I tested this method over the last three years on the GBPUSD. Because the entries are at bar opening, and the exits are well defined, it's very easy to test quickly. Over three years there were 21 trades. Six were losers. Fourteen went to break even after reaching the halfway gain. And one was a pure winner. The winner had an R/R of 4:1.
What does this mean. Assume that you risked 2% of your account on each trade. Over three years, you would make a return of 10% on your account. The losses and breakeven trades would keep you almost dead even, while 80% of your gains would have come from a single trade.
Twenty one trades is not big enough to evaluate the system. I'd want probably 50-100 trades before I had any faith in the results. That said, the testing was enough to convince me that this method was not for me. I have two basic problems.
First, the trades, especially winning trades, can take a very long time. The pure winner took over two months to complete. A couple of the breakevens only got back to break even after about a month. If you traded this from your regular account, then with the no hedging rules in the US, you would be prevented from making a contrary trade on that pair for the entire time that you were in the trade. It looks to me like the potential gains may not be worth the lost opportunities.
Second, I don't know how I could get the right position sizes for this system without changing brokers. The stops are often over 200 pips, and sometimes as big as 400 pips. With a 10K account, assuming 2% risk, a 200 stop lets you trade one mini. That's the minimum trade with my broker (and I don't have a 10K account). So I could reduce my %risk/trade, and thus reduce the rewards. Or I could pass on the trades with the bigger stops. However, it looked like a big opening move made it more likely that there would be a good trade. So, I don't see how I could trade this system without going to a micro account.
It's really incredibly easy to test this system, and takes no time to do. Spread and slippage are non-issues here, since they are almost a microscopic portion of the trade. And daily data is also pretty solid. So a backtest should be almost exactly as reliable as a forward test. If you are interested in this method, by all means, trade it on demo first. But you should also do some thorough backtesting for whichever pairs you decide to do. (Testing 10 years on a pair should take maybe an hour or an hour and a half. And yes, I know I made the same claim about testing Gap trades a while back, to deaf ears. But it's worth trying again.)
What does this mean. Assume that you risked 2% of your account on each trade. Over three years, you would make a return of 10% on your account. The losses and breakeven trades would keep you almost dead even, while 80% of your gains would have come from a single trade.
Twenty one trades is not big enough to evaluate the system. I'd want probably 50-100 trades before I had any faith in the results. That said, the testing was enough to convince me that this method was not for me. I have two basic problems.
First, the trades, especially winning trades, can take a very long time. The pure winner took over two months to complete. A couple of the breakevens only got back to break even after about a month. If you traded this from your regular account, then with the no hedging rules in the US, you would be prevented from making a contrary trade on that pair for the entire time that you were in the trade. It looks to me like the potential gains may not be worth the lost opportunities.
Second, I don't know how I could get the right position sizes for this system without changing brokers. The stops are often over 200 pips, and sometimes as big as 400 pips. With a 10K account, assuming 2% risk, a 200 stop lets you trade one mini. That's the minimum trade with my broker (and I don't have a 10K account). So I could reduce my %risk/trade, and thus reduce the rewards. Or I could pass on the trades with the bigger stops. However, it looked like a big opening move made it more likely that there would be a good trade. So, I don't see how I could trade this system without going to a micro account.
It's really incredibly easy to test this system, and takes no time to do. Spread and slippage are non-issues here, since they are almost a microscopic portion of the trade. And daily data is also pretty solid. So a backtest should be almost exactly as reliable as a forward test. If you are interested in this method, by all means, trade it on demo first. But you should also do some thorough backtesting for whichever pairs you decide to do. (Testing 10 years on a pair should take maybe an hour or an hour and a half. And yes, I know I made the same claim about testing Gap trades a while back, to deaf ears. But it's worth trying again.)