The Most Profitable Trading Pattern You Will Ever Encounter

Nice strategy Philip! It’s interesting to see other traders using MA crossovers as a leading signal rather than lagging. The extra filter with stochastics works great as confluence for trading pullbacks.

All the best!

Hi ToengToeng,

As per what i understand from Philip, the only time we conclude a “failed patterns” is when the opposite signal is being formed.
Yes those pairs are currently in the losing end, but we only close trade only when the opposite signal is being formed.

Sorry im newbie too. Correct me if i’m wrong.

So in conclusion, you close all 6 trades just before the pattern fails (opposite signal is formed), just like Philip did when a pattern fails ? Thanks for the response btw

Guys, I’m a newbie here. I used Philip system and found that AUDUSD and EURUSD pop a buy signal while we are having a strong down trend for both pairs. Shall we ignore the setup or we just buy whatever we can see ?

Philip or anyone that can help. :slight_smile: I’m having trouble with the fib extention. I’m using mt4 and its called fib expansion.

  1. am I using the right tool?

  2. can anyone share some details on setting it up correctly? ( I have scrolled through and found info Phil shared about it being 1.618,2,2.618,3 and so on but when I enter those figures and draw it as instructed it doesn’t seem to work for me.)

  3. when speaking about the main line crosses over on the Stoch,are we talking about the main line -20 & +80 or the k Stoch line?

Any help would be great.

Trade what the system tells you. If in doubt, take a smaller/smallest position on such trades and see how it goes.

I’ve had two such losing trades that were recovered this week.

GBPUSD H4 Sell
and Brent H4 Sell, which overshot by a large margin only to reverse back. The trade is now close to my original sell entry.

How were this past two weeks for everyone’s closed trades? Previous week yielded +300 pips and +25pips respectively for me.

I started looking at my log since I began following this method since 17/03 in one of my accounts. Results are decent.

[B]Week 12 (16 - 20 March)[/B]
Total Pips: 1636.7
Excluding Gold from the equation it was -134.3 Pips on Fx

[B]Week 13 (23 - 27 March)[/B]
Total Pips: 641.6
Note: Did not trade on Friday, so that’s the tally for 4 days

Observations:

  1. Money management is of utmost importance with this system. Even a slip for a moment into getting greedy is enough to rip your account apart.
  2. Trade only the first signal and add to positions only if you are already in the trade. Use proper MM rules while adding to position
  3. Recovery trades happen, but it takes their own sweet time (refer to point 1 about MM in this regards)
  4. I enter a trade on the closing price of the Candle that signaled the trade. Price usually hovers around this level for 2 - 5 candles before moving.
  5. I strictly buy only when Stochs cross up from 20 and sell when Stochs cross down from 80.
  6. Points 4 & 5 have been especially helpful in the recovery aspect
  7. Last but not the least, I split my trades to book partial profits at 100%, 127.2%, 161.8% and let the final trade run its length

Hope this helps others who are just getting started with this method.

The jury is still out on this long-term. I was able to get my hands on 10-years of historical 4-hour data for the 7 major CCY pairs, and I finished implementing the Monthly RSI(14) filter. The results came back really bad over this 10-year period, but I need to review this data, as it may not be the best. More to come when I have definitive results. My initial back-test (w/RSI Monthly filtering) came back really good over 5 years of 4-hour data for 3 of the major CCY pairs, so I need to find where the disconnect is.

I like this post a lot because you took the system and added to it based on your own experience and preference. It’s actually these details that creates a difference between someone who made a return of 10% and another who made a 120% for the same period.

To answer an earlier question, I haven’t traded at all last week. But March yielded 1640.9 pips for me. February 2078 pips and January only 37 (only one position closed in January.)

So my avg during the first quarter of 2015 was 1251 pips a month.

[QUOTE=“jw1981;691982”]I started looking at my log since I began following this method since 17/03 in one of my accounts. Results are decent. Week 12 (16 - 20 March) Total Pips: 1636.7 Excluding Gold from the equation it was -134.3 Pips on Fx Week 13 (23 - 27 March) Total Pips: 641.6 Note: Did not trade on Friday, so that’s the tally for 4 days Observations: 1. Money management is of utmost importance with this system. Even a slip for a moment into getting greedy is enough to rip your account apart. 2. Trade only the first signal and add to positions only if you are already in the trade. Use proper MM rules while adding to position 3. Recovery trades happen, but it takes their own sweet time (refer to point 1 about MM in this regards) 4. I enter a trade on the closing price of the Candle that signaled the trade. Price usually hovers around this level for 2 - 5 candles before moving. 5. I strictly buy only when Stochs cross up from 20 and sell when Stochs cross down from 80. 6. Points 4 & 5 have been especially helpful in the recovery aspect 7. Last but not the least, I split my trades to book partial profits at 100%, 127.2%, 161.8% and let the final trade run its length Hope this helps others who are just getting started with this method.[/QUOTE]
Thanks for sharing the logs.
Could I know which pairs did you trade as well ?

I would like to see those results as well :slight_smile:

Just so I’m clear the RSI monthly was calculated using the 4 hour candles? Because that would be my explanation and I still think using a dashboard with the indicator will yield better results.

I already did the trades for EURUSD with monthly RSI so I would like to see the results of those back tests.

Thanks a lot for what you do Doughayman.

Regarding point 5: Does that mean you trade like PhilipPirrip or did you add an additional rule e.g. that the main line or the signal line or both have to come out again of the overbought/oversold level before you open a trade.
I am asking this because sometimes they move around quite a long time in oversold/overbought area so maybe it would be good to wait until the move out again of the 20 or 80 area.

Well, the good news (if it’s good news) is that my 10-year data is crap. Lots of missing data all over the place, and 4-hour boundaries drift from 0,4,8,12,16,20 to 1,5,9,13,17,21 all over the place. The data cannot be trusted, so this means that the simulation I did for 10 years isn’t valid either. Scrap it. BTW, this 10-year data was from https://www.dukascopy.com/free/candelabrum/.

Yeah, my RSI Monthly (14) was ultimately calculated using 4-hour bars, which is absolutely what we want, since this is how they are going to be calculated in real-time (even with a Dashboard), so that should be the basis for back-testing too, IMO. I use the 4-bar Monthly Close for 13 prior months, and the current 4-bar close for open month. I checked it with an RSI Calculator that I built, and one that I found on the Internet. I believe it to be solid at this point.

I want to post results for the 5-year back-test that I did with 3 CCY pairs, where the data is good. Unfortunately, I stand corrected - the results were not that good with RSI threshold values of 33.33 and 66.67 (2 losing years, and overall not profitable, I think 41 trades; I think 53% winners). However, when I adjusted them to 30/70, the results were much better (only 1 losing year, but overall profitable, 32 trades; 65% winners), and when I upped it to 25/75, even better (no losing years, overall profitable, 21 trades; 67% winners)… It takes a while to sim this stuff, so let me know which one you want me to post. Data is for EURUSD, GBPUSD, and USDJPY, for 5 years, but no trades for 1st 14 months obviously, since RSI Monthly(14) has to be calculated first.


HELP: I need “good” 10-year, 4-hour bar data for the major 7 CCY pairs. This still needs to be validated, and if it passes, we can work on putting all the logic in a Dashboard. Don’t want to put the cart before the horse yet, but that’s just me.


Well these are very interesting findings you made. The use of 30-70 is quite common and could be used. But it has to be said this is the first time I hear about 75-25. It’s interesting nonetheless.
I’d prefer posting the 33.3 for now. However, if possible, I’d like you to keep score of the two other thresholds. That way if we do confirm that 75-25 is best then you have made a technical analysis discovery :slight_smile:

Just one not on the RSI I disagree. As I said earlier this would not be how the RSI was calculated in real time because we will only trade after a monthly RSI close above or below the threshold, and not a 4-hr close.
The second thing is as far as I remember we were only considering every x no. of 4 hour bars as a month. The real-time way of doing it would have calculated the open and close for the exacts months. Over time I expect them to show a significant difference.
This is actually why I want to see the 5-year test results for EURUSD because I have already done the back testing manually for this and we can compare. I think I’ve done it for GBPUSD as well but I’ll have to go back and see the post where I shared the results.

OK, then that’s a mistake on my part. I will need to revise the code to handle only the 14 last Monthly Closes on the 4-bar, and to IGNORE the current month. Let me revise this, and then I’ll post the 33.33/66.67 results on those 3 CCY pairs. Easy fix given the current implementation.

You probably missed one of my earlier posts during the week - I was considering doing every “x” bars as a month because it was easier to implement. But, I got a brainstorm on how to implement on the actual Monthly Closes. I just have to make the above change to make sure we’re in synch. Thanks for pointing that out.

OK Philip, easy change to facilitate using the last “Closed” 14-month RSI’s for filtering. Here are the results. Please keep in mind that my data is only inclusive until Mid-March, so last couple weeks of data weren’t used. Monthly RSI Thresholds of 33.33 and 66.67 were used, per your request. Note: No trading 1st 14+ months of date interval, since we needed to obtain Monthly Closing values for Monthly RSI filtering. Again, for those of you following along at home, my tool, WealthLab, doesn’t support FX natively, so I’m assuming 10% of a $250,000 initial portfolio is applied to every trade.

IMPORTANT NOTES:

(1)This change to only use the last 14 Closing Month values, significantly increased the performance of the system !!! Yay!

(2) I also ran the test using 30/70, and the Net Profit was slightly less than the results below, and the Winning % was slightly less too. This certainly helps confirm your 33.33/66.67 hypothesis (although I still want to test with more data).

(3) I also ran the test using 25/75, and the Net Profit was about the same as the results below, but better than the 30/70. Of note here, 23 trades were taken and 18 were profitable (78.26%), so this had the best Win/Loss ratio of the 3 tests. Still, before we anoint this as a potential RSI filtering values method, I really want to see more data, across the major 7 CCY pairs.

Overall Performance:

Raw Return Graph:


Trades Taken:


There is one thing I wanted to point out Doughhayman.

I noticed that you usually focus on losing years in your analysis. While I agree with you that its important, I just wanted to say it is not as important as I feel you think it is. What I would be concerned with at the moment is % of winners and the win to lose ratio.

The reason for this is coming from a stockmarket background (and I think so do you) a losing year is important. If I am net loser on a year for a stockmarket I’d be devastated because it will actually have a long effect on my portfolio for the future (I’m more of a value investor.)

However in forex a losing year in EURUSD only means you lost net total on one stock, but we do not know yet how the portfolio has done. I could lose 1,000 pips for example on EURUSD but go on to make 15000 pips on AUDUSD, so I’m a net winner. Of course the opposite is true.

It’s only once we do the test on the majors (EURUSD, GBPUSD, USDJPY, EURGBP, USDCAD, AUDUSD, NZDUSD) and combine the results of a particular year that we can refer to that year as a loser.

Of course I understand we will also trade other pairs (my biggest win this year was on GBPCAD) and we may not take all the trade of one pair, but at the moment we are trying to value the performance of the system.

Thanks for that. The one thing I liked is that long and short system was higher than the rest. If you want to try the 30-70 and 75-25 be my guest.

I will look to translate the profits to pip terms, so that I can clarify to those watching how the performance would have translated in forex terms.

Great job Doughayman, I hope someone has those CCYs.

Philip, just so you know, any comments I made on a “Losing year” was meant to be against Entire portfolio of trades across all instruments, so we’re in total agreement in that regard.