Sunday Breakout Strategy

[s050399b]

It’s a simple change that you can do it yourself.

[phil838]

wow! big sunday candle. The range is more than 150pips. I think that is a no trade? Even if we win, the position size is so small its not really worth the risk.

G/Y is even bigger.

Yeah, I’m with you guys. No trade this week… Something made the Sunday candle way too big.

I had the EA running and wasn’t home so I just noticed. The EA did trigger the GBP/USD short trade, but I closed it out for -2 pips loss. No big deal.

And the latest version of your EA worked perfectly, s05!

[Firstfx]

Do you really want the brokers to know u’ve been using an EA for that?

Ya, I guess some brokers are not really set up for EA’s. I am using Forex and have asked them about using EA’s and they have said it is not an issue with them.

[s050399b]

Yeah, I’m with you guys. No trade this week… Something made the Sunday candle way too big.
I had the EA running and wasn’t home so I just noticed. The EA did trigger the GBP/USD short trade, but I closed it out for -2 pips loss. No big deal.

And the latest version of your EA worked perfectly, s05!

hahaha!! thanks, and finally it works!!! hahahah!!

[s050399b]

[B][U]Line Reactor.zip[/B][/U]

• maybe its a myth that the price will react when its nearing those 1.4500 or 135.00 mark; anyways, this is a simple indicator that reminds you action might take place around those marks!

http://forums.babypips.com/133505-post986.html

[fxster]

Hi guys! This system has been very profitable for me so I thought I’d share it.

I’ve traded this live since late 2008, and I’ve also backtested it manually from Oct. 2004 (as far back as my charts go) to the present day and it has remained profitable all 5 years!!

[B]The Sunday Breakout Strategy[/B]

Pair: GBP/USD
Timeframe: 4 hour
Indicators: An ATR(14) on the WEEKLY chart, or use the attached indicator on your 4H chart.

Your broker’s charts MUST include the Sunday 20:00GMT candle for this system to work. Some broker’s don’t put this candle on their charts so make sure yours does! If not use an IBFX demo account, they include the Sunday candle and the demo never expires.

Find the Sunday candle:

• On a 4H chart find the high and low of the Sunday candle. If you’re backtesting and using MetaTrader turn on the Period Seperator to make finding it easier. Draw a line 10 pips above the high and 10 pips below the low.

Entry:

• Go long on upper break of the line.
• Go short on lower break of the line.

SL:

• For long trades the SL is the Sunday candle low.
• For short trades the SL is the Sunday candle high.
• Set SL to break even once your profit has reached 2x your stoploss.

TP:

• Your TP is � of the weekly ATR(14).

That’s it! A simple system that only takes 10 minutes per week to manage!!

I’ve attached an excel file with my backtesting results and money management projections, as well as a weekly ART indicator at the bottom of this post.

Also, S050399b has made an excellent indicator for this system that computes all the entries, stoplosses, etc and draws all the lines on your screen. You can find the latest version on this post.

Update - Sept. 6 2009 � This thread has grown to almost 100 pages since I posted this 3 months ago. We’ve learned a lot more about the system and I’ve answered a LOT of questions. Here are the answers to the most common questions.

And yes, I know these answers contradict some of the things I said early in the thread. Like I said, we’ve learned a lot since May.

1. Why the heck does this system work? It looks like you’re just taking random trades?

Post #27: 301 Moved Permanently

2. Can I trade this system on other pairs?

You can, but it’s not really worth it. Most pairs are too closely correlated, so you’ll either win all the pairs, or lose all the pairs.

That being said, I am testing some other pairs with slightly different rules to help lower the correlation, but it’s still in the testing phase. I’ll update this if and when we change the “official” Sunday breakout rules to include more pairs.

3. How many times per week should I trade this system?

Once long and once short. You should never trade this more than twice per week.

4. What if the trade is still open on Friday?

I would close the trade on Friday if it hadn’t hit my profit target yet. I’ve never had this happen since I’ve been trading live, but I did encounter it once or twice in my backtesting, so it could happen.

5. When should I cancel the second trade if it’s not triggered?

Never take the second trade after Wednesday, or if the first trade went above 40% of the ATR and then got stopped out.

6. I was up 200 pips and then lost it all!! Should I have closed out early?

NO!! This system depends on the few big winners to offset the large number of small losers. If you panic and take profit early you will end up losing money in the long run.

However, there are a few times I’ve taken profit early. If you’re a new trader this is a “do what I say and not what I do” situation, but if you’re an experienced trader who is exiting because of a real reversal signal then feel free to exit [I][B]slightly [/B][/I]early.

Please understand what I’m saying here… Price moving in the opposite direction is not a reversal signal! Exiting early is for experienced traders only.

Hi Phil,

Thanks for your staretgy and the recap. As you’ve pointed out, this thread has hundreds of pages, I 'll need some time to go thru it.

Meanwhile, may I ask, how do you calculate the average of the weekly ATR(14)?
Maybe you can show some example?

Thanks

[phil838]

Hi Phil,

Thanks for your staretgy and the recap. As you’ve pointed out, this thread has hundreds of pages, I 'll need some time to go thru it.

Meanwhile, may I ask, how do you calculate the average of the weekly ATR(14)?
Maybe you can show some example?

Thanks

You don’t have to calculate the average. The ATR is the average. In fact, the “A” in ATR stands for “average.”

Just put an ATR indicator on a weekly chart and set it to 14 periods. The number you get is the number you should use. Do keep in mind the answer will be in decimal form on some indicators though, so if the ATR is .0250 that means 250 pips.

[fxster]

Thanks Phil.

So the ATR will be the final ATR shown for the final 4 hours of friday trading.

From my MT4, the ATR was 0.0094 at the final 4 hrs of 28Sept09 (GBPUSD).
It means my TP should be 94pips.

However, the high for that 4 hrs was 1.5978 and low was 1.5800. So my SL=178

The SL > TP. How to overcome that?

Also i notice you’ve mentioned win trades is less than loss ratio (based on no. of trades).

[phil838]

Thanks Phil.

So the ATR will be the final ATR shown for the final 4 hours of friday trading.

From my MT4, the ATR was 0.0094 at the final 4 hrs of 28Sept09 (GBPUSD).
It means my TP should be 94pips.

However, the high for that 4 hrs was 1.5978 and low was 1.5800. So my SL=178

The SL > TP. How to overcome that?

Also i notice you’ve mentioned win trades is less than loss ratio (based on no. of trades).

You have to be looking at the ATR on a weekly chart, 94 pips is the 4 hour ATR, not the weekly ATR.

This week had an unusually large Sunday candle, so we didn’t trade this week. That’s the first time this has happened so far this year, so it’s not a normal occurrence. The TP is usually 3x or more the SL. If you’re trying to learn how the system works then ignore this week.

The system only has somewhere around a 25% win rate, so you will lose 3 out of every 4 trades, but the winners are huge and the losers are small, so you make money in the long-term.

[MattW2009]

Is anyone trading this strategy and ONLY this strategy?

[phil838]

Could someone check the zip file on the first post for me? Someone said it won’t open for them, yet it opens fine for me.

I’m just trying to narrow down the problem…

[Sweet_Pip]

You don’t have to calculate the average. The ATR is the average. In fact, the “A” in ATR stands for “average.”

Just put an ATR indicator on a weekly chart and set it to 14 periods. The number you get is the number you should use. Do keep in mind the answer will be in decimal form on some indicators though, so if the ATR is .0250 that means 250 pips.

What’s the difference between the Average True Range and Average Daily Range?..I mean besides the daily part…lol.

Like if you set your period on the ATR indicator to reflect a daily segment for whatever t/f you’re on ie on an hourly chart set it to 24, or on a daily set it to 1…will they give you about the same value? I think I tried it and it didn’t, but I don’t understand why.

[Sweet_Pip]

Could someone check the zip file on the first post for me? Someone said it won’t open for them, yet it opens fine for me.

I’m just trying to narrow down the problem…

Nope I can’t open it either. It says it appears it’s not a valid archive.

[o990l6mh]

What’s the difference between the Average True Range and Average Daily Range?..I mean besides the daily part…lol.

Like if you set your period on the ATR indicator to reflect a daily segment for whatever t/f you’re on ie on an hourly chart set it to 24, or on a daily set it to 1…will they give you about the same value? I think I tried it and it didn’t, but I don’t understand why.

As I remember it, the difference between ADR and ATR is that ADR doesn’t take gaps into account while ATR does.

[phil838]

As I remember it, the difference between ADR and ATR is that ADR doesn’t take gaps into account while ATR does.

Yeah, but that’s just a byproduct of the formula, not the main reason you would use one over the other.

ATR is like an EMA. It’s weighted to give preference to the most current days (or if not days whatever timeframe you have it on).

I’m not an ADR expert, but I believe it is simply an average with no extra filters thrown it.

I don’t use ATR over ADR for any in-depth technical reason… I use it because MT4 doesn’t have an ADR indicator built in.

[phil838]

Nope I can’t open it either. It says it appears it’s not a valid archive.

Thanks Sweet Pip. Now that I know it’s broken I’ll see if I can get it fixed.

452 views since I last updated it and no one mentioned it was broken until now.

[MattW2009]

Could someone check the zip file on the first post for me? Someone said it won’t open for them, yet it opens fine for me.

I’m just trying to narrow down the problem…

Downloads and the Excel spreadsheet opens for me on Vista…

[phil838]

Downloads and the Excel spreadsheet opens for me on Vista…

Hmm… must only be certain zip programs that are not working. I’ll get it figured out eventually.

If Babypips would let us attach spreadsheet files and MT4 indicators directly, like Forex Factory does, this wouldn’t be a problem (hint, hint admins).

[MattW2009]

I wonder if there is a filebucket.com or equivalent that would host the files for you and you could just post links to them…?

[fxster]

You have to be looking at the ATR on a weekly chart, 94 pips is the 4 hour ATR, not the weekly ATR.

This week had an unusually large Sunday candle, so we didn’t trade this week. That’s the first time this has happened so far this year, so it’s not a normal occurrence. The TP is usually 3x or more the SL. If you’re trying to learn how the system works then ignore this week.

The system only has somewhere around a 25% win rate, so you will lose 3 out of every 4 trades, but the winners are huge and the losers are small, so you make money in the long-term.

So for the trade I should look at 4hour chart. But for ATR I should look weekly chart.

Also for it to work, the TP (i.e. ATR amount) must be at least 3X larger than SL (length of candle body), since 3/4 times its a lost. I think should be 4X, since 3X only breakeven. In this case if the weekly ATR is not at least 3X/4X larger than the 4H candle body, i shouldn’t trade.

Am i right?

I do agree it’s a simple strategy, but a whole lots of patience is tested here.

Anyway, thanks a lot for your clarification.
I’m gona test my patience on coming trades. Will test it on a few majors too.