Trading system based on the detrained price oscillator
In this article we are going to explain with details a trading system based on the technical indicator detrained price oscillator (DPO). It also uses other indicators to confirm the signals of the DPO, in this case the MACD and the ADX. The ADX and its complements (-Di and + di) represent a group of indicators of directional motion and among other things measures the strength of the current trend.
The combination of these three indicators produces a system with signals of higher fiabililidad, which can be used to perform medium-term operations in time frames of 60 minutes.
As always, it is recommended to test this system in a demo account before using it to operate with real money.
System settings
Currency pairs: all.
1 Candle/bar graph with 1 hour time frame.
1 Simple moving average of 3 periods.
1 Simple moving average of 15 periods.
detrained Price Oscillator (DPO) indicator set to 12.
ADX indicator 14 with DM.
MACD with standard configuration (12.26, 9).
* You can download the DPO indicator for MT4 at the following link (the other indicators are already included in the platform):
-Indicator detrained price oscillator for MT4 and MT5
System rules
The opening of the buying and selling positions is based on the crossing of the DPO up/below the zero line. These signals are confirmed by the other indicators for greater reliability.
Buying positions
The DPO must cross the top of the zero line.
The line of the MACD must be above the signal line.
In the ADX, the + di must be above the-Di or at least must be crossing above the-Di. This is not 100% necessary, but it is preferable.
Finally, the moving average of 3 periods must cross over the moving average of 15 periods in a period that does not exceed three candles, either before or after the bullish crossing of the DPO.
The stop loss is placed below the moving average of 15 periods, at a distance of at least 10 pips, depending on the tolerance to the risk of the trader.
Sales positions
The DPO must cross below the zero line.
The line of the MACD must be below the signal line.
In the ADX, the + di must be down the – di or at least must be crossing down the – di. This is not 100% necessary, but it is preferable.
Finally, the moving average of 3 periods must cross the moving average of 15 periods in a period that does not exceed the three candles, either before or after the bullish crossing of the DPO.
The stop loss is placed above the moving average of 15 periods, at a distance of at least 10 pips, depending on the tolerance to the risk of the trader.
System examples
In the example above we can see a good sign of purchase in the EUR/USD. In the same candle, the Dpo crosses above the line zero, the bullion of the + Di is produced over the – di, the moving average of 3 periods crosses the moving average of 15 periods and the MACD has just moved above the signal line. In this case, we wait for the closing of the candle and open a position of purchase in the next candle to ensure the reliability of the crossover of moving socks. This is usually a good practice to avoid premature entry. As you can probably notice, there is another good sign of purchase which occurred shortly after the first position was closed, but not included in this example to keep it simple.
Purchase: 2629
Stop loss: 2601 (28 pips, ie 10 pips below the moving average of 15 pips)
Position closing: 2751 (when the bearish half-crossing of the Moving stockings occurs)
Benefit: 122 Pips.
In the image above we can see an excellent signal of sale with this system. The reason for this assertion is that each indicator shows a sales signal in the same candle simultaneously. We can see the Dpo crossing the line zero, and at the same time the + di crossed down the – di and came from a bearish crossover of the moving average of 3 periods and the moving average of 15 periods, which confirms the signal. The MACD was also below the signal line. The signs like this are the ones that are most likely to succeed. One thing we can notice is that the prices had a temporary setback almost to the average 15 minutes, and then continued in the expected direction. This is something that occurs more or less frequently, so it is recommended to place the stop loss on the opposite side of the moving average of 15 periods.
venta2338
Stop loss: 2368 (at a distance of 30 pips, ie 14 pips above the moving average of 15 pips)
Position close: 2029.
Benefit: 309 Pips.
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