Rubicon indicator is not just another custom indicator designed to perform some specific function, it can be considered a full-fledged trading strategy that is suitable for any timeframe and instruments.
This algorithm is especially popular among the newcomers who want to follow the trend from their first steps in trading. This is due to the fact that the indicator marks a specific signal to buy or sell on the chart in the form of an arrow, indicates the recommended level to set a pending order, and gives advice on the levels of stop-loss and take-profit.
Rubicon indicator can also be useful for some experienced traders, as it is based on the intersection of the moving averages, and displays an alert in the operating window when the signal appears – partial automation of the process has never harmed anyone.
As for the choice of such an original name for the algorithm, the author draws an analogy with the famous fixed phrase "to cross the Rubicon". We remind you that it is the name of a river in Italy, which Julius Caesar crossed against the prohibitions of the Senate, when returning from a campaign in Gaul. Such a daring deed provoked a civil war in Rome, which resulted in Julius being able to seize power.
Since then, Rubicon means a certain line, which once crossed leaves you no way back and makes you go to the bitter end. To draw an analogy with the indicator, everything fits together – once a pending order triggers, a trader can only be patient and wait for the result of their adventures (in the best sense of the word).
How does the Rubicon indicator work?
Building the indicator markup involves three moving averages. The first one by default is red and shows a trend on a larger timeframe. It is calculated for 116 candles using exponential transformation (let’s call it EMA(116)) and is the main identifier of the trend, i.e. if the price is above this line, only the signals to buy appear, if below – signals to sell.
The two remaining movings are "fast" and are designed to forming the signals themselves. Unfortunately, it was impossible to calculate their period, because the developers’ website is currently closed, and only the compiled .ex4 file was freely available (you cannot see the source code), but it does not matter, the very meaning is important:
- After the blue line crossed the EMA(116) upward, we wait for the signals to buy to appear. Yellow arrow appears at the moment when the light blue line crosses the blue upward;
- If the blue moving is below EMA(116), we consider selling. Down arrow appears only if the light blue line crosses the blue downward;
- One more parameter was added to the algorithm, which logic we failed to unravel, but due to it, the signals do not appear immediately after crossing the fast lines, but some time later.
The drawbacks of this approach are associated with the inability to change the periods of moving averages on your own, but on the other hand, you can always combine multiple timeframes, i.e. if the signal seems to be unreliable, it is reasonable to examine the situation on older chart.
There’s nothing special to note about the expert settings, as their set is very poor – the trader is allowed to change only four variables – in particular, the parameters argetLabelSize, StopLabelSize and AudioAlert are responsible for the size of the price marks and the signal arrow (i.e. they do not affect the results of calculations) and a variable AudioAlert allows to enable/disable alerts.
Rubicon indicator and trading signals
Now let’s consider systemic patterns. As already mentioned, after the signal appeared, the indicator marks several levels, the most important of which is colored green and represented by a solid horizontal line – this is the optimal price to set a pending order in the direction of the signal arrow.
If the indicator Rubicon recommends buying an asset, we set a buy-stop order; if the sell is relevant, we work with the sell-stop. Thus, trading is expected only in the direction of the trend on the breakthrough of the level (again, remember the river from Roman history), which means that the position does not fall under the influence of the additional risks associated with slippage and market manipulations.
Orange price mark on the chart is the optimal price to place stop-loss, the yellow mark is an advice to set take-profit. Please note that the indicator recommends rather than orders, so you can experiment and match the risk/profit ratio for each pair depending on its volatility.
And since we are talking about modifications, we cannot ignore the fact that the stops by default often exceed the amount of potential profit. The chart above shows just such a situation, seeing that any seasoned speculator can say that this is a direct route to siphon-off. We can offer the following procedure to solve the problem:
- first of all we study the Rubicon indicator painted on the chart;
- if the distance from the signal level to profit twice the distance to stop, we follow the recommendations of the algorithm;
- if the distance to the profit is less that double stop, we double the stop and mark up a new level of take-profit.
Strengths and weaknesses of the Rubicon indicator
To sum up, we will traditionally list the advantages and disadvantages of the considered indicator. As we noted at the beginning of this article, this expert will appeal to beginners. Moreover, some speculators sometimes ask the question: “What is a pending stop order?” Well, what can we say? The Rubicon indicator provides a good opportunity to learn this way of work. This is the first advantage.
The second advantage of the algorithm lies in its versatility. Tests have shown that a similar set of moving averages shows good results on all timeframes, except for minute charts (spread will eat up most of the profits there).
Multicurrency may also be noted here – the author was able to choose the parameters of the formulas in such a way that signals of good quality appear on any currency pairs, whether they are major pairs, crosses or currency indexes. It also makes sense to try to apply the Rubicon indicator when trading CFDs for stocks, because the stock market is considered to be trendy, and hence the intersection of the "movings" on it will be processed well.
There are also some flaws, because in addition to the problem of the profit size discussed in the previous paragraph, you should take into account the vulnerability of the indicator during flat (there are false signals). Our regular readers already understand the nature of this phenomenon, but for beginners we’ll repeat – the average prices always lag behind the actual trends in the moment.
Another disadvantage is the destruction of the old markup when changing trend, making it impossible to evaluate the work of an expert on history. We’ll emphasize – this is not "repainting and brazen fit", but rather the complete removal of markup, so this problem can be solved by a special tester Simle Forex Tester.Social button for Joomla