the first thing i want to look at personally is, do we have a nice capital graph and in this case
we do. We're pointing upwards
The general trends. And I'm looking at a decent amount of data. We're starting in 2002, so we've got
13-14 years worth of data here
And over most of the time periods shown here. The strategy has tended to be profitable
Pick out a couple of quick things from The Results. We've got 68% winning trades
Reasonably average. Although our average losing trade is slightly higher. This is offset by our
significantly higher than 50 percent of winning trades.
So
What can we so with this trading strategy? Well I've already said i like to use the linear regression line.
Another very commonly used way of
filtering trades Is an
Exponential Moving Average. So i'm going to demonstrate that here
Now this is the actual back test model. Very simple to use, we've got the data on the left and we have here the
Technical Indicators. If you are interested in technical indicators, I do have two eBooks available
In the Amazon Kindle Bookstore. And they show you how to calculate
Technical Indicators in Excel. There Is a Link on The screen so click on that Link if you Would like more Information about that.
So
To alter a Tradinformed backtest model, all I'm going to do is
click in this top cell and
you can see here. We're looking at the Linear Regression slope. Now i don't want
to do that anymore i want to change that and i'm going to say. If we have a close
Greater Than the Exponential Moving Average, Then we can Enter Long
Just double click to copy that down to all the cells below. And It really is as easy as this.
Do the same for the short trade
also I want to close below the 200 period Exponential Moving average. Now
I just double click on here and it's going to copy it down to all the cells below.
Now if i go back to the Results Tab we're going to see different results. So we can see in fact a slightly steeper
Capital Graph, which is always good to see. We've got a slightly higher net profit in fact we've got a slightly higher number of
winning trades. So for the very quick test that I've just demonstrated
We look to have, potentially, a better trading strategy. It seems to work better
with a 200 EMA as a Filter. Now this is just one way
That You as a trader can look at a trading strategy and refine It so that It suits what you're looking to get out
of it.
Maybe you want a higher percentage of winning trades, and you're willing to sacrifice
some of the the size of your trades well then you can change it to suit this
Well i hope you found this useful. If you're interested in Tradinformed Backtest Models, again there is a link on the screen
Click on this and have a look and see What is available.
If you'd like more Information about
trading the Financial Markets, Back Testing trading strategies, calculating Technical Indicators please go to
www.Tradinformed.com and of course please Subscribe
to this Channel for more videos about Back Testing and
Technical Indicators