The logic of the brain trend is based on 3 key aspects:
A signal is generated whe we have a momentum + volatility break - out of a digitally filtered price over a momentum treshold.
The first aspect is the momentum
The Brain Trend needs a momentum computation in order to generate a signal for the trade. The momentum is computed using the Stochastic indicator. As the momentum often preceeds the price action this is a sound technical principle.
In fact it is possible to change the tresholds for the momentum manually.
In the privded expet we did not touch to this parameter. The default setting is a 9 period Stochastic for momentum computation.
As far as I understand we need a strong momentum in the direction of the price action in order to generate a signal. If we go up we need the momentum to go in the overbought area. If we seel we need the momentum to go in the oversold area.
The second aspect is the breaking of a volatility range
The momentum by itself is not sufficient in order to generate a signal A break - out over a determined range is needed.
The signal would be active only the price goes beyond a predetermined range. This part of the formula has never been touched. However as we know the volatility is changing all the time in the forex market and there are repeatable patterns of volatility I think that should be adapted.
There are many possible ways to determine the break - out. The core idea of the digital mods is to use not the price but a smoothed price in order to check if there is a break - over the predetermined range or not. The more smothed is the price the break above range level would be identified later. In fact this is the thing that is used to regulate the sensitivity of the filter and this was the main innovation of the digital brain trend mods. For example in the jurik JJMA versions we are not used the actual price but we are using the values of the filter. And we are looking for smoothing without delay and that is what the digital filters do in the digital Brain Trend. It was not very far the idea to use jurik everywhere in complex systems so that gave birth to a whole new generation of systems. However we can use everything that smoothes the prices without lag.
The third aspect is a volatility stop
This is a classic in the trend following systems. The idea is to slide the stop loss level point by point based on the current volatility in the trend.
2. The history of the advanced systems
A mystical guy appears on the cyrillic Russian alpari forum that uploades the first digital mod.
I tried to contact him in vain, the files have been edited by Larionov, and the JJMA library is of Kositsin, from the copyright information). There is has been for some years. Then I wanted to share with others as the Alprai forum was only in Russian and practically unaccessible to non cyrillic readers. I shared it both on Forex Factory and TSD. After that I started to to share private messages with some traders. This was Mr. Tools from TSD. And we discussed the possibility of putting different things instead of JJMA. I was thinking mainly about Fractally modified Jurik, the idea was to use more smoothing than general but to obtain a fast response when the market breaks out sharpy prvoquing a change in the fractally adaptive jurik smoothing filter.
He thaugt about using double smoothed jurik. And there are two versions that practically are different filters: mladen's version and the original kositsin version. That is how the new generation of brain trend was made.
After that logically I wanted an expert adviser in order to know the truth about the profitability of this system. In fact I use a simple rule, stop and reverse rule. Using that rules even if there were entries that were profitable before going negative at the reverse signal the expert prooved to be a good one.
I do not use the expert for trading I use for for knowing and optimizing the parameters. From this part it is
excellent, because the system appears very robust either it is profitable on all parameters either it is not profitable at all. The 30 minute frame on EUR/USD prooved to be the most profitable on the back test with almost every setting. The daily frame is profitable on almost every setting.
Lately I decide to disclose what I have here. This is a state of the art trend following strategy if used in its conventionnal way. Howver this should be mentionned we need a very carefull selection of the istrument we are going to trade. We need something that is making clear impulses, not necessary trending.
Няма коментари:
Публикуване на коментар