Buy a currency pair that is in the “undecided” stage (ie: when there is no trend)
Sell the same currency pair the moment after
Put stop loss for both trades at -40 to -50 pips
Put limit order for both trades at +80 to +100 pips
The logic is that if the pair starts going up over 40-50 pips (the number will need to be calibrated after practicing this strategy several times), it will most likely keep going up for a while after that. One of the orders will stop at -40 pips loss. A while after the second order will be at +80 pips gain, so in the end the profit is 40 pips. Same logic applies if the pair goes down.
It is important to enter the trades when the pair is bouncing up and down in a range (eventually it will breakout of the range).
What happens when the pair drops to -55 pips then reverses back to +120 pips? Well, it would mean both positions would of been stopped out! Reverse that: Gains +88pips then the pair drops down to -109 pips… double stop out! This would probably be the case the majority of the time.
Where would you implement the coin toss? Would it be based on price action or would it be as archaic as flipping the coin every 4 hours?
Hey, good thinking though… having insane ideas and understanding why they will or will not work is the path of wisdom.
The best thing would be to pull up a chart and back test the method manually… I did this on a ES coin flip system… it would stop out at -3 points and close out on +6 points… at +3 points a trailing stop was implemented, -2 points , so I would lock in a profit of plus 1. According to my sparse data sheet my manual back test resulted in 50/50 Win/Losses! But the really neat thing is due to the trade parameters I was able to get 5 points out of the system per month… (same results for when inversed the positions during the manual back test!!)
So, there is some merit in such a system… but I suspect over the long run, IE over several market cycles, the result would be a flat line with the occasional spike in the red and black.
edit I reread your post… it seams in my beer induced state it did not fully take you stated to implement the strategy during a channel… that does increase of success… based on if it is a true channel vs. congestion. …considering you like channels perhaps your should look into test your strat with other well accepted TA patterns such as triangles, pendants, and flags…
Right now I am testing it using different s/l and limit orders. I think making limit order only twice as high as the s/l (ie s/l -40 pips and limit +80 pips), is not enough. Because in most cases that I’ve already tested the “winning” trade went actually much higher than +80 pips, therefore I lost a lot of potential profit on those. I am gonna try doing -40 s/l and +110 to +150 pips limit for each trade.
OK, so far I’ve tried the following s/l and t/p combinations for my new strategy (not sure of the name for it, “buy & sell the same pair at the same time”):
-40/+80 Doesn’t work very well, about -150 pips loss for all trades atm
-40/+100 This one is at around -190 pips loss for total trades atm but half of the trades are still open and are all winning, so I’ll check on it tomorrow
-15/+30 Now this one is interesting, atm the total trades profit is 75 pips and 2 trades are still open waiting to hit the 30 pips limit
-15/+35 This one I just started trying out a few minutes ago
-10/+20 -10/+25 -10/+30 -10/+35 are all unsuccessful but I’ll give it a few more trades to test the strategy a little more
-10/+40 at the moment is at +5 pips profits in total, 2 trades are still open and seem to be winning, if they both hit the 40 pip limit, the total profit for this strategy will be around 50pips.
I am going to test much more combinations. I think combinations like -15/+45 or -10/+45 will work pretty well. Also I will try something like -40/+125.
OK I’ve tried a few more combinations like -15/+40 and -15/+25 and several others. Most of them either produce losses or produce as much losses as profits, except the -15/+30 combination. After about 16 trades (by 1 trade I mean that it consists of the buy and the sell trade of a currency pair), each one is 10k lot (which is 50$ on a 200:1 leverage), I now have a total of 150$ profit. I’d say that’s not bad considering that’s only less than 2 days of trading, and all that I’ve been doing is mindlessly applying that strategy to currency pairs with low spread. Never even took a glance at a graph. But of course I’ll need to test this for several more days to see how it goes in the long term.
Also I continue trying other combinations. I am gonna try something like -20/+40 or -20/+50
Hey Lakontis, I’ve got an idea that might save you a couple of pips each time you trade. It will also help you out in case you are with a broker that is discontinuing hedging if you are in the states. Rather than actually placing both a buy and sell at the same time, place a buy stop order and a sell stop order at the same time. This way, you avoid paying the spread 2 times on each trade.
Right now, if you are trading with a 2 pip spread, each trade you initiate automatically puts you down 4 pips since you are paying for both the buy and the sell. So if the price moves higher by 15 pips from your entry and you are stopped out, you are at a net loss of 4 pips (you are plus 13 for the buy order and minus 17 for the sell order). Then if price moves in your favor by another 15 pips and you hit your TP, you have really only gained 11 pips total.
However, with the pending order, if price moves up 15 pips, you haven’t actually opened a trade so you haven’t paid a spread yet. Once it hits that 15 pip increase, then you are triggered into the trade and are at the same spot you would be had your sell order been stopped out. However this time, you are only paying 1 spread since you only triggered 1 trade. When price moves to your TP, you have now made 13 pips instead of only 11.
You mentioned earlier that you were up $150 after 16 trades on 10K sizes or basically, $1 per pip. Since you save 2 pips each trade no matter if it is a winner or a loser, you would have had an extra $32 by placing pending orders. That alone would allow one extra loss to come out with the same dollar value by placing both trades at the same time.
As your man Mike points out below, you’re paying heavily just to be flat. You’re strategy is really asking a simple question - after a movement of X number of pips, is it more likely it’ll carry on or reverse? You’re assuming that it does. To answer that they way you’re doing, you’ll blow up before you find out. You’ll need to do some stats analysis to quantify it, which will most likely reveal a very small edge that’ll probably be drowned out by the cost of the spread.
Not being dismissive at all - everyone starts off with these ideas - but it’s important to realise why they’re doomed to failure before moving on.
At this point the only profitable combinations were -15/+30 and -20/+50 but I still have many others to try. Here is report for the -20/+50 after 26 trades. I was going to actually think about choosing the right entry points too but in actuality I did it completely on random.
I wouldn’t enter any trade based on this, but I’d never knock the experience testing it gives you. Knowing what randomness really looks like stops you trading systems that are effectively random.
Hi Lakontis,
did you think of trying with a trailing stop?
Ninja you can make scripts for trading with trailing stops. This way the stop would follow the high by as many pips difference you like and as soon as it comes down it would stop you out. Save it as a template and it would apply to every trade.
MT can do it too but you have to place the order first then you can make trailing stops but I don’t know enough about MT.
Hmmmm, just thinking about 2 things, what would tymen has to say about that? (he probably is laughing already)
And, I think it’s worth to look into it on an automated base.
A penny here, a penny there, and before you know it, it is real money.
Hmm, I actually never really knew what exactly a trailing stop is, until today. But it’s never too late to learn, especially considering I’ve only been trading for just over a month or so. I am gonna try using the trailing stop instead. It sounds much easier because you don’t need to worry about different combinations of s/l and t/p orders.
I am just wondering about one thing: in the fxcm trading platform it doesn’t allow me to adjust the stop min. move. It is by default at 0.1 pips. I am thinking that there is no reason really to make it higher (especially in my strategy). What do you people think? Is 0.1 a good number or do you think some higher number might work better?
I did not tried till now , but i will try it must , the strategy seems me to me very good and i will make profit also i think, so i will follow your strategy must.
(he probably is laughing already)
