Diary of a position trader

[djhenry1981]

Cheers. It will be interesting to know what, effect it has on results. What do you use to backtest? Manual or software based? I was thinking about purchasing forex back tester but don’t know if its any good :-/

[Cmac132]

Cyco, can you confirm that my entry and my rules are OK?

Thanks

Rejection rule is subject to the 5 day condition where the 55 channel is flat, or closing in on price for 5 days or more.

[Cmac132]

No problem. Just to be clear, this was a backtest of a 20/10 channel; it’s plausible for the 55/20 to be unprofitable during the same period. I know, not exactly “by the book,” but o990l6mh got me looking at it. From my backtesting so far, 20/10 breakouts with Smith’s rules (with the exception of ADX Filter) far outperforms 55/20.

Here’s how I’ve been applying the Rejection Rule:

We go long at the break of the 20 day high (or 55, no matter) at the first red up arrow. The market follows through nicely until selling off and chopping sideways for 10 days. On the 11th day (marked with a red X), the market breaks up through the level of the new 20 day high, but closes below it. Because we had at least a 5 day period of a flat channel (descending would count too, of course), the Rejection Rule activates, and we liquidate the position at the close for a tidy profit.

The next day, the market breaks above the high of that rejected candle, which signals another long entry. We ride it until being taken out by the 10-day low (blue dot).

Not sure if that’s any different than how others are using the Rejection Rule, but this is simply how I read it.

Placement of the Last Bar for me is completely unscientific; I simply use the last “significant” bar before the breakout. I have been noticing that this seems to be around 1x the 40-day ATR.

Courtney defines the RR as only valid for the day the sitting entry is tripped when prices moves +3pips outside of the channel and then one day after that, then it goes to the last bar stop. (and rr only happens if the 5 day condition is in place)

So did you pyramid (add another long position with the risk factored the same as your initial entry) or did you simply close your initial long? If you did pyramid are all the results you’ve posted from the back testing subject to pyramiding as well?

The way I see that trade and the way it’s described by the book you should of still been in until around day 27 (I counted day one on the day of entry) which probably would have been a bishop exit or at the touch of the 10 day channel.

[767trader]

Cheers. It will be interesting to know what, effect it has on results. What do you use to backtest? Manual or software based? I was thinking about purchasing forex back tester but don’t know if its any good :-/

I’ll definitely post if I do go back through and check the RRR results. I just do this manually, so there might be an error or two. I do check my work before posting, however. Very tedious!

Courtney defines the RR as only valid for the day the sitting entry is tripped when prices moves +3pips outside of the channel and then one day after that, then it goes to the last bar stop. (and rr only happens if the 5 day condition is in place)

So did you pyramid (add another long position with the risk factored the same as your initial entry) or did you simply close your initial long? If you did pyramid are all the results you’ve posted from the back testing subject to pyramiding as well?

The way I see that trade and the way it’s described by the book you should of still been in until around day 27 (I counted day one on the day of entry) which probably would have been a bishop exit or at the touch of the 10 day channel.

I simply closed my initial long as if the Rejection Rule was triggered by a new trade. I treated it as if I was flat until a subsequent candle traded above the rejection candle (the one marked with the red X), and a new long position was entered using the last bar technique for the stop.

I actually did two backtests on GBP/USD; the first one was the application of the Rejection Rule only on the entry (closing the trade only by Last Bar, Bishop, or 10-day low), and a second time removing profitable positions (like my example above) if the Rejection Rule was triggered as if on a new trade (and of course, using the 5 day condition). The results were significantly different:

Rejection Rule only on entry (2008-2013): +2297
Rejection Rule continuously applied (2008-2013): +3839

I did the same on EUR/USD however, and the difference was a wash. It seems to improve the performance of choppier pairs, and not affect the performance of smoother pairs. I’ll have to do more backtesting.

[o990l6mh]

THe 20/10 is in daily view?

Can you explain the double bar entry?

Can you explain also how do you are selecting your last bar, and if using it for exit, as Smith says?

Thanks!.

The double bar entry is nothing special. I try to place the stop beyond some sort of support/resistance. Sometimes I end up using more than just the last bar to get that done. It’s the only area where there’s any fuzzyness in my trading rules.

[medisoft]

The double bar entry is nothing special. I try to place the stop beyond some sort of support/resistance. Sometimes I end up using more than just the last bar to get that done. It’s the only area where there’s any fuzzyness in my trading rules.

For lastbar and rejection rules, are you applying them on bar close or on price touch? I mean, if current bar closes below the rejection rule level, you close the trade (on close) or if price trades below current rejection rule level, you close the trade?

Are you using the donchian(10) to trail your stops once they are on profit or always if the channel is above the last bar level?

[medisoft]

Are you making the backtest using data from 2008/01/01 00:00 to 2013/04/03 00:00?

just for comparison with my own backtest.

I’ll definitely post if I do go back through and check the RRR results. I just do this manually, so there might be an error or two. I do check my work before posting, however. Very tedious!

I simply closed my initial long as if the Rejection Rule was triggered by a new trade. I treated it as if I was flat until a subsequent candle traded above the rejection candle (the one marked with the red X), and a new long position was entered using the last bar technique for the stop.

I actually did two backtests on GBP/USD; the first one was the application of the Rejection Rule only on the entry (closing the trade only by Last Bar, Bishop, or 10-day low), and a second time removing profitable positions (like my example above) if the Rejection Rule was triggered as if on a new trade (and of course, using the 5 day condition). The results were significantly different:

Rejection Rule only on entry (2008-2013): +2297
Rejection Rule continuously applied (2008-2013): +3839

I did the same on EUR/USD however, and the difference was a wash. It seems to improve the performance of choppier pairs, and not affect the performance of smoother pairs. I’ll have to do more backtesting.

[767trader]

Are you making the backtest using data from 2008/01/01 00:00 to 2013/04/03 00:00?

just for comparison with my own backtest.

That’s correct; first entry on or after 1/1/2008 to the last closed trade in 2013.

[medisoft]

That’s correct; first entry on or after 1/1/2008 to the last closed trade in 2013.

Got it.

For lastbar and rejection rules, are you applying them on bar close or on price touch? I mean, if current bar closes below the rejection rule level, you close the trade (on close) or if price trades below current rejection rule level, you close the trade?

Are you using the donchian(10) to trail your stops once they are on profit or always if the channel is above the last bar level?

Do you are entering your trades when price touches the donchian(20) plus 3 pips or when it closes above (for buy) that level?

Sorry for this lot of questions, but I can’t get the same results as you on my backtests, so I think I’m doing something wrong or different.

[767trader]

Got it.

For lastbar and rejection rules, are you applying them on bar close or on price touch? I mean, if current bar closes below the rejection rule level, you close the trade (on close) or if price trades below current rejection rule level, you close the trade?

Are you using the donchian(10) to trail your stops once they are on profit or always if the channel is above the last bar level?

Do you are entering your trades when price touches the donchian(20) plus 3 pips or when it closes above (for buy) that level?

Sorry for this lot of questions, but I can’t get the same results as you on my backtests, so I think I’m doing something wrong or different.

It’s possible I’m doing something wrong or different!

I’m entering the trades as the price trades above each of these levels, not when the bar closes. This is true for anything except the Rejection Rule, which of course requires a 1st or 2nd day bar close to be below the breakout level.

Yes, I’m using the 10 day channel to trail the stop once above the last bar unless a Bishop or Rejection Rule takes me out earlier. I’m sure it goes without saying, but as soon as the market trades above (or below) the high/low of a candle that triggered the Rejection Rule, I’m back in the trade.

How different are your results?

[medisoft]

So you are using last bar as a hard stop loss, that is activated when the price just touch it.

It’s possible I’m doing something wrong or different!

I’m entering the trades as the price trades above each of these levels, not when the bar closes. This is true for anything except the Rejection Rule, which of course requires a 1st or 2nd day bar close to be below the breakout level.

Yes, I’m using the 10 day channel to trail the stop once above the last bar unless a Bishop or Rejection Rule takes me out earlier. I’m sure it goes without saying, but as soon as the market trades above (or below) the high/low of a candle that triggered the Rejection Rule, I’m back in the trade.

How different are your results?

[RogoPip]

I have been using 55/20 channel breakout and Conqueror since early February. Trading EUR, GBP, USD, CAD, AUS, NZD and CHF pairs. Using the rejection rule and last bar technique 95% of the times (I am still testing). Risking 0.5% of my equity in each trade I am not impressed with the results until now. Lately I have been loosing my last bar SL entries during Sunday open which is annoying as they would have been winning trades if the last bar was not used. February closed +0.53%, March -0.32% and April is -0.5% (I lost 300 pips this morning on a conqueror GBP/JPY trade I opened last night :S). I also have an open short loosing trade for EUR/GBP. I still haven t done enough trades to make my final conclusions though so I keep on studying

[Cmac132]

Yes, I’m using the 10 day channel to trail the stop once above the last bar unless a Bishop or Rejection Rule takes me out earlier. I’m sure it goes without saying, but as soon as the market trades above (or below) the high/low of a candle that triggered the Rejection Rule, I’m back in the trade.

So, if you get in and the trade moves in your favour - then goes side ways for 5 days and therefore the 5 day condition is in place, then price moves out of it’s mini-range and tests the 20 day channel but closes back within the 20 day price channel that day or the next day, you exit your position based on your modified rejection rule? Did you add another position on the second test?

[o990l6mh]

For lastbar and rejection rules, are you applying them on bar close or on price touch? I mean, if current bar closes below the rejection rule level, you close the trade (on close) or if price trades below current rejection rule level, you close the trade?

Are you using the donchian(10) to trail your stops once they are on profit or always if the channel is above the last bar level?

Rejection rule I trade on the close. For exits I have four possible exits: Bishop, Rejection Rule if applicable day 1 and 2, last bar inital stop and when donchian 10 surpasses I trail til the stop gets hit.

[o990l6mh]

I have been using 55/20 channel breakout and Conqueror since early February. Trading EUR, GBP, USD, CAD, AUS, NZD and CHF pairs. Using the rejection rule and last bar technique 95% of the times (I am still testing). Risking 0.5% of my equity in each trade I am not impressed with the results until now. Lately I have been loosing my last bar SL entries during Sunday open which is annoying as they would have been winning trades if the last bar was not used. February closed +0.53%, March -0.32% and April is -0.5% (I lost 300 pips this morning on a conqueror GBP/JPY trade I opened last night :S). I also have an open short loosing trade for EUR/GBP. I still haven t done enough trades to make my final conclusions though so I keep on studying

I got killed myself on GBPJPY, went from +1.5R to a loss -1R…

[medisoft]

So, if you get in and the trade moves in your favour - then goes side ways for 5 days and therefore the 5 day condition is in place, then price moves out of it’s mini-range and tests the 20 day channel but closes back within the 20 day price channel that day or the next day, you exit your position based on your modified rejection rule? Did you add another position on the second test?

I, instead of checking that price is “sideway”, only check if the 20 day channel has been flat (without changes in its value) in last 5 days. That because “sideway” is subjective and depends on the eye of the trader, but checking the numeric value for past 5 bars on the channel is objective.

[medisoft]

[B]767trader,
[/B]
Something that I miss in my questions: what is the closing time of your bars? Is it 00:00 UTC?

I found that closing time of the bars sometimes affect strategies.

What is your broker’s timezone?

Thanks!

[djhenry1981]

I’ve just bought some backtesting software (well i got it a few days ago) i just figured out how to use the damn thing!!!

Currently going to test as many pairs as I can using the following 2010, 2011, 2012

55/20 - Only Last Bar
55/20 - Rejection & Last Bar
50/20 - As above + Riding Rejection Rule
20/10 - Only Last Bar
20/10 - Rejection & Last Bar
20/10 - As above + Riding Rejection Rule

I’ve spent 90 minutes testing the first half of AUD/JPY. Will post results when I have some.

Unfortunatley i cannot incorporate the bishop entry/exit signal, as this software doesnt seem to calcuate it accurately, so for the time being I have omitted it.

[djhenry1981]

Based on 1 mini lot, disappointing result - based on 10k bank, the best return over 3 years is 4.26%

Method 1
2010 -764.03
2011 -618.14
2012 391.7
Total 9.53

Method 2
2010 -905.90
2011 -508.29
2012 1053.17
Total -361.02

Method 3
2010 -845.44
2011 -314.57
2012 1058.82
Total -101.19

Method 4
2010 -1160.19
2011 -307.04
2012 1342.46
Total -124.77

Method 5
2010 -239.78
2011 -388.23
2012 764.61
Total 136.60

Method 6
2010 -358.63
2011 -289.23
2012 1074.16
Total 426.30

[medisoft]

Note that 4.26% is only on ONE pair. Find 10 more pairs that give similar results and you will have more than 100% because compounding.

Based on 1 mini lot, disappointing result - based on 10k bank, the best return over 3 years is 4.26%

Method 1
2010 -764.03
2011 -618.14
2012 391.7
Total 9.53

Method 2
2010 -905.90
2011 -508.29
2012 1053.17
Total -361.02

Method 3
2010 -845.44
2011 -314.57
2012 1058.82
Total -101.19

Method 4
2010 -1160.19
2011 -307.04
2012 1342.46
Total -124.77

Method 5
2010 -239.78
2011 -388.23
2012 764.61
Total 136.60

Method 6
2010 -358.63
2011 -289.23
2012 1074.16
Total 426.30