London Breakout 1

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973

I’ve been developing a Metatrader 4 EA for this strategy for several months. The main reason was to back test this great strategy and possibly to trade it. To date I’m having amazing results on the GBPUSD pair and I want to share my findings with all of you like Edward Revy did sharing this Strategy.

First I have to say that currently this EA is still like a wild horse that needs to be domesticated, it has a lot of potential, gives huge profits but also gives scary losses. The good thing is that on the long term, profits prevail. May be together, sharing more ideas, we can improve it.

For example, back testing using Alpari UK historical data, starting January 2008 with a 10K account (10K = 10.000 USD), risking to loss 2% of the account on every trade, the EA managed to turn those 10K into 87K by the end of 2008.

When I say that the EA is risking 2% of the account, I mean that the EA calculates a different Lot size for every trade based on the Stop Loss, no matter how far or close the Stop Loss is, the EA will calculate the Lot size so that if the Stop Loss is hit, 2% of the account will be lost. That risk percentage is configurable.

What about testing with 2009 historical data? The EA continued with 87K and ended with 199K.

What about 2010? The EA continued with 199K and ended with 330K.

So, the EA went from 10K to 330K in three years, risking only 2% of the account on every trade? That sounds possible.

On the other hand if we set the EA parameters to risk 5% on every trade, the profits go ballistic! On that same period of time, from 2008 to 2010, it goes form 10K to 27 Million USD!!! That is crazy and I don’t think that would be permitted on a real account, because when the EA is configured with 5% risk, it ends trading really huge lots and I think no Broker is going to permit that.

Any way, that is configurable and we can set a maximum lot size to avoid problems with any Broker if we ever go live with this EA.

The EA is based on the original rules but I have tweaked the rules in some aspects to improve the EA performance. In the near future I will comment about the changes I made to the rules.

In the mean while, you can download the EA source code along with my last tests, on the following site: Trend Lines Breakout System - FX Passion

Please feel free to download and test.

I only tested using Alpari UK historical data, it would be nice to test with some other Brokers data and see what happens.

Happy trading.

Haydel

974

hello Heydel, that is interesting results but when I look at the graph I see you are right about the wild horse! I wonder if there could be some change that would smooth the curve so it would not be such a wild ride? !

975

Thought it would be interesting to run the Kelly Criterion on the results of both.

Kinda eye opening in terms of risk.

The first 2% strat looks like it would bust a few accounts out of 100, but the 5% strat looked like it was a crapshoot. Might lose a few soldiers before you could buy that Ferrari…

2% results:

5% results:

[Edit] That was running 100 lines on each result :slight_smile:

976

Those charts look like a bomb went off :D!

977

[B]inpBrokerTimeZone[/B]

Is the Broker Time Zone difference from GMT. You should ask your Broker the Time Zone they use in their MT4 Servers. If they use GMT Time Zone this parameter should be 0, otherwise use the specified differences. For GMT+10, inpBrokerTimeZone = 10; for GMT-4, inpBrokerTimeZone = -4, etc.

[B]inpRisk[/B]

This is the percentage of the account balance to risk in every trade. For example, if this parameter is 2, then the EA will risk 2% of the account on every trade, this means that the EA calculates a different Lot size for every trade based on the Stop Loss that will be used for that trade, no matter how far or close the Stop Loss is, the EA will calculate the Lot size so that if the Stop Loss is hit, 2% of the account will be lost.

[B]inpRiskMinLotSize[/B]

Minimum Lot Size to use when the EA calculates the lot size based on inpRisk parameter. If the calculated value for Lot Size is smaller than the value of inpRiskMinLotSize, then the value of inpRiskMinLotSize will be used for the trade.

[B]inpRiskMaxLotSize[/B]

Maximum Lot Size to use when the EA calculates the lot size based on inpRisk parameter. If the calculated value for Lot Size is bigger than the value of inpRiskMaxLotSize, then the value of inpRiskMaxLotSize will be used for the trade.

If inpRiskMaxLotSize is 0, then the EA will not set a limit for Lot Size.

[B]inpFixedLotSize[/B]

This parameter is ignored unless inpRisk is 0. If inpRisk is 0 then the value of inpFixedLotSize will be used for every trade.

[B]inpPivotsStartTime[/B]

This is the EST Hour when Daily Pivot Points will be calculated. This EA has its own internal Pivot Points. These Daily Pivot Points will be calculated using 24 hours starting from the Hour before the value of inpPivotsStartTime. For example if inpPivotsStartTime is 0, then the previous 24 hours (0 to 23 ) will be used to calculate the Daily Pivot Points, if inpPivotsStartTime is 5, then the previous 24 hours (5 to 4) will be used to calculate the Daily Pivot Points.

[B]inpMinPivotOpenDist[/B]

The rules of the strategy says that “We would also choose the second Pivot point level of support/resistance as our profit goal if the first Pivot level appears to be too close to our entry point.”

Use inpMinPivotOpenDist in pips to define the “too close” distance. If the distance between OpenPrice and the closest Pivot level is smaller than inpMinPivotOpenDist, then the next Pivot level will be used as our profit target.

[B]inpPipsToBrakePivot[/B]

If during the first hour, the price break through the first pivot level, the EA will move the Stop Loss level to Break Even. The EA will do this if the price passes the pivot level by the value of inpPipsToBrakePivot in pips.

[B]inpPivotTouchOffset[/B]

Distance in pips to a Pivot point to consider it as touched. This EA only sets the profit targets using Pivot point support/resistance levels. If inpPivotTouchOffset set to 0, the price should actually touch the pivot point level to hit the target.

[B]inpPipsSLOffset[/B]

The rules of the strategy says that “A protective stop is placed just above/bellow the candle that broke through the trend line.” The EA will set a protective stop in the other trend line, if the other trend line does not exist the EA will set the protective stop at the High/Low of the entry bar +/- inpPipsSLOffset.

[B]inpMaxSameDaySameSideTrades[/B]

If inpMaxSameDaySameSideTrades is 1, then only one buy and one sell per day will be triggered, even if the protective stop is hit and the price retest the trend lines. If you want to reenter on a trend line retest after a failed trade, then increase the value of inpMaxSameDaySameSideTrades.

[B]inpMaxTradeTime[/B]

Sets the Hour when the trend lines will be deleted. This means that no more trades will be triggered after this hour.

[B]inpSlipPagePoints[/B]

Set the Slip Page for every trade. The value is in points, not in pips. This means that if the broker uses 5 decimal prices, 30 points is the equivalent of 3 pips.

[B]inpSMAFilter[/B]

This is an addition to the original rules. The value of inpSMAFilter will be used to calculate a SMA and that SMA will be used to filter Long or Short trades. By default SMA 150 is used. If the price if above SMA 150, only LONG trades will be triggered, if the price is below SMA 150, only SHORT trades will be triggered.
If inpSMAFilter is 0, then no filter will be used.

I hope this Quick Guide clarifies some things. If any one have any question or suggestion please let me know.

Regards,

Haydel

978

Using this London Breakout Strategy, the version 1.2.3 of the EA made a nice trade today with USD/CAD (See the attached image), giving a tip that this strategy may also work with that pair. Obviously, more testing is needed.

Happy trading,

Haydel

TLBS_20110223_USDCAD.jpg700×431 36.3 KB

979

hi,

I dont get it with the times used in this strategy. I live in Germany and we have GMT+1. I use Alpari, I think they have GMT+1, too (they say it a little bit complicated at their homepage).
My problem is, that Edward uses 0-4 am at EST. When I am not wrong, this is 6-10 (10.59) at my time. But at this time, the breakout has allready be done, because Frankfurt opens at 8 o clock and London follows an hour later.
Is here anybody who uses this strategy at my timezone?-would be nice if you answer…
I went back up to an half year…and the breakout normally occurs at 8-10.

what do you think?

thanks,

Ghaz

980

Unquestionably “timing” in this strategy is very important and also very confusing. I can tell that using wrong time parameters can seriously affect performance.

For that reason I published version 1.2.4 of the EA in order to help everyone to trade with this Strategy using the right times.

You can find version 1.2.4 here: sites.google.com/site/fxpassion/eas/trend-lines-breakout-system

Version 1.2.4 adds more detailed Bar Time information on the upper left corner of the chart, and that will help you to configure the EA properly.

Please proceed with the following steps after adding the EA to your charts (See the attached image

TimeSettings.jpg700×381 53.6 KB

):

  1. Move your mouse to the last “One Hour” Bar on the chart, when the ToolTip pops up it will show your Brokers time for that last Bar. Confirm that the EA is using the correct value comparing the time on the ToolTip and the “Broker” Time shown by the EA on the upper left corner.

  2. Browse to wwp.greenwichmeantime.com to view the current GMT time and confirm that the EA’s GMT is correct, if GMT time at the upper left corner is wrong, change the value of inpBrokerTimeZone parameter to fix the difference. The minutes are not important; we are only talking about the Hour, the moment the current Bar opened.

  3. Browse to wwp.greenwichmeantime.com/time-zone/usa/eastern-time/ to view the current Eastern Time and confirm that the EA’s Eastern Time is correct, if Eastern Time at the upper left corner is wrong, change the value of inpETDaylightSavingTime parameter to fix the difference. The minutes are not important; we are only talking about the Hour, the moment the current Bar opened.

Once Broker Time, Greenwich Mean Time and Eastern Time on the upper left corner of your chart are correct, then the EAs timing parameters are correct.

On the other hand, this EA works on real time, that means that the EA has to be running before midnight Eastern Time, then when the time comes, the EA will draw the vertical limits then it will draw the trend lines when valid swings form and eventually the EA will place trades. The EA will not work for the day if it is started after midnight Eastern Time.

Version 1.2.4 is also optimized to work with 4 or 5 digit brokers and solves some problems that raised with pairs that where not GBP/USD nor EUR/USD.

Happy Trading,

Haydel

981

Thanks a lot for your EA.

Have just tried to start it and i’ve got the following:

I am using FXCM.UK server thus my broker hour should be the same as London hour.
Is this setup ok or do I need any changes?

Have gone through your explanation couple of times and I think I should be correct?

Appreciate if you can clarify.

jebus

982

According to my charts, the last bar in the chart you are showing corresponds to 06:00 (GMT), 02:00 (EDT).

That means that your Broker servers are runing in GMT+0

It seems that you should set [B]inpBrokerTimeZone = 0[/B]

983

thanks a lot mate

984

anyone using this method now ?

985

@Master Tang, do you still use this system and does it work. Does the EA work?? 90% is that for real? Sorry for directing all these questions at you but I was looking to trade a LondonB and was directed here from one of your posts

986

Dont worry back test says this is no holy grail…

Could work if you use price action to confirm but you may aswell just use price action

987

I realise that this thread is quite old now but thanks for the charts. I have seen alot of what I perceive to be incorrectly drawn trend lines. I have seen down trend lines pointing up and vice versa!!

Anyway i just wanted to pop you a question because this strategy still seems valid to me even though people are always trying to better it, create an EA out of it etc and as with all things, constant tampering result in the system running out of steam!!

So, there is one point i dont understand about this system. In the instructions it says that if there are no swing highs or swing lows in the 5 bar period there will be no valid respective trend line for that day. What does that mean? Does it mean then that if you cannot draw a valid down trend line for example where you would be looking for a break of such and a subsequent buy trade, you will only be looking for selling opportunities ie a break of a valid up trend line? Or does the lack of one valid trend line invalidate the day in terms of trading? I notice that this system originally started with just marking off horizontally the high and low levels within the five bar period and at some point progressed onto trend line breaks.

Would welcome anyone’s thoughts on this if anybody is still looking at this thread.

Cheers

988

Hey Harry

I used to trade this strategy but found that the London Open breakout would often reverse after the initial breakout. ICT (What every new and or aspiring trader…still wants to know thread) calls this a judas swing.

I found it was good for say 10 - 20 pips but then you would often see a judas swing the other way. Observe it for a few days and you will surely see the initial breakout and then reversal. Maybe you can incorporate this into the strategy somehow?

Cheers

989

That wasn’t an EA. There used to be a Kelly Criterion applet that showed you the odds of having a successful system, providing you had accurate stats to use. Obviously with the results of the 5% risk strategy being all over the map, there was a better chance of consistency with the less risky 2% option proposed by Haydel. It was his EA:)

990

Hi there gbl83

Thanks for taking the time to respond. Yes, I take your point about the Judas swing - looking back, drawing horizontal lines at the high and low of the 5 candle period (which was the basis of the original system) as opposed to the swing high low trend lines does seem to filter out a few of those swings but I am only it for 15-20 pips in any event and the trading time is good for me and fits into my day. Im not looking at making huge pip gains and I cant spend all day in front of the charts - not looking for much am I lol - just a consistent 15-20 pips a day would suit me just fine!! Any other suggestions apart from this approach? I notice you say you used to trade this system - have you moved on to a better alternative then?

Cheers

991

The system seems simple and doesn’t consume your time however I just found that the london open can get quite choppy so yeah you might get 10-20 pips on a good day. However because of the “choppiness” at that time of the day you might find yourself 20-30 pips in the red in no time at all.

Being in the red anymore than 10 pips on this system ruins your risk:reward ratio (ie your losses are generally bigger than your winners). Those are just my thoughts and observations and to be honest I didnt persevere long enough with it as I found ICT’s original thread.

You ask if i have moved to an alternative? Yes I have started using ICT’s methods, cant really say it is a system though, more method. Im no pro by any means but i’ve been around long enough to know something with some substance which is what ICT’s methods are full of.

He gives you many tools to work with that you dont need to spend hours on charts with. You have the time at London Open session free i assume if you were looking at trading this system? Well you can use the tools he describes like optimal trade entries, market flow, top down analysis, traders trinity, pivots etc to trade London open. It sounds like a lot which it is but once you know them and what to look for you can plot these on your charts and you wont be staring at the screen for hours.

If you want anymore info let me know

992

Where can i download ea ?