I don’t have metatrader and I don’t know the first thing about coding. So I’ve been playing around with the Forex Strategy Builder as a way to test a few ideas I’ve had.
Combining the idea of fractal breakouts with market times I’ve come up with this system. It centers around only opening positions on GBPUSD between 14:00 and 16:59 GMT which as I understand is NY 9:00 to 11:59. On the one hand these hours are most convenient for me to be near my computer. On the other, I figured breakouts during these hours may carry a decent amount of momentum.
After much fiddling about and tweaking, I came up with an equity curve that looks like this covering hourly market data from May 06 to July 09:
http://img204.imageshack.us/img204/1749/gbpusd1.jpg
This is 2,000 dollar account using single minilots. If risking a whopping 10% of the account on each trade, the equity curve looks like this heh heh heh:
http://img36.imageshack.us/img36/1116/compound1.jpg
Unfortunately over-optimization is a problem with this kind of testing. Nevertheless, the results for USDJPY, EURUSD, and USDCHF also offer positive results though with large drawdowns. This suggests to me that the system is ultimately profitable and could ultimately work on all USD pairs if small adjustments are made to the TP and SL or indicator settings for each pair. Here are equity curves for the other pairs mentioned using the original settings:
EURUSD
http://img36.imageshack.us/img36/9891/eurusd1.jpg
USDJPY
http://img248.imageshack.us/img248/6380/usdjpy1.jpg
USDCHF (not so good)
http://img40.imageshack.us/img40/7108/usdchf1.jpg
I’ve used 3 indicators which seems like overkill. Really I just wanted a simple system based on price action. In fact as a simple fractal breakout strategy, this system would still be profitable over the last 3 years. What I have attempted to do with the indicators though is limit the drawdowns. The idea here was to get the equity curve looking more like a staircase than a rollercoaster. Thus when optimized, 5 losing trades in a row was the biggest drawdown for GBPUSD. The win/loss ratio is 0.48, however with a SL of 105 and a TP of 200, the risk reward ratio is almost 2:1. The spread for each trade is calculated at 4 pips.
So here is the system.
Opening (Entry Signal)
Open a new long position or add to an existing one or close a short position at an Up Fractal when all the following logic conditions are satisfied:
• the entry time is between 14:00 (incl.) and 17:00 (excl.); and
• the Rate of Change* (Simple, 18, 0) rises; and
• the Average True Range* (Simple, 12) rises; and
• the price is higher than the Parabolic SAR (0.01, 0.20, 2.00)
Closing (Exit Signal)
Close an existing long position when the market falls 105 pips or rises 200 pips from the last entry price.
Handling of Additional Entry Signals
Entry signal in the direction of the present position:
• Add to the position no matter if it is at a profit or loss.
Entry signal in the opposite direction:
• Close the present position regardless of its amount or result. Do not open a new position until the next entry signal has been raised.
For short positions, simply do the opposite.
That’s it. I don’t pretend this is a killer system or that it will even work in the long run. But I’d love some feedback from the more experienced traders on here. Am I completely barking mad or am I on the right track? All comments and suggestions welcome. I’m especially open to forthright criticism here. Don’t be shy. I don’t want to have to learn the hard way 1 year down the track that I've been wasting my time and the system was always doomed to failure.
Combining the idea of fractal breakouts with market times I’ve come up with this system. It centers around only opening positions on GBPUSD between 14:00 and 16:59 GMT which as I understand is NY 9:00 to 11:59. On the one hand these hours are most convenient for me to be near my computer. On the other, I figured breakouts during these hours may carry a decent amount of momentum.
After much fiddling about and tweaking, I came up with an equity curve that looks like this covering hourly market data from May 06 to July 09:
http://img204.imageshack.us/img204/1749/gbpusd1.jpg
This is 2,000 dollar account using single minilots. If risking a whopping 10% of the account on each trade, the equity curve looks like this heh heh heh:
http://img36.imageshack.us/img36/1116/compound1.jpg
Unfortunately over-optimization is a problem with this kind of testing. Nevertheless, the results for USDJPY, EURUSD, and USDCHF also offer positive results though with large drawdowns. This suggests to me that the system is ultimately profitable and could ultimately work on all USD pairs if small adjustments are made to the TP and SL or indicator settings for each pair. Here are equity curves for the other pairs mentioned using the original settings:
EURUSD
http://img36.imageshack.us/img36/9891/eurusd1.jpg
USDJPY
http://img248.imageshack.us/img248/6380/usdjpy1.jpg
USDCHF (not so good)
http://img40.imageshack.us/img40/7108/usdchf1.jpg
I’ve used 3 indicators which seems like overkill. Really I just wanted a simple system based on price action. In fact as a simple fractal breakout strategy, this system would still be profitable over the last 3 years. What I have attempted to do with the indicators though is limit the drawdowns. The idea here was to get the equity curve looking more like a staircase than a rollercoaster. Thus when optimized, 5 losing trades in a row was the biggest drawdown for GBPUSD. The win/loss ratio is 0.48, however with a SL of 105 and a TP of 200, the risk reward ratio is almost 2:1. The spread for each trade is calculated at 4 pips.
So here is the system.
Opening (Entry Signal)
Open a new long position or add to an existing one or close a short position at an Up Fractal when all the following logic conditions are satisfied:
• the entry time is between 14:00 (incl.) and 17:00 (excl.); and
• the Rate of Change* (Simple, 18, 0) rises; and
• the Average True Range* (Simple, 12) rises; and
• the price is higher than the Parabolic SAR (0.01, 0.20, 2.00)
Closing (Exit Signal)
Close an existing long position when the market falls 105 pips or rises 200 pips from the last entry price.
Handling of Additional Entry Signals
Entry signal in the direction of the present position:
• Add to the position no matter if it is at a profit or loss.
Entry signal in the opposite direction:
• Close the present position regardless of its amount or result. Do not open a new position until the next entry signal has been raised.
For short positions, simply do the opposite.
That’s it. I don’t pretend this is a killer system or that it will even work in the long run. But I’d love some feedback from the more experienced traders on here. Am I completely barking mad or am I on the right track? All comments and suggestions welcome. I’m especially open to forthright criticism here. Don’t be shy. I don’t want to have to learn the hard way 1 year down the track that I've been wasting my time and the system was always doomed to failure.
