Hello Everyone
I am new to the world of forex trading and I really wanted to see for myself if divergence strategies held any sort of truth. I came to learn of it from some random youtube videos which made me question if these nobodies with no professional experience can really profit off basic technical signals.
So I gathered up all the available 4H data there was on EURUSD (2016 - present 2022 August) which is apparently the most commonly traded and went in to see if it was profitable. Identifying signals are pretty simple in summary: Find higher highs or lower lows in price and if the RSI indicator contradicts the directions then this should indicate a price reversal.
So with some simple python coding: I set up some parameters to identify these divergence patterns based on thresholds, length, the flexibility of the patterns, etc. For realistic backtesting purposes, I would enter a trade after 2 ticks (8 hours in 4H) with the open price. I also experimented with multiple risk management parameters like take profit, stop loss, and the expiration of the trades which sort of transformed these trades into Forward contracts on currency pairs. For back testing purposes, I used 1:1 leverage and 1 mini lot per trade.
Anyway here is my results based on my parameter tuning which was based on the rate of return, max drawdown, # of trades, etc. My take profit was set at 125, my risk to return ratio was 1.25 and my expiration period for each trade was 52 ticks which are approximately 208 Hours or 8-9 Trading Days ~ Less than 2 actual weeks.
I wish I can attach my python notebook to this post but I don't know how to, if any of you guys are interested I can DM the file to you guys which contains a lot more detail.
https://preview.redd.it/r4mdr1rqafk91.png?width=895&format=png&auto=webp&s=56ddd533312c82e53451a4fb2814f57835d91d12
Anyways given the results, I will look to trading this live at some point but who knows this strategy might stop working the next day. Also if any of you guys have cool ideas you want me to backtest let me know as this was really fun to do.
Edit: I might as well add the parameters here.
https://preview.redd.it/8urrp6h9efk91.png?width=877&format=png&auto=webp&s=6b55feac64ea4399e066074bdc98d410fbbc3c12
https://preview.redd.it/joiqlcadefk91.png?width=1099&format=png&auto=webp&s=44f35f212ad2221f82c791de2b553637cd496e30
submitted by actssassin to Forex [link] [comments] I am new to the world of forex trading and I really wanted to see for myself if divergence strategies held any sort of truth. I came to learn of it from some random youtube videos which made me question if these nobodies with no professional experience can really profit off basic technical signals.
So I gathered up all the available 4H data there was on EURUSD (2016 - present 2022 August) which is apparently the most commonly traded and went in to see if it was profitable. Identifying signals are pretty simple in summary: Find higher highs or lower lows in price and if the RSI indicator contradicts the directions then this should indicate a price reversal.
So with some simple python coding: I set up some parameters to identify these divergence patterns based on thresholds, length, the flexibility of the patterns, etc. For realistic backtesting purposes, I would enter a trade after 2 ticks (8 hours in 4H) with the open price. I also experimented with multiple risk management parameters like take profit, stop loss, and the expiration of the trades which sort of transformed these trades into Forward contracts on currency pairs. For back testing purposes, I used 1:1 leverage and 1 mini lot per trade.
Anyway here is my results based on my parameter tuning which was based on the rate of return, max drawdown, # of trades, etc. My take profit was set at 125, my risk to return ratio was 1.25 and my expiration period for each trade was 52 ticks which are approximately 208 Hours or 8-9 Trading Days ~ Less than 2 actual weeks.
I wish I can attach my python notebook to this post but I don't know how to, if any of you guys are interested I can DM the file to you guys which contains a lot more detail.
https://preview.redd.it/r4mdr1rqafk91.png?width=895&format=png&auto=webp&s=56ddd533312c82e53451a4fb2814f57835d91d12
Anyways given the results, I will look to trading this live at some point but who knows this strategy might stop working the next day. Also if any of you guys have cool ideas you want me to backtest let me know as this was really fun to do.
Edit: I might as well add the parameters here.
https://preview.redd.it/8urrp6h9efk91.png?width=877&format=png&auto=webp&s=6b55feac64ea4399e066074bdc98d410fbbc3c12
https://preview.redd.it/joiqlcadefk91.png?width=1099&format=png&auto=webp&s=44f35f212ad2221f82c791de2b553637cd496e30
![The last time [1] Relative Strength Index (RSI) momentum indicator, [2] Moving Average Convergence/Divergence (MACD) momentum indicator, and [3] Share Price were looking like now...was just before the August pop...](https://preview.redd.it/ed38yo5p9q3a1.jpg?width=640&crop=smart&auto=webp&s=9bb45e6c47b13ed0247cab6ae510d060281e5254 "The last time [1] Relative Strength Index (RSI) momentum indicator, [2] Moving Average Convergence/Divergence (MACD) momentum indicator, and [3] Share Price were looking like now...was just before the August pop...")
