Tarea técnica
Need someone to make a robot using this info. Please let me know what cost would be.
The 4 week trading rule system has been at the
heart of many successful trading systems and is
one of the simplest, easiest and most profitable
ways to trade trending markets.
The Rules
The original rules were used for trading
commodities and can be summarized by:
1) Close short positions and go long whenever the price exceeds the highs of the previous 4
calendar weeks.
2) Close long positions and go short whenever the price falls below the lows of the previous 4
calendar weeks.
If run with a SAR (stop and reverse), the above system will always maintain a position in the
market (either long or short).
That’s it!
The Advantages of the System
It’s robust and will put you on the side of ALL the big trends.
The Disadvantages of the System
The market works very well in trending markets - but like most trend following systems, it will have
problems when markets consolidate or go sideways. This will of course affect performance and
cause drawdown.
Filters A common solution to this problem is to enter on the 4 week rule (the breakout), and to exit on a
shorter time frame such as 1 or 2 weeks.
Traders can also use other exit rules i.e. exit when a moving average is broken. For example,
applying a 10-day moving average as the exit - A 10-day moving average is one-half of the entry
signal (four weeks is of course 20 trading days), but any time period shorter than the entry signal
can be used.
Another use of the system is as a trend filter on the overall market.
The system can objectively tell you if the market is bullish or bearish on a short-term basis. If the
market's most recent signal under this system is a buy, the trader can conclude that the market is
in an uptrend. Downtrends can be defined as times when the latest 4WR signal was a sell i.e. the
market has made a new four-week low more recently than it made a new four-week high.
Using the system as a filter, the trader would look for the 4 Week Rule to be on a buy signal before
entering new long positions. Conversely, short positions would only be entered when the market is
on a sell signal.
Customization
The 4 Week Rule makes a great addition to any trader's toolbox and can be customized in a number
of ways.
Entry and exit signals can be changed and adapted. For example, entering on 4 Week Rule signals
but exiting on two-week new lows. As noted, moving averages can also be used to generate exit
signals. The system can be combined with indicators, such as the Relative Strength Index (RSI),
Average Directional Movement (ADX) or Moving Average Convergence Divergence (MACD) as
filters.
The 4 week rule tends to benefit from uncorrelated markets i.e those that do not tend to move
together, so when some markets are trading sideways the spread means others are trending, this
smoothes the overall equity curve.
You can of course diversify within currencies and trade uncorrelated ones and you could also throw
in some other great trending markets (not currencies) for diversification such as, energies and
interest rates. You should experiment a little and find out which system produces the best results
for you.