Sell short signals based on the Dynamic Trio Next
will only be taken if the Dynamic BP Step High is above
the prices (the trend is down). Any other signals will be an
exit and go flat scenario. Figure 3 shows the rules in the
Fibonacci Trader System module.
Notice that the Dynamic BP Step High is set to "use
as trend indicator" and requires a two tick close.
Now here's a subtle but important point: Even though
our entry and exit signals are based on the close of the 50-
minute time frame, because we are using the Dynamic
Trio Next, we can have a buy signal on a ten minute bar
basis (Figure 4) because the Dynamic Trio Next may
have flipped first to the long side, but the market was below the Dynamic BP Step High, so we
can only be flat. But, if the ten minute bar closes
now above the Dynamic BP Step High we will go
long via our rules. This is a special feature of the
Fibonacci Trader many of our indicators are calculated
on a Dynamic basis, giving us intraday signals
based the higher time frame.
After running the system I copied the results
for the month of April by selecting just
the April results in the Results window, pressing
the key combination “Crtl C”, and then I
pasted the information into an Excel spreadsheet.
I then rearranged the columns to offset
buys and sells, and then I visually checked each
and every trade for the MFE, MAE, and profit.
You may, at first, think that this sort of detail
work is something best done by a computer.
I think not. This sort of visual detailed
analysis brings you to a full focus understanding
of the subtle nuances of the trading system.
There is a very valuable psychological
benefit to doing this sort of hand work because you will have a better intuitive feel and acceptance
of the trading system, an important psychological
asset for becoming a successful
trader. Figure 5 is the table of this analysis. Let's
use this table version of the data and take a more
visual look at the results.
April was quite a month for this system. Using
a two tic slippage, the system netted out 108 ticks
over 9 trades, including the assumption of an exit
on the last day of the month. Figure 6 shows a histogram
of the closed profits and losses of each individual
trade. Five of the nine trades were profitable,
with the best just over 60 ticks. The losses
ranged from –1 tick to –27 ticks.
Let’s take a look at the MFE and MAE for
this month of trades. Figure 7 shows that every
trade did start off with at the least a six
tick profit for a minimum gain and the best
trade reached an extreme of 98 ticks.
How might we use this information? One
trading philosophy is to include a procedure
to take a partial profit at some point in every trade if the market reaches a preset objective.
How might you determine a reasonable objective
for a partial profit. It appears here by simply
looking at the data one could set an initial
target of 20 ticks for one contract, and then
hold one more contract for an exit signal.
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