Sunday Breakout Strategy

[zebra]

Originally Posted by phil838

Hi guys! This system has been very profitable for me so I thought I'd share it.

I've traded this live since late 2008, and I've also backtested it manually from Oct. 2004 (as far back as my charts go) to the present day and it has remained profitable all 5 years!!


The Sunday Breakout Strategy

Pair: GBP/USD
Timeframe: 4 hour
Indicators: An ATR(14) on the WEEKLY chart, or use the attached indicator on your 4H chart.

Your broker's charts MUST include the Sunday 20:00GMT candle for this system to work. Some broker's don't put this candle on their charts so make sure yours does! If not use an IBFX demo account, they include the Sunday candle and the demo never expires.

Find the Sunday candle:
- On a 4H chart find the high and low of the Sunday candle. If you're backtesting and using MetaTrader turn on the Period Seperator to make finding it easier. Draw a line 10 pips above the high and 10 pips below the low.


Entry:
- Go long on upper break of the line.
- Go short on lower break of the line.

SL:
- For long trades the SL is the Sunday candle low.
- For short trades the SL is the Sunday candle high.
- Set SL to break even once your profit has reached 2x your stoploss.

TP:
- Your TP is � of the weekly ATR(14).

That's it! A simple system that only takes 10 minutes per week to manage!!

I've attached an excel file with my backtesting results and money management projections, as well as a weekly ART indicator at the bottom of this post.

Also, s050399b has made an excellent indicator for this system that computes all the entries, stoplosses, etc and draws all the lines on your screen. You can find the latest version on this post.

We also have an MT4 EA for the system, but it's new and all the bugs may not be worked out yet. Please test it on a demo account before you use it live! The EA can be found on this post... http://forums.babypips.com/133505-post986.html






Update - Sept. 6 2009 � This thread has grown to almost 100 pages since I posted this 3 months ago. We've learned a lot more about the system and I've answered a LOT of questions. Here are the answers to the most common questions.

And yes, I know these answers contradict some of the things I said early in the thread. Like I said, we've learned a lot since May.

1. Why the heck does this system work? It looks like you're just taking random trades?

Post #27: Sunday Breakout Strategy

2. Can I trade this system on other pairs?

You can, but be careful. Many pairs are closely correlated, so you'll either win all the pairs, or lose all the pairs.

That being said, I am now trading this on two pairs, GBP/USD and EUR/JPY. I have a slightly different set of rules for EUR/JPY, help help lower the correlation between the pairs. The EUR/JPY rules can be found here... Sunday Breakout Strategy

testing some other pairs with slightly different rules to help lower the correlation, but it's still in the testing phase. I'll update this if and when we change the "official" Sunday breakout rules to include more pairs.

3. How many times per week should I trade this system?

Once long and once short. You should never trade this more than twice per week.

4. What if the trade is still open on Friday?

I would close the trade on Friday if it hadn't hit my profit target yet. I've never had this happen since I've been trading live, but I did encounter it once or twice in my backtesting, so it could happen.

5. When should I cancel the second trade if it's not triggered?

Never take the second trade after Wednesday, or if the first trade went above 40% of the ATR and then got stopped out.

6. I was up 200 pips and then lost it all!! Should I have closed out early?

NO!! This system depends on the few big winners to offset the large number of small losers. If you panic and take profit early you will end up losing money in the long run.

However, there are a few times I've taken profit early. If you're a new trader this is a "do what I say and not what I do" situation, but if you're an experienced trader who is exiting because of a real reversal signal then feel free to exit slightly early.

Please understand what I'm saying here... Price moving in the opposite direction is not a reversal signal! Exiting early is for experienced traders only.

Hi, Phil838,

thank you for sharing your system. By "find the low and high of sunday candle" did you mean the one that has formed at exact 20:00GMT or to find the low and hight among all candles that formed between 20:00 and 00:00 GMT.

thank you

[dusktrader]

Originally Posted by zebra

Hi, Phil838,

thank you for sharing your system. By "find the low and high of sunday candle" did you mean the one that has formed at exact 20:00GMT or to find the low and hight among all candles that formed between 20:00 and 00:00 GMT.

thank you

It is the 4-hour candle that closes at 20:00 GMT that you are looking for. At exactly 20:00GMT, the currently forming candle will stop and a new one will start.

[Clint]

Originally Posted by dusktrader

It is the 4-hour candle that closes at 20:00 GMT that you are looking for. At exactly 20:00GMT, the currently forming candle will stop and a new one will start.

Wrong, dusktrader. It's the 4-hour candle that OPENS at 20:00 GMT that you are looking for.

This candle opens at 20:00 and closes at 00:00 (midnight) GMT, which corresponds to 3pm-7pm EST.

[dusktrader]

Originally Posted by Clint

Wrong, dusktrader. It's the 4-hour candle that OPENS at 20:00 GMT that you are looking for.

This candle opens at 20:00 and closes at 00:00 (midnight) GMT, which corresponds to 3pm-7pm EST.

Sorry for confusion, my bad... correct me if I'm wrong but it's the candle that completes itself at 7pm Eastern. This is the 20:00 GMT candle, correct? We take our readings and input orders at 7pm Eastern.

[Clint]

The Sunday candle has closed:

HIGH = 1.6669
Low = 1.6621
Range = H-L = 48 pips
ATR(14) = 386
TP = 193 = 3.33xR
SL = 58 = 1xR
R:R = 3.33:1

Entry LONG at 1.6679
TP at 1.6872
SL at 1.6621

Entry SHORT at 1.6611
TP at 1.6418
SL at 1.6669

For either trade, move SL to BE at 116 pips profit.

[Clint]

Originally Posted by dusktrader

Sorry for confusion, my bad... correct me if I'm wrong but it's the candle that completes itself at 7pm Eastern. This is the 20:00 GMT candle, correct? We take our readings and input orders at 7pm Eastern.

You got it, my friend.

[aaron3719]

I would put Buy Stop at the upper break or Buy limit?

[nutrader]

Originally Posted by Clint

The Sunday candle has closed:

HIGH = 1.6669

Low = 1.6621

ATR(14) = 386

SL = 48 = 1xR

TP = 193 pips = 4xR

R:R = 4:1

Move SL to BE at 96 pips profit.

Entry is 10 pips above high or 10 pips below low, therefor SL =58 pips & BE =116 pips of profit

[dusktrader]

Here are my figures for those taking the EURJPY trade also:

ATR=362
trigger high=133.73
trigger low=133.40

BUY @ 133.73 + 10 + sp = 133.87
TP @ 133.73 + 181 = 135.54
SL @ 133.40 - 10 = 133.30
breakeven @ 133.87 + 90 = 134.77

SELL @ 133.40 - 10 = 133.30
TP @ 133.40 - 181 + sp = 131.63
SL @ 133.73 + 10 + sp = 133.87
breakeven @ 133.30 - 90 = 132.40

[Clint]

Originally Posted by nutrader

Entry is 10 pips above high or 10 pips below low, therefor SL =58 pips & BE =116 pips of profit

You're right. My mistake. I will edit my previous post.