Hello,
I am in the process of placing a few egies together in one EA and have got stuck on a single important matter. My system is quite vulnerable to tight trading ranges, that is it produces a number of false signals in such conditions. Do not confuse this with a ranging market, it may range as long as it ranges in a slightly more interesting pattern than up, down, up, down, up, down...
rather than tweaking the logic of the machine that's already quite complied, I thought I would think of an external protector that could monitor the price behavior and stop the system from trading if circumstances are unfavourable. Two approaches have tried up to now, not one of which seems to please. First off, I tried a very simple threshold - if it is fallen below by the high minus the lowest low within the last N phases no trading. This obviously doesn't work if the price goes up or down slowly but always - you will miss an adequate trend.
The I moved on to trying because I called it a comparative trading range. This is the ratio of the trading ranges within the last N periods and M periods in which M gt; N.
There's no trading if this ratio goes below - say - 0.2 (20%). This technique has one drawback - it's got a performance when a tight range gets tighter. In this case you might have a range of 10 pips which provides you 35% comparatively.
As I am getting a feeling that I am attempting to reinvent the wheel, can you share your ideas on this? Note - I am not interested in any indis based on moving averages. I need something that quickly responds to unexpected events such as breaking from a range ( enjoy the approaches I have just explained). It doesn't need to work in general. About exploiting a number of its attributes, so I am thinking I am targeting GBPUSD on M5. Any ideas/suggestions more than welcome.
Cheers