ATR Based EMA Variant 1
If you’d like to follow along with the e-book version of the blog, click on the play button in the audio player below (at the bottom of the page).
We’re Trying Something New
This week, we’re going down a new path. There was a bit of a journey prior to this path, which we’ll get into. But first, you should know, and this is the coolest part, is that it was totally community based.
I Know A Guy
I actually do, which makes this even more interesting. The origin of this path started a few weeks ago by a guy named Jasen who suggested I look at a TradingView indicator called “ATR Extension” which blends ATR and moving averages to create a color change signal line that purports to display momentum, exhaustion, breakouts, and surges in buying or selling pressure. It sounded just like something we would be interested to explore, so we went to investigate.
We discovered that the code was available, so we copied it and contacted our good friend Niels, who did some work with it and transformed it into three different baselines based on various portions of the code. This week, we’re going to take a look at the first of three he named ATR Based EMA Variant 1. So that makes this week’s indicator a two person suggested, community based created indicator especially for us to bring to you in 2023. That, is pretty amazing.
It’s in the Mail
Thank you for your continued contributions. We never thought this would have any legs, and yet, we’re pleased to report that we have suggestions to last for the unforeseen future. Please keep sending your phenomenal doodahs to [email protected], and, we appreciate your efforts.
Explanation Please
Before we get into it, we’ll sum up a short clarification of what the indicator is actually doing. Niels explained that it calculates ATR% instead of ATR in pips and uses an exponential moving average with a dynamic range based on the ATR%. All that, in the palm of your hand. Let’s go see what it looks like and what it can do.
All Terrain Roamers
Yep, I’m making up acronyms again. It’s becoming a thing. We’ve left this indicator exactly like it was meant to be. A thick yellow line for easy signal identification. We changed candles to the blue and red configuration to help with signal identification and proper entry points.
Settings
There are just two settings we need to concern ourselves with, and we use both of them.
EMA_Fastest: The main variable for the internal calculations. The default value is 14.0 which, coincidently, is the same value we use when calculating our stop loss and take profit levels based on the ATR. Pretty neat.
multiplier: The value ATR% is multiplied with, prior to multiplying it with the EMA value.
Advantages
* Based on the most important indicator in the universe.
* Created by one of our own who understands the assignment.
* Easy to adjust for testing purposes.
How we use it.
To clarify specific concepts relating to the NNFX system. There are three possible trade actions;
OPENING A TRADE
CLOSING A TRADE
MAINTAINING A TRADE
One of these three actions need to happen in the last 30 minutes prior to the close. This is when you make your trading decisions, and not actually wait for the close at 1700 EST, because we trade on the daily time frame.
Long signal: When the signal line crosses above price. Entry is in the last 30 minutes of the trading day.
Short signal: When the signal line crosses below price. Entry is in the last 30 minutes of the trading day.
So Bold and Beautiful
We’re going to do what we always do and mark off some signals to see how the default settings do. Remember, always start with default and go from there when you test…and keep notes that your teachers would be proud of.
Nice and Clean
We were pretty impressed on the default signals. Not a lot of guessing here. There were two areas where price couldn’t decide what to do, and you would record losses when testing out the indicator by itself, but used in an algorithm, you’d most likely have never entered a trade. Nicely done.
Testing, It’s The Call of the Wild
If you’re new to these studies, we recommend looking at some of the older blogs to understand how we conduct our testing.
The six pairs we recommend testing are…
EUR/USD
AUD/NZD
EUR/GBP
AUD/CAD
CHF/JPY
CAD/SGD
The markets we test our indicators are the:
EUR/USD (Euro/US Dollar)
BTC/USD (Bitcoin/US Dollar)
XAU/USD (Gold/US Dollar)
SPX500 (S&P500 Index)
Timeframes and Results
We’ll run the ATR Based EMA Variant 1 indicator on the EUR/USD, BTC/USD, XAU/USD, and the SPX500 using the default and tweaked settings across the daily and 4-hour timeframes on the MT4 strategy tester.
We focus on three metrics;
Total trades
Win/Loss ratio
ROI (return on investment)
Results to tell your Mom.
Below are the results from our testing undertakings.
Baseline For Your Bottom Line
We were able to get some pretty decent numbers across the board. Notice that the EUR on the default values was above the waterline, a sweet beginning. Good across BTC and XAU, but a little low on the daily SPX500. For you 4-hour indices traders, you’d definitely want to make this part of your testing regime. I mean, look at those default metrics. Pretty hot stuff!
Don’t Forget!
* There is a short survey on the Stonehill Forex home page. Your input will help guide our direction with regard to the things we do here at Stonehill Forex. We’ve received a number of responses, but additional data would be helpful. It takes less than five minutes, we promise. By clicking on the thumbnail below, you’ll be taken directly to the survey.
* We added pages to the site. Both are located under the “Resources” tab.
* The first page is a “Marketplace” where we encourage you to contact those who have coding skills. If you’re a coder and wish to be listed, please send me your relevant info to [email protected] to be listed on the page. Payment and conditions are your business. We’re just bringing people together. We already have our first “contractor” – Niels. Got a coding question? Email him, his credentials are there.
* The second is the repainting indicator page we spoke of in the past. We find many repainting indicators in our quests and figured it would be helpful to list them. Each profiled repainter will have an accompanying video, which will be housed in a separate playlist on YouTube. We’ve already posted some videos for your viewing pleasure and are currently working on more.
Money Management
Money management is based on the NNFX risk profile. That information can be learned in the Advanced Course.
Resources
We’ve made the ATR Based EMA Variant 1 indicator available for download on our site from the indicator library, for free. When you’re ready to get it, click HERE.
We’re Here For You
Don’t forget to sign up for the latest digests. We just put one out a few days ago. It’s loaded with information, and we’ve reformatted it for easier viewing. If you missed it, be sure to sign up on the website and email [email protected] with the title “Latest Digest Please” and we’ll send the most recent one off to you within 24 hours.
Other Resources
Be sure you’re subscribed to our YouTube channel for the technical analysis videos which pair well with these blogs…like pancakes and syrup. Don’t forget Facebook and Quora, where we answer questions relating to Forex.
Our only goal is to make you a better trader.
BTW – Any information communicated by Stonehill Forex Limited is solely for educational purposes. The information contained within the courses and on the website neither constitutes investment advice nor a general recommendation on investments. It is not intended to be and should not be interpreted as investment advice or a general recommendation on investment. Any person who places trades, orders or makes other types of trades and investments etc. is responsible for their own investment decisions and does so at their own risk. It is recommended that any person taking investment decisions consults with an independent financial advisor. Stonehill Forex Limited training courses and blogs are for educational purposes only, not a financial advisory service, and does not give financial advice or make general recommendations on investment.