Pros and Cons of Bali Strategy

Pros and Cons of Bali Strategy


2020-02-21 00:41:00

The Bali system is elementary, i.e. a trader does not need to spend a lot of time trading and closely monitor signals, as is the case with scalping techniques. Perhaps this is the main advantage of this "resort" method.>

Another list of strengths includes versatility. Yes, the author’s description is presented only for the EURUSD pair, but experiments have shown that the signals are suitable for other major pairs, especially in this respect the British pound and the Canadian dollar, whose volatility allows regular profit.

The Bali system also has obvious shortcomings, in particular, despite the successful combination of indicators, it still remains vulnerable in flat, while market segments where the sideways coincides with a period of low volatility are of particular danger.

The graph shows an example of such a situation. Obviously, it’s almost impossible to make money here, so you will either have to put up with periods of drawdowns, or think about options for modifying the template, which is difficult for beginners to do.

Secondly, since all the template indicators of the Bali system are based on moving averages, the notorious “delay” makes itself known. In fairness, we note that we have not yet encountered alternative similar strategies where such lags are absent in principle.

And the last minus lies on the surface - we do not like fixed take-profit and stop-loss, because the nature of the market is constantly changing. This means that during a period of high trading activity, a trader will lose profits and often fix too short stops, and at low volatility, the price will simply stop working on takeouts.


How to improve the quality of Bali signals.

The listed problems are very serious, but not “fatal”, in particular, the most dangerous flats can be easily eliminated in three ways, the first of which involves installing an additional indicator on the chart that is responsible for identifying sidewalls. In our opinion, the Xaser_FV algorithm with a period of 30 cope with this task.

As you might guess, a flat means a situation in which the coefficient is zero. If the main trading signal coincides with such a section, it is reasonable to ignore it, since the price can come back, while engaging in a stop loss.

The second method is even simpler - the flat can be detected by the slope of the “heavy” moving average, in particular, if it does not exceed 10 degrees, this is an obvious side, the combination of price and MA looks like a chain. In this case, the direction of MA (upward or downward) absolutely does not matter.

And the last method (the most accurate) we devoted a separate review, it comes down to calculating the autocorrelation coefficient. Recall that this indicator allows us to evaluate how current quotes depend on prices formed by N candles in the past. If this dependence is too weak, we can talk about the presence of a flat on the market.

In principle, the listed methods will be more than enough, although there are other ways to identify the sidewall, for example, you can use the linear regression angle, it makes sense to make a filter by CCI or ADX, well, and the most experienced speculators often evaluate the market simply by eye (by level).

The second drawback of the Bali system is already more difficult to fix, moreover, the delay can only be slightly reduced, but not completely eliminated. We recommend combating this phenomenon with the help of Renko charts, which break down the price not into temporary sections, but into equal boxes.

In our opinion, everything is obvious here without comment - the delay has significantly decreased. At first glance, it might seem that the Renko chart fundamentally changes the logic of the system, but this is not so. It may be necessary to revise the parameters of some template indicators for specific values of "bricks", but this is not scary (normal working time).

As for take-profit and stop-loss, we recommend that they be linked to volatility through the ATR indicator, in particular, if transactions are made on the H1 chart, it is reasonable to set the take-profit in the amount of three-time ATR (600), and stop-loss should be considered by multiplying the resulting value by 1.5.


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