The Trendfollower Trading System

I keep a number of trading systems on file as backups in case the one I'm currently using goes haywire and I need to shift strategies. At some point I may also start trading with one of these backup systems concurrently with my main system to spread out my risks a bit, so I have fewer trades in one basket, so to speak. One of these trading systems I've always thought highly of was devised by Trendfollower, a trader who used to frequent the MoneyTec forums (and maybe still does, haven't checked lately).

You can access a copy of his system for free at ForexBasic.com. It's the first one listed, and you can download it as a Word doc by clicking on the little Word icon.

To briefly summarize how it works, the Trendfollower system looks for a cross of the STARC band below the Bollinger Band for short trades, and the STARC band above the Bollinger Band for long trades. STARC bands are an indicator you don't see enough of, in my opinion, and in fact they're not available on all charting platforms. I know GFT's DealBook software has them, as does Oanda's system; if they're anywhere on MetaTrader I haven't found 'em yet. STARC is an acronym for Stoller Average Range Channels, and you can read more about STARC bands in this Investopedia article.

Here's a picture of a trade specified by this system, which took place over about 2 months (!):



I won't go into all the detail of how the system works, since Trendfollower's explanation tells you everything you need to know. But here are some of the things I like about it:

It uses a multi-day or even multi-week timeframe, which means you don't have to spend hours every day staring at your charts or make trading decisions on a minute by minute basis. As Trendfollower puts it, "The nice thing about trend trading, is that you don't need to be at the computer all day long. 3 looks a day is enough."

It uses a very straightforward entry signal. There's no ambiguity as to whether it's happened or not.

It has very clearly defined exit strategies.

It uses Bollinger Bands, one of my favorite indicators, and STARC bands, which are an interesting indicator in the same genre as Bollingers, since they also form a statistical envelope around the price trend.

Trendfollower says he traded with this system successfully for 3 years, which I consider a pretty good track record.

It gives you the option of trading several different currencies without worrying too much about spread costs, since the trades are large and fairly infrequent. To quote Trendfollower again: "Because of the long term nature of my trades pip spreads are not important to me so I look for new trend breaks amongst 17 odd currency pairs." This means that your "inventory" of potential trades to choose from is quite substantial.

So if you're looking for a trading system that doesn't require constant attention, high spread costs, lots of short-term trades and all the stress that ensues, this might be the one for you. Good luck if you trade with it!

Related Links:
Trendfollower System Download
STARC Band Definition

Related Topics:
A Nice Bollinger Band Trade
Chart-Based Trading Systems
Simplify Your Trading