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The Trendscore strategy
The Trendscore strategy trades the Bund Future. The German trader, Oliver Bossmann, designed the strategy. He later described it in an article in the Traders’ magazine.
|Suitable for||: Bund|
|Instruments||: Futures and CFD-Forex|
|Trading type||: Daytrading|
|Trading tempo||: 5-6 signals per month|
|Using NanoTrader Full||: Manual or (semi-)automatic|
The strategy in detail
The strategy is based on the Trendscore indicator designed by well-known trader, Tushar Chande. Trendscore is a method of rating the trend. The rating is done by comparing the close of the current bar with the close of x bars ago. If current close is greater than the close x bars ago, the score is 1. If the current close is less than the close x bars ago, the score is -1.
The author compares the current close to the close prices 15-21 bars ago. The Trendscore is the sum of the scores from these seven bars (15-21). Its value therefore oscillates between +7 and -7. The strategy is used on hourly charts.
When to open a position?
To convert the Trendscore blocks into a line, Oliver Bossmann calculates its Exponential Moving Average (EMA) over 5-periods.
A trend filter decides if a signal is accepted or rejected. The trend filter is a Crossing Exponential Moving Average calculated using the close price. The trend filter colours the background of the chart. Green, and the filter accepts buy signals. Red, and the filter accepts short sell signals.
- A buy signal is generated when the 5-period Trendscore EMA crosses above 0 (and the trend filter is bullish).
- A short sell signal is generated when the 5-period Trendscore EMA crosses below 0 (and the trend filter is bearish).
This example shows the grey bars of the Trendscore indicator. The Trendscore EMA is a blue line. Both a short sell signal (red vertical line) and a buy signal (green vertical line) appeared. Only the buy signal was valid because it coincided with the trend filter being bullish (green chart background).
When to close a position?
The Trendscore strategy uses a flat filter. The filter closes
an open position just before the end of the day.
The strategy’s designer recommends a stop-loss order to limit risk. In NanoTrader a Click Stop is included with the strategy. This stop is automatically placed at a distance equal to 3x the current ATR. The user can drag and drop the stop to any other level which he feels is appropriate.
This example shows a short sell signal. The Trendscore EMA (blue line) crosses below the zero line while the trend filter is bearish (red chart background). The trader placed a manual stop loss slightly above the high of the day. The price continued to go down. The position was closed with a profit at 22h00 by the flat filter.
This example shows two short sell signals and one buy signal. Only the buy signal was a valid signal. This trader added an intelligent solution to limit his risk: a Periodshighlow Stop. The trade was closed at 22h00 by the flat filter.
The trader developed the strategy to trade the BUND in the 60-minute timeframe. The concept can be used on all instruments and in all timeframes. With the powerful NanoTrader platform it is very simple to experiment with different markets, timeframes, stops and price targets.
Using the NanoTrader Full follow these steps:
- Open a Bund chart.
- Select the template study "WHS Trendscore” in the "WHS Strategies" folder.
- To trade semi-automatically, activate TradeGuard+AutoOrder in the chart. To trade automatically, activate AutoOrder in the chart.