Hello traders, I would like to let you know & hopefully get your feedback on a simple breakout method that i have backtested from Jan 2007 with impressive results.
I came up with the system in my endeavour to find a trading method that i can use with minimum disruption to my day job
The results based on a 1% risk per trade are:
2007-85% return
2008-62% return
2009-17.7% return
2010 so far 45%
Overall by compounding profits the backtesting shows a 500% gain from the start of 2007 until today (29th April 2010)
Although 2009 did not perform well with just 17.7% gain i hope this can be put down to the turmoil across all the financial markets during much of that year.
The method is simple
Using a 1 hour gbp/usd chart set to the current London time
Take the high & low of the 1 hour 8am candle
on the first break of the high or the low enter the trade
If long then the SL is at the low of the 8am candle
If short then the SL is at the high of the 8am candle
TP is 2 X SL (2 X 8am candle range)
If there is no break of the 8am candle within 3 hours then no trade for today
Once opened the trade is then left to run
If the trade has not hit TP or SL by 9am the following morning it should be closed before setting up your trades for the new day
So as you can see this method can easily be traded by someone like myself who has a day job by simply logging on for about 10 mins every day at 9am London time to set pending orders
However you will need to set text alerts to notify you when a trade is entered so you can cancel the other pending order.
I have not traded this method live yet as i have just finished spending many weeks scrolling through the 3.5 years of data.
If you can see any flaws in this system please post them here as i too am surprised that such a simple method can notch up these impressive returns.
The backtesting was calculated without using a buffer for Stops & entries etc. so it is entirely possible that there is plenty or room to optimize by adjusting the entry & exit criteria
Although entries are for the most part mechanical, there are times when you will need to use some discretion. Generally any candles over 100 pips should be treated with caution. As a rule of thumb if the 8am candle looks unusually large in comparison with the recent price action then dont trade for that day. I tried to adopt this approach during the backtesting although this may prove more difficult when trading live. however being overcautious will undermine performance
Although primarily designed as a set & forget strategy, i believe better results can be achieved by managing positions as it was not uncommon for profiting trades to go on to reach 3,4,5 & possibly even more x SL offering a far better R:R than 1:2
I am keen to try this live but i obviously dont want to fall flat on my face by starting at the begining of a losing run. To minimise the risk of this i will wait for short string of losing days before jumping in
Drawdowns did take place & were more likely during choppy price action, therefore some people may chose not to trade during choppy market conditions
Yesterdays trade hit TP during this mornings 7am candle
So far this week 3 wins & 1 loss
Wednsdays trade missed it TP by just 1 pip:mad:
So even if todays trade is a loss this weeks gain will be 4% using a 1% risk per trade
One point i did not mention in the earlier posts is that fridays trades should be closed at the end of the day before markets close if TP or SL has not been hit
For the backtesting i used the last candle of friday trading
I also experimented with the london breakout 1 method (if that is what you are referring to) however like many methods here on babypips i found it difficult to trade whilst holding a day job.
The beauty of this system is that it only takes 10 mins a day to trade, or for those who have more time, positions can be managed to enhance results
By the way last weeks results were far better than average. I am keen to start trading this method live but this years excellent performance so far leaves me a little worried that a drawdown is possible soon
Yeah i know what you are saying, having a day job makes it very hard. Thats the reason i have stopped trading the london breakout 1. I got a new job which meant my hours changed and am at work (in Aus) when london is opening. Try it out with micro lots or something small, it sounds like it has some potential.
I was wondering if someone could help me with confusion over "London Time"
When you say 8am candle is that 8am London Time or the 7:00 candle that corresponds with 8am?
Seems quite interesting, since I’m in NZ and I’m usually home by the time the London market opens, it’ll be interesting to try it out while I’m at home.
I really like this guide. I back tested the last few months and it seems to work quite well. One question: Do you wait for the close of the breakout candle to confirm the direction/trend for the day? I imagine that would be the case since there are charts that show the price went past the opening 8AM candle only to reverse.
I will demo trade this for the next few weeks before throwing real money at it. I’ll post up wins and or losses.
So, following the rules (sort of) in my demo account. The 8AM candle (3AM here) was followed by a major break out to the positive which represents buy for the day (although the rules did state that if the breakout candle is significantly larger than the 8AM candle then be very cautious). The following candle agreed. I didn’t get up until 6AM EST and so I put in a buy just after 6AM (10AM GMT) - after it already went long for 64 pips. I bought at 1.6401 and then it decided to fall 6 straight hours which would have triggered my SL had I put one on. First day of demo and so I didn’t place a SL…wanted to see what it would do and if it would recover like most other days the past few months have done. I’m now at - 50 pips on this long order. If I would have gotten up at 3-4AM this morning like I had planned I would have had 60+ pips before my morning coffee. I’m still anxious to see if this rallies by the end of the day. Still, lesson learned: Follow the rules, both chart-wise as well as time-wise.
One part of me says to couple this position by looking at chart indicators and buy in more on trending buy signals, but I really want to test this strategy for a “hands off” approach so I will not hedge down to recover.
Looks like it is coming back. Amazing. I’ll get in early on this tomorrow if the signals point to action. I’d be happy to just grab 60-70 pips in the morning and call it a day.
I’m in for pips every day with this system, using my pals EA to place the trade then monitor manually on GU & GJ. My only prob is I’m closing too early, leaving pips behind. +78 pips this week to date
I too am in for pips every day with this system. I haven’t followed the rules to a “T” yet though as I am getting in a hair late every day (can’t seem to get up to watch at 3-4AM here on the US east coast), so I am getting in late when a lot of the first hour rally has taken place. Still. I get in and watch throughout the day. Usually, shortly after I get in it turns for a few hours and I wait it out for 30-40 pip gains for the day. Since I get in late I don’t put a stop loss since it would most likely get triggered on the bounce shortly after I get in. But I am seeing and experiencing that if I wait it out it recovers for a daily gain. I’ve had to average down once but that payoff was quite nice (I got in VERY late on the very top of a spike). I’ll start getting up and in early for the initial boom to up my positive pip intake. So far so good with this though. This AM I got up at 5AM and was able to get in at 1.6434, missing the breakout of the 8AM candle. The 8AM candle was huge, from 1.6366 to 1.6432. But as the rules state, you have to wait for a break out of that candle which did happen. I didn’t catch it right at the start of the 9AM candle but got in shortly after that. We’ll see (history has shown) if I can grab 30-40 pips today as well. If the rules follow through the 9AM candle doubled would give a daily pip count of 108 pips (double the break out candle). We’ll see…
I’m down, but only 6 pips as of just a few seconds ago. I could have cashed out earlier today with a modest 20 or so pip gain. I’m holding on a few more hours and will close out near 11:00PM my time…and on to trading again tomorrow morning. Can’t win every day I suppose
