Nicely done there rtripath, love it!
Day 2 update : Initially for first 6 hour after London open all 4 GBP pairs were positive and I was up by almost 150 pips. However as day progress all except EURGBP turns red and I was down by 120 pips. So the key here is to find an effective way to manage the trade . 1. 1.5 R/R wonât work. It is better to exit trade with green than waiting for recovery and giving up the profit. Based on my yesterday experience I tried not to exit the trade once they turned red.
Any suggestion on how to make this strategy effective by keeping loss to minimum and maximize profit ? Lets see how the rest of the week turned out. My goal is to find an effective strategy to maximize the profit using this london break out method.
Using trailing stop will help for this type of scenario.
Thank you, CloudNinee. Sometimes it takes more than 4 candles after 8AM candle to set up a trade. How long should I wait please?
Iâm enjoying the conversation in this thread and have started backtesting the system with a couple of tweaks. Regards to the results yesterday - we had 2 lots of high impact news on the major currencies during the trading session this system takes its results from. A suggestion would be to avoid using this system on days where high impact news is due on the relevant currency pairsâŚjust a thought
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This is personal preference, so it depends on you but I often wait around about 5-6 hours MAX as thatâs usually my bed time. So up until then and it still does not break the range, you should be cautious. Due to low volatility during the Asian session, you will often find up to 70-80+ % of the time it should break the range within the first 2-3 hours.
Major and high impact news can cause this issue. Not much you can do about it to be honest as you know any strategy can be affected by this.
As the others have mentioned, either to avoid it altogher when there are major news, be more cautious or a trailing stop will also be helpful.
The only thing with a trailing stop is you have to find the right sweet spot. Because itâs so volatile, while it can help you save pips, it will also take away pips at time because it can swing down, grab you trailing stop then keeps going.
Very true regarding your comment about trailing stop. Today I didnât do any trading and was busy with back testing my EA. I found a sweet spot of 1;1 R/R with 75 pips. By running the EA from Jan2019 . it return me 20% on GU and about 10% on rest of the GBP pairs. So I am sure having a hybrid approach of automating trade and managing it manually will give the best result. Thanks all for your input and insight. Now I need to find other possible pair that behave similarly on any other session. If you knows of something let me know I can very easily test that out .
That it reversed after 6 hours has to do with the opening of the New York market. It happens quite often when the London market is very bullish. Always watch out for this. If after the first hour of the opening of the New York market a strong reversal happend, youâre better off closing the trade as most likely you will lose on that trade. Till now I didnât really find a way to predict this reversal. All I came up with is to limit the risk by adjusting the S/L. Depending on where you live this might not be possible for you to do. Being from Zurich I can do this easily as the New York market opens 2pm my time.
Yep, Thats what I am doing right now . Luckily its 8.30 am for me NY open. But sometime it reverses before that as well. That is part of this strategy and having 4 GBP pair helps to consolidate the loss. Today was an exception as most of these reverses . So for now I have decided to reserve 25 pips in all the 4 pair by managing it through SL. For someday like today I may not be lucky but for most of the day it works fine. As i have the system that perfectly place trade in london breakout , now need to find some other pair at different session behaving similarly so that it helps to balance the trade. If you guys have any idea pls share . Thanks for all your valulable feedback.
Hi CloudNinee, Please see the test results of last week. It is not very encouraging. Can you please post your Live results for last week so that I can understand if I did any mistakes? Thanks once again.
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A few other things I noticed from other traders who have followed my strategy is if your trade is in profit and the Londons sesson is coming to and end / the New York session is openning:
- Close your trade and take your profit or
- Move your SL to BE to avoid reversals
Obviosuly there are pros and cons in doing this. But rather lock in profit or come out BE is better than losing.
Exactly , that is what I did for my two days of live trading in last week and got a return of 15% . I will do the same in coming week and update you with the findings.
I traded this in demo last week and had a loosing week. Risking ÂŁ100 per trade I was down ÂŁ244.83 on the week. I want able to trade Monday.
Thats a nice strategy using a box and 1.5 rr, thankyou. I have used something similar in the past. I have also used something I call the âlunchtime reversalâ ⌠its uk lunchtime, or us open. It can shift as daylight savings fluctuate. Essentially it is a bit of a reversal for a few hours after the morning run. Probably the us traders drink their morning coffee and say âhmm, looks a bit extendedâ so they trade against it? Anyway, wasnt always reliable but thought I would mention it. . Thanks for the thread, yes its simple and clean, a nice strategy. 
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Hello, I appreciate your efforts for explaining your strategy here. Itâs always a good idea to mould a strategy in your own way and then test it. Keep it up buddy. Looking forward to more results from your strategies and then will definitely give a try to it. Much interested in trying new strategies and sharing it with others.
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Hi CloudNinee and others,
Please see this weekâs test result below. Please note that I didnât wait for TP to hit. I closed the trades near 50% of TP or earlier. It has increased winning rate a lot. Though I allowed the bad trades to hit SL it still is a profitable strategy. Any comments please?
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Hi Cloudinee, I have followed this excellent post since you started it about a month ago. It has taken me this long to document how I wish to approach any strategy and plan that I will back test with historical results and forward test with a demo account. I would be grateful if you could review my playback of your modified London Breakout Strategy and let me know if I have interpreted your strategy 100% correctly. In particular (and this is work in progress for me), you mentioned that sometimes the three indicator candles were too volatile, so that meant you did not put on the trade. It was commented that this would make it difficult to automate if conditions were not captured that lead to no trades. Once I have tested a limited set of entry conditions, I intend to determine this can be linked to a maximum ATR of the first 3 candles that would result in a less than zero edge, and apply that accordingly. Thanks in advance for your kind review.
51 TEST STRATEGY
The strategy (what and why) is to document a modified London Breakout Strategy (LBS) based on explanation by BabyPips forum member Cloudinee (Cloud Nguyen) on 24Jun2020.
The âwhatâ is the modified LBS trading plan
The âwhyâ is to achieve the first goal of J275 Forex Trading project (Phase 2) to learn how NOT to lose money. The Strategy shall be completed with a definition of The Algorithm for LBS, and:
- Identifying the zone in which to trade
- Creating the setup for the trade with pre-defined risk value (R in pips and $ value), fixed stop loss (SL) in pips and $ value and fixed take profit values
- Entering the trade at price E with journal entries of date, time, pair, R pips+$, SL pips + $, TP pips + $. Initial testing is to automate entry (E ), SL, TP values and return before close of NY session to close out any trades
- Any further improvement is out of scope and would be the subject of another strategy and test plan
- The objective is to perform sufficient back testing of historical data to have a 95% confidence that the data demonstrates the strategy does NOT lose money
52 TEST PLAN
The Test Plan for J275 LBS v0.1 (London Breakout Strategy version 0.1) is a document that links the LBS Plan to direct achievement of Objectives as set out in the ToR for J275 Forex Trading Phase 2 2020, and quantifies how much of the Trading income objective this plan is intended to contribute.
Background â Explanation of modified LBS Plan
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Applicable to: Foreign Exchange trading only (Forex trading)
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In scope pairs: EURUSD, GBPUSD, USDJPY, USDCHF, EURGBP, GBPJPY. The first three from the primary 5 and the second three are secondary pairs.
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Indicators: Average True Range, Market direction (long, short or choppy)
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Timeframe: One hour candlestick charts for each pair in scope
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Session: London opening session local time 08:00 hrs for setup, 09:00 onwards for entry, 09:00 onwards for exit
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Tools: a) TradingView.com charting software (in brokerâs package or via subscription separately), b) this strategy and plan document c) trading journal with template specific to this trade plan
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Strategy name: J275 Phase 2 LBS v0.1
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Trading Plan name: J275 Phase 2 LBS v0.1
Initiation / Feasibility
Full description of the Trading Plan and confirmation of interpretation.
| Plan action | Detailed description |
|---|---|
| Identify zone | Plot on a TradingView chart (with sessions background visible) historical one hour candlestick bodies and wicks as OHLC. Draw a rectangle around the candlesticks closing at local UK time 06:00, 07:00 and 08:00 hrs, the third and last one being the close at the start of the UK trading day. This is represented by the second green candlestick closing at 16:00 hrs on Figure 1 below. The red rectangle is drawn after closure of the UK time 08:00 hrs candle and contains the OHLC values of the previous three hours. Caveat â if this OHLC range is too volatile (caveat 1 below in setup) the trade may not satisfy all indicator criteria. This relates to the ATR of preceding candlesticks and the expected daily range following 08:00 breakout. Back testing will quantify the maximum value of this range for optimum win/lose ratio. |
| Set up â any time from 09:00 hrs UK local time (closure of the first candle during London opening) and later | The trend is short. |
Verify that this agrees with the weekly / monthly trend. This strategy relies on trading with the trend, not against it. If the trend is the other way, do not enter the trade.
The zone of acceptable loss
has been set represented by the red rectangle and in the case of Figure 1 that is a risk range including the highs and lows of the last three candlesticks â from 0.95008 to 0.95158 or 15 pips.|
|Entry|Setting risk pips and risk $.
Wait for the first one hour candle of the London open session to close (Figure 1 17:00 hrs candle representing London local time 09:00). Enter the trade in the same direction as this trigger candle, and draw a âtake profitâ green rectangle on the chart which is 1.5 times the risk. The risk is now defined as the highest value of candlesticks 1, 2 and 3 (0.95158) minus the entry point at the start of the London time 09:00 candlestick at 0.95008. This is 15.0 pips.
Money Management. Set risk $ as 1% of Forex bank.
For a demo bank account of US$50,000, and a money management plan of 1% per unique trade, define the risk as 1% of $50,000 = $500. This represents 15 pips, so the risk is 500/15 or $33.33 per pip risked.
Enter the trade
with a short entry at 0.95008, stop loss at 0.95158 (+15 pips) and a take profit level equal to 1.5 times risk pips, or 22.5 pips. This is a TP level of 0.95008 minus 22.5 pips or 0.94783.|
|Management|Record snapshot of screen chart in journal for this trade, and record red zone range (0.95060 to 0.95158), green zone range (0.95008 to 0.94783), Entry E = 0.95008, SL = 0.95181 = 15 pips, TP = 0.94783 = 22.5 pips, and their dollar values ($500 risked = $33.33 per pip, TP = 22.5 pips = $750, expected spread (buy to sell = 2 pips?) and slippage (=1 pip), to compare actual outcome with planned outcome|
|Exit|For the purpose of back testing this strategy and forward testing it on a demo account, set the TP level at the same time as entry and SL setting.|
Figure 1 â LBO Example 1 from Cloudinee post on BabyPips.com forum
Identify zone, set zone, entry zone and trade exit identification.
The one hour candlesticks on this chart are Australian east coast times of 14:00, 15:00 and 16:00 hrs representing candlestick closure times in UK as 06:00, 07:00 and 08:00 hours respectively. (Edited)
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Certainly impressive explanations, but donât you offer any myfxbookâs page showing your performance? That would help a lot.
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gbptrade.docx (49.3 KB) This document explain how the GBP pairs behave using the strategy. I had almost 60% win trade on 7 days . I tried to use GBPNZD and GBPAUD in last two days and results are not impressive. However I was able to secure 25% return in this 7 days of trading. The key here is to manually manage the trade once they got executed by the EA. This will help you from loss during reversal which happen a lot of the time. Also one day I found the width of the rectangle very high due to volatility. I will use the same strategy again coming week and update you with my findings.
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