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Quicker and Dirtier EOD

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  • First Post: Edited Jul 10, 2012 11:14am Jul 3, 2012 6:16am | Edited Jul 10, 2012 11:14am
You know I get system ideas all the time and you know I like to share them. Well here's another end of day system.

Step 1 - Daily charts only - no indicators.

Step 2 - The body of the previous candle must have been at least 75% of the ATR(20). ATR indie attached.

Step 3 - Put a fib study on the candle from the high to low of the body of the candle with the 38.2 level and the 38.2 extension so that the extension extends below the low of a down candle or above the high of a high candle (screens to follow).

Step 4 - If the price retraces as far as the 38.2% fib level then place a pending buy order at the open price of the current candle.

Step 5 - Put the stop loss at the 38.2% fib level.

Step 6 - Put the take profit at the 38.2% fib extension.

Step 7 - Wait.

Step 8 - If the price retraces past the 75% retracement level then cancel the order. If the order is not hit by the end of the current candle then close the order. If the order is hit but still open at the end of the day then close the order.

Step 9 - Repeat next day.

I have manually backtested this with a trading simulator, as accurately as I can but I may get an EA coded to test fully and on other timeframes.

Screenshots to follow.

Attached below is a dashboard indicator which follows each pair and an expert advisor which trades the strategy exactly as laid out above. A big thank you to FerruFx for more outstanding coding.
Attached File(s)
File Type: mq4 ATR in Pips.mq4   3 KB | 764 downloads
File Type: ex4 Quicker&Dirtier_EOD_dashboard_v2.00.ex4   26 KB | 521 downloads | Uploaded Jul 10, 2012 11:14am
File Type: ex4 Quicker&Dirtier_EOD_expert.ex4   12 KB | 491 downloads | Uploaded Jul 10, 2012 11:14am
Here's todays eurgbp. Notice I've got the fibonacci trade manager from the simple fibonacci method thread to trade this for me.
Attached Image (click to enlarge)
Click to Enlarge Name: eurgbp fib example.gif Size: 21 KB
Interesting...
An alternative approach, which is the only way I trade engulfing bars, is to enter on a retrace to the 38.2. This is a good way of increasing your reward:risk ratio. Your win rate goes down because some of these setups never turn around and move in the right direction. But total profitability goes up vs just entering at market on the close of a bar.
Hi Hugh,

Are you sure about steps 4, 5 and 6?

Because you put a pending buy order with SL on 38.2 fib and TP on 38.2 extension. I think you want to put a pending SELL order. Am i right?

Thanks.
Quoting California
An alternative approach, which is the only way I trade engulfing bars, is to enter on a retrace to the 38.2. This is a good way of increasing your reward:risk ratio. Your win rate goes down because some of these setups never turn around and move in the right direction. But total profitability goes up vs just entering at market on the close of a bar.
That's interesting and I will check it out. Not sure what you mean by entering on the close of a bar? The pending order goes at the 0 fib level so the price pulls back during the day into the body of the previous candle and when it breaks the open of the current candle you're in the trade with the momentum on your side.
Quoting onlyghost
Hi Hugh,

Are you sure about steps 4, 5 and 6?

Because you put a pending buy order with SL on 38.2 fib and TP on 38.2 extension. I think you want to put a pending SELL order. Am i right?

Thanks.
You are right. You need to trade in the direction of the previous candle so if it's a down candle you wait for a pullback and then place a sell order at the 0 fib level. In an up move you put the pending buy order at the top.
Quoting Hugh Briss
That's interesting and I will check it out. Not sure what you mean by entering on the close of a bar? The pending order goes at the 0 fib level so the price pulls back during the day into the body of the previous candle and when it breaks the open of the current candle you're in the trade with the momentum on your side.
You are right. Instead of "on the close of a bar" I meant using a confirmation entry above the signal bar's high (for longs). I believe that waiting for the 38.2 retrace, and then entering on a limit buy order (for longs) at that 38.2 level, will generate higher profitability, albeit with lower win rate, as the reward:risk ratio is increased and it therefore becomes easier to hit the 2:1 and 3:1 trades.

You would have to do the testing, of course, to become convinced of this. Most traders prefer a reward:risk of > 1:1, e.g. 2:1. So they set the t/p farther out than just 1:1. However, there are other ways to increase r:r. One of them is entering on a retrace, and this is the way I have done it. I have only seen this mentioned by a couple of other people off of this forum. And your first post on this thread caught my attention because I thought you were actually entering on the retrace.

The other way to increase r:r is to reduce risk by placing s/l closer to entry. That is a whole other discussion.

Again, the testing will prove all of this out. The overarching concept here is that increasing reward:risk can be accomplished by using retracement entries and/or tighter s/l's, and that overall profitability should increase more than one would think.
Thanks for sharing.
If you've backtested, what were the results??

What if it retraces to the 38 or 75% on the day of the candle you are using?? Do you not trade the next day??
Quoting California
You are right. Instead of "on the close of a bar" I meant using a confirmation entry above the signal bar's high (for longs). I believe that waiting for the 38.2 retrace, and then entering on a limit buy order (for longs) at that 38.2 level, will generate higher profitability, albeit with lower win rate, as the reward:risk ratio is increased and it therefore becomes easier to hit the 2:1 and 3:1 trades.

You would have to do the testing, of course, to become convinced of this. Most traders prefer a reward:risk of > 1:1, e.g. 2:1. So they...
Ok, that's something that definitely needs trying out then. Thanks for posting it here.
Quoting zortan
If you've backtested, what were the results??

What if it retraces to the 38 or 75% on the day of the candle you are using?? Do you not trade the next day??
The results were positive with a strike rate of around 70% and a 1:1 r/r. This is only a limited backtest on the manual strategy tester so over longer periods and more pairs it may not be as good, or might be better. This is why I would like to get an EA coded for it for backtesting purposes.

Regardles of the previous price action if the previous days candle is a valid candle in terms of body size then you trade it.
Here is a 1 hr chart for to make it easier to see, which arrow would the entry be??

Attached Image (click to enlarge)
Click to Enlarge Name: br.jpg Size: 77 KB
Quoting zortan
Here is a 1 hr chart for to make it easier to see, which arrow would the entry be??
In the picture you posted the entry would be at the second arrow because that is the first time the 0 level is hit after it has retraced to the 38.2 retracement level.

The eurgbp chart that I posted earlier makes it quite clear where the entry should be. A large daily down candle forms, you place the fib from the high to the low of the candle. If during the next day the price reaches the 38.2 retracement level then you place a pending sell order at the 0 fib level with the stop loss at the 38.2 retracement and the take profit at the 38.2 extension. Not sure I can make it clearer than that?
I'll try to explain it another way, if the daily bar closes BELOW the 38 retrace, does it have to retrace past it again the next day or will a trade be taken if it passed the high??
Quoting zortan
I'll try to explain it another way, if the daily bar closes BELOW the 38 retrace, does it have to retrace past it again the next day or will a trade be taken if it passed the high??
You're putting the cart before the horse. How can the daily candle close anywhwere in relation to the 38.2 retrace? You don't know what the retrace will be until the candle closes.

Don't try to think too hard. Wait for a daily candle to close. If it's over 75% of the ATR(20) then draw the fib, high to low for a down candle, low to high for an up candle. Then wait for the price to retrace to the 38.2 level, then place your order at the 0 level. That's it.
Don't forget you are only using the body of the candle, no wicks.
That explains the confusion, I hadn't read it correctly.
This is how you've written it Step 3 - Put a fib study on the candle from high to low
Quoting zortan
This is how you've written it Step 3 - Put a fib study on the candle from high to low
I'll change it now.
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