Trailing stops using Moving Averages

[mehoolsheth]

Hi 4x,

Thanks for your valuable advice on Kijun. I have never heard of it before. I will surely explore this and would incorporate it in my EA for trailing stop based on the research. I am just trying to find out the most accurate way of getting the trade closed in Auto mode. Not convinced with anything yet. So having a hope with Kijun

Thanks again.

Regards,
Mehool.

 

[mehoolsheth]

Hi 4x,

Just one more question. I watched the Youtube video on Kijun and it said that if price closes above the Kijun line, possibility of change in trend.

So when you use Kijun as trailing stop, do you wait for the price to close above Kijun line or when it just touches the line.

Appreciate your help.

Regards,
Mehool.

 

[Piratetrader]

Hello I use the ichimoku as the most superior part in my methodology The kijun sen can be relied as a significant level of price support and resistance level and it is primarily used to measure the trend momentum as well. if you look at the ichimoku chart you will see that Price tends to move away and back toward the kijun sen this is because of the gravitation pullback .. kinjun acts as an equilibrium as well . also when you see that if the price action goes to far away from the kinjun there is a pullback to it and then you can rely on it to be used as a support or resistance! Usually if you are trailing stop you want the body of the candle to break and settle on the opposite side of kinjun where you can exit your trade because how do you know that if price action touches the kinjun it will not act as a S and R thus pushing the pair on the other way. you also want to look at the higher time frame for confirmation and add them in a confluence ! On the higher time frame yes it a fine candle breaks though the kinjun the price action gives a warning for a trend reversal ! here you want to look at the positioning of the kinjun where if its flat there are gonna be a lot of break through and pullback so it is always a good idea if you are using kinjun for trailing stop loss let the candle break though it and settle and look at the direction of the overall trend and kinjun as well.

 

[mehoolsheth]

Thanks Saif,

So from your message, I can conclude to say that the candle should close above the Kijun line to close the trade rather than closing when the price touches the Kijun line.

I looked at a video on Youtube where stops were place 5 pips below the Kijun line for long positions. So in your long position, when the price retraces and touches 5 pips below the Kijun line, your trade would close.

Would you advice this or still stick to closing of candle crossing the Kijun line.

Regards,
Mehool.

 

[4xpipcounter]

Mehoolsheth,

I'll post a chart a little later.
You cannot wait for price to close above the kijun. Not at least from a money management perspective. There are many times when a key support or resistance area is accompanied by a strong break. So, here are some related questions:
1. What if that were to actually happened? You would have an ugly position to deal with. Emotions get involved, and all objectivity is thrown to the wind.
2. What if you are not at your computer the time the candle closes above the kijun; or, do you want to spend all your life glued to the monitor?

Let me add to or correct something else that Saif said. Equilibrium has nothing to do with setting stops. The last thing you are doing is waiting for price action to gravitate back to the kijun and get stopped out. Also, you want to trade the thought of equilibrium once price action has wondered too far away from it, then initiate a contrarian position, but that is a topic for another day.

So, yes, if the candle closes on the other side of the kijun, there is a strong possibility of a trend change, but you do not want to use the current reading of the kijun as a stop, because any remote spike would, by accident take out your position.
The way to use the kijun as a stop is to count back 3 candles from its current reading, and then set the stop accordingly. You trail the position by adjusting the stop with each passing candle. Eventually, the stop ends up on the positive side of the entry and you are guaranteed a profit, regardless of what happens.
Another thing is to have a solid way of ascertaining a stationary S&R. This might be a pivot point or a chart form. The reason for that is that you would have the trailing stop, as described, but there are also points in the move that could be impenetrable, and you might just want to get out of the trade at that point.
The other thing to look for is what is the most dominant TF, and then scope down to the next lowest to enter the trade and set the stops.

BTW, just another nugget. This is in no way a knock on MA's. You can use a MA along the same lines of what we are talking about. One of the major drawbacks with a MA is that once the candle starts moving against your position, the MA will move with it, by virtue of the math of the MA. At that point, you would be moving your stop against your position, and that could be a never ending process. The only way the tenken or the kijun is going to switch directions is that a move on the other side of it is going to be necessary.

Hi 4x,

Just one more question. I watched the Youtube video on Kijun and it said that if price closes above the Kijun line, possibility of change in trend.

So when you use Kijun as trailing stop, do you wait for the price to close above Kijun line or when it just touches the line.

Appreciate your help.

Regards,
Mehool.

 

[Piratetrader]

Sir LOL I added the Equilibrium just as a basic of how it can be used ! There were moments like I was in a good bullish profit pips move and the price was just to far away from the kinjun . the kinjun was near my entry point and was flat as a result If I waited for the price action to get back to the kinjun to see where if it breaks below it and give me a loss or acts as a support and pushes the pair my way again that would be not be smart move so I used to exit it earlier on the break of the tenken sen or other near by support level ! at times I also noticed that I used to place stops above or below the kinjun and the spikes after the candles were created used to hit them and go again my way and I was like damn I should have moved my stop losses a little more higher/lower that is why I prefer to use the candle closing on the other side of the kinjun "If" I am riding a good trend from my entry point ! sir in all brokers mt4 I think we can place our stop loss at a point or a certain level where if the price goes below a certain level the trade would automatically get closed suppose I am in a 100 pip profit move I can place my stop loss at a certain level suppose 85 pips that if it goes below this level(85 pips) the trade would get closed and give me 85 pips profit I used to set like this and go to sleep when keeping overnight positions !

 

[4xpipcounter]

Mehool, I know your question was directed at Saif, but let me jump in here.

A set quantity of pips is a very unsafe way to gauge a stop under any condition. An x amount of pips stop has no measurement of the markets volatility or lack there of.

Now we go back to the attributes of the ichimoku, particularly the kijun.
First, you don't need an indicator to look at a chart and tell if it is in a strong trend, and if that market is very volatile. The kijun measure how volatile or how trendy the market is. If your setting are set at 9,26,52 (the default), then the kijun is plotted by looking at the last 26 candles, taking the high and low and drawing the line at the mid-point. So, in a trend the odds are the mid point between the high and low will not be hit.
The next thing you want to do is to make sure you have a stop far enough on the other side of the kijun just to make sure you don't get taken out on some weird spike. My experience has been to look at the level of the kijun 3 candles back, and that would be an adequate stop.
If the kijun is heavily trending then the stop will be much further back, but is need in order to make up for the strong volatility that is sure to ensue on any correction. If the kijun is more level, then the market is in a calmer state, but as long as the trend keeps going, it is still unlikely your stop will be hit.
Things are busy around here, but I will catch up to you with some charts. Feel free to post all the comments and questions you might have.

With all respect to your thread, I have been doing a series on the ichimoku that will eventually be ready in a one-document text. I also covered in that series these same ideas regarding stops.

Thanks Saif,

So from your message, I can conclude to say that the candle should close above the Kijun line to close the trade rather than closing when the price touches the Kijun line.

I looked at a video on Youtube where stops were place 5 pips below the Kijun line for long positions. So in your long position, when the price retraces and touches 5 pips below the Kijun line, your trade would close.

Would you advice this or still stick to closing of candle crossing the Kijun line.

Regards,
Mehool.

 

[4xpipcounter]

Later came quicker than I thought. I just noticed this trade is getting very close to hitting my TP, so I wanted to hurry and get a picture of it before it closed off. Actually, as I was writing this my TP was hit.

I'm using one of my trades for today to demonstrate about everything I have already discussed with you.
First of all, this was not one of my prettier trades considering the stop was still on the other side of my entry at this time of the day. But, the market is heavily trending, and so that is why the stop had to be where it is. Also, notice the yellow candle and how strong it appeared, and then the next candle continued moving against. I have said this often, but you want to give your trade enough room to breath.
I mentioned the idea of having static or stationary S&R's to be used as a reference. There has to be a point during the day that the trend is going to give up the ghost. My TP was 1.4554 which is the yellow line, the MP. That is actually the point the monthly candle formed a perfect doji.
As I'm writing this, the move continued a little on the other side, and may even go deeper. Nevertheless, the trade, even though less than sparkling, made me 42 pips. There are decisions you make. One could have been I could have continued trailing the trade. I went with the TP, in this case, because the market has been very volatile, and I did not want any strong spike against me, and then settle for 10 pips instead of what was, for me, a hard fought 42 pips.
This trade was not placed on what I saw just on the hourly chart. I'm going to post another chart, which is going to show the importance of using all the TF's when making a trading decision.

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[4xpipcounter]

This is the daily chart. It is showing that when the day started, there was a break under the tenken and kijun. When you get a break on the other side of both, this is added R (in this case). When you develop a knack for your favorite MA's (That's if you continue using them.), you will then notice the added support and resistance once price has broken through both of them. The nice thing about the kijun and tenken, is that when they are broken, the total scope of the median was broken, and that is in regard to its formula as discussed before.
The stochastics oscillator also came into play with my trading decision. It was not OB by any stretch of the imagination. The thing it showed at the beginning of the day the value line crossed the signal line and was on a divergent path from it. This told me the bears weer heavily favored and consider how closely the candle was to the kijun it also showed a low risk trade, even though a wide stop was still needed.

If you trade forex, then you especially need to be aware of the time of day you are trading. There are certain times of the day that are more voluminous than others. Volume is the octane that pushes price action. The times of high volume IST is 11:30 am to 10:30pm. I'm mentioning that because once you are in the trade, you would probably want to use the hourly or greater to trail your stop. If you are a daytrader, then starting at circa 10:30pm IST, you want to scope down to the 15-min to trail the trade. During this time the sheer volume is going to take out the 15-min charts, even 3 candles back.

One more thing, and this is my personal experience talking. You Tube is a good source to see training videos, but take them with a grain of salt. You check it out and you will see those videos have a web site attached to it. The idea is to get you to visit the web site, and then they have something to sell you-- online training program or seminar, e-books, etc. Their videos are designed to make their sales pitch look plausible. Everything they talk about looks good on a video.
Am I going anywhere with this? You better believe I am.
There are exceptions, but for the most part, if someone really knows how to trade, there is no need to be moonlighting, namely selling stuff on the side. There is to much money for the pro to make in trading to be concerned with selling e-books and training material. Here's an example. I talked about this GBP/CHF trade. It was tough! I won't tell you how many lots I had on the trade, but one lot made 450 USD, and all I had to do was press the sell button, then add some data concerning the stop and TP. If an e-book cost 50 USD, that would be 9 e-books I'd have to sell in order to equal what I got on a tough trade. Your question should be, "Why are you selling e-books if you are making that much money?" Seminars are worse. You get all the people to come in at 450 USD at a crack, but then you have all the devoted time and preparation for that. That time could have been spent sitting in front of the computer making money the same way you're charging others.

The best information and most valuable is the free information without the ulterior motive. There are many good threads in this forum that will abet that interest.

Now let me smoke a pet peeve of mine, and if you are not convinced, then get back to me, and I'll elaborate further. Hopefully the sheer common sense will prove the point.
A set amount of pips on a stop does not work, and that includes setting a stop "5 pips on the other side of the kijun". That set amount could very well be within the zone that price is moving in. Stops need to be more systematic in order to be effective. They need to be placed on the other side of key supports and resistances. If it is a straight dollar amount or x amount of pips, you're looking for trouble....period. The guys that show that stuff on a chart on You Tube are good at finding whatever charts they can that will support their view.
Here's a classic example: There are great salesman (I call them that because they do not know how to trade.) that show, and eventually sell their MA crossover systems. Every single time you go to You Tube or their web sites, the crossover con artists are showing the perfect trend, where the candles crossed the MA's, and all the money you could have made.
So, here's your monkey wrench. After you view their garbage, pop open your own charts, plot their system on your chart, but view i on a sideways market, then ask yourself how many trades you would have taken base on the methodology espoused and how many times you would have been stopped out.

Now, I'll put the shoe on the other foot. I'm used to it, because I tell people this all the time. Do not believe anything I say (Doesn't mean you have to call me a liar.). Take everything I say, observe it on your charts, and then post all your doubts. Make me prove what I say. Afterward, you go through the learning process, then rather just believing someone, you develop a heart conviction about what you do. That, my friend, is powerful stuff.

I've given you a lot of stuff to consider. I look forward to talking more.

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[mehoolsheth]

Hi 4x,

Thanks for taking time and explaining Kijun to me. To be honest, I didnt follow everything you mentioned in your explanation about this indicator but what I understood is to keep Kijun value 3 candles back from its current reading. I will certainly explore that.

I might be wrong in assuming that the strategy you have mentioned is on manual trading. If I want to exit the trade manually, I can certainly follow the instructions you have mentioned. But I am looking for something where EA can handle this. For EA to set stops 3 candles back from its current reading is easy. But I discovered another big problem today and due to which I might not be able to use trailing stops based on Kijun or MA. Let me explain.

For E.g, when EA opens a long position, it will have its predifined stops. I would want the trail to start only when I am in profit. So when Kijun value crosses my entry point, this is when the trail starts locking as many pips as kijun moves ahead. When price reverses and hits Kijun value (or 3 candles back it's current value), I would want trade to close. This is ideal scenario where Kijun value was well below my entry point.

Now consider another example where Kijun value is well above your entry position. In this case, as your trailing value is well above your entry price, trailing will start when price crosses Kijun value. Immediately trail will start and with small retracement, there are chances of trade getting closed unless price has crossed Kijun with a distance which might be very rare.

One way to tackle is to set a criteria of minimum number of pips into profit before the trail triggers and that's way too complex.

So finally, I have narrowed down to trailing stops using PSAR. I know, I might not be taking full advantage of my trade using PSAR but I guess thats the best when you are having a fully automated trade which you dont even need to monitor. Another option is to set fix pips or combination of fixed and PSAR.

Most likely I will have a combination of fixed pips followed by PSAR. With backtesting, I will know my average profit using PSAR. Will add more pips to that average value and ask the EA to close if it hits that value. If not then let PSAR close the trade.

I liked your comment and also agree that markets are more volatile from 11:30 AM to 10:30 PM and believe me just today, I have asked my developer to put time filter in my EA. So that EA opens trades just in that window.

Even I agree with you that many people sell ebooks, seminar's, sell EA's and other services but I dont understand, why dont they focus on trading as they can earn in multiples in what they are doing. I would never do that. The best what I would do is open a PAM account and be a account manager. So what you earn, your friends and collegues also earn and you make 50% earnings on each of these accounts linked to you and they get 50% doing nothing. I would love to do that in future.

Youtube is indeed a great learning mode. I learnt about Kijun today. All my forex learnings over 2 years are from youtube only. Its easy to catch using videos rather than reading texts. Also as you rightly said, people who sell trailing MA's EA show perfect trend which is very rare. All the videos I have seen on youtube on trailing stops have perfect trends. Postive part was I got the idea and using that to build my own EA.

Thanks again for your detailed explanation on Kijun and I would surely try using in my manual trades for exiting.

Talk to you soon..

Mehool.