Topic: The Prevailing Trend Direction
I’ve thought for several days on how to determine the prevailing trend direction on a market. What came to my mind was to find out a profitable trend following strategy. The main idea is to find different strategies for the different currency pairs and time periods and the only factor used to determine the trend is the profit the strategy generates. I assume that if the strategy (regardless of the indicators) generates profit it is on its own the best trend indicator. Basic strategy rules:
1. Use the particular market (currency pair and time period) for the trend we are looking for;
2. There are no adding, reducing or permanent stop loss;
3. Entry point is at the beginning of the bar;
4. Exit point is at the end of the bar;
5. There aren’t any “Closing Logic Conditions”;
6. (optional) Set the spread to zero.
Such a strategy gives signals at the beginning of the bar so I hope that when I get signal the trend is:
- buy signal - Uptrend;
- sell signal - Downtrend;
- no signal - No trend.
I used the strategy generator to find out a proper strategy. In order to do that I locked the “Strategy Properties”, “Opening Point” and “Closing Point” slots. I also set the number of “Closing Slots” to zero and set OOS (Out of Sample) testing to 30%.
In 1 minute I got this strategy:
Since I’m trading manually and always in the trend direction I hope I have found out a new valuable way to improve my trading performance. What I’m going to do is to observe these parameters on my trading platform and to trade only when this system allows. I used “Out of Sample” (forward) testing to generate this strategy, so I think it has to work for some time. Probably I’ll change it if its performance drops.
What do you think? Does it make sense?