Hi.
Its been a year since I started my babypips journey. Started about this time last year and it took me a few months on and off of reading the school of pipsology but I got there in the end. I had a nice journal on meetpips but that got suspended so I’m starting on here.
Just like the advice in the school of pipsology, I DIDN’T go out and live trade straight away. I’ve been very very patient haha. From around March through to June 2016 I backtested a few systems. I mucked around with the Cowabunga system, using Ichimoku indicators (first time I wasn’t even reading it correctly but somehow would’ve made money - go figure). I started backtesting the 2618 trade on various pairs of 4hr charts after watching a video by Jason Stapleton. I also had another mate say he had some success trading a variant of the 2618.
My current trading system:
2618 trade
Setup condition 1
A double top needs to have formed, with a very definitive ‘V’ between the two tops. The 2nd peak of the double top’s highest high needs to be above the highest close of the 1st peak and the close of the 2nd peak cannot be higher than the 1st peak’s highest high.
Setup condition 2
After a double top has been confirmed, a breakdown in structure to the downside must occur and the market must close below the lowest close of the ‘V’.
Entry point
Structure support needs to form, prompting me to place an entry order at the 61.8 retracement when drawn from the new lowest low to the double top’s highest high. My entry is 5 pips before this retracement value.
Stop loss
Stop loss is 10 pips above the double top’s highest high
Take profits
Take profits at a 1:1 risk ratio. If stop loss is 50 pips, then take profits is at 50 pips.
This method allows me to check up once a day on the 4hr charts as this allows 6-7 candles to form. This is usually (but not always) enough time to set entries or catch an order.
Above image courtesy of: https://www.tradingview.com/chart/EURUSD/TRN8FkXp-Double-Top-definition-2618-trade-setup/
Risk/reward
Trade R=1:1 in other words, risk to reward ratio is 1:1.
Risk no more than 2% of my trading capital. This will increase or decrease depending on how much trading capital I have.
Backtesting results
This gave me a few viable pairs to start live testing: NZD/USD, GBP/USD, USD/EUR, AUD/CHF, AUD/JPY. These were all backtested over a 3.5 year period with all yielding positive long term gains. However, gains were most consisten over time on NZD/USD, GBP/USD, and USD/EUR. The other two pairs were very very volatile.
I then went to live testing for a period of two months from early July through to start of September. From this, my NZDUSD pair had the best data, followed by GBPUSD and USDEUR. I decided to drop the AUDCHF and continue testing the AUDJPY.
Since then I now live trade NZDUSD while still live testing the remaining 3 pairs until I am happy with their performance.
Broker
I use OANDA as a broker as it allows me to set any lot size (custom lots as small as i like) which helps me keep to my ‘risk 2%’ rule. Hell at the moment my account size is only $250 and it lets me trade lots of $700 or so as that is what my risk allows me to do.
Anyway, that’s enough for now. I will update as we go.