Hey everyone, as a busy person I wanted to make a system that was easy for me to manage, one that didn’t have a lot of indicators (in fact, this one doesn’t have any) and one that didn’t require me to sit in front of my computer all day to wait for a signal. However I haven’t perfected it yet and I need some help, especially with the stop loss.
This system is based on the daily charts but you MIGHT be able to use it down to the 4hr level. I wouldn’t recommend going any lower. This system uses the previous day’s High/Low points to place trades. It’s about as simple as you can get.
Step 1. Look at the previous day’s candle to see if it was a bull or bear candle.
Step 2. Depending on whether or not yesterday’s candle was bullish/bearish, look at the price of the high/low. For example, if the candle was bullish then find the high of the day and for bear candles find the low.
Step 3. Place a buy/sell order at the high/low of the previous day. For example, if it was a bull candle yesterday then place a buy signal at the high price. You should do this BEFORE the new day has hit the high/low. If it has already hit the high/low, don’t bother jumping in.
Step 4. Set your TP/SL depending on the currency pair.
Note: You should only be making 1 trade a day. Also, if the new day’s candle never hits the high/low of the previous day, remember delete the order ASAP so you don’t trigger it. Also, although there are no indicators, you can use them to find trends or channels in the daily charts. The best way to do that would be to use high/low data depending on the trend and NOT the previous day’s candle. I haven’t tried it myself but that may be a more accurate way of doing it.
Basically that’s it. You should only be using this strategy on high volume currencies like EUR/USD or GBP/USD. Smaller volume pairs will NOT work with this system. For example, EUR/USD usually has a tendency of reaching 20-30 pips farther than the previous day’s low/high so for TP I use a fixed 15 pips. GBP/USD is about the same but I use 10 pips because it doesn’t have as high a volume. I tried manually backtesting the system on daily charts and it seems to win pretty consistantly, like 90%.
Unfortunately, when looking at the hourly charts it tells a different story. Even though on winning days the candles pass the previous day’s high/low, it sometimes retraces in the opposite direction right when it hits the entry point. This means that SL happen often. After discovering this, I thought to myself, “Hey, why not just reverse the trade orders and set the lows to buy and the highs to sell?” Well I tried that and the thing is that it doesn’t ALWAYS retrace.
After that, I thought to myself, “Well why not just make the SL higher?” I’d love to do that but then my trades would be floating a LOT and it would become a very risky system. Now my problem is that I don’t know where to set a proper SL in order for the price to retrace a little (if it does at all).
My thoughts were to set the SL to the close of the previous day. However, this could cause a problem if the close was right at the high/low of that day. I don’t think that a fixed SL will do me any good either seeing as currencies are very unpredictable.
If anyone could give me some thoughts, maybe a suggestion on how to solve this problem, then I think that this system could turn out pretty great. I love the fact that this system is very accurate and it’s also very simple, no indicators and no waiting for signals. After I get it all figured out I’ll delete this post and create a new one for the community to develope ideas and whatnot.
