Here’s a KISS London Breakout system I’ve been working on for a while. I’d like to hear what everyone else thinks:
Set entry points at high and low of EURUSD from 00:00 GMT to 9:00 GMT. Entry is the first cross of the high or low point (i always use a close above or below. It keeps alot of the wipsaw price action that can be seen at the daily high and low from triggering trade.) Cross above the high is a buy order and below is a sell order.
I use TP of 50 pips and SL at 20. I move SL to breakeven once I hit 25 pips of profit.
In backtesting I found 60 pips is the average move for the EURUSD once it crosses one of these lines, but the standard deviation is 41 pips so that does vary a good deal. 50 pips is the best TP point i’ve seen. Average SL required is 21.1 pips with a standard deviation of 33.6. My 20 pips SL stops out a fair amount of good orders but in the long term, the lower drawdowns payoff. I always move SL to a near fib high/low if there is one within 5-7 pips.
Overall the system has shown around a 45% sucessful trade ratio. Thats both live (real money) and backtesting. Accounting for those failed trades that cross the break even line I see between 15-16 pips per trade on average.
This has been a source of a good deal of my recent profits. I do deviate slightly from plan when it is logical but I try to “set it and forget it” so to speak. Doing so has proven to prevent alot of emotion.
The element I would like to incorporate into this is a method of analyzing the general volatility, say average candle size, and use a ratio of that to determine tp/sl. I’ve tried a couple of things but they haven’t worked for me yet. Any ideas?
I like trade short term on EUR/USD, take 10-15 pips.
I see your system is good.
Is there any requirement for this ? like must be install your software system on our platform ?
your simple system seems to have great merit, I will try it out for sure! Can you clarify one thing for me. You say “(i always use a close above or below. It keeps alot of the wipsaw price action that can be seen at the daily high and low from triggering trade.)” what time should I use 5min chart?,so as to identify a CLOSE before entering . If you could give an example I’d much appreciate it.
I always try to enter when the charts tell me to. once I enter and I simply put my exit price and wait for it to hit the target. i dont look beyond a certain target. generally its 10-15 and that gets hit within 10-15 minutes. If my intention is to get 50 pips, then I do it in installments. I dont waste my time trying to find out what is the standard deviation etc. I am a simple straight forward trader, and I understand only simple things. on an average I spend just about 2-3 hours on trading a day(early morning 6 am to late night 11pm). never trade more than 15-20 minutes in one go. this strategy has been working well for me.
This method is highly doable and it can also be backtested, obviously. The London session is very volatile. The NY session has a more discernible direction. The volatility during London creates the high and low, and then you enter in accordance with this methodology.
Using EUR/USD as the example, and addressing a concern earlier in the thread, 15-25 pips is actually practical. After all, EUR/USD has a practical range of circa 100 pips per day. The high / low range created during London is going to be about 50 pips. Then you have the spread, circa 3 pips. You are now down to about 47 pips. There is will be no way you are going to capture all of them, and so 15-25 is practical.
The Op misled, but I’m sure with no intent. A standard deviation of 33.6 would not be possible. An SD is also irrelevant concerning a strategy like this one.Let me explain the 1st part. An SD measures a standard deviation from the norm. The norm for the EU is about 100 pips. 68% of all data in an SD is contained within the 1st sigma (or sigma 1). This means that 68% of all data will be contained within the parameters of +1 and -1 sigma. With 33.6, there will be a lot more than 68%. This can also be backchecked. You can download the daily data on to a spreadsheet, then do the formulas for the high - low. Let’s say you have 100 candles of data, then that means 68 of the hi-lo’s will drift from the mean, where approximately 34 will be higher and 34 lower. That is your sigma +1 and -1. There is a formula to figure it out, but I won’t get into that.
Also 95% of all the data is contained within the 2’s, and 98% contained within the 3’s. 33.6 * 3 = 100.8. That means you could not even scale a -3 sigma. With SD’s all data can be plotted.
There is no need for SD’s with this type of methodology because you are only looking for a high and a low, and the break thereof. Part of my methodology is an SD channel. Once the 3rd line has been hit at either extreme, that shows an extreme reading for that market. That is the time to enter a trade heading in the opposite direction it took to get to that point. When extremes are hit, it makes for a high probability, high octane trade.
I will try it out for sure! Can you clarify one thing for me. You say “(i always use a close above or below. It keeps alot of the wipsaw price action that can be seen at the daily high and low from triggering trade.)” what time should I use 5min chart?,so as to identify a CLOSE before entering . If you could give an example I’d much appreciate it.