The strategy is based on The Quartes Theory as already discussed here: http://fxcodebase.com/code/viewtopic.php?f=27&t=65146
I actually use a few more "moving parts", but this simple version is a good starting point.
Timeframe
- 1h or 30min
Pairs
- Majors only (with USD)
- GBPUSD has worked better for me.
Trading Hours
- Entry on London or NY only. Should be able to configure.
- I only enter trades from Europe open (London -1) to London Close, and may avoid entries during the switch
- Exit can be forced at the end of NY or not.
Indicators
- Moving Averages - In this simple version I use SMA 8 of the same timeframe, but Period, Timeframe and MA Type should be configurable. Also, the ability to check the relation between more than one MA is desirable, for example, only go long if EMA 8 is above SMA 20 and above WMA 8 of 4h chart.
- Quarters Theory Indicator - Basically an indicator that shows the Major Small Quarter Points and highlights an area of interest between them. (Better explained below)
The Theory
The Major Small Quarter Points occur every 100 pips: At 1.2600, 1.2700, 1.2800 etc (dark green lines in the image)
Besides the psychological effect explained in the book mentioned in the referenced post, these are decision levels for the institutions. They have to decide if price is going to trade around that area or go to the next area.
If we consider a buffer area of +25 and -25 pips around each of these points, we stay with a 50 pips zone around these points that are the "decision zones" (white areas around the dark green lines in the image).
The idea is that once the institutions make up their mind and decide to move price, it will go from one of these areas to the next with certain easiness.
The Strategy
ENTRY
- Price LEAVES a "decision zone" (Enters the light green zones in the image)
- Is Trending: Is above Above SMA 8 (for Longs) or Below SMA 8 for Shorts (or more complex conditions)
- During the limited trading hours
- Has touched or crossed a Major Small Quarter Points during the previous day
- 25 pips - Stop at previous Major Small Quarter Point.
- 50 pips - Target at begin of next "decision zone" (Leaves the light green zones in the image).
- Move stop to B.E. after 25 pips
The Image gives an idea of how it works and how it performed this december.
There are several ways to improve this, like adding more of the quarters theory (more points) and having zones inside zones, or having more MAs to help with the trending decision. But i think whis is a great start.
Hope we move forward with this. Happy 2019