Easy Does It off the TDI indicator – EDI TDI

Hello all,I would like to submit a trading strategy for discussion that I think has a lot of potential. It would no doubt be very easy to turn into an EA. The strategy stems off of Xman’s S3 system here at FF, which is in turn an offshoot of Big E’s TMS system. No doubt many of you are already familiar with these strategies and there are already some EA’s in place that you may have tried.

 

So first the dessert, before the meat and potatoes:

I did a visual backtest of the strategy on the E/U from the first of the year forward. I’m proposing it to be traded on the H4, so not a large data set but it shows a lot of promise. EDIT: Trading this live since the end of April I have switched to the main entry off of the Daily.

Now a caveat here, for the backtest it was a bit difficult to tell exactly where the entries and exits would fall in relation to the TDI. I tried to be conservative in my estimates, going with the nearest new bar opening, as that’s when the TDI updates.

Having said that, the attached pdf is an excel file of the trades that would have been taken this year and the results. Lot sizes were a bit difficult to decide on as I didn’t want to try and adjust them to each trade, so I went with an average of about 50 pips. Based on that I figured a risk factor of 1% per trade to determine lot size. I do feel in live trading, which I have begun, the actual stops may be lower, allowing a larger lot size for the same risk %, enabling a faster equity growth.

From Jan 1st through April 23rd there were 22 trades taken. There were 16 winning trades for a total of 1,344.4 pips and 6 losing trades for -92.8 pips. Total account equity increased by 35.44 % during that time.

The Strategy:

As mentioned I’m using the Trader’s Dynamic Index with alerts as my only indicator (other then trade info indi’s, if you don't like all the indi's take em off). I trade it on the Daily as I feel that gives more opportunity for trending then shorter time frames. Then I stack orders based on the H1 (when I'm in front of my computer)

Low spreads are always a plus.

All indi’s and template are attached.

Entry:
When the green TDI is outside of the blue bands and then crosses red we buy/sell. Stop loss is set below/above the last swing low/high which will be nearby. SL will be moved to BE when profit is approx. 25 pips.

Stacking:
Once the initial daily entry has been made and trade has been moved to BE and as long as the green remains on the same side of red that initiated the daily entry, then I move to the H1 and stack orders based on the TDI Cross irrespective of the blue bands. SL treatment is the same as on the daily.

If the initial Daily entry hits SL before stacking starts I would reenter based on stacking criteria.

Reset:
When green crosses back over red in the other direction on the Daily chart that run is over. Occasionally, after a long run, our reset point will be an immediate entry in the opposite direction (providing that the green has traveled all the way back outside the blue bands before crossing red again).

Exits:
Trader discretion. Many will exit all positions when reset occurs on Daily.

I however am going to use the strategy as an entry to Graeme's Equity Millipede approach. If you haven't read that thread yet, you owe it to yourself to do so. Here's the thread: http://www.forexfactory.com/showthread.php?t=245149

So, when the Daily turns back against my trades, I will close half my positions and let the others ride. If entry conditions are met, as stated above, in the opposite direction then I will start to stack trades that way.

Automation:
As you can imagine, it's impossible to be at the computer for all the H1 stacking trades, especially if you're in slumberland during the London session. So an EA for this would be awesome, and I don't think, that complicated.

I found and EA for trading the TDI cross that Xaphod had already written. Hopefully it wouldn't be too difficult to add the 'bands' criteria and other parameters. So for you coder's out there that might be interested in tackling this, let's give it a go and see if this has legs.

Meanwhile I am continuing to trade this live as best I can.

Let the discussions begin.

EDIT 5/27/12: I'm trying a few new indicators to try and filter the trade exits. They may or may not stay part of my strategy, but here they are for now.