Time Frame

The feedback on the group trading strategy was phenomenal! I’ve never had so many emails with such a broad range of opinions. Thank you to everyone for your response and thoughts.

Numerous people pointed out an obvious oversight on my part: which timeframe will the strategy use? Before you have a heart attack, please hear me out. Notice on the graph (republished below) that the curve really does not kick outward until 0.3% or more. On the current EURUSD price, that’s a movement of 39 pips (0.3% * 1.3000). I used the M1 chart to create the graph. The strategy, too, will use the M1 chart for its signals.

The graphs displays the percent distance of the price from the SMA against frequency (i.e., how often is the price this far from the 200 SMA?)

Another reason to consider the M1 chart is the number of trades per year. The average number of bars that the price spends above or below a 200 SMA is… 200 bars. This is based on research that I performed earlier this year. There are approximately 386,000 trading minutes per year. Divide that by an average of 200 M1 bars between crossings and you get a maximum of 1,930 trades per year (386,00/200).

I’m only looking at taking a percentage of those trades. If 20% of the crosses result in desirable opportunities, that is 386 trades per year. While active, it’s hardly crazy. 386 trades per year averages to ~1.5 trades per day.

Leave comments below if you see anything worth adding on the time frame.

After-thoughts

This series eventually led to a profitable trading strategy. If you’d like to read through the journey, then I suggest reading the articles sequentially

The initial strategy idea
Time frame
A research plan
An annoying surprise in the initial backtests
An attempt at range trading
Range trading results
The moving average envelope scalper