If you would like to look into or test this method, here is how I am trading it. I am using the Daybreak Sprit ea to test and set orders. The Daybreak Currency Portfolio is limited to these pairs with the following parameters: Proceed at your own risk. One day I may solve the mystery of why this backtests so well, but, when trading, I have yet to achieve anything close to backtest results. A trading method for those who can't watch the market all day and, maybe, for those who can.
It starts with a casual observation. Look at daily bars. Does it seem to you that when the high low of yesterday is broken, the close today is often also higher lower than the break point? We can use a spreadsheet to ask a simple question: We will define a breakout as a pip above the high or below the low. And, here is your excel formula to check the short trades: For pairs with four decimals, add two zeroes to your breakout spread and to the multiplier that gets you to a whole pip number.
Here are the results for our portfolio just taking the breakouts and holding until close:. The reason for the Monday exception is that we are going to have a limited data base from Sunday trading. See what your own datafeed provides. In any case, you will probably agree that we would feel safer asking the market to move a little before we jump in on Monday. Some traders have a valid aversion to Monday trading and may want to skip that day entirely.
By now, we should all know that the best days to trade, from the standpoint of price movement, are Tuesday through mid-day Friday. The only other matter is that of an emergency stop-loss.
As indicated by the results from our spreadsheet, we want to give our positions every opportunity to go to close for a profit.
Emergency stops are intended to be just that, for emergencies only. Only those days when the market sucks us into a position, then turns like a rabid wolverine. We can determine these stops for each pair based on relative movement and the probability that the stop would occur.
Until I can get in more research on this, we will use the following emergency stops:. By adding these emergency stops, we are avoiding only the extreme moves against us and we are getting a significant improvement in our expectation for overall profit.
To get an estimate of the difference these stops might make, do this. Keep any other number. The spreadsheet study has a few limitations, but if someone is interested enough, this one looks simple enough to program for more accurate results.
There may also be occasions where our stop-loss is hit, but the market recovers to show a more favorable outcome. To hedge or not to hedge For this system, I am always assuming my reader can't watch the market all day and, for the most part, wants something to set and forget.
On days when we get two signals, the spreadsheet will trade both, effectively putting the trade in a hedge, limiting our losses to yesterday's range. Therefore, in order to have yielded the approximate results for the test period, we would have to be taking both sides of the trade on those days when two were triggered.
From a practical standpoint, most brokers do not allow hedges. We have a few options. Since the portfolio shows the highest yield with the hedges, it is preferable to hedge. In order to hedge, you will either have to be with a broker who permits those orders or have two accounts. Some brokers also have sub-accounts which work like separate accounts. You would place all your buy stops in one account and all your sell stops in the other.
Should both sides of a trade be initiated, you will be hedged between the two accounts. If you can't or don't want to open additional accounts and if your broker doesn't permit hedging, you can do this. Enter both sides of the order. When one side is opened, the platform will not allow the second. Be sure your broker operates this way.
Mine do, and if I attempt to enter a second order while one is open, I get a pop-up saying, "Hedge not permitted," and the order is unfilled. Another alternative is to enter only one side of the entry stops. How do you decide which one, long or short? I ran a test choosing the entry closest to the open, seemed most likely to be triggered. I commented on this area in a response post later in the thread, but thought it was important enough to also bring up here.
For the sake of those who might have to set it up and go to bed or work, for testing purposes, and for the space available on bp, I kept these rules pretty static. In real trading, if we are watching the screen, I don't think we can or should avoid some discretion.
One example would be when you see the close of the day coming at or near the high of the day. If you are already in a long position, why not just leave it open with a tight stop as we enter the new day? Or, as jj suggested, if entering a new trade, require a few additional pips movement before entering. For a great example of this, look at June 28 and 29, this year. We were in a short on the 28 which was successful. Had we put a tight stop on that short as it continued into the 29th, we could have saved the run up against us and even profited by closing out the short and taking the long as it broke.
Another discretionary decision might be when we have seen a good run in our favor. Then, the market enters that afternoon sleepy time where hourly ranges get small and we see a drift off our high point. Close, bank the money, go for a cup of coffee. Then, hope it doesn't hit another big run which would have been in your favor while you're gone.
Another suggestion from jj was that we not wait until the actual closing bar, but exit the trade maybe two or three hours earlier. Still another decision might come if we look in on a chart, no trade has been triggered, and it is getting late in the day. If we had in mind to close by end of day, why give a trade only an hour or two to develop? Cancel the orders, especially Friday. Go into the weekend flat and get it off your mind.
Discretionary decisions are hard to teach, possibly as often wrong as they are right, and just come with experience. If you are the type to panic, move stops, curse the market, then you need to keep it mechanical. If you can keep your head, make some judgment calls. In any case, maintain a trading journal, so you can look back and see what you did and what on earth you were thinking at the time.
This looks interesting pipwoof. I am going to do some analysis tomorrow on this. I am with FXCM, will be interesting to see if the numbers look the same. Also will look at adding more pairs. This is cool and clean. But what if we try to know the bias and place just one order in the direction of the bias. I learnt this from my mentor Nikitafx on price action for dummies that if yestaday was buy today will be buy using our support or resistance for entry depending on bias.
So in my own opinion I will suggest that we place a buy order on yestaday's high if yestaday was buy and a sell order on yestaday low if yestaday was sell. What do u think pipwoof and others? Less I forget I'm going to vote your system as the best system for the month of june its almost my style of trading. I'll try and work out entry and stop loss tonight and see how it comes - defo the top system in the last year that I have seen in my research congratz.
A comment after a brief analysis on the charts: I see, so does it mean one will set 2pending order till the close of the day or u cancel one when one trigger? Does anyone with some programming knowledge wanna code an ea to back test this? Using the original settings and formulas for excel it seems that the smaller you set the stop loss the greater the results.
I think its because of the use of daily bars and know being able to tell Does anyone wanna share their backtesting sheets? The limitation is that we are looking only at the daily high, low, and close. For example, on March 9, , we would have gone long at After climbing to a high of Because of our spreadsheet limitations, this trade is not going to show the reality of a loss.
It will show only a My feeling is, even allowing for these and other limitations of the spreadsheet study, we still have enough net pips to get our attention and motivate us to work this premise toward an acceptable trading method. A proficient programmer, of course, can just build a study using a shorter timeframe and get more accurate results. The spreadsheet showed net By hand, I got I have been compiling the data for these 4 pairs plus 4 more. I am with FXCM and my data only goes back to septMore...