Easy Signal Tweaks to Boost Trading Performance

Happy holidays fellow forexers - hope your trading's going merrily. Before heading off for a week of no charts, no trading, and probably no blogging unless I get really bored, I thought I'd pass on a couple little tweaks I use with some trading signals that I've found can crank up their profitability significantly.

High/Low Breakouts

Take one of your usual signals and for the last trading period (hour, day, whatever) specify that the maximum or minimum price was higher or lower than the previous period's maximum or minimum. In some cases this type of breakout may point to a reversal, in others an accelerating trend in the same direction. How do you find out which? Backtest, backtest, and backtest!

Price Closed Up or Down

Take your usual signal and add the requirement that the previous period's price movement was up or down. For instance, if a moving average indicates a downward trend, specify that the price closed up in the last trading period. Backtest and see what happens to the performance. Then specify that the price moved down in the same period, and backtest that pattern.

I've found some of the most dramatic results occur when the trend indicator is pointing in one direction and the last period's price moved in the other direction. This is a good example of a simple divergence pattern that can be attached to just about any indicator.

Try out various combinations of these rules and see if they help boost your signal performance. They might not work for every indicator, but in my experience they'll definitely work for some.

Best wishes for a wonderful holiday and a happy (and profitable) New Year! And if you find yourself thinking about your next forex trade while opening presents, you may want to read this.

Related topic:
Signals aren't set in stone - so don't be afraid to fine-tune them