The GTT Direction module
The main Forex direction guide
Overall direction is the most important element of the Grid Trend trading strategy. However there are aspects of Direction you need to be aware of. As you will see this is a long term trading technique – it is closer to an investment technique as you need to make an investment in open trades throughout the trading of this technique when trading the technique continuously.
So you don’t want to use a direction finding approach that is going to give you a buy phase one day and then a sell phase the next. You want as few phase whipsaws as possible. Ideally the phases should last a long time if the market will allow for that.
So we need a method of finding the phase that you can use at any-time. That means that you need not wait to only start trading when the price moves into a particular phase the first time. You need something that will allow you to start trading even when the phase has been active for quite a while.
Now there are literally hundreds of ways of find the direction of trading. We are going to show you the simplest and sometimes the most efficient way of determining longer term trades. Please bear in mind this method applies to the Grid Trend Trading technique in particular. In order to ensure that trends are of a longer term nature we would suggest that you use the Daily charts. One of the best dynamic divider between buy and sell phases is the simple moving average. You want it to be quite sensitive so a setting of 3 or 4 is recommended. To make this moving average work best for this technique you need to shift it 4 to 5 periods into the future. The shift creates a dynamic support and resistance level as well as providing cleaner crossovers from one phase to the next.
Some traders do not like the daily chart so a 4 period setting offset by 4 on the daily is close enough same as the 24 period offset by 24 on the 4 hour ( x 6 ) or 96 period offset by 96 on the hourly ( x24 ). Using short timeframes make the candles close on the other side of the MA much faster.
So the general rule is if the price closes below the MA trade in the Sell direction. If the price closes above the MA trade in the Buy direction – that is on any adapted timeframe you select.
Now that is pretty simple but what if…..
The price crosses over and closes in a different phase than you are in.
If the price crosses over and closes in a new direction you need to assess you current profitability.
If profitable close all deals
If you are profitable after taking your open deals and closed deals into account it might be a good idea to close all open deals and start Grid trend trading in the new direction.
If you are not profitable there are a few options.
1. Close all deals anyway and trade in the new direction.
2. Stop the grid trading in the previous direction and open a new grid in the new direction. This is a partial hedge type solution but is risky as open trades will accumulate losses faster than new trades will cash in gains in the short term.
3. Use the solution above but use much smaller grid sizes for the new direction. This will increase the chances of the multiplier effect working in the new direction and make your cash-ins more frequent.
4. Put a total hedge on the open deals and open a new grid trending trading system in the new direction. So if you have 5 open sell you would open 5 open buys. In addition you would start a new grid trend trading system in the new direction. The danger of this is that you will end up with a huge amount of open deals.
Clearly the Grid Trend Trading system has great benefits when you get the direction right. However if you are trading it continuously you need a definite strategy when the market phases change.
Many of these complications can be avoided if you are selective when you use the Grid Trend Trading system and only trade when you are sure of the short term trend and don’t use it on a continuous basis. Using it this way you would only use it for shorter 4 to 24 hour trading sessions. This will be covered in the next modules.
I recently purchased the Grid Trend Multiplier EA and have been evaluating it on different currency pairs besides putting it to trade on a demo account. I’m using an EMA crossover on the daily TF to determine the trend. In back test after back test, the non-directional mode fails miserably while the directional mode produces consistent profits. I wonder why the ability to automatically trade in a particular direction was not built into the EA.
the ability to automatically trade in a particular direction has been built in – not sure why you think this is not so. We do not recommend the EMA method as this was only introduced as result of client requests.
So for the directional mode the trader decides of the direct and activates the GTM in that direction – the GTM will trade in that direction on a set and forget automated basis until it reaches its exit criteria or the trader stops it manually. Please note: the trader determines the direction the EA does not have that ability. It also does not have the ability to change directions on its own. That is by design as it is intended to be traded as a mechanical trading tool.
Be careful The Grid non directional method will fail if inappropriate currencies and settings are used.
Please read the marketing page carefully. The non directional method is a set and forget method. The directional method requires the trader to make the trading decision as to which direction to use. That’s the way the EA works. You can use any method you wish to use the directional method but starting the EA in that direction is a manual process.Through extensive backtesting the EMA was found to give NO positive results using any currency and any grid size so was removed to protect less experienced traders.
when optimising the EA you find many setting that work for the non directional technique. The larger the grid size the bigger the chances of success
Hi Alex
Just purchased GTM and reading this article it seems that an ema is being recommended at beginning of this article and by the end it is not, ie your last published comment above.
And having traded for a few years now I am wishing to try trading with an ea, but yes the same problem afflicts all traders, namely reliable direction finding.
Also after few years with Elliott Wave I can tell you that EW is only as good as the Elliotticians ability at reading and interpreting the waves, and some of the greats get it wrong consistently, as you would see if ever you try a well known subscription service.
Every time I have tried a service in the past I throw my hands up in despair as they are no better no worse than the subscribers themselves at forecasting direction changes.
And the fact that there is an alternate count or two shows that the interpretation is wrong or 50-50.
If were correct there would be no room for alternates.
I mean you wouldn’t tell a new trader to study EW so as to learn to get the direction right would you?
I wouldn’t myself, as I know how tricky and deceptive it is thinking you know Elliott Wave.
Markets are never wrong, and Elliott Waves are never wrong, only the practitioners interpretations are wrong.
Just wondering what it is you do recommend as direction filters, as I read somewhere else on EXpert 4x somewhere that getting the direction right IS the Holy Grail in trading, so just wondering if you could clarify your stance on this.
Hope this doesnt come across as a rant but as you have pointed out before the direction is super important, even if this EA was fully non directional, and used in a ranging environment, ie a corrective phase of market moves.
I mean, coming back to EW thing again, once you have in mind a particular wave count and get attached to this, it is well hard to see the wood for the trees at that point, and see that you were maybe wrong in the count and direction bias etc.
Anyway looking forward to using GTM, directionally that is.
Hope you can respond to this, but maybe will also send this to you anyways as I cant believe that no one else has any questions or comments on this since 2014.
regards
Robert
Thanks for your comment – apologies for the late reply.
Our research has shown that the entry is not as important as people think. To prove that we created an EA that opens a buy and a sell at the same time at a particular time of day. This EA is very profitable and has a 90% success rate. I would urge you to re examine what you re focusing on in your Forex trading. Transaction management is way more important than getting precise entries. http://automatedmt4indicators.com/a-set-and-forget-ea-for-any-currency-timeframe-and-setting/
The best guides for direction could be the weekly and daily charts – but then again you could get the direction right and blow your account at the same time with the GTM. That is why you need to focus on transactionmanagement