System - Super Trend Follower
Market - EURUSD or GBPUSD or other major pairs, personally trade EURUSD.
Timeframe - 1 hour charts
Indicators used - 10ema and 55ema
Entry - Await 10ema to cross 55ema either crossing up or down, take the relevant long/short position. NOTE - ema crossovers set and move hourly, as do new 1H candles open, so await the correct candle ‘set’ to take the actual crossover and open on the correct candle.
Exit - Exit position on the same basis, awaiting for the signal to crossover the opposite way to your current trade. NOTE - When long await for a re-cross short to exit that long trade etc etc.
Stop loss - A tight stop loss of 25 pips is used, attached to this stop loss is a 25 pip ‘step’ meaning as soon as the trade moves +25 pips into profit the trade is covered at BREAK EVEN. Please feel free to play around with the SL amount, but do keep it tight as i will explain below.
Theory and basis for system - This method and theory is based on the fact that a few trades maybe 1-2 per month maximum will run away from entry to go on and be a very large move, allowing you to bank anywhere from 100-400 pips. On the downside the losses will only be -25 pips of trades that do not work out.
Because of the 25pip step value, a LARGE percentage of trades end up being break even. This is KEY to my system. Most people ask why not allow for the trades to ‘run’ and recross to exit with a larger stop loss. Typical of most crossover systems.
But if you consider how important BE actually is. From 100% of my trades around 45% will end up being BE. Meaning from the remaining 55% of trades that effect cash 25% often win and 30% lose. However if you then discounted BE as null value, i am actually now winning a fairly respectable % of trades when only considering the winning and losing trades. Around 33% fairly low for a system but ok for a trend following method.
Please find data below from 2012 tests;
Trades - 67
Wins - 22
Lost - 45
Win % - 33.00%
Av Win - 139
Av Loss - -25
Profit Factor - 2.73
Drawdown - -225
Pip Profit - 1950
Months + 10
Months - 4
These figures have discounted break even trades.
As you can see the average win is 5.56 times the average loss.
Leverage is personal, I however risk 2.5% per trade which i work as 25 pips. Therefore if make a +100 winner, this would be 10%.
PLEASE MESSAGE ME with a provided email address if you would like me to send full 2012 backtests with equity curve and averages. I seem to have a error loading excel and word docs on this thread? If anyone can help me.
Many thanks, and good luck banking the Super Trends 