Really simple system, need some help

Hey everyone, as a busy person I wanted to make a system that was easy for me to manage, one that didn’t have a lot of indicators (in fact, this one doesn’t have any) and one that didn’t require me to sit in front of my computer all day to wait for a signal. However I haven’t perfected it yet and I need some help, especially with the stop loss.

This system is based on the daily charts but you MIGHT be able to use it down to the 4hr level. I wouldn’t recommend going any lower. This system uses the previous day’s High/Low points to place trades. It’s about as simple as you can get.

Step 1. Look at the previous day’s candle to see if it was a bull or bear candle.

Step 2. Depending on whether or not yesterday’s candle was bullish/bearish, look at the price of the high/low. For example, if the candle was bullish then find the high of the day and for bear candles find the low.

Step 3. Place a buy/sell order at the high/low of the previous day. For example, if it was a bull candle yesterday then place a buy signal at the high price. You should do this BEFORE the new day has hit the high/low. If it has already hit the high/low, don’t bother jumping in.

Step 4. Set your TP/SL depending on the currency pair.

Note: You should only be making 1 trade a day. Also, if the new day’s candle never hits the high/low of the previous day, remember delete the order ASAP so you don’t trigger it. Also, although there are no indicators, you can use them to find trends or channels in the daily charts. The best way to do that would be to use high/low data depending on the trend and NOT the previous day’s candle. I haven’t tried it myself but that may be a more accurate way of doing it.

Basically that’s it. You should only be using this strategy on high volume currencies like EUR/USD or GBP/USD. Smaller volume pairs will NOT work with this system. For example, EUR/USD usually has a tendency of reaching 20-30 pips farther than the previous day’s low/high so for TP I use a fixed 15 pips. GBP/USD is about the same but I use 10 pips because it doesn’t have as high a volume. I tried manually backtesting the system on daily charts and it seems to win pretty consistantly, like 90%.

Unfortunately, when looking at the hourly charts it tells a different story. Even though on winning days the candles pass the previous day’s high/low, it sometimes retraces in the opposite direction right when it hits the entry point. This means that SL happen often. After discovering this, I thought to myself, “Hey, why not just reverse the trade orders and set the lows to buy and the highs to sell?” Well I tried that and the thing is that it doesn’t ALWAYS retrace.

After that, I thought to myself, “Well why not just make the SL higher?” I’d love to do that but then my trades would be floating a LOT and it would become a very risky system. Now my problem is that I don’t know where to set a proper SL in order for the price to retrace a little (if it does at all).

My thoughts were to set the SL to the close of the previous day. However, this could cause a problem if the close was right at the high/low of that day. I don’t think that a fixed SL will do me any good either seeing as currencies are very unpredictable.

If anyone could give me some thoughts, maybe a suggestion on how to solve this problem, then I think that this system could turn out pretty great. I love the fact that this system is very accurate and it’s also very simple, no indicators and no waiting for signals. After I get it all figured out I’ll delete this post and create a new one for the community to develope ideas and whatnot.

[QUOTE=lagoona2003;10654]Hey everyone, as a busy person I wanted to make a system that was easy for me to manage, one that didn’t have a lot of indicators (in fact, this one doesn’t have any) and one that didn’t require me to sit in front of my computer all day to wait for a signal. However I haven’t perfected it yet and I need some help, especially with the stop loss.

This system is based on the daily charts but you MIGHT be able to use it down to the 4hr level. I wouldn’t recommend going any lower. This system uses the previous day’s High/Low points to place trades. It’s about as simple as you can get.

Step 1. Look at the previous day’s candle to see if it was a bull or bear candle.

Step 2. Depending on whether or not yesterday’s candle was bullish/bearish, look at the price of the high/low. For example, if the candle was bullish then find the high of the day and for bear candles find the low.

Step 3. Place a buy/sell order at the high/low of the previous day. For example, if it was a bull candle yesterday then place a buy signal at the high price. You should do BEFORE the new day has hit the high/low. If it has already hit the high/low, don’t bother jumping in.

Step 4. Set your TP/SL depending on the currency pair.

Note: You should only be making 1 trade a day. Also, if the new day’s candle never hits the high/low of the previous day, remember delete the order ASAP so you don’t trigger it. Also, although there are no indicators, you can use them to find trends or channels in the daily charts. The best way to do that would be to use high/low data depending on the trend and NOT the previous day’s candle. I haven’t tried it myself but that may be a more accurate way of doing it.

Basically that’s it. You should only be using this strategy on high volume currencies like EUR/USD or GBP/USD. Smaller volume pairs will NOT work with this system. For example, EUR/USD usually has a tendency of reaching 20-30 pips farther than the previous day’s low/high so for TP I use a fixed 15 pips. GBP/USD is about the same but I use 10 pips because it doesn’t has as high a volume. I tried manually backtesting the system on daily charts and it seems to win pretty consistantly, like 90%.

Unfortunately, when looking at the hourly charts it tells a different story. Even though on winning days the candles pass the previous day’s high/low, it sometimes retraces in the opposite direction right when it hits the entry point. This means that SL happen often. After discovering this, I thought to myself, “Hey, why not just reverse the trade orders and set the lows to buy and the highs to sell?” Well I tried that and the thing is that it doesn’t ALWAYS retrace.

After that, I thought to myself, “Well why not just make the SL higher?” I’d love to do that but then my trades would be floating a LOT and it would become a very risky system. Now my problem is that I don’t know where to set a proper SL in order for the price to retrace a little (if it does at all).

My thoughts were to set the SL to the close of the previous day. However, this could cause a problem if the close was right at the high/low of that day. I don’t think that a fixed SL will do me any good either seeing as currencies are very unpredictable.

If anyone could give me some thoughts, maybe a suggestion on how to solve this problem, then I think that this system could turn out pretty great. I love the fact that this system is very accurate and it’s also very simple, no indicators and no waiting for signals. After I get it all figured out I’ll delete this post and create a new one for the community to develope ideas and whatnot.[/QUOTE]

Trading high low breakouts can be profitable. Attached is a pdf file with the daily breakouts for the past six weeks in GBP/USD.

I think the easiest way to trade the setup is to wait for the break of the high or the low. Then wait for price to pullback and enter on the move back above or below the high or low. This helps avoid false breakouts, like today in GBP/USD, 1 pip over Friday’s high.

Initial targets could be the average pips for previous breakouts 53 pips for new highs and 43 pips for new lows.

The stop can be placed just beyond where the pull back ended.

See the chart for May 10 attached. It’s a good example of the setup and the potential.

You can do the same thing for breaks of session highs or lows. There is a thread here about “Scalping the Asian High/Low”. Same thing can happen in NY and European sessions. Breakouts of highs and lows tend to travel to new highs and lows. The trick is to understand how the happen and where they might end. Sometimes highs and low act as resistance or support. Like GBP/USD last night, 1.9842 Friday’s high became resistance and price moved in the opposite direction today.

Good trading.

David

Well, waiting for the retrace of the breakout would be the best idea. However, it defeats the purpose of not sitting in front of my computer all day. I originally intended for this system to be sort of a “Set it and forget it.” method. If there could be some way to accurately calculate how much the price would retrace then it would work well and I could be able to set a proper SL. Or perhaps if I could know how often the price retraces after a breakout then I could perhaps that to my advantage too.

P.S. Thanks for the advice and input.

“Set it and forget it” would be nice but unfortunately I am not sure successful trading works that way.

David

I’ve seen quite a few successful set/forget methods, especially daily20pip.com. I still use daily20pip.com and I love the results I get from it. To top it all off, it’s one of the most simple systems you could ever find.

But besides that, I think that if we could find some way to get a solid SL on this system, I think that it would do very well. Like I said before, my current idea is to put the SL at the close of the previous day, but sometimes that could get risky. I might go home and backtest to see the results of that claim later. Anyways, if we could get a good SL, then it would be possible to set/forget because the price has some room to hover around you know?

To Dlw1999

Could you post back and tell me how you attached that thumbnail. I am relatively new to computing and i can use file attachments but have not idea how to attach a thumbnail although everyone else does seem to know.

Kind regards, Tymen Wortel, Perth, Western Australia.

Sure, look further down the screen when you make a post or reply for “Additional Options”. There is a button “Manage Attachments” which will bring up a new window. Use the “Browse” button to find the file you have saved on your computer. In the upper righthand corner of the new window is an “Upload” button click that and your finished.

Good to hear from WA, I have worked with several companies in the area.

Good trading .

David

A simple s/l I have tried befor is to set your loss at a few pips below the lowest point of the 3 previous candles. Only exception is if one candle (body and wick) is within the wicks of the candle befor it then it doesnt count. So if that is the case you would look that the last 4 candles. This is simple but with the day charts you want a large account over $2k atleast. Sometimes you can risk 200 to 300 pips. My problem with this is I could not find a good t/p. So maybe we can help each other on this one.
Good luck and keep your stick on the ice

Yeah, I thought about setting it to something like that but I don’t want 100-200 pip risk float for a 20 pip profit you know? Have you tried doing what I thought about? Setting SL to closing price of the previous candle?

Yes, I have set my stop at the previous candle. The problem with that is it is too close. Sometimes when you get in the market will bounce around. And if you go too close you will get knocked out befor you get a chance to get a win.
Also if you are trading off of the day charts then you have to be willing to risk 200-300 pips sometimes. And you will lose on some of them but you will also win 1000pips on some of them. With the day charts you are really following the long term trend. So you have to wade out the little bumps.
If you are only willing to risk 20 pips pre trade then you need to look at a smaller time frame or try scalping.
That is why I said that if you want to go in for the long haul you need an account with atleat 2k and probably closer to 5k to get started.
Hope this helps

Hi lagoona2003. Thanx for sharing this system. I think at first glance its a very good system/method. Why do u take a fixed 15/20 pips profit? If u let ur trade go on for a few days u will see it gives more profit so u cud set ur SL pips higher. Do u mean u have to close the trade the following day itself? Maybe to set a Sl u cud use PSar or something like that. ALso as u have mentioned u cud use an indicator to filter trades. for ex use stochs to go long when fast stoch is above slow stoch and vice versa etc. If u r looking for retracements on the hourly u cud use the cornflower system(i saw on the other site i dont know if i can mention here for the benefit of other members if u want u can email me). u cud also use fibo levels for tp as u go along? All in all thanx again for posting this.

Hmmm,
seeing the chart make me confused.hahaha…:smiley:
But thanks for your info guys, it makes me know more little about forex…
success for all…
I hope too, i can success to gain consistent profit with my love broker, lite forex…