Backtesting +686 PIPS & The TDI Explained

Backtesting

In my last video, I presented all of the indicators that make up my trading system and explained my entries and exits. Today I did a DeepSpacefx Backtesting with a single 5EMA (shift 3, Typical Price HLC/3), Heiken Ashi candles and the TDI (Traders Dynamic Index) added and made 686 pips in two trades. The software used is called FX blue Trading Simulator which is a free, awesome tool for forwarding testing trading strategies. In this video, I also explain why the TDI is NOT a good indicator to use for exits, but only for entries. This is because the TDI will cause you to exit profitable runs a lot earlier than other indicators out there, resulting in a lot of money being left on the table.

 

deepspacefx Backtesting

In this DeepSpaceFX Backtesting, I had two profitable trades on the 4HR chart. One for $409.14 and the other for $277.54 totalling $686.68. Of course, I could have shown many more, but I wanted to show only 2 trades for demonstration purposes with the TDI included with the system. If you search TDI “Traders Dynamic Index” in Google, you’ll find tons of search results, many of which include trading systems using this indicator. The most popular strategy using the TDI is a strategy on Forexfactory called, “Trading Made Simple” started in 2011 which is by far one of the most popular, ongoing strategies on the net based on popularity and relevancy.  I love the TDI, and my strategy itself is a rendition of the Trading Made Simple strategy. However, I only make use of the TDI for entries and do not recommend using it for exits as explained in the video.

Foward Test (ENTRY)

DeepSpaceFx Backtesting
Look at how nicely all indicators match up for my trade entry as per the trade entry rules.

As you can see in the photo above for the DeepSpaceFX Backtesting, this is what I refer to as a class A entry trade. All of the indicators align perfectly as per the trade entry rules:

  1. As you can see, the overall market sentiment was below the 200EMA (red line) which I use as a trend filter. In this trade, the market sentiment was in favor of a bear market, so I’ll be on the lookout only for SELL trades.
  2. Going down the chart, the vertical green line indicates our signal for entry, with the Heiken Ashi candle crossing and closing below the 5EMA.
  3. Our next indicator, the DSFX CMF indicator, came from above in the overbought region and made it’s way down past the 70 level and crossed through the 50 level midpoint line, indicating a valid entry from overbought market conditions.
  4. The DSFX TrendLines Cross (Explained in video)
  5. The CFM Volume indicator was above the 0 level midpoint line, indicating strong volume in the market to give us the ADR we need.
  6. And lastly, our TDI (Traders Dynamic Index) gave us a signal entry with the green line crossing below the redline. The angle wasn’t AS good as I would have liked it to be, but with all the other indicators working in our favor, and the TDI cross being near the overbought zone, I gave this one a bit more aggressiveness on entry.

Backtesting (EXIT)

Deepspacefx Backtesting

As you can see in the photo above for the DeepSpaceFX Backtesting, this is what I refer to as a class A exit trade. All of the indicators align perfectly as per the trade exit rules:

  1. The DSFX CMF indicator (indicated with the bottom 2 arrows) gave us our entry on the green arrow, and the red arrow shows us where to exit. This indicator is so simple and powerful to use, that it is as easy as waiting for the indicator color to turn yellow which would be our signal for the exit. You can see how long we would have stayed in the trade following this indicator in the chart above the arrows, which ended up being a nice profit run of about 8 Heiken Ashi candles before price started to make a major retracement once the pullback started.
  2. In the video, I explain the entry rules on the other two indicators below it, (The DSFX Trend lines indicator, and the CMF Volume indicator).
  3.  The DSFX Trendlines indicator is a simple indicator that can be used to exit our trade when the red and blue lines intersect (cross) again.
  4. The CMF indicator (red line) is above the 0 level midline (dotted line) indicating strong volume in the market so we have the ADR to make a proper exit.
  5. The bottom-most indicator which is the TDI (Traders Dynamic Index) was used for our entry, but NOT for our exit as the TDI actually started to flatten before the verticle line. Which means that our exit would have been alot earlier than what our DSFX CMF indicator would have prompted us, leaving ALOT of money on the table!

This post could not do the video justice in explaining the DeepSpaceFX Backtesting so I highly recommend you check out the video for a much more in-depth analysis on entries and exits as per the rules for my system. If you have any questions, please feel free to leave a comment on the video and I will get back ASAP. Thanks for reading!

 

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-Brandon Peoples

 

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