Trading Systems

Reversal trading system based on Keltner channels and Bollinger Bands

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The trading system that we will explain below is based solely on two indicators, the Keltner channels, and the Bollinger Bands, which are actually quite similar. It is a price reversal system that tries to find the price inversion points.

Therefore, it works best in range markets where extreme value readings of indicators such as Bollinger Bands produce more reliable results. In trending markets where it is more difficult to predict maximum or minimum extreme values, their signals have less reliability.

Since this system uses two well-known and commonly used indicators found in any technical analysis package, it can be used in any trading platform.

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Channel breakout system with retracement for Forex

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This trading system was primarily designed to trade in extended time frames (4 hours later). It is based upon the breakout of a dynamic price channel which is calculated through the highs and highs of the price bars. In this sense, the strategy seeks to enter the market after two events occur:

  • The bullish or bearish breakout of the price channel.
  • A retracement movement of the price after the channel breakout. After this setback, the trader must open a position in the same direction as the breakout.

Trading Strategy with Supports, Resistances and Stochastic

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In this article, we present a trading strategy developed and kindly provided by a collaborator named Erick Diaz Guerra.

This strategy uses an automatic indicator of supports and resistances; and as a filter, the standard stochastic oscillator of MetaTrader 4, a known technical indicator used in many trading systems. The strategy is based mainly on the likely price rebounds made in the supports and resistances. The stochastic serves to confirm the rebound movement. The approach seems simple and interesting at the same time, though I have not tried the strategy, however, I am planning to include it in the list of systems awaiting assessment. According to its author, the strategy has performed well in the backtesting and in a demo account, so he has decided to use the system with a real account.

Now let’s see a complete description of the strategy.

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Main Types of Trading Systems

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Introduction

We have already talked in other articles about the natural evolution of the Trader, from the beginning of his career in the markets until he obtains the knowledge and skills necessary to develop his own profitable Trading System, and now we are going to focus on the different types of trading systems that exist. Any person interested in the markets and trade successfully through a system is going to find a multitude of systems and methodologies of various types and characteristics, therefore we will present a classification as objective and simple as possible that allows the reader to know the main categories of trading systems that can be used.

The objective is merely didactic without offering any direct recommendation on a specific system, although the following information does offer advice on certain general aspects, especially when it comes to guiding the trader in the future development of systems. There are thousands of trading systems developed for all types of market conditions, and the best system is the one that each trader designs according to the strategy that gives the best results and makes him feel more comfortable. Do not expect to become a millionaire with the system that someone has sold you. Develop your own trading rules.

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Trading Using the Simple but Effective Rule of 2 Candles

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This trading technique that can be found for free on forums and websites like this has the advantage of requiring no more than a few minutes a day so it is perfect for traders with many occupations and with no time to see charts and analyze the market all day. Furthermore, the procedure of The rule of the two candles is not complicated and can be learned very quickly.

Basically, this strategy is based in the identification of an “Inside Bar” as shown in the following image:

Inside Bar Trading System

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The Calmar Ratio – Profitability and Risk Indicator

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The Calmar Ratio is an indicator that is designed to measure and compare the performance of an investment portfolio or trading system.

The interesting thing about this ratio is that it summarizes how the profitability of the period has been with respect to the assumed risk.

Although it is a less known indicator than the Sharpe ratio, the Calmar ratio is currently widely used in the financial industry. It was first published in 1991 in the Futures magazine and was developed by Terry W. Young; precisely its name comes from the acronym formed from the name of the newsletter that the author sent to his clients, called CALifornia Managed Accounts Report. The Calmar ratio is defined as the ratio between the annualized profitability of the system and its maximum drawdown in absolute value. 

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Double RSI Trading System for Forex

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The trading system that we are going to present below is based on the use of two RSIs, as the name implies, specifically the crossings of two RSIs with different periods (One with a short period and the other with a longer period). As a filter of the signals generated by the crossings, the Fisher indicator is used, which allows having more reliable trading signals, since RSI crossings under certain market conditions can generate false signals and losses that could be avoided with the right filter.

The system itself is not complex. Long positions are opened at the RSI bullish crosses and short positions at the RSI bearish crosses. The Fisher indicator is used as a tool to confirm the different signals.

As always, it is recommended to test the system in a demo account before using it to trade with real money.

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NR4/IB strategy for intraday trading

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The NR4/IB trading strategy is an intraday trading system which was developed by the traders Lawrence A. Connors and Linda Bradford Raschke and presented in their book “Street Smarts“. The meaning of the letters NR4/IB is “Narrow Range Bar 4Bar/Inside” and each time this pattern is detected there is a high probability that the market will produce a strong movement after the breakup of the formation. This pattern consists of a series of four bars or candles in which the fourth candle has two very important conditions:

  • Condition 1: The last bar or candle (also called NR4) must have a minimum and a maximum lower than those of the three previous bars, which means that it is a narrow bar as it is trapped within the range of the previous bars.
  • Condition 2: The NR4 bar must not exceed the maximum or minimum of the bar that precedes it, which makes it what is known as the “inside bar”.

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The Most Popular Forex Strategies

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Popular Forex trading strategies

Do you want to trade in the forex market but you still don’t know how to do it? Do you have doubts about doing short or long term operations? Don’t you know what kind of analysis to use? If you are a trader who is starting in the exciting world of Forex and doubts assail you with any of these questions, then we present a few types of strategies, the most popular in the market, so you can decide which one suits better to your needs.

If, later, you decide to train in more depth in any of these trading methodologies, you can always find more information here (see article on trading systems) or in the different publications specialized in trading strategies that we have on this website.

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