OK, so I’ve been doing a lot of talk about back testing and optimizing and about this one bot that I have been working with. The reason to help develop ones own personal mechanical trading system. So here it is, Its call “BnB TurtleScalping”. I often refer to the turtles. In fact I’ll let Richard Dennis sum this up best:
"I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anybody can make up a list of rules that are 80% as good as what we taught our people. What they couldn’t do is give them the confidence to stick to those rules even when things are going bad.”
Many thanks to Brian and his mastery!
What you will need
We are Trading the GBPUSD on the 5min chart. Set one up to your preferences.
Donchian Channel indicator, I have attached the indicator and template files.
A keen eye
Nerves of steel
Market and Chart Set-up
This system is designed for the GBPUSD exclusively on the 5min Chart. To your chart attached the Donchian channel indicator twice. We are going to to use one for the Upper Resistance Level and one for the Lower Support. Set one with period of 240 in the inputs tab, set in the colors tab the upper color to green (or whatever) and none for the lower color. That’s the upper resistance. To set the lower support set the period on the second indicator to 360, the lower color to red and the upper color to none. Or use the template I have provided.
Position size
We are going to to use a set percent risk of equity. The lot size will depend on which method you use to set your stop loss. What % equity you wish to use will depend on what type of risk your are will to take. For a medium risk level, use 3% equity. Your reward will be looking at doubling your money every 3 to 6 months and a maximum draw down of around 22% in a bad month.
Entry Conditions
Long Entry Rule
Enter long at the exact moment the price touches the upper resistance channel but only after the price has retraced by at least 25 pips from the upper channel prior to the current price wave up. I can’t stress that enough. The price must off retraced by at least 25 pips. What we are allowing is time fore the market to reset itself after our last trade. It principally prevents us from re-entering to soon after a win.
Short Entry Rule
Enter short at the exact moment the prices touches the lower support channel but only after the price has retraced 30 pips from the lower support channel prior to the current price wave down. Again that value is 30 pips.
Personally I like to wait to the last moment to enter a pending order. It means I stand a better chance of entering the market at a price I want and allows meet to tailor make the order to current market conditions.
Stop Loss
I have three versions of stop loss you can employ;
Simple Stop Loss
Set stop loss at 25 pips for long trades 30 for short. That’s it.
Intermediate Stop Loss.
For those familiar with ATR you can refer to the ATR on the 4 hour to determine stop loss value
Advance Stop Loss
Use price action or price patterns to determine your stop loss level.
As you become more familiar with the system you should notice a strong co-relation between the three methods and it will become second nature to determine your stop loss level.
Exit
Now this is where you need an eagle eye and nerves of steel. As the system names suggest we are trying to do is “Scalp” a few pips out of the market. What we are trying to take advantage off is the old 1-2 push. At a break out, the market either breaks through and continues pushing up strongly or retraces for a small period before pushing up again. These two push ups can be rapid and these are the conditions best suited for this system.
Rules for Exit
This is the same for long and short. Working in units of three pips, every time the price moves up through a unit, trail your stop by 1 pip. Examples. When your trade is in profit by 3 pips move your stop loss to trail by just 1 pip thus locking in 2 pips profit. If it pushes up to 6 pips again trail your stop by 1 so locking in 5 pips. If it push up 9 pips again trail your stop by 1 thus locking in 8 pips profit and so on. Most brokers don’t allow you to trail with such a small range so you probably need to learn to watch carefully by eye once the trade is on. And you’ll probably (no-will) only get one chance to get it right. This is where the blood rush will hit and greed take over. The urge to let the trade run. Don’t let it people. If it retraces to that stop loss level, get out! The secret to this system is that it usually spits out 1 to 3 trades a day and wins close to 90% of these trades. Most of those wins will only be two pips. But once your on trade and that trade pushes up, it can be very rapid, particularly around news times and profits of 8, 11, 14 … are possible and do happen on a regular basis. Now for some screen shots
This is an example of a long trade
Plenty of long opportunities here, but the price never retraces back inside the 25 pip mark. We will wait until it does before taking another long opportunity.
Here is an example of a short trade
Again, opportunities to go short but the price has not retraced back inside the 30 pip level so we will leave them alone. Patience.
And there you have it. And just like the original turtles, once you start using this system you will get very familiar with the moment of the GBPUSD pair and will be able to pick when to open or tighten your stop loss (opening gives the trade more chance to work but reduces return, tightening increases the chance of being stopped out but also the trade size so increasing the end return. And you’ll learn when to exit a trade and when to let it run a bit more. Follow the rules and you should see your balance double in about 6 months. Backtest suggest that is is possible to achieve 10% a week with this method. Thats handy
Donchian Channels.zip (11.8 KB)
My prediction, probably could have stayed on this trade, think the price will pull back to about 1.6820 before the bulls come back.
