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Attachments: Method BB (Final)
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Method BB (Final)

  • Post #1
  • Quote
  • First Post: Feb 4, 2007 12:37pm Feb 4, 2007 12:37pm
First of all, I'd like to thank all of you here for your contributions and the kind words you spoke of my method and even ME!

There were a few additions to the original method. Many of you voiced your concerns about changing the method too much, and I assure you that I am satisfied with this final product, and it will change very little from this point on.

Attached is the final method and backtesting results for GBP/USD and AUD/JPY. For both backtest results, a 100 pip stop loss was used. In the method PDF, you will find it says to use the ATR value. If anything, this makes the results more profitable as far as AUD/JPY goes. Also, these backtests do not include the advanced "Bounce" technique.

You may find my journal of live trades using Method BB here.

I wish you all the best of luck,

Kevin
Attached File(s)
File Type: pdf Method BB FINAL.pdf   293 KB | 5,595 downloads
File Type: pdf MethodBBbacktestFINAL.pdf   16 KB | 2,804 downloads
I forgot to recommend pairs to trade...

CAD/JPY
EUR/GBP
EUR/USD
GBP/USD
USD/CHF
USD/JPY

These are the ones I would suggest, but you do what you'd like.

Kevin
Why didn't you just post it in the original thread by updating POST #1? Anyhow, great system as always...
Quoting et_phonehome_2
Why didn't you just post it in the original thread by updating POST #1? Anyhow, great system as always...
You can only update a first post for up to 24 hours. As it has been past that point, this was the only way to make it appear in a place where everyone could find the changes without sifting through pages and pages of posts.
  • Post #5
  • Quote
  • Edited 7:30pm Feb 4, 2007 6:49pm | Edited 7:30pm
Kevin,

I'm still checking out the "bounce" entry in some back testing, and some questions came up.

If you have a chance, take a look at the USD/JPY chart, and specifically around 1/8 and 2/1.

Would both of those have been "bounce" entry opportunities in your opinion? If so, the 1/8 "bounce" would have resulted in a 200+ pip gain. The 2/1 trade is still playing out.

Second question . . . on the standard rules, you state that a daily candle can break into the resistance band, and then serve as an entry signal if it closes within the channel. However, on the " bounce" rule, you mention waiting for confirmation from the next day's candle before entering. Is this just to confirm that it really has bounced off the MA?

The final question has nothing to do with the "bounce" rule, but I noticed you settled on a 20-period ATR instead of the 14-period that was originally suggested in a post. It's a fairly minor difference, but I was just curious why.

Thanks!
Greetings from Guanajuato, Mexico
I like your strategy buddy. Good job.
How you act is more important than how you feel.
Quoting Warmagus
I like your strategy buddy. Good job.
Right on. Thanks!
Kevin,

Let me pick your brain on a couple of charts, i.e. USD/CHF & EUR/USD.

Currently, USD/CHF is in a buy signal, & EUR/USD is in sell mode. Both are in extremely tight Bollinger Bands & both (on my charts) have slightly touched resistance & are now back in the channel.

If the candle ends in the channel, would you now take the opposite position on these trades per the rules?

This is probably a situation where each trader will need to use his own discretion, but I'd appreciate your thoughts on it.
Greetings from Guanajuato, Mexico
On my charts with Alpari data neither has touched the opposite band yet, though USDCHF has come very close.

Quoting yen44x
Kevin,

Let me pick your brain on a couple of charts, i.e. USD/CHF & EUR/USD.

Currently, USD/CHF is in a buy signal, & EUR/USD is in sell mode. Both are in extremely tight Bollinger Bands & both (on my charts) have slightly touched resistance & are now back in the channel.

If the candle ends in the channel, would you now take the opposite position on these trades per the rules?

This is probably a situation where each trader will need to use his own discretion, but I'd appreciate your thoughts on it.
Attached Images
Michael fxgorilla
Quoting fxgorilla
On my charts with Alpari data neither has touched the opposite band yet, though USDCHF has come very close.
Michael,

Now that I put my glasses on . . . you're absolutely right. I'm 2 pips short of a touch on USD/CHF on my charts.

However, just for the sake of discussion, I'm still interested in Kevin's thoughts on how he would handle it if they had touched. I personally am inclined to stick with the USD/CHF trade just because the SMA slope supports it.

I'm not in a EUR/USD trade, but I noticed the situation was similar.
Greetings from Guanajuato, Mexico
Here is a complete manual backtest of 2006 for GBPUSD. For this test I used a 100 pip stop loss. On the GBPUSD, using 100% ATR would have kept you in a few more trades, but the trade off would have been much larger stops as the average ATR is about 140. My results are not quite as good as Kevin's, but not all that far off. The biggest difference is that my test shows a few more losers, with the win ratio at 74%. There are also a few "close calls" for several entries and exits, that would definitely depend upon broker data and personal judgment. For example, when the bar closes pretty much on the innermost band or just a pip or 2 inside, is it a valid signal or not? From my observations, it almost always worked out better to wait for a bar to have a "clean" close instead of trying to make a judgment call. Also, when trading a single lot counter-trend, it almost always worked out better to only close at the SMA if the SMA was against the trade at the time that price reached it. In otherwords, it the trend has changed to with you by the time price crosses the SMA, then stay with the trend. I did not take any "Bounce Signals".

All in all this looks like a very robust and potentially profitable system! Now on with the forward testing...
Attached File(s)
File Type: zip Bands 2006 Backtest.zip   5 KB | 942 downloads
Michael fxgorilla
Yen,

Would an "according to the rules" decision be based on whether this candle closed later today to the plus side or to the down side?

To the plus side, keep your current long position. Otherwise, close and short a red (or black?) candle. Mind you....if we are assuming a resistance tag.

thoughts?,
Randy
Quoting RandyG67
Yen,

Would an "according to the rules" decision be based on whether this candle closed later today to the plus side or to the down side?

To the plus side, keep your current long position. Otherwise, close and short a red (or black?) candle. Mind you....if we are assuming a resistance tag.

thoughts?,
Randy
Hi Randy,

By "according to the rules", I was referring to Kevin's post: http://www.forexfactory.com/showpost...8&postcount=96
which simply states that the bar needs to close in the channel after touching a resistance bar. No mention of made in regard to whether the candle closes up or down for the day.

I think FXGorilla makes a valid point in post #11 that some of the decisions will come down to trader judgment & experience as we forward test the system.

BTW, so far so good. I'm up 57 pips on EUR/AUD & 51 pips on EUR/CAD currently. On the other hand, I'm down 39 pips on NZD/JPY, but all in all, a nice start.

Good luck!
Greetings from Guanajuato, Mexico
I'm glad this was brought up then because I had it in my head that the color/direction of the candle made a difference.

Randy
Hi at all,
can someone explain how to read the ATR Indicator, please?

How do you set S/L depending on ATR? ATR gives me an information like "value 0.9527" so I'm asking myself: What to do with that info and how to calculate S/L from that

Or is the ATR-Stop indicator meant introduced in the BAT-Strategy. If so, which settings are correct?

Help PLEASE
42
Freewheelin,

I had the same issue with ATR that you have, but it's actually quite simple (as explained by Kevin).

It's plain 'ol addition/subtraction. When you set an entry price, note the value of the ATR at the time of entry and add this value to your entry price to set a s/l for for a SELL and subtract the ATR value to set a s/l for a BUY order.

Or, if this presents an uncomfortable s/l (say more than 100 pips) note that Fxgorilla found very good results backtesting the GBP with a flat 100 pip s/l.

HTH,
Randy
Quoting Freewheelin
Hi at all,
can someone explain how to read the ATR Indicator, please?

How do you set S/L depending on ATR? ATR gives me an information like "value 0.9527" so I'm asking myself: What to do with that info and how to calculate S/L from that

Or is the ATR-Stop indicator meant introduced in the BAT-Strategy. If so, which settings are correct?

Help PLEASE
Hello,
here is how I would explain :]
ATR can be read as average price change over given period of time (example value: 0.0105 = 105p).
Initial idea was to use 100p SL default,but depending on pair this may vary and is not always the best value (100).
So, you would like to put your SL as close as possible but also reasonably far away and not to be stopped out accidently by "noise" of the price.
I think one can identify ATR as some kind of noise amplitude on price chart.
So you put stop loss at the distance of noise, which is ATR.

Is it clear and correct what I wrote? Hehe, I've been carried away a bit with this noise but that's how I like to interpret it
Thomas
Quoting fxgorilla
Here is a complete manual backtest of 2006 for GBPUSD. For this test I used a 100 pip stop loss. On the GBPUSD, using 100% ATR would have kept you in a few more trades, but the trade off would have been much larger stops as the average ATR is about 140. My results are not quite as good as Kevin's, but not all that far off. The biggest difference is that my test shows a few more losers, with the win ratio at 74%. There are also a few "close calls" for several entries and exits, that would definitely depend upon broker data and personal judgment. For example, when the bar closes pretty much on the innermost band or just a pip or 2 inside, is it a valid signal or not? From my observations, it almost always worked out better to wait for a bar to have a "clean" close instead of trying to make a judgment call. Also, when trading a single lot counter-trend, it almost always worked out better to only close at the SMA if the SMA was against the trade at the time that price reached it. In otherwords, it the trend has changed to with you by the time price crosses the SMA, then stay with the trend. I did not take any "Bounce Signals".

All in all this looks like a very robust and potentially profitable system! Now on with the forward testing...
I think FXGorilla makes some very valid points & suggestions. My feeling is that the ATR is of greatest value when applied to currency pairs that have an ATR of less than 100; for example, EUR/GPB, because it will make it obvious that such a large stop loss is unnecessary.

You mentioned the GBP/USD as an example. I faced the same problem entering the EUR/AUD trade, which has similar volatility. My preference entering the trade would be to place the stop above recent resistance, but that would have required a stop loss of over 160 pips, so the ATR of 135 or so really wouldn't have protected the trade that well. In this case, I finally settled on a 100-pip stop loss also.

BTW, a lot of my friends already think I'm insane for trading Forex. Now if they knew I was writing to a gorilla . . .
Greetings from Guanajuato, Mexico
as you added the ATR, do you think it would be a good idea to ignore signal when the closest BB distance is more or less equal to the ATR value at the given time when the signal appears ?

i'm just sending an idea...
Quoting Freewheelin
Hi at all,
can someone explain how to read the ATR Indicator, please?

How do you set S/L depending on ATR? ATR gives me an information like "value 0.9527" so I'm asking myself: What to do with that info and how to calculate S/L from that

Or is the ATR-Stop indicator meant introduced in the BAT-Strategy. If so, which settings are correct?

Help PLEASE
An ATR setting of 0.9527 would be rounded off to 95 pips. What that tells you is that, on average, this particular currency has a daily range of about 95 pips. Kevin's suggestion is to use that figure as your stop loss when entering a trade.
Greetings from Guanajuato, Mexico
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