Test of the “Fuller 3 Oscillators” strategy with Forex Tester

The famous financial coach-trainer Nial Fuller used this technique at the peak of his popularity as a trader. It was part of a set of strategies, thanks to which he managed to win the Million Dollar Trader Competition from the AxiTrader broker in 2016, and showed a fantastic result — almost 370% in three months of trading.

Today Nial lives in Australia and prefers trading CFD contracts, futures, and American stocks. He is also considered an active popularizer of knowledge about the financial markets. His articles and recommendations are constantly published here — we recommend everyone to read it regularly.

We recall that the trading guru himself has long abandoned indicator trading in favor of Price Action patterns. Nevertheless, he recommends the "3 Oscillators" strategy for beginners to study technical analysis, as well as for those who use technical indicators as the primary source of trading signals.

The “Fuller 3 Oscillators” strategy description

It is supposed to trade on foreign exchange assets with stable liquidity and a stable trend, at least to medium-term trends. Fuller used the technique on D1 and above, following his principle of trading only on "quality signals" with high-profit potential.

However, judging by the fact that the basic trend is suggested to be tracked using SMA (9), we still recommend the H1-H4 timeframe.

important So, we need SMA (9, Close), RSI (8) (red), RSI (14) (blue), RSI (19) (green) with levels 30, 50, 70 (see Using Indicators). All oscillators are applied to the closing prices and are located in one window below the main chart.

The first signal is received from the moving average. We enter the market if the oscillator lines are located as follows:

  • Buy: the price crosses the SMA (9) from bottom to top and closes higher; the oscillators move from bottom to top in the 19-14-8 order (the red line is the highest); the entry is on the next bar after the three oscillator lines crossing.
  • Sell: the price crosses the SMA (9) from top to bottom and closes below; the oscillators go down in the 19-14-8 order (the red line is the lowest); the entry is on the next bar after the point of intersection of the oscillators.

Stop Loss is supposed to be moving, with a trailing at a distance of 20 to 30 points from the SMA (9) line. It is assumed that the trade is not closed while the RSI link moves above/below the level of 50.

important We do not trade on speculations and within an explicit flat. Close the deal by Stop Loss or on the reverse signal.

Creating a Strategy File in Easy Forex Builder

There are a few key points to note before creating the strategy file in the Easy Forex Builder.

The point of the three oscillator lines crossing is a conventional concept. This point can be visually seen on the chart, especially since you can also use Graphic Tools. But in fact, the lines cross sequentially, and the correct order of the lines is not always observed, so it is almost impossible to track this moment (and the price!) correctly. Moreover, the estimation of the position of the lines relative to the zones of 30-50-70 does not make sense at all — such dynamics will be different for each oscillator.

important It is also not easy to program the moment to enter a trade “on the next bar after the three lines crossing”. Therefore, we will open a deal on the next bar after the trend breakout — this will be a more reliable signal.

The situation with “lines crossing” and subsequent actions can be implemented in the Easy Forex Builder objects in several stages. So, let’s get started.

Let’s create a strategy in the form of a template with public access. After that, it will be possible to make copies of the strategy based on it for use with different parameters.

Let's create a scheme of conditions for purchase.

The first two “rules” describe the situation when the price breaks out the SMA (9) from the bottom up — the “Rule #1” and the next bar closes above the trend line — the “Rule #2”. Approximately as shown on the diagrams:

Next, we implement the processing of the oscillator signals: let’s assume that the “bullish fan” 19-14-8 we need will be fully formed when the red RSI (8) line is located above (the “>” operator) the blue RSI (14) line — the “Rule #3 “, and, in its turn, the RSI (14) will move above the green RSI (19) line — the “Rule #4”. Look at the diagram.

If all the conditions are met in the appropriate order, we will open a market buy order.

We use fixed Take Profit / Stop Loss and enable trailing of 50 points with a step of 20 points. The volume of the transaction is one standard lot, Martingale and other risky tactics are not used.

By creating an inverse rule, we form a scheme for sale with similar conditions.

The “Rule #1” — breakdown by the price of the trend line from top to bottom, the “Rule #2” — a close of the next bar below the SMA (9) (operator “<”). Look at the diagram:

Check for the presence of a “bearish fan” on the oscillator lines: first, check the red RSI (8) line — it should move below the blue RSI (14) line, while the RSI (14) is below the RSI (19).

If the conditions are met, we will open a sale with the same technical conditions.

Don't forget to save the project.

To pre-check profitability, we conduct a quick test of the strategy in EFB — you can select any three months from the price history. We recommend choosing the most "fresh" period.

On the base (for Fuller himself) asset GBP/USD, we get an excellent result — 46% in three months with an excellent recovery rate. It means that the general idea of the strategy is quite profitable. However, it is necessary to carry out a series of tests in more "battle" conditions for an adequate assessment.

We export to a *.dll file for use in Forex Tester and move on.

General test conditions

We do not have clear author’s recommendations for choosing an asset. But still, given that during the period of using this strategy, Fuller preferred CFDs on foreign exchange assets, we will try to test the methodology on three major pairs with the dollar and two most liquid cross-pairs.

important

We use five-digit quotes of the brokers Alpari and FXCM. The spread is 2 pips; we take into account a swap for each asset separately (see below); the timeframe is H1. The initial deposit is $100.000; the leverage is 1:100; the minimum transaction volume is 1 lot; the “Bars to skip” parameter is set to 50.

We use trailing with the conditions specified when creating the template (TrailingStopPips 50, TrailingStopStep 20), but for cross-pairs, we recommend to reduce the TrailingStopPips parameter to 40 points.

All deals are opened automatically, without manual adjustments. During trailing, Take Profit also follows the price, so the limit of 100 pips specified when creating the template may end up being higher. All orders are closed by Stop Loss.

The testing period is 3.5 years (42 months). We will only analyze the statistics of the current test. The maximum load on the deposit is no more than 3 lots. Let's take a closer look at the results.

Test #1: GBP/USD

important We recall that this test does not imply partial withdrawal of profit.

The result is significantly worse than expected after the quick test (see above). However, according to classical technical analysis, a profit of about 20% per year (1-1.5% per month) is considered normal for a medium-term strategy.

In fact, the main profit was achieved in the last period of the test. Before that, the balance fluctuated within the range of ± 25% of the initial deposit, and the maximum drawdown (at the moment) of 62% is quite dangerous.

About 2 trades were opened a week according to the strategy. There were 1.5 more losing trades than profitable ones. Statistics indicators are in the positive zone, but the profit factor is still weak.

Test #2: EUR/GBP

The final profit is about the same (about 20% per year), but the balance line looks more stable. In particular, the maximum drawdown of 37% is an excellent indicator for medium-term trading. But there is still no steadily growing balance.

Apparently, the euro's stability in the cross improved the result during the period of strong speculation in GBP/USD, where the previous test failed. The absolute profit turned out to be a little less, but the ratio of losing/profitable trades and statistics indicators are much better.

Test #3: AUD/USD

Attempts to catch the trend on the Asian asset were unsuccessful. The account left the maximum drawdown zone of 60% rather quickly, but almost all the time of the test, the balance fluctuated in the initial level zone in the range of ± 25%.

The fact that at the end of the test, the balance turned out to be positive, is rather an accident.

important Note right away that attempts to change the Stop Loss size and trailing parameters only worsen the situation.

The statistics indicators in such trading are naturally low.

Test #4: EUR/USD

The result clearly demonstrates that there is no fundamental connection between the main European assets EUR and GBP, and it is no longer worth relying on the fact that they will react and move synchronously. Where GBP/USD began to give profit actively, its counterpart, the EUR/USD pair, showed a loss and, as a result, reduced the deposit by 60%.

The general trend is the same as in the previous tests: even before starting to “failure”, the pair did not even show any attempts to grow confidently, and the attempts to reduce Stop Loss only accelerated the negative result.

Test #5: EUR/JPY

In fact, the euro/yen pair is constantly in a fairly wide flat, and, as it seemed to us, this range should have been enough to get a short-term profit in both directions. Alas, the intersection of oscillator lines gave too many “false” signals, due to which the trades fell into a loss, even if the trend breakout signal was strong.

The main deposit “was lost” almost immediately, but in the last period of the test at a new level (about 3 000), the usual fluctuations in profit/loss were observed.

important It’s interesting that the average profit turned out to be more than 2 times higher than the average loss, that is, when the strategy signals did “hit” the medium-term trend, they used it to the maximum.

You can experiment with the Take Profit / Stop Loss parameters and the oscillator settings, but the general impression of using the technique on this asset is negative.

Several practical remarks

As an active trader, Nial Fuller uses only moving averages of all standard technical indicators — to control PA patterns in the main trend zone. At one of the seminars, the financial guru mentioned that it was the instability of the once successful “3 Oscillators” technique that made him finally turn towards Price Action. Now we understand the logic of such a step.

important Do you want to know more about Price Action? We will present a complete guide to the most popular Price Action patterns to all users who purchase the Forex Tester 5 upgrade! Stay tuned to get more info!

The capabilities of the Easy Forex Builder allowed us to quickly create a strategy template and test it on multiple assets. Of course, we had to make some deviations from the methodology and tighten the entry rules, but this only increases the credibility of the test results.

What is the result? Only GBP paired with the dollar and in the cross with EUR showed a fairly confident profit. The good news is that the positive dynamics of profit have intensified recently, although the profit factor could be higher. But this can be adjusted using Take Profit / Stop Loss and Trailing Stop / Trailing Step, as well as more aggressive money management. Forex Tester will help you to find the optimal parameters.

important

Please note that all tested currency pairs gain and lose profit at approximately the same rate, due to which there is no stable growth.

The modern market is much more speculative than at the beginning of Neil Fuller’s career: the market does not indulge us with strong protracted trends. Therefore, it is unprofitable to use signals from impulse indicators to confirm entry into a trade.

Any speculative signal quickly breaks the oscillators’ logic, and you either get a “false signal” or miss a strong trend entry. So if you want to use this strategy, you will have to work on it thoroughly.

Try It Yourself

As you can see, backtesting is quite simple activity in case if you have the right backtesting tools.

The testing of this strategy was arranged in Forex Tester with the historical data that comes along with the program.

important To check this (or any other) strategy’s performance you can download Forex Tester for free.

In addition, you will receive 20 years of free historical data (easily downloadable straight from the software).

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