An Idea From The Guy Who Made 1250% Profit Within 3 Months
There is a guy with a Youtube-channel with name "Simple Ton" who traded a demo account from 10K to 125K within 3 months. This guy definitely can trade! And he has produced 600 very informative and very entertaining videos. You should watch his videos. Even experienced traders can learn one or two things from him.
"Simple Ton" recently produced a video where he introduced an indicator that draws support and resistance lines based on pivot points of the previous (last closed) candle. He said that automated selling at the resistance lines and automated buying at the support lines is a profitable trading strategy.
I created an ExpertAdvisor based on his idea. And guess what, the ExpertAdvisor with the fixed rule set really made money on many trading instruments :)
Download the newest version of the ExpertAdvisor here
Here Is The Youtube Video Where "Simple Ton" Presented His Idea
The Logic Of The ExpertAdvisor
I found the idea interesting and wanted to give it a try. I downloaded the original indicator with only 3 support/resistance levels from the mql5 website.
Then I thought about how the ExpertAdvisor could work.
The indicator draws the support/resistance lines on the chart and the ExpertAdvisor can read the price levels of each line. Because we want to buy at each support price level the ExpertAdvisor places limit buy orders at each support price level. The only logical price level for the target price of these limit buy orders would be the lowest resistance level. Therefore, the ExpertAdvisor places the limit buy orders as shown with the 3 green arrows in following screenshot. The beginning of each arrow is the entry price level. The end of each arrow shows the target price level of each limit buy order.
The ExpertAdvisor executes the same logic for the sell limit orders. The following screenshot shows the entry price levels and targets with the 3 red arrows.
With this logic we can only be short or long. We can't be long and short at the same time, because all sell positions are close before the first long buy order gets filled and vice versa.
It will often happen that the newly opened positions will not close during the actual candle. And when a new candle is opened the indicator draws the 3 support/resistance lines at different price levels.
Now we have to answer the question which target should be used for the old positions which are opened during the previous (now closed) candle? Should use the old target or should we adjust the targets of the old positions to the new price levels? I decided to adjust the targets to the new price levels, because the complete logic of the ExpertAdvisor is built around the logic of the indicator. And when the indicator says that the support/resistance levels have changed then the old positions should behave accordingly.
This behavior (adjusted targets) can lead to positions that reach their targets but are exited with a loss. From my EA-coding experience I know that closing at adjusted targets can give better results than exiting with a stoploss. Therefore, the ExpertAdvisor places the limit orders with no stoploss and only adjusts the target prices. To prevent the trading account from a total loss if a catastrophic event occurs as the SNB intervention (CHF currency) we could add an emergency stop at e.g. 500 pips away. But in the actual version i have not used a stoploss and during all back-tests all accounts on all pairs (even the CHF-pairs) survived from 2011 to 2017.
The Back-Testing Results
The back-testing results are very promising! You can definitely see that the logic of buying low and selling high has an edge. This "dumb ExpertAdvisor" which sells during the strongest upward trends and buys during the strongest downward trends can make money on many pairs as a complete auto-trader.
BUT i would not trade it as a complete auto-trader. There are better ways to use this ExpertAdvisor. As I will later explain I would only activate the ExpertAdvisor at special conditions in a only-selling-mode or only-buying-mode. Then this ExpertAdvisor will have a much bigger edge.
The back-testing was done on the daily timeframe because the original indicator can only shows the values of the daily timeframe. But you can adjust the indicator to test lower timeframes as well. The ExpertAdvisor can handle the lower timeframes without adjustments.
Here are the results for the pair AUDCAD from 2011 to 2017 (Because of the limit-order logic the model "control points" is exact enough) :
Not bad for a dumb EA with a simple logic.
Here are the results for the pair AUDNZD from 2011 to 2017
Here are the results for the pair EURGBP from 2011 to 2017
Here are the results for the pair EURUSD from 2011 to 2017
Everyone who has ever tried to program a complete auto-trader knows that this are results that can be used as a basis for further improvements. If a complete auto-trader can make money over 15,000 trades then it definitely does something that makes sense in the context of trading. Please remember that we had a very strong trend in the year 2014. The pair EURUSD for instance moved 3,500 Pips downward during this year. The ExpertAdvisor, because of it's logic, bought most of the time during this monster downward move. After the 7 years of back-testing the "dumb" ExpertAdvisor still produced a little bit more than breakeven on the EURUSD. This is a very stable behavior for such a simple auto-trader.
So buying low and selling high works. The question is only when should we activate the ExpertAdvisor in which direction?
The logical answer can only be:
1. Activate the ExpertAdvisor for only buying when the price reaches a major support zone. The ExpertAdvisor can stay active in the support zone for multiple buy-trades. Deactivate the ExpertAdvisor if a new trend to the upside emerges or the support zone gets broken to the downside.
2. Activate the ExpertAdvisor for only selling when the price reaches a major resistance zone. The ExpertAdvisor can stay active in the resistance zone for multiple sell-trades. Deactivate the ExpertAdvisor if a new trend to the downsid emerges or the resistance zone gets broken to the upnside.
With this deactivation/activation method you will automatically avoid the bad trading conditions "strong trends". You will automatically improve the profit factor. And I assume that the profit curve will go steady upwards. Therefore i have implemented this feature in the ExpertAdvisor.
Usage Of The ExpertAdvisor
As I said, the actual version of the ExpertAdvisor only trades based on the daily timeframe. Therefore, if you want to back-test the ExpertAdvisor you must choose the daily timeframe in the strategy tester of MT4.
Of course you can modify the source code of the indicator and the EA so that they can run on lower timeframes too, if you know how to do it.
You need to put the ExpertAdvisor "SimpleTon_PivotSupResEA" and the indicator "FiboPiv_v2" on the chart, because the ExpertAdvisor reads the lines that the indicator is drawing.
Because of the deactivation/activation feature the ExpertAdvisor does nothing without instructions! You must tell the ExpertAdvisor when it should start looking for buying opportunities. This you can simply do by putting a horizontal line or a trend line on the chart and then you must give this line the name "l" (small L for LONG). To tell the ExpertAdvisor that it should look for selling opportunities, then you must put a line on the chart with name "s" (small S for short). Obviously, if you want to allow the ExpertAdvisor buying and selling then you must put both lines on the chart. If you remove the lines then the EA will stop placing limit orders.
Download The Indicator And ExpertAdvisor
You can download the indicator and the ExpertAdvisor HERE
I have improved the first version according to the suggestion made in the comments section of the video. The following improvements are implemented:
1. You don't need the indicator on the chart anymore. The ExpertAdvisor calculates the support / resistance zone itself.
2. You can now trade any timeframe.
3. I have implemented the rectangle-feature in addition to the previous functionality.
Further explanations of improvement 3:
You can still switch the EA on with lines that have the names "l" or "s" as described above in the first version. But you can now also draw rectangles on the chart and name them "l" or "s". If you draw rectangles then the ExpertAdvisor will check if the price is between the boundaries of the rectangle (price1, price2, time1, time2). Only then a buy or sell cycle is allowed. With this feature you can activate the Expert Advisor at a major support resistance area many hours or even days before the price reaches this region. Many thanks to Met Dat for the good ideas!
You can download the V2 HERE
Have fun! And good trading to you :)