Submit by joy22 from Workin paper of the author. When the black dots are below the tunnel, initiate long positions. We want the market to exhaust itself before we enter. An example will clarify. This is our signal to initiate a new long position at approximately the area and change. In other words, we book half the position for a profit. If this leads to a losing trade, then we must wait for the market to come back to the tunnel and start over. Perhaps you will trail the market with a stop, or look to get out, for example in a bull run, with a violation of the previous days low.
Maybe you have something else in mind. To see Manua in attach. In the picture Vegas Tunnel Trading System in action. Swing Trading with Fibo. Because this is a model its not a complete system but with your help i think there is room for improvement to what already is so far as i can tell a profitable system.
If any of you been to forexnews lately then you may have seen many of us trading what we call the Tunnel System. OK lets me get on and describe it.
The benefit of 4 hours is you get good nights sleep, can go out during the day for many hours and so basically are not tied to the PC all day. However it has been noted that in the case of euro it will only deviate from the 55 SMA out pips away before it has to retrace. There are some rare spillage exceptions but this is a rule of thumb. Other pairs like cable and some volatile crosses will go to pips away from the 55 SMA and retrace.
So the basis of the system is we buy as soon as we are above the 55 SMA and sell below it. Now this is the clever part that makes nearly ALL moving average systems fail. OK so you might ask well how do I know what set to use on each pair?
I seen a thousand other filters can be used BUT anything you use will result is a delay and can miss major moves.
I was amazed how well this works. It needs no stops, no filters nothing. If it closes above we go long, a close below we go short. Now we left the tunnel going long with say 4 lots. This is because if the last lot is left open if we return to the 55 SMA it is so small it wont really harm our profit but there is a chance the 55 SMA can begin to slope up at a steep angle and the price and the 55 SMA will run for hundreds of pips.
So the last lot left open begins a free trade. This is the opposite of most conceptions where you think you should be adding to trades but we are reducing our risk by taking profits in fibo stages. In practice this is MUCH safer. OK you hopefully have the basis of this system. In practice a risk map needs to be defined the 55 SMA does get whipped. Most of the danger is in the crossing because we are fully loaded.
If any one can script this on MT4 the back tester has an automatic optimizer to find the max profit of any user variable. Also one can see the greatest portion of the order is taken at the 1st fib. This is because the market ranges more at the 89 fib than it does trending so we lock in the greatest portion of the profit early rather then later. Incidentally profit is only taken at each fib level once.
If the market ranges between the 1st and 3rd fib level we only take profit only once the first time it was hit. I think this system is brilliant. I use a similar system but instead of fibo I use quadrant lines placed around a median price point for a certain time frame.
I think trading shorter time frames is a crapshoot because the price movements in shorter time frames are in my opinion just random noise. There may seem to be a trend going on in a shorter time frame but I think it is just merely coincidence. The only thing I don't like about a long trade when the price closes above the sma is that it is still a gamble on how far the price may rise above the 55 sma. It could very well just cross over and turn around again.
Also we don't know if it will hit the first fibo level let alone the 2nd. You could end up taking profit too early or, you may not take profit at all because of loftier expectations. Since we know that retracements to the 55sma are very likely to happen, I would take an opposite position and that is, I would instead short at the 2nd or 3rd fibo position above the sma. We can be more certain of the magnitude of the move from this perspective more than the other perspective.
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