Frankfurt Breakout EA
This thread is an archive of trades and development of a trading system. My goal with the thread is to develop and optimize a simple system for consistent profits over the long term. This first post, since we can edit it over time, I will describe the theory and the variables I hope to optimize.
Theory of the Frankfurt Breakout EA
I know there are many European or London breakout strategies, however looking to make this successful based on my analysis through development and testing. The range of the 6AM (London Time) / 1AM (NY Time) candle seems to hold significance in terms of support or resistance on an intraday basis. Once this range is broken, we have three scenarios:
- Price of the instrument continues in the direction of the break for a reasonable % of the daily ATR
- Price reverses (prior to a % of the ATR) and re-tests this range, then continues in the direction of the original break
- Price reverses and closes above the opposite side of the range (this would be a failed trade)
This initial strategy will be based on option #1 where we are trading the breakout in anticipation of a continuation move and closing the trade prior to the US open (ideal scenario) or prior to the next 6AM candle if the price has not breached and closed above the other side of the range. In the future, we certainly could entertain evaluating option #2 as a possible trading opportunity, but initially option #1 will be the focus. In the next couple posts, I will demonstrate the above logic with charts.
Entry – Stop Loss – Exit
- Entry will be taken once the price breaches and closes +5 pips above/below 6AM high/low
- Timeframe – H1 chart
- Instruments Traded – GU, GJ, GA, GCHF, GCAD, GN, EU, EJ, EG, AU, NU, UCHF, UJ
- Lot Size – 0.25% of account balance
- Stop Loss – At an hourly close +5 pips close above/below 6AM high/low on the opposite side of the range
- Take Profit – 50% of the 30 day ATR
- No indicators are used
- Should trades not reach profit or close on opposite site of range, will let trade enter next session for continuation. If break is in the opposite direction, exit trade and take new trade in direction of signal.
- Monday after NFP, look for continuation if numbers are strong and trade with NFP direction. Resume normal methodology on Tuesday.
- Holiday's not to trade - MLK
Variables to Optimize
- Instruments to trade
- Stop Loss
- Take Profit
- Days to trade
- Money Management
- Range of 6AM Candle
- Pips Above / Under Range For Entry
I am going to begin manually trading this strategy looking to enter all opportunities at 8AM (London Time) / 3AM (US Time) from the Frankfort breakout. The goal is to capture the % of ATR and to be out of the trade prior to US open.
Down the road, once we have a few months of data, planning to develop an EA to assist with the early morning entries and take all trades precisely at the start of the new hour.
I have set up a small live account with trade explorer to track all trades and performance. Yes, live. My philosophy is “you cannot drive the boat with one foot on the dock”. Live results are important.
I have been evaluating this strategy on the charts for about the last year or so. I have a lot of biases concerning the variables, however they are just biases. I do not have concrete data to verify them. I am hoping this thread will help confirm these biases about the strategy.
If you would like to participate, you are welcome. Please be respectful to others and look to add value with your ideas. Should you present statements, conclusions or ideas, provide charts or data to back them up. I do work full time at my day job, so I am not in front of the computer at all times. I will not be the fastest responder due to other responsibilities, but I will get back to you.
Finally, I am not a professional trader or adviser. If you follow any part of this system or any future EA’s which are developed, you are responsible for your trades, execution with your trading platform and your results. I am simply sharing an idea, collecting data and adjusting to the market for potential profitable gains.
Happy Trading to All…