This page will show example trading systems that have been found on websites, that we made, or others have given us. They may or may not actually be good - that's up to you to find out for yourself.

We'd be happy to put the details of your trading system here, with all credit to you. The only requirement is that the system uses purely objective trading rules.

This system was found on the Chairman Maoxian website, more particularly at this page.

He credits a book called "Street Smarts", written by Linda Bradford Raschke.

Here's how it is described:

The basic idea for this set-up is that when the Average Directional Index (ADX) is high and price drops back to the 20 period exponential moving average (EMA), you should look to buy and target the previous swing high as your exit.

A bit of tinkering is required to complete this system (in terms of what I think of as a "complete" system). For example, that paragraph uses the words "...you should look to buy..." But when creating purely objective trading systems, a specific value of where to enter needs to be written out.

Here's what I came up with:

Rule Type	Description
Long - Entry Rules	ADX In Overheating (with "Overheating" set at 25)
Long - Entry Rules	Low Above Exponential Moving Average (Period=20), with Bar Offset equal to 1.
Long - Entry Rules	Low Below Exponential Moving Average (Period=20)
Long - Entry Values	High Of Current Bar
Long - Init. S/L Values	Low Of Current Bar
Long - Init. T/P Values	EMA Swing High (Period=20)

And for shorts:

Rule Type	Description
Short - Entry Rules	ADX In Overheating (with "Overheating" set at 25)
Short - Entry Rules	High Below Exponential Moving Average (Period=20), with Bar Offset equal to 1.
Short - Entry Rules	High Above Exponential Moving Average (Period=20)
Short - Entry Values	Low Of Current Bar
Short - Init. S/L Values	High Of Current Bar
Short - Init. T/P Values	EMA Swing Low (Period=20)

The Bar Offset feature means you want that rule to have been true 1 bar ago. In this way we ensure that, in the case of the Longs, we are only placing the order when the Low of the bar was above the EMA, and then falls down below it.

Again from the Chairman Maoxian website, more particularly one of his archive pages.

On that archive page, he lists quite a number of trades under the "Trading for Dummies, Q&A Series" banner.

While he does not specify his rules explicitly, you can work them out.

Here's what I came up with:

• On 30-Minute chart.
• Unusually active (more volume than normal).
• Very volatile. Perhaps a gap.
• Wait for pullback.
• "Pullback" means lower high in uptrend, higher low in downtrend.
• "Uptrend" means prices above EMA. "Downtrend" means prices below EMA.
• Set entry at high of pullback bar (for Long trades).
• Set initial stop-loss at low of pullback bar (for Long trades).
• If next bar pulls back further, reset entry and initial stop-loss.
• Trade must be before lunch-time. The noon bar is the last bar to make calculations off. Otherwise finish for the day.
• Exit at the end of the day (or could keep half if you want).
• One trade per stock per day only (i.e. don't get back in if stopped out).

Please keep in mind that this system is meant for trading shares. Some adaptation is required to make it usable for trading currency. For example, currency does not have volume. Further, currency trading is 24/7, 5.5 days per week. The rule to stop trading at noon or at the end-of-day needs to be dropped or adapted.

There are also a couple of things which need to be changed into "purely objective trading systems" language. For example "unusually active", and "very volatile".

If you look at the charts he has given, you can see that yes, obviously, the volume is much higher than normal, and yes, obviously, the price is more volatile than normal.

But for purely objective rules, we need to specify exactly what this means.

Let's see how we go.

For "unusually active" I was thinking of using the Average True Range rule that I've already coded - "True Range is more than a multiple of the average".

And then for "very volatile", perhaps using Bollinger Bands. They flare out when prices are volatile, and narrow when they aren't. Along with Bollinger Bands, John Bollinger came up with 2 other indicators which are based on the same calculations. %b is one - see the %b Systems below for more details. Bollinger Bandwidth is the other. That's what we'll be using, although you'll have to experiment yourself to see which values of the Bandwidth are to be considered "volatile".

For the time-based rules, such as the noon bar being the last to make calculations from, and the end-of-day being the time to sell, we could see what happens if we make these times based on the various trading sessions throughout the day - the U.S. one, the London one, the Asian one, etc (are there more?)

We won't know the results until we backtest...

Anyway, here are the rules written in objective form:

Rule Type	Description
Long - Entry Rules	True Range is more than a multiple (2.5) of the average
Long - Entry Rules	Bollinger BandWidth is above X
Long - Entry Rules	Close Above Exponential Moving Average (Period=20)
Long - Entry Rules	Current High Below Previous
Long - Entry Rules	Time Of Day Is On Or Before 12PM (for whatever session you want to trade in).
Long - Entry Values	High Of Current Bar
Long - Init. S/L Values	Low Of Current Bar
Long - T/P Mgmt Rules	Time Of Day Is On Or After 5PM (for whatever session you want to trade in).
Long - T/P Mgmt Values	Exit At Market

And for shorts:

Rule Type	Description
Short - Entry Rules	True Range is more than a multiple (2.5) of the average
Short - Entry Rules	Bollinger BandWidth is above X
Short - Entry Rules	Close Below Exponential Moving Average (Period=20)
Short - Entry Rules	Current Low Above Previous
Short - Entry Rules	Time Of Day Is On Or Before 12PM (for whatever session you want to trade in).
Short - Entry Values	Low Of Current Bar
Short - Init. S/L Values	High Of Current Bar
Short - T/P Mgmt Rules	Time Of Day Is On Or After 5PM (for whatever session you want to trade in).
Short - T/P Mgmt Values	Exit At Market

Please note that the Chairman recommends to not get back in on the same day after being stopped out. TS cannot provide this functionality yet.

Thanks to Trader Eyal for his help with this system.

This is the same system above, but combined with (one of) Chairman Maoxian's trailing stop technique(s), which is described in the very last paragraph of this page:

One simple way to trail a stop is to place it below the last "up" bar... an "up" bar is simply a bar with a higher high and a higher low than the previous bar.

Rule Type	Description
Long - Entry Rules	True Range is more than a multiple (2.5) of the average
Long - Entry Rules	Bollinger BandWidth is above X
Long - Entry Rules	Close Above Exponential Moving Average (Period=20)
Long - Entry Rules	Current High Below Previous
Long - Entry Rules	Time Of Day Is On Or Before 12PM (for whatever session you want to trade in).
Long - Entry Values	High Of Current Bar
Long - Init. S/L Values	Low Of Current Bar
Long - S/L Mgmt Rules	Current High Above Previous
Long - S/L Mgmt Rules	Current Low Above Previous
Long - S/L Mgmt Values	Low Of Current Bar
Long - T/P Mgmt Rules	Time Of Day Is On Or After 5PM (for whatever session you want to trade in).
Long - T/P Mgmt Values	Exit At Market

And for shorts:

Rule Type	Description
Short - Entry Rules	True Range is more than a multiple (2.5) of the average
Short - Entry Rules	Bollinger BandWidth is above X
Short - Entry Rules	Close Below Exponential Moving Average (Period=20)
Short - Entry Rules	Current Low Above Previous
Short - Entry Rules	Time Of Day Is On Or Before 12PM (for whatever session you want to trade in).
Short - Entry Values	Low Of Current Bar
Short - Init. S/L Values	High Of Current Bar
Short - S/L Mgmt Rules	Current Low Below Previous
Short - S/L Mgmt Rules	Current High Below Previous
Short - S/L Mgmt Values	High Of Current Bar
Short - T/P Mgmt Rules	Time Of Day Is On Or After 5PM (for whatever session you want to trade in).
Short - T/P Mgmt Values	Exit At Market

Please note that the Chairman recommends to not get back in on the same day after being stopped out. TS cannot provide this functionality yet, although you can use Holidays to ensure that no new orders are placed after (or before) a certain time of day.

%b is a single line whose value is determined by where the closing price is in relation to the upper and lower Bollinger lines.

When the close is exactly at the lower line, %b equals 0. Below the lower line, %b is negative. When the close is exactly at the upper line, %b equals 1. When it's exactly in the middle, %b equals 0.5. And so on.

It's very rare for %b to be lower than -0.3, or higher than 1.3.

The way Bollinger Bands are constructed, the price moves from the lower band, to the upper band, and back to the lower band. The problem is that the Bands aren't static. Just because the price moved from the lower band to the upper band, it doesn't necessarily mean that the price is rising - the upper band might have come down to meet the falling (or stagnating) price.

Anyway, here's a system which attempts to use this knowledge. It was tested on 5 Minute bars and seemed to do quite well. However it was only a couple of months of prices, so, as with all trading systems listed here, please backtest thoroughly before use. In particular, using a %b value of 0.1 for Longs and 0.8 for Shorts might need to be changed. As might the percent to be added to or subtracted from the Close price for the Stop Loss settings.

All Bollinger settings used a period of 720, with 2 standard deviations above and below.

Rule Type	Description
Long - Entry Rules	Value of %b Is Below X (0.1)
Long - Entry Values	Price Where %b Would Equal X (0.1)
Long - Init. S/L Values	Close Minus X (0.3) Percent
Long S/L Mgmt Rules	Every Bar
Long S/L Mgmt Values	Close Minus X (0.3) Percent

And for shorts:

Rule Type	Description
Short - Entry Rules	Value of %b Is Above X (0.8)
Short - Entry Values	Price Where %b Would Equal X (0.8)
Short - Init. S/L Values	Close Plus X (0.5) Percent
Short S/L Mgmt Rules	Every Bar
Short S/L Mgmt Values	Close Plus X (0.5) Percent

I haven't tested this system out at all, I just wanted to give an example using the Chandelier stop. As you will see, I'm about to mix my 5-Minute %b System #1 with a stop loss technique which is supposed to be used on Hourly bars. Therefore please backtest and modify before use! (Should go without saying).

I've heard of the Chandelier stop before in Dr.Alexander Elder's "Come Into My Trading Room". I came across it again in the Oanda forums, specifically this post.

Here's what a fella (?) called EZCurrency said:

For a trailing stop for a long, I use HHV(H,24)-3.5*ATR(24) on an hourly chart. This is the highest high value of the past 24 hrs, then subtract 3.5 times the average range of the past 24 hrs. This accounts for the volatility. Plot it and you will see it is an excellent trailing stop for most pairs!

Another person, Gouranga, then came up with a possible improvement:

One can combine this with a LLV(n) (eg. Long Trade) and take the higher trailer of the two. LLV(n) trailer locks in profit when market consolidates. While (HHV - ATR) locks in profit when market trends. So, you get the best of both mkt conditions.

The basic theory of using a number of ATRs in order to calculate the stop loss, is that it's adaptive to the current market conditions - during volatile periods the stop will be placed further away, and during less volatile periods the stop will be brought closer to the current price.

All Bollinger settings used a period of 720, with 2 standard deviations above and below. The period for the ATR is 24.

I'm not going to use the Highest High minus the ATRs. Instead, I'm just going to use the High of the current bar minus the ATRs.

Rule Type	Description
Long - Entry Rules	Value of %b Is Below X (0.1)
Long - Entry Values	Price Where %b Would Equal X (0.1)
Long - Init. S/L Values	[OHLC] (using the High) Minus X (3.5) Average True Range(s)
Long S/L Mgmt Rules	Every Bar
Long S/L Mgmt Values	[OHLC] (using the High) Minus X (3.5) Average True Range(s)
Long S/L Mgmt Rules #2	Every Bar
Long S/L Mgmt Values #2	Low Of Previous X (24) Bars

And for shorts:

Rule Type	Description
Short - Entry Rules	Value of %b Is Above X (0.8)
Short - Entry Values	Price Where %b Would Equal X (0.8)
Short - Init. S/L Values	[OHLC] (using the Low) Plus X (3.5) Average True Range(s)
Short S/L Mgmt Rules	Every Bar
Short S/L Mgmt Values	[OHLC] (using the Low) Plus X (3.5) Average True Range(s)
Short S/L Mgmt Rules #2	Every Bar
Short S/L Mgmt Values #2	High Of Previous X (24) Bars

Note that TS automatically works out which is, in the case of the Long trades, the higher of the two Long S/L Mgmt Values (and the lower of the two Short S/L Mgmt Values). Also note that stop losses never move to a position of increased risk.

As with %b System #1 above, this System was tested on 5 Minute bars and seemed to do quite well. However it was only a couple of months of prices, so, as with all trading systems listed here, please backtest thoroughly before use.

Instead of only using a trailing stop, this sytem also attempts to lock in a bunch of profit if the price has moved a fair distance in our favour.

For longs, initially the stop loss is set to the lower Bollinger line (where %b equals zero). The stop loss is then kept at the same level as the lower Bollinger line every bar after entry (remembering that the stop loss will never go down, however). But, if %b ever gets above 0.8, then the stop loss is moved up to where %b would equal 0.8. And from then on, the stop loss is kept where %b would equal 0.8.

All Bollinger settings used a period of 288, with 2 standard deviations above and below. Directional Movement System period was 14.

Rule Type	Description
Long - Entry Rules	ADX Is Below Both D and -D
Long - Entry Rules	Value of %b Is Below X (0.2)
Long - Entry Values	Price Where %b Would Equal X (0.2)
Long - Init. S/L Values	Price Where %b Would Equal X (0.0)
Long S/L Mgmt Rules	Every Bar
Long S/L Mgmt Values	Price Where %b Would Equal X (0.0)
Long S/L Mgmt Rules #2	Value of %b Is Above X (0.8)
Long S/L Mgmt Values #2	Price Where %b Would Equal X (0.8)

And for shorts:

Rule Type	Description
Short - Entry Rules	ADX Is Between D and -D
Short - Entry Rules	Value of %b Is Above X (0.8)
Short - Entry Values	Price Where %b Would Equal X (0.8)
Short - Init. S/L Values	Price Where %b Would Equal X (1.0)
Short S/L Mgmt Rules	Every Bar
Short S/L Mgmt Values	Price Where %b Would Equal X (1.0)
Short S/L Mgmt Rules #2	Value of %b Is Below X (0.2)
Short S/L Mgmt Values #2	Price Where %b Would Equal X (0.2)