per the system, we are now setting the following buy/sell stops:
eur/jpy
b 139.96
s 138.65
mid-point stop 139.30
gbp/jpy
b 170.42
s 168.29
mp stop 169.35
Pipwoof
Any luck in finding someone to develop a EA for daybreak?
Hi PipWoof,
A few weeks ago I stumbled across your Daybreak and Triple Threat threads. I’ve been looking into it and so far the theory seems sound.
I can see three major areas that I would like to address. I was going (to attempt) to do this solo until I saw this new thread. But now that Daybreak has re-awoken, I’d like to put it to the community to see if anyone else has solutions/suggestions.
- A break out that drops into negative - This is what triple threat was trying to address, but for that the trade needs to be monitored. I was thinking setting up two entry orders for each breakout - each at half the position size, one to snatch quick profits and the other to ride out the ebbs and flows of the day and close at the close of the candle.
I don’t know how effective this would be, but I feel it would reduce overall risk, although it is at the cost of reducing overall profit.
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Double breakouts - These aren’t common, but when they happen, if you have an entry at both ends and it closes in the middle, the results can be devastating. I have no idea’s how to compensate for this. I’m sure an EA could cancel one order when the other is filled, but this get’s rid of the profits when it breaks low, breaks high and closes high (or vice-versa) As I said, I have no practical solution to the Double Break out problem.
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Letting profits run - Just an observation, but when one candle closes up, the next candle seems to, quite often, close up as well. (The GBP/USD pair has closed up the last three days, for example) When yesterdays high is lower than yesterdays close (almost all the time) and today opens and keeps climbing, we miss pips waiting for the next breakout.
I feel like if we close 3/4 of the position, and let 1/4 with a very tight stop, we could increase profits with little increased risk. This is just how I’m thinking of trading it (maybe 1/3 or 1/5 of the position size let run) and would love people’s opinions on this last point.
I’m not sure if any of those issues could be addressed, but I feel like they are the biggest obstacles in the way of the system.
Edit: edited for typos
Nib, thanks so much for your participation. It is apparent that you have taken a serious interest in the threads and done your homework. I am fortunate enough to be able to watch the markets and can adjust to changing conditions during the day. I wanted to find something for those who can’t do that and it has been a challenge to come up with an approach broad enough to be managed only at entry and exit times.
The problem of double entries might be addressed in more than one way. Obviously, a broker who accepts oco orders would work, but my understanding is that the US brokers can’t do that. I have accounts with some US brokers and some others, so am able to use the broker that fits the system. Not everyone can or wants to dothat. Another solution is to enter the order on the side of the trade that is most likely to occur. Looking at most recent movement and close relative to open, we would probably be right most of the time. Another thought is to tighten initial stops and possibly end up with both trades, or not. A lot oftraders have commented on being uncomfortable with the big “emergency stops.” So, instead of risking 150-200 pips trying to hold on until close, we might try something in the 25-35 range. Now, we could still take the side of the trade that looks most likely and hold our day’s losses to something really reasonable. Or, we could end up entering both sides and be risking 50-70. Tightening stops, we will miss those trades that go against us initially but eventually get into profit, but that may be an acceptable loss relative to taking the big hits.
Regarding triple threat, I still like the idea of multiple entries and multiple exit options. I am less enamored these days with choosing stops on round numbers. I have done some preliminary looking at using different indicators, including Renko bars, to determine exits. But, with trying to keep the method “set andforget,” I currently have only one idea that shows promise. If we enter three positions, all with the same and tighter initial stops, then our first level ofrisk might be 75-100 pips, i.e., three positions with stops around 25 to 35. Then, attach a be stop to all positions, probably at 25 pips or so. Next, attach trailing stops to each position. These can be varied and, for example, might be 25, 35, and 45. I believe all this can be done with tools readily available on mt4 and at one sitting in front of the computer.
Your observations regarding continuing moves, letting profits run, are spot-on. We have the multi-level task of finding definitive rules so that everyone can understand and follow along, but also allowing for many different circumstances. One of these, for example, is when we are in a trade that closes in profit near the extreme of the day. That is, a long trade that closes near the high. As you point out, the next day is often a continuation of that move and the whole idea behind breakouts is that movement beyond that resistance gives us an INDICATION of where price might be going. We would not want to close out that trade, only to possibly re-enter in a few pips. The strategy here would seem to be keeping the trade open with a tight stop. If it reverses, we give upa modest portion of our profits. If it continues, we gain significantly.
These and the other ideas that came in on the two prior threads are speculative, of course, and difficult to evaluate. I have observed on all the threads that participants can come up with ideas faster than any coder could objectify and write to keep up with them on an ea. It is easy to say, “What about this?” but that makes a moving target for someone trying to come up with a program to test. It may have happened on my two prior threads. Coders tried to keep up with the incoming suggestions and, in the end, we had nothing representative of the trading method. They ran out of time, got discouraged, something. I’m notsure anyone, including me, can say this approach has guaranteed merit. We just haven’t been able to quantify and examine all the ideas. I have also noted that many traders have that notion, indicator, or theory that they got married to and are really hoping it will work. They want to throw it into everything.
I digress, but find it amusing that on almost any thread, regarding almost any method, at least one post comes in from one of these pa guys who says to abandon all these ideas and indicators and go with this pure, ideal, clutter-free, etc., notion and you’ll never make money ‘til you do and it’s the next stage of your growth as a trader and you aren’t mature ‘til you get there. It just doesn’t seem to dawn on them that whether you are looking at one bar or a thousand, just eyeing the bar or packaging it with some math to give it a different perspective, you are still looking for some INDICATION of where price might go next. In any case, we are compelled to look only at the past to propose what might happen in the future. Plus, if you can read those convoluted, subjective, morphing threads and come away with anything objective or consistent, you are ahead of me.
For now, we have to look at these ideas by hand. This is labor-intensive and we will do what we can. Any help is always appreciated.
I also wanted to highlight this observation in a separate post. This is really the heart of the matter for breakout systems in general and this one in particular. We are looking for the smallest edge, the indication that gives us the slightest probability that we might have an idea of where price goes from here.
Pipwolf,
I am one of those traders that loves PA, having said that i really like the guts of what you are trying to achieve. Perhaps keeping it simpler is the answer there is never going to be IMO the set and forget anything that will deliver consistent results my reasoning being that there is so much news coming out ( this Central Bank farted i sniffed and the EURUSD dropped 200 points) EAs are inherently inflexible hence never consistently profitable unless you fudge the results.
I rekon you were close to it at the start of this thread GBPYEN EURYEN being the profitable ones in your spreadsheet analysis, so stick with those. The only thing perhaps is looking at the two pairs and picking better one to trade. Some basic filtering rules will no doubt pick up the Risk Reward ratio. Trending etc…
I would love you to be successful so i never have to look at a screen again and have the $$ roll in and i beleive your strategy is a winner just dont think you can take the human element out… so perhaps its about minimizing that human factor and providing some basic rules as i think your working towards
My 2 cents
All the best
Crow
Scarecrow, thanks for the contribution and encouragement. Hmmm. Okay, I’m not in anything that requires watching for a while, lunch is more than an hour away, I think I’ll go ahead and tackle this, at least in a shallow fashion, but, fair warning, it won’t be an easy read.
Where to start… There are those who doubt that money can be made trading. Their posts appear throughout this and other forums. Perhaps the alleged 95% of traders lose money is actually 100% or maybe 95% lose and 5% just don’t make any. Is trading purely subjective? Like going to the casino, is it a gamble one might take and find himself way ahead for the moment, but doomed if he keeps playing? Doomed to fail because the casinos understand math better than my university statistics professors and apply it objectively to part you from your hide. Can you override that with mathematically sound opposition like card counting? According to the group from mit, you can. You can also be advised to leave the city and not return.
Can money be made trading? If so, is it made on a subjective, discretionary, “I know what I’m doing, I just don’t know how to tell you about it,” basis? Or, “The rules change from minute to minute, so you just have to stay on top of the market and watch ‘Price Action.’” If so, that is not card-counting to me, the results of which are empirical, measurable, and replicable. Rather, the former would be guesswork and luck. I know markets change and the ability to predict their movements changes. There was a time when I could have predicted certain outcomes if you drove into a service station. There would be an attendant there; he would fill your car with gas; he would check your tires, battery, and radiator; and he would clean your windshield. I can still predict events if you drive into a service station, but they will be different events. You will fill your own car with gas and attend to all those other services if you flippin’ want to. I wonder why we still call them “service stations.” Seems like “gas fill” or “fuel depot” might be more appropriate. Is climatology changing and will that affect our ability to predict the weather? It seems likely, but the meteorologists of today have apparently mastered some technology that gives them a reasonable 80-90% predictive ability, at least for the time being. Being the professional scientists they are, I would expect that they would stay on top of changes and continue to refine their predictive methods to match current conditions.
And that is what draws my focus. Can we find methods that are empirical, measurable, replicable and will work for a reasonable period of time? Or, if we insist on trading, are we compelled to play by luck and circumstance beyond our control? If we are playing by luck, we will continue to see the same things we see at the casino: endless rationalizations, excuses, explanations, additional qualifications, and additional conditions that are the hallmark of most forum posts lacking in objective, quantifiable methodology. Then, if we go the other way and actually find a quantifiable way to win, how can it last for long when all one would have to do is computerize it and drain the bank?
I have much more to say in this regard, but will shorten the post at this point and give it some more thought. I will add that one of my favorite philosophical “opponents” at the university was a Jesuit priest. Not on the same page is an understatement, but I greatly loved the man and admired how he framed his arguments. Weigh in here if you understand the dilemma. If forex trading is a loser’s game, we might try something else or give our discretionary income to Morgan Stanley.
Let’s say you have built up a considerable trading account. Or, you are at the point where you are a full-time trader paying your bills from the proceeds of your efforts. How are you doing that? No, I mean specifically, empirically, in great detail, how are you doing that? What are the specific, measurable observations you make day in and day out that lead you to draw predictive conclusions and take actions that result consistently in profits?
If you really can’t quantify it, even if it requires 9,000 variables, you must be trading by the seat of your pants. If you really are making consistent profits and have been for some time, there must be some set of observations, conclusions based on those observations, and actions that you take repeatedly that result in those favorable outcomes. Not all the time, but that give you even a small predictive edge in the markets. That’s all the casinos ask for. Give them a market and a 51% or better edge and they will put up the game. Like Roulette? The player’s expected value (EV) is -5.26%, meaning the house edge is +5.26%, i.e., they have the advantage. They know this because they made countless simulated mathematical observations, drew conclusions about how to structure the wheel, and now take actions (allowing bets and spinning the wheel), resulting in the predicted favorable outcomes.
Not everyone wants a definitive approach. Guy buys a lottery ticket, wins multi-billions, and is later asked, “How did you do that?” He probably won’t care at that point because he really doesn’t need to repeat the behavior on a daily basis, but it usually comes down to picking the numbers from his daughter’s birthday or something equally scientific. In other words, he got lucky and there really is no set of observations, conclusions, and actions that would predict winning again. If you just want to gamble, forex works for that. So do options, futures, and stocks. For those who want to win frequently and win more often than lose, it is a different story. We need something we can package for ourselves and use over and over with a degree of confidence that we will win more than we lose. If we don’t have that, we may be among those who start their forum posts with, “I blew my account…”
If you have that, surely you can make it comprehensible to at least most of us. Boil it down to objective elements, that’s called reductionism. Stay away from citing your years of market experience and your unique powers of observation. Reduce it to understandable terms and, I promise, most of us will get it.
More to come.
August is my Moby Dk. I must get that whale!
In the spirit of what I am suggesting, I have gone back through August and applied a new set of rules. I can objectify and quantify those rules and you can go back to August data and apply them for yourself. As usual, enter on the break of prior day high or low. Enter three positions, each with an initial stop-loss of (25). Activate a break-even stop on each position at +25. Activate trailing stops for each position. Position 1 trails at 35, position 2 at 45, and position 3 at 55.
Studies by hand/eye are subject to error, but it is an open-book test. We should be able to spot mistakes quickly. What I got was (600) pips in losses, 1,188 pips in wins, and about (228) in transaction costs. Net +360. If taking three at a time causes you to wince, we could have traded just one with (200) losses, 442 wins and (80) transactions, net +162.
As the commercials say, “But, wait, there’s more!” We are pretty sure this past January was a good month for methods like this, so I applied the new rules and did another look. I got 2,560 wins, (375) losses, (240) transaction costs, net +1,945. Trading just one resulted in (125) losses, 927 wins, (125) transactions, net +677.
how did your trades workout today pipwoof
I really wish I could program. This looks like a good place to start. The rules are simple to follow. And your results seem to suggest it is pretty successful (except in august) If we could get an EA working, we could fiddle with the initial stops to see if giving it a bit more play, or tightening it up even more could prove prudent.
No entries today, opmac. Both were inside bars. The new “day” has begun, however, for ibfx and we were put long in both pairs and appear to have been taken back to our mid-point stop loss in both. So, two losers. I will provide more details when I have a little more time.
Nib, I wish I could program, too. Evidently not enough to actually learn it, though. I must be burned out from former careers. I learned fortran, cobol, some basic. I learned tradestation easy language. Forgot it all and don’t use it anyway. Just don’t want to do it again. Anyway, take another look at August using the new rules and see if you can still think of it as unsuccessful. If my observations are accurate, we would have taken 20 trades and, including transaction costs of 4 pips per trade, netted an average of 8 pips per trade. My idea of unsuccessful is being short multiple contracts of oil futures on the almost certain anticipation that we would resolve trade differences with the Saudi’s and having the Secretary of State go to the podium and begin, “Regrettably…”
You’re right, unsuccessful is an unhealthy way to describe a profit. A better choice of words would have been “Less successful” when compared to the January result.
How are you running these tests? Off of the hourly candles? and did we see many break evens? I’ll get the data tonight, but asthe weekend is here so it may be a few days before I can get any results to you.
pipwoof,
Last night I traded 16 low spread pairs. 9 wins, 4 losses, 3 inside bars = +283 pips
Serious kudos! Are you using daily h/l for your breakouts? And what are you doing for trade management?
Bobkat, from our past exchanges, I know you to be a knowledgeable trader. You had mentioned that breakouts had been profitable for you over the past few years. Feel free to share anything you are comfortable with that might help the general ideas here. Thanks.
Nib, I start with hourly candles. If the sequence of what happened isn’t clear, I go to the 15”. I am sure I will have missed some retracements within hour bars that may have changed our results, but, at this point, I am just trying for a general look at how this might work. I do try to consider the size of the bar around an entry point to determine whether I should look at it on a smaller timeframe.
Latest trades were both losers. Gbp/jpy went long at 170.38 and back to mid-point stop, losing about (60). Eur/jpy did pretty much the same thing, breaking long at 139.91 and dropping back to the mid-point stop, also losing about (60).
Now, let’s do a little homework on this one. The idea behind breakout trading is that our entry points represent some support/resistance areas. A breakout that holds is an indication the move might continue. However, a brief test of the s/r is just that, a test, and price will move back away from those points once tested. For mechanized trading, both these trades would have been taken with the stated rules. In real life, we must note that both pairs closed near the high of the day, i.e., near resistance. The “breakout” was what another trader calls a “prairie dog.” He pokes his head up for a moment, then ducks back down. That’s what we got on both pairs. Again, in real life, I took both trades with a 15 pip stop-loss plus spread and lost about (40) total.
An important point is that this call is not based on tealeaves, my years of experience as a trader, or my special ability to see through the chart. It is all right there for all of us. When our close is close to the extreme, we apply extra caution to the trade. That’s all. There will be other circumstances we encounter that will mitigate going completely mechanical, but they will be obvious and intuitive to any trader.
The previous night’s trades were an experiment at “basket trading” your system. I followed your rules. And yes, GJ and EJ were two of the inside bars with no trades as 2 of the 16 pairs. However, today’s current trades don’t appear to be as productive.