MACD, RSI, and PMI (Volatility Alternative) - Automated Trading
This trading strategy combines momentum, volatility, and limited risk by using three key indicators. Those are MACD (Moving Average Convergence Divergence), RSI (Relative Strength Index), and PMI (Price Movement Index). The latter is an indicator I created for this strategy to measure price movement rather than volatility to keep things extremely simple and make sure the code works as intended.
Overoptimizing and using fancy indicators early on during backtesting often leads to overoptimization problems, so I've tried to keep everything extremely simple. We trade when the following conditions are met:
1. Price movement is low (long or short; we want to trade in low-noise conditions)
2. MACD is crossing over (long) or under (short)
3. RSI is above 60 (short) or below 40 (long); setting to the traditional 30-70 gives too few opportunities.
We also stop the trade based on brute-force trial-and-error tested stop losses and profit takes at simple levels such as 1000 pips, 3000, 5000, 10000. This is sensitive to over-optimization, but I only used these crude values to try and keep it sane.
Rule #1 that's being followed here is to keep it simple and to diagnose areas where your algorithm is weak, trying to use general principles over specific things on a single chart.
Happy trading!
Overoptimizing and using fancy indicators early on during backtesting often leads to overoptimization problems, so I've tried to keep everything extremely simple. We trade when the following conditions are met:
1. Price movement is low (long or short; we want to trade in low-noise conditions)
2. MACD is crossing over (long) or under (short)
3. RSI is above 60 (short) or below 40 (long); setting to the traditional 30-70 gives too few opportunities.
We also stop the trade based on brute-force trial-and-error tested stop losses and profit takes at simple levels such as 1000 pips, 3000, 5000, 10000. This is sensitive to over-optimization, but I only used these crude values to try and keep it sane.
Rule #1 that's being followed here is to keep it simple and to diagnose areas where your algorithm is weak, trying to use general principles over specific things on a single chart.
Happy trading!