I am posting this system to share with the members here on BP for testing purposes. It will consist of straddling the price base on the daily close while utilizing the ADR indicator. This system should be profitable 50% of the time and work during consolidated and trending markets.
Pairs: Majors
Indicator period to use: 10 previous days (note: I plan to round down for an even number using steps of 25)
1st Ex: 10 previous days is reading is 118 pips so I will use 100 pips
2nd Ex: 10 previous days is reading is 136 so I will use 125 pips
Rules:
Divide the rounded down 10 previous day ADR by 2 (ex: 100/2 = 50). Place a buy stop and a sell stop at half the rounded down ADR value (ex: 50 pips based off of 100) from the daily close with a take profit and stop loss equalling the same pip value as the stop orders. If a trade is triggered then cancel the other order if possible. Repeat every day if the order has been closed. If the trade does not close out by the daily close then keep it open until either the t/p or s/l is hit.
MM: The money management will use a step sequence to increase the position size by a factor of 1 after a win and decrease the position size by a factor of 1 after a loss. This should continue to build new equity highs as long as the system stays robust.
Example of sequence:
1st trade is .1 lot resulting in a win
2nd trade is .2 lot resulting in a loss
3rd trade is .1 lot resulting in a win
4th trade is .2 lot resulting in a win
5th trade is .3 lot resulting in a win
6th trade is .4 lot resulting in a loss
7th trade is .3 lot resulting in a win
8th trade is .4 lot resulting in a loss
9th trade is .3 lot resulting in a win
10th trade is .4 lot resulting in a win
This seems like a good possibility. I like not having to sit at the computer all day nor be up all night for the European market. Has anyone done any length of testing on this idea? I started this morning and am showing a 50 pip profit on 6 pairs with 2 more trades still open. I spent most of the morning creating an Excel spreadsheet that will automate most of the numbers for me and make my record keeping pretty simple. Let me know if you’ve tried this and what your results were.
OK…I ended the day at +315 pips…feels great, but I need to see how this does long-term. I also finished my spreadsheet to simplify everything. I am trading the following pairs:
Kwilli, PM me with your e-mail address and I’ll send it.
OK…first of all, I very slightly modified the “range” for entry/exit/TP/SL. To keep everything nice and round, I round the 10 day range to the nearest 25, then take half of this value and round that to the nearest 10. This is a simple formula that is part of my spreadsheet so I don’t ever have to think about it.
Next…while I think (so far) that this system may work well in the long run, there is potential for quite a bit of draw-down. For the past 3 days I’ve been +315, -704, and -260. This is with trading 8 different pairs consecutively. Obviously not going to be possible on a small account, so I would suggest picking 1 or 2 at the most for small accounts to avoid margin calls.
Pipchaser, have you done any testing on this? What are your thoughts?
As I posted earlier, there’s just too much leverage draw down with the original $1000 practice account I started with. I used the same data and re-did the first 2 days on a $2500 account (trading as mini, i.e. .1 lots, 1:200 leverage) and finished the week out. Not bad for the first week. I was +315, -704, -260, +220, and +850 for a net of +421. Over 13.25% in a week on a $2500 account.
The spreadsheet makes order entries simple as well as record keeping. Since MT4 does not have any sort of OCO, if your buy stop is hit first, you have to manually cancel the sell stop. (There were several occasions where if you didn’t, you would have hit both buy and sell and had both stopped out). Since you can set up alerts for any type of price info, I plan to have an e-mail alert sent to me (eventually to my phone) as soon as one of the stops is hit. The alerts remain active in the alerts tab, so each evening I simply have to change the values to the current levels, then I don’t have to worry about missing a cancellation. This is the only “babysitting” part of this method.
I am going to track it from here with 2 different accounts. One where I just keep the profit and let it build, the other where I cash out down to the original $2500 at the end of each week. I’m also going to run an account at 1:100 leverage since that is what IBFX uses on a standard account.
Holy Mega-profitable day, Batman! I’m +1250 pips today. I’ve got 4 trades still cooking (2+, 2-) that should end up -90 pips off that. Is anyone else testing this yet?
I’ve also been studying MQL4 (I have a strong programming background) so I hope to be able to automate and fully back test this by the end of the month. I hope some of you can give me feedback so I don’t think I’m crazy…this really seems to work. I’ve got another spreadsheet to track weekly performance by each currency pair for 13 weeks which should take me near to the end of the year. If I can show consistent winability I will probably go live as of 2009.
Nice job bkr1969. I just started working evening shift due to the hurricane repairs to our facility so I will not be able to put my orders in at 0:00 GMT until I return back to day shift. Please keep us posted with your results. What are you doing differently than the original rules?
I haven’t really changed the rules at all. I just round the final number to the nearest 10. For example…10 day ADR = 185. This gets rounded to 175 as you stated (nearest 25) then divided by 2 = 87.5. I just round this to 90. I like how it clearly defines T/P and S/L. Thanks for the idea.
So the daily ranges have been lessening a bit this week, but nothing really terrible has happened. Yesterday I was -400 on the 2 trades that hit and went anywhere…I had 4 carry over to today. Only one of those closed today for +80, and I manually closed USD/JPY at 0 because it had been doing a small see-saw for 3 straight days and I had good profit for the week already. (Ended up being a good decision because it ranged back up on my sell, though not to my S/L yet so just another day without closing based on the system)
My 2 remaining trades are both sells…EUR/USD and AUD/USD, both now headed down, EUR at +90 and AUD at -3 so I will let them run their course.
Not quite as profitable as last week, but that’s because most pairs weren’t ranging very much after Monday. I still ended up at +150 for the week. The pairs have performed (from best to worst) over 2 weeks as follows:
AUD/USD +490
USD/CHF +430
EUR/USD +100
USD/JPY +50
USD/CAD Even (but up $3.35 from swap)
GBP/JPY -27
EUR/JPY -160
GBP/USD -369
This type of strategy is the core for many large CTAs and hedge funds–its what made crabel and trout very succesful all through the 90s. However, as the methodology became well known, it started losing its overall profitability in recent years as intraday fx volatility has changed because of strategies just like this. However, it can still be used very profitably. I would suggest testing different 24-hour trading periods to calculate your ADR and closing/openning price. For example, test 2am-2am then 5am to 5am etc. You wil find the yen and yen crosses perform better based on the Asian open then european currencies perform better during the europe/nyk overlap. Also, use volatility filters–the 10 day ADR for the euro is above 20 pips now but summer of 2007 it less than 60 pips–you’ll find there is a line in the sand where the strategy doesnt perform that well. Also, apply pattern analysis–two lower closes might suggest buys will outperform. Be prepared for some drawdowns that can last while, but when conditions are right, u can make a bundle.
