Multi-market, multi-timeframe testing and trading

As mentioned in “Trading intraday FX swings,” the concept used here is, theoretically, applicable to any market or time frame. The AUD/USD rate and the 10-minute time frame were representative choices. Experimenting with and testing other markets and time frames is a necessary step toward determining the technique’s value in a given situation. The following rules take the concept outlined so far and turn it into a more dynamic and customizable strategy that can be tested on any market or time frame.

Instead of using an absolute high-to high or low-to-low price move to signal a trade, this strategy requires the market to move up or down a certain amount relative to the recent bar ranges. For example, the requirement for a buy would be a low that is 125 percent or more of the five-bar average range. This makes the setup dynamic:

The more volatile the market, the wider the bar ranges will be, and the larger the move that will be necessary to trigger a trade.

Also, the simple “trend filter” used in this case only required that the current price be higher or lower than the price x bars ago, depending on whether you’re testing long or short signals. Here’s the formula for long trade setups:

Go long if Low <= Low[1] - Multiplier * average(Range,Length) and

Low[1] - Multiplier * average(Range,Length) <= low[Length2] Where

Length = number of bars in the moving average of range calculation (e.g., 5 = 5 bars);

Multiplier = the percentage used to determine how big the move will be, based on the average range — e.g., a multiplier of 1.25 will mean the most recent low must be 125 percent times the five-day average range below the previous low;

Length2 = the number of bars back the previous low must be lower than (e.g., a value of 20 would mean the current low must be lower than the low 20 bars ago). For example, to go long after price drops below the previous bar’s low by 1.2 times the 10-day average range, as long as the current price is below the low five bars ago, the formula would be:

Go long if Low <= Low[1] - 1.2 * average(Range,10) and

Low[1] - 1.2 * average(Range,10) <= low[5]

Other trend filters or range definitions can easily be substituted. The rules are reversed for sell setups.