Catch and Release Strategy

[bossxero]

I am introducing this interesting trading strategy here because I find it to be very powerful and not that complex at the same time. The strategy can work with any pair and any timeframe. But the preferred pair for it to work the best are the trending pairs such as the majors. One of the main strong points of this system is its give you the opportunity to re-enter into trades. So when a trend is on the way, you can have quite a number of re-entries into the trend and will eventually make more profit on the long run.

The system uses 5 indicators which are the Stochastics (9,3,3), RSI(3), EMA (20 and 30), the GMMA Slow and the last one is the famous Heiken Ashi. All these indicators combined together can give very accurate entry signals. You do not need to place these indicators manually on your chart, you can download the template at the end of this post and apply it to your chart and you will be ready to start working with it. Though, the system will need some practice time so that you can gain better inderstanding of it. So, let us dive into this strategy...

When to BUY

I will be writing about the rules in order to determine a BUY signal from this trading strategy. I am also posting a screenshot below so that you can gain a better understanding of the rules. So, let me go straight to these rules.

1. The GMMA Slow lines should be well spaced and not stuck with one another. When they are stuck, it means that the market is ranging and when they are spaced, with at least 1 pip between each other, then it means that we have a trend. Since we are dealing with a trending system, it is primordial that this rule should be observed very closely. I will try to elaborate on this at the end.
2. Heiken Ashi Candle should retrace back to the Blue EMAs after a prior UP MOVE.
3. Stochastics should be below 30 and trying to go up.
4. RSI should be below 20
5. Finally, the Heiken Ashi should produce a new CLOSED white candle after the red ones. This is our entry.

Here are the 5 basic rules that can guarantee you profitable trades if you follow each and every of them without ever burning a single one. Now take a look at the screenshot below for the BUY trading examples.

As you can see above, we have 2 clear cut buy trading signal from the system. You could have taken only the first one and ride it or you can divide you lots and re-enter again on the 2nd,3rd,4th etc signals. Both of these signal has fulfilled all the 5 rules as outlined above. You can see that there could have been other signal as well, but not all the rules had been met, so we totally discard them. Success in these trades can only be achieved if these rules are observed closely. That is all regarding the Buy Trading Signal, let us move to the Sell signal now.

When to SELL

So, let us look into the Sell details. Determining whether we have a Sell signal or not is fairly easy by now since it is the exact opposite of the Buy signal. The rules are as follows and the screenshot is at the bottom with the illustration on the Sell rules as well as the Sell signals. So, the Sell rules are:

1. Moving Averages should be well spaced and not compressed together. Will talk a little more on this at the end of this post.
2. Heiken Ashi (price) should retrace back(up) to the BLUE moving averages after a prior DOWN move.
3. Stochastics should be above 70 and start to fall
4. RSI should be above 80
5. Heiken Ashi Candle should turn RED from white and CLOSE on a RED candle.

These are the Sell rules that you will need to observe in order to determine a Sell signal from this trading method. As a reminder, burning even one of these rules can render the trades into losers. Now, let us look into the screenshot below for a detailed view on the Sell signal and trade examples.

As you can see above, we have 2 trades one after the other, each fulfilled all the 5 rules and gave us accurate entries. If you miss a trade opportunity, do not worry about it as trades like this happens everyday on any pair and timeframe. Just study the system and practice it for some time.

Stoploss and Takeprofit

For the stoploss, I suggest that you place it at most recent swings high or low. This will keep your risk quite low and will give your trade enough room to develop. You can also place the stoploss at pivot, SR or fibo levels.

As for the takeprofit, you can use a fixed takeprofit or you can use trailing stops to trail your orders. However, since we intend to take advantage of the trend, then the best thing to do is not to use takeprofit and just move the stop loss to new swing highs and lows, therefore, trailing your orders manually. This should enable you to catch more pips from the market.

When NOT to trade

You should not be trading when the moving averages (GMMA Slow and Blue emas) are compressed to one another. When they are compressed together, it means that there is not clear trend in the market and the market is in congestion, therefore, it is ranging. You will not be able to trade in this situation because if you do, you would be burning rule number one. Do not trade when all the rules have not been fulfilled. Even 4 out of 5 is still considered invalid. Take a look at the screenshot below for a clear idea about compressed moving averages versus well spaced ones.

As you can see above, we have a compressed moving averages scenario and a well spaced moving averages scenario. With the Catch and Release system which is a trending strategy, we will trade only in the well spaced moving averages situation as it shows that there is a trend on the way.

This system is very interesting and accurate as well. Take some time to learn and practice it on a demo account for a while to see if it fits your trading psych. I hope that you have enjoyed this explanation and I wish to hear back from you. Please feel free to download the indicators and templates attached below.

Thank you and Good Luck

[sirogreness]

interesting. can you please post the gmma that you use?

[bossxero]

Originally Posted by sirogreness

interesting. can you please post the gmma that you use?

I have attached it in the first post.

[FXP]

It Really Seems Like A Great Strategy.
I Can't Wait To Write An Ea Based On Its Rules.

Thanks A Lot, Bossxero - You Are The Best Thing That Happened To This Site.

[bossxero]

Originally Posted by FXP

It Really Seems Like A Great Strategy.
I Can't Wait To Write An Ea Based On Its Rules.

Thanks A Lot, Bossxero - You Are The Best Thing That Happened To This Site.

Thank you for your nice words. Indeed this strategy has big potential when fed with the right market conditions.

[ddole]

I have built this "Catch and Release" strategy into an EA and ran it thru backtest from 1/1/2009 to 10/10/2009. It only generated 10 trade signals using EURUSD - 5 minute bars. I was expecting many more trades... I’m thinking that the problem is I'm using just the previous bar and the bar before that to do ALL of the logic checks (GMMA/EMA Price touch/Stochastics/RSI/Heiken Ashi).
To clarify, I'm using the previous bar to determine
1) 1 pip or more spread between the GMMA lines
2) Heiken Ashi has changed from white to red or red to white (using the bar before the previous for the comparison)
3) Stochastics is below 25 (BUY) or above 70 (SELL)
4) RSI is below 20 (BUY) or above 80 (SELL)
5) Heiken Ashi Bar touches the EMA (20 / 30) lines
If all of this comes into alignment then it generates the appropriate Order (BUY/SELL). But looking at your EXAMPLE pics, it appears that maybe there should be flexibility in how far back the logic can look for the testing of the logic…
So would be safe to say for example - that if 3 bars ago the GMMA lines had a 1 pip or more spread AND 2 bars ago the Sto and RSI were in the right places and on the current bar that Price touches EMA… etc????

Can you also tell me what your preferred timeframe is? Again I ran the test on a M5, maybe M15 or H1 is better…

[inno4all]

This is worth trying, I will demo trade it.

[chunnel]

First of all thank you for the great contributions!
But I see you have allot of different systems, have you all tried them yourselfs?

[FXCatty]

I like this system, in fact its what I use for my trading.

[chunnel]

Originally Posted by FXCatty

I like this system, in fact its what I use for my trading.

Can you share a few results with us? it's always nice to have allot of information!