Daybreak revisited

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***IMPORTANT CHANGES TO THE DAYBREAK APPROACH! If anyone is interested in trading breaks of previous day’s high/low, understand that the original Daybreak method has gone through several stages of evolution. It is still a “set and forget” method and I am currently trading it live, albeit small. If you would like to look into or test this method, here is how I am trading it.

1. I am still entering on a break of yesterday’s high or low. I am using the Daybreak Sprit ea to test and set orders. I manage that ea with sl’s and tp’s and set the close time to 30 so trades are not closed or canceled eod.
2. The Daybreak Currency Portfolio trades these pairs with the following parameters:
GBP/JPY TP 70 SL 20
EUR/JPY TP 70 SL 20
EUR/USD TP 30 SL 7
AUD/USD TP 30 SL 7
GBP/USD TP 30 SL 7
EUR/GBP TP 30 SL 7
3. Using this method, I am also trading gold, xau/usd, in a separate account and trading a combination of gold and the s & p in still another account. These are my parameters for these assets:
XAU/USD TP 1200 SL 200
S & P TP 500 SL 150
I also set the close time at 30 to keep trades and orders open.
The big question, is it working? The big answer, I don’t know. But, I have started keeping tabs with myfxbook and here are the links for you to follow if you wish:
Daybreak Currency Portfolio: http://www.myfxbook.com/members/pipwoof/daybreak-currency-portfolio/881692
Daybreak Gold: http://www.myfxbook.com/members/pipwoof/daybreak-gold/868585
Daybreak S & P and Gold: http://www.myfxbook.com/members/pipwoof/daybreak-sp-gold/875888
Please note that I have five small accounts with four different brokers I use for experimenting. One account has only the Daybreak Currency Portfolio. However, both the Daybreak Gold and Daybreak S&P and Gold will show trades from some other methods I have thrown in just because I don’t have enough accounts to cover all my questions and I prefer trading live and small over trading demo. It is simple enough to see how just the gold or s&p trades are doing. Go to the tab “trading activity,” “history,” and click on “symbol.” It will sort the assets alphabetically and you can see how gold and the s&p sorted out. Also, keep in mind that in experimental accounts, I am much more interested in pips than money. My minimum trade for the s&p platform is .2 and a loss here translates to significantly more money than a gold trade where I can size at .01. Look at the pips or points to see what’s going on.

For a complete look at the Daybreak system, visit that thread on this forum. I am starting a new thread regarding this old method for a handful of reasons. From some current thread titles, I detect a renewed interest in breakout systems on the forum. The original Daybreak thread ultimately ran to 33 pages. Within those pages were many suggestions, recommendations, criticisms, questions, and ideas. I have to believe this was educational for everyone and I, for one, enjoyed the journey. However, the original intent of Daybreak was to provide a simple set and forget method for those who could not watch their computer all day. In this regard, the initial research was quite promising. Rather than having you plow through more than 300 entries, this thread might be able to help you decide rather quickly whether you want to pursue in depth.

I will remind everyone of the caveats associated with the original research. I cannot program mt4, but am pretty handy with excel. My studies were all spreadsheets. Though several people tried to write ea’s for this approach, for inexplicable reasons, none seemed to actually capture the parameters of Daybreak.

Spreadsheet studies have inherent limitations, thoroughly discussed in the original thread. Given those limitations, the approach still has significant merit. Especially if you have limited time and need to set up trades one time per day and be on about other business. You should also keep in mind that these studies provide no accounting for transaction costs. These can be significant.

I like breakout systems because they put me in when the market moves. I have always thought that if I wanted price to go from A (my beginning point) to C (my target), it has to go through B (my breakout point) to get there. Of course, not that it always goes to C after B, but you get the idea.

So, I went back and reprogrammed the spreadsheet studies and did a fresh look. The idea here is to get in on a break of yesterday’s high or low and hold the position until the close using only wide “emergency” stops. Briefly, here’s how the spreadsheets were set up. If the high of today is greater than the high of yesterday, subtract the entry point, which is the high of yesterday plus one pip from the close of today. Step two was if any trade showed a loss greater than the recommended stop loss, take the stop loss, otherwise, take the trade results. Step three, eliminate Sunday trades. My current results were obtained using IBFX data. Their platform time is GMT 0, so the definition of “day” begins at GMT 0, which is 6pm central time. This means you could set your trades at 6pm today and not have to look a them again until 6pm next day. Obviously, this is not a trading approach for everyone, especially those of us who can and choose to stare at the screen all day.

According to Daybreak, the original recommended portfolio was GBP/JPY, EUR/USD, AUD/USD, and USD/JPY. Stop losses suggested were (200), (150), (125), and (100), respectively. At some point, I got disappointed with the performance of EUR/USD and USD/JPY and suggested dropping them from the portfolio and adding EUR/JPY with a stop loss of (200). As you will see, this decision is an object lesson that we do not have a crystal ball, do not know which pairs may perform in what way, and should always trade a diversified portfolio.

Using the trading parameters described, here are the spreadsheet results:
Revisit Results.pdf (116 KB)
Results suggest that, had we continued trading the original portfolio, we would have added over 4,000 pips to our total since July 2012. Had we dropped the EUR/USD and USD/JPY and added EUR/JPY, we would also have added over 4,000 pips. Had we consulted our spiritual advisor, we would have traded GBP/JPY, USD/JPY, and EUR/JPY and added over 7,000 pips.

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I don’t know if these issues were raised in the initial thread but I’ll say them here.

Did you consider a GMT+3 broker to eliminate the Sunday candle?

What was the RR ratio? Since trades were held to the close of the day, I guess you would have to average the wins and average the losses to find this out, or simply provide a profit factor ratio (based on pips).

What was the winning to losing trades ratio?

You have a static stop loss of 200, 150, 125, and 100 pips. How did you decide on these values? If you trade this system long term, a currency pair’s movement range (ATR/ADR) can change quite drastically. How often was the SL hit or was this not an issue?

The stop loss and lack of RR issue is worrying because without knowing these, it is hard to envision a money management system that exponentiates.

I think most mortal systems will have flat years, you just have to accept them and hope the next year yields good results.

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kwyjibo, thanks for your interest and comments. the short answer is yes, in more than 300 posts virtually all those important questions were raised. let me kinda start from scratch here and perhaps give you and other readers a perspective that may result in some help from other members.

i have confessed to a marked inability, unwillingness, some of both, to program mt4. i know how to use spreadsheets and employ them simply as generalizations. definitive answers cannot be provided considering the limitations of the sheet. definitive answers must come from an accurate ea and/or studies by hand. i can certainly count winners, losers, ratios, and so on. but obtaining the results would be tedious and inaccurate.

there are any number of breakout ideas. session-based, momentum-based, price-based, take it from the open, take it from the high, take it from the close, trade selected hours, ad infinitum. here’s my point. the spreadsheets are suggesting a direction, that’s all, suggesting a direction especially for so many i see on the forum who just don’t have time to sit in front of the screen. they have jobs, families, activities, that occupy their time and they are looking for something they don’t have to sit over. there are those of us who are fortunate enough to be able to watch three-pip renko bars and those who can’t.

when i wrote daybreak, i followed it up next month with an exit strategy called “triple threat.” in retrospect, i wish i had held off on publishing triple threat until we had reached some final conclusions on daybreak. it seemed that the interest aroused gravitated to triple threat. i had several programmers who tried to capture the method, though, again, were never completely successful. if you look at the triple threat site, you will see the efforts of rpotor, dinesh, and some others. now, i am seeing new threads start with the familiar breakout ideas. new threads that may not have found the old threads, so may not know what has been asked and answered and what hasn’t.

i believe someone who knows just a little about programming could do the forum a great service. write an ea that allows for some variables regarding entries, exits, and stops. possibly, we could put this breakout idea to rest or give it meaningful life. the ea’s written for triple threat start with entries using daybreak. am i underestimating the work to just take the front part of the programming to get the entries and program to close end of day?

questions are easy, answers are more difficult. i have a special place in my heart for those who come with answers. meantime, i will find some time to look at some results by hand and see if we can raise enough interest for someone to take on mechanization.

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Welcome back pipwoof! Great to hear from you again! :59:

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hey, bobkat! good to hear from you, too. hope things are going well! i seem to have completely lost some of my skills for posting on the site, but will cripple along here.

i pulled three months of gbp/jpy and walked through by hand to compare what i got with what the spreadsheet shows. did that just to get a gauge of how accurate the spreadsheet might be. it comes close enough and the differences can be explained by the limitations of the sheet.
Three Months.pdf (119 KB)
i looked at august and september last year and january this year. everyone says august is a terrible month to trade, so i wanted to be sure to include it. by hand, we lost (213) in august, gained 228 in september, and gained 525 in january, total +540. the method trades between 15 and 20 times a month, so let’s say an average of 18 X transaction costs of 4 pips per trade = 72. 540 pips - 72 pips leaves 468 or about 150 per month. not too shabby for one pair set and forget. i’m pretty confident that a couple of other pairs would do as well, which could take our pip total to maybe 400-500 per month. i suppose it all depends on what traders are looking for and how much time they have to trade.

you were a very involved participant in the original threads. what do you think? is it worth pursuing further or should i let it die a natural death? i will appreciate your advice.

btw, did you notice that one of the currently active threads is titled, “High/Low Breakout Strategy,” and that last october’s winning systems was, “The Simple Day Breakout System.” guess what entries are based on? that’s right, high and low of yesterday. heh!

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Hey don’t give up on it. I am brand new to all this forex and trading stuff. Just leaning to use mt4. lol. I am reading tonnes of material and want to read more then digest it all. Simple effective strategies is what I am looking for. You hit the nail on the head. A lot of people don’t have a lot of time to spend in front of their computers.

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thanks, opmac. in the original thread jdog and spirit had both written ea’s. i couldn’t get jdog’s to work at all and spirit’s took multiple entries on the same day and threw everything off. i don’t think either of those are accessible for editing. but, of course, the results were terrible when people backtested them.

rpotor wrote one for “triple threat” which is completely accessible for modification. is there someone who could look at this strategy and write a brief ea or modify rpotor’s to take only one position and close eod? the strategy is really simple. enter a pip above/below yesterday’s high or low, close at end of day, use an emergency stop loss. thanks, anyone.

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Pipwoof

Trying sending a PM to vijaygpfx

Ask him or redirect him to this thread

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pipwoof,

Yes…pursuing and refining your breakout methodology is well worth the effort. In 7 years of trading, breakout trading has been the only strategy that has consistently made profits for me. The Phoenix has risen!

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thanks, bobkat. take a look at these new rules:

  1. as usual, go long/short at +/- 1 pips from yesterday’s extremes.
  2. on days other than monday, calculate the mid-point of yesterday’s range and use that as an initial stop-loss.
  3. on mondays, and other days with tight prior-day ranges, add about 20 pips either side of the mid-point for an initial stop.
  4. implement a 100 pip trailing stop that doesn’t require a profit before it starts to trail. i think this is just the regular trailing stop on the mt4 platform.

my cursory look at this suggests it may cost us some pips when one of the stops is hit but price moves back favorably. however, it seems that most of this is made up, on balance, by avoiding huge losses. also, it is infinitely more psychologically comfortable to be using reasonable stops. using the old method, i showed by hand for gbp/jpy in january about +600. with the new approach, i got about +450. but, looking at august, the old method hit us for over (200) lost and the new method holds that loss to (30). i will start trading this with gbp/jpy and eur/jpy and will post trades here for a while.

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A couple of questions, please:

These new rules apply to the IBFX data set as per the old thread?

Have you performed any evaluation using other 24 hour periods? For example, my broker is Oanda, and the new daily period occurs 3 hours prior to the London market open (5:00 GMT).

How would you feel about using only the 100 pip trailing stop, but no fixed stop ( the result would be greater breathing room, but perhaps greater losses)? :53:

Thanks.

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bobkat, we can try it both ways, of course. here’s my reasoning for the mid-point stop. i am using august as my benchmark bad month. there may be worse, but i am doing all this by hand, so have to take what i have time to find. for example, on august 1, we went short at 148.26. the pair immediately ripped back the other way, eventually closing eod at 150.29. with the original rules, we would show the maximum loss of (200). with the trailing stop, we would show close to (100). mid-point on July 31 was 148.85. using the mid-point stop on this particular trade would show a loss of (60). again on august 6, we went short at 150.30. mid-point stop was 150.89, hit for a loss of (60). trailing stop would have taken us out at 151.22 for a loss of (90). i’m sure there are other days when the ts would have worked better than the mid-range. lucy, we just have some 'splaining to do.

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i will be using ibfx data for the gbp/jpy and eur/jpy. they are gmt 0. for me, in central time, that is currently 6:00 pm. so, at 6pm central time, gmt 0, i will record prior day high and low, set entry stops and stop losses per the rules. those account allow me to trade those pairs at .01, which i will do to start. what? you thought i would throw some big bucks out there?:18:

i also have a datafeed for bitcoin, btc/usd, which is the same platform time as ibfx. and another for the s&p futures, currently trading the march contract. that is on gmt +2. i am going to at least look at these on a daily breakout basis, but certainly do not recommend anyone touch these until they can go to bed at night and honestly say, “I know exactly what I am doing.”

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Ok…sounds good. I have my pendings placed on my live account for both EJ and GJ as per your specified parameters. :59:

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here we go.

eur/jpy
b 140.30
s 139.25
mid-point stop 139.77
100 pips trail

gbp/jpy
b 169.08
s 167.48
mid-point stop 168.28
100 pips ts

btc/usd
b 601.70
s 547
mp stop 574.35
ts 100 pips

as always, check my work.

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mar s&p
b 1818.51
s 1794.37
mid stop 1806.44
i haven’t been able to place a trailing stop on these trades. may have to install an ea.

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eur.jpg700×335 31.1 KB

Eur/Usd just fired a PinB on Daily… Is this a valid?

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made a mistake on the btc/usd short entry. corrected it in the post above.

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okay, so the idea of 100 ts really doesn’t make sense until we go into profit. i will put a regular ts 100 on these trades, but it will have to get to +100 before it kicks in. otherwise, we would negate the mid-point stop.

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so, i’m really not confident enough to spend too much time with the s & p and btc/usd. those are high-spread trades, expensive moves, and i threw them in for fun. the short of it is that both broke out today, went heavily into profit, then reversed. whether you could have come out on that or not depends on how you managed the ts.

now, let’s look at the trades i actually did take. eur/jpy broke out short at 139.24, achieved a low at one point of 138.66, not enough to activate our 100 ts, and closed the day at 139.22. We’ll say a breakeven trade.

gbp/jpy broke out long at 169.08, never retraced to a stop, and closed at 170.16 for +108.

for purposes of testing and commenting on results here, we will consider these trades closed and that’s where our account stands. in real life, i’ll suggest what i would actually do. the eur/jpy essentially went nowhere. i will leave that short trade open, but bring the sl to a closer point. the chart shows two recent failed efforts to penetrate 139.50. sounds good enough to me. i’ll set a sl at 139.51 and risk about (25).

gbp/jpy closed near the high of the day. no reason to exit when we might be entering again in 25 pips. but, though the move may continue, i have also seen the “teepee” where it drops like a skydiver and leaves an inverted v on your chart. i would leave the trade open and set a 20 pip sl from the close, i.e., 169.96.