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Daily Range Strategy

  • #1
  • First Post: Mar 13, 2007 2:53pm Mar 13, 2007 2:53pm
I would like to introduce a method I have seen on another board but for some reason it was dropped and hasn't been used for some time. I think it has great potential and if it catches one of the EA programmers attention I am hoping they can produce a reliable EA as it is perfectly suited to that type of trading.

It is called the dynamic daily range strategy.

Firstly you attach the following indicator to your daily chart this will give you an average daily range for the pair you attach it too.

Then you simply divide by 50% so for example lets say that EURUSD has an average daily range of 100 your levels are 50.

You enter your first trade at 50 points from the high or low of the trading day. So if it goes down 30 points then reverses you enter when it is 50 from the low or vice versa if it goes up first.Obviously if it goes straight up from the open you enter at 50 points from the open

You only reverse twice per day and leave the order to run until close at 1900 hours GMT.

I can't backtest so can't give you historical results I have done it manually on a lot of pairs and it is very good. It may work better with a trailing stop i'm not clever enought to say!

Please have a play with it and let me know if you can do an EA of you can improve it! Bear in mind that most of the profit will come from only about 3 or 4 days of really strong trend days per month!
Attached File(s)
File Type: mq4 DynamicBreakoutV1-1.mq4   6 KB | 2,479 downloads
  • #2
  • Mar 13, 2007 3:31pm Mar 13, 2007 3:31pm
Schoe,

I'm not sure I followed completely.

Going back to your example, how can you tell when the high/low has been hit? Isn't the opening price the high AND low? therefore there would be no need to go any higher or any lower?

Or are you saying that as price moves higher your "reversal" entry trails up?

So an example trade would be:

1) First a BUY stop is placed 50 pips above the open and a SHORT stop is placed 50 pips below the open

2) The price then goes 10 pips up, and with it, the entry price of the SHORT stop (now officially 40 pips below the open)

3) The price retreats and then goes down 30 pips, so now your BUY stop entry price is only 20 pips above the opening price and only 10 pips away from triggering your SHORT stop.

4) The price goes down 20 more pips...and your SHORT stop is triggered and now 10 pips in the black...I assume your BUY stop entry moves down 20 pips and is now AT the opening price.

Now, the question is, do you keep this process going? meaning if the price continues to fall, do you trail the BUY stop? Or what?

I think I may be able to do some WLD back-testing on this theory...If I have some time I'll look into it.


Quoting schoe
I would like to introduce a method I have seen on another board but for some reason it was dropped and hasn't been used for some time. I think it has great potential and if it catches one of the EA programmers attention I am hoping they can produce a reliable EA as it is perfectly suited to that type of trading.

It is called the dynamic daily range strategy.

Firstly you attach the following indicator to your daily chart this will give you an average daily range for the pair you attach it too.

Then you simply divide by 50% so for example lets say that EURUSD has an average daily range of 100 your levels are 50.

You enter your first trade at 50 points from the high or low of the trading day. So if it goes down 30 points then reverses you enter when it is 50 from the low or vice versa if it goes up first.Obviously if it goes straight up from the open you enter at 50 points from the open

You only reverse twice per day and leave the order to run until close at 1900 hours GMT.

I can't backtest so can't give you historical results I have done it manually on a lot of pairs and it is very good. It may work better with a trailing stop i'm not clever enought to say!

Please have a play with it and let me know if you can do an EA of you can improve it! Bear in mind that most of the profit will come from only about 3 or 4 days of really strong trend days per month!
  • #3
  • Mar 13, 2007 3:42pm Mar 13, 2007 3:42pm
After reading the code, I understand what you're talking about, basically all of my assumptions were correct.

This EA seems to be functional (although I haven't exactly tested it).

Is this not working or what?
  • #4
  • Mar 13, 2007 4:01pm Mar 13, 2007 4:01pm
Quoting mrmikal
Schoe,

I'm not sure I followed completely.

Going back to your example, how can you tell when the high/low has been hit? Isn't the opening price the high AND low? therefore there would be no need to go any higher or any lower?

Or are you saying that as price moves higher your "reversal" entry trails up?

So an example trade would be:

1) First a BUY stop is placed 50 pips above the open and a SHORT stop is placed 50 pips below the open

2) The price then goes 10 pips up, and with it, the entry price of the SHORT stop (now officially 40 pips below the open)

3) The price retreats and then goes down 30 pips, so now your BUY stop entry price is only 20 pips above the opening price and only 10 pips away from triggering your SHORT stop.

4) The price goes down 20 more pips...and your SHORT stop is triggered and now 10 pips in the black...I assume your BUY stop entry moves down 20 pips and is now AT the opening price.

Now, the question is, do you keep this process going? meaning if the price continues to fall, do you trail the BUY stop? Or what?

I think I may be able to do some WLD back-testing on this theory...If I have some time I'll look into it.
Yes you've got it figured out. In the original method you don't trail the stop just reverse a maximum of once and thats it for the day until close. It is easier to test this way but a trailing stop may be better to lock in profits i'm not sure.
  • #5
  • Mar 13, 2007 4:03pm Mar 13, 2007 4:03pm
Quoting mrmikal
After reading the code, I understand what you're talking about, basically all of my assumptions were correct.

This EA seems to be functional (although I haven't exactly tested it).

Is this not working or what?
Was that an EA ooops I meant to post the indicator to give you the daily range!! Hold on i'll try to upload it.
  • #6
  • Mar 13, 2007 4:06pm Mar 13, 2007 4:06pm
You watch the price fall from the opening of your Daily candle 30 pips and rise 50 pips; you buy because you "believe" it is 50 pips above the "perceived" low for the day and........................oops, it has just reached the "real" high for the day (the previously "perceived" low was NOT the "actual" low) and now the price drops "100 pips" from your entry price to the "real" low for this trading day. I ask because I have seen this happen.

How do you "really" know when the actual high or low for the day has been reached, so as to place your buy or sell at the correct price?

Quoting schoe
I would like to introduce a method I have seen on another board but for some reason it was dropped and hasn't been used for some time. I think it has great potential and if it catches one of the EA programmers attention I am hoping they can produce a reliable EA as it is perfectly suited to that type of trading.

It is called the dynamic daily range strategy.

Firstly you attach the following indicator to your daily chart this will give you an average daily range for the pair you attach it too.

Then you simply divide by 50% so for example lets say that EURUSD has an average daily range of 100 your levels are 50.

You enter your first trade at 50 points from the high or low of the trading day. So if it goes down 30 points then reverses you enter when it is 50 from the low or vice versa if it goes up first.Obviously if it goes straight up from the open you enter at 50 points from the open

You only reverse twice per day and leave the order to run until close at 1900 hours GMT.

I can't backtest so can't give you historical results I have done it manually on a lot of pairs and it is very good. It may work better with a trailing stop i'm not clever enought to say!

Please have a play with it and let me know if you can do an EA of you can improve it! Bear in mind that most of the profit will come from only about 3 or 4 days of really strong trend days per month!
  • #7
  • Mar 13, 2007 4:09pm Mar 13, 2007 4:09pm
Well, my initial results from the strategy tester on MetaTrader weren't good. I got around 90% modeling quality and the system didn't do very well.

In theory, the break-out makes sense...but I'll have to see if I can't build something in WLD that might give us a better understanding of how this works.

Quoting schoe
Yes you've got it figured out. In the original method you don't trail the stop just reverse a maximum of once and thats it for the day until close. It is easier to test this way but a trailing stop may be better to lock in profits i'm not sure.
  • #8
  • Mar 13, 2007 4:09pm Mar 13, 2007 4:09pm
This was what I meant to post in my first post sorry.
Attached File(s)
File Type: mq4 DYNAMIC_Breakout_Daily_Range_v10.mq4   3 KB | 1,859 downloads
  • #9
  • Mar 13, 2007 4:17pm Mar 13, 2007 4:17pm
You don't...that's the risk of the system. However, I think the prevailing thought here is that a reversal of half of the daily range would be strong enough most days. While I have seen what you're talking about as well, I'm not sure that's a common day. Most days (in theory) I would think that if a pair does move in a direction for at least half of the daily range, then the price would "normally" continue in that direction. I think the main issue we have here is the possibility that the RR on this system may be very low. Since the max risk is technically 100 pips, but probably an average of 50 pips, I don't know whether or not the system can actually win enough.

What seems to happen most trades is that the price will "max out" right around 1/2 of the daily range and then meander...ultimately closing in a loss most days. That seems to be happening in the MetaTrader backtests. Since there isn't really a profit target, it's hard to guage the long-term viability. Right now, the tests have yielded about a 38% winning streak...which means we'd have to have a TP of 2 times the max loss...now since the losses are more dynamic, it's really hard to determine what the TP should be.

I think WLD will give us more clear results. I just need to spend some time thinking about it.

Quoting BeachBum
You watch the price fall from the opening of your Daily candle 30 pips and rise 50 pips; you buy because you "believe" it is 50 pips above the "perceived" low for the day and........................oops, it has just reached the "real" high for the day (the previously "perceived" low was NOT the "actual" low) and now the price drops "100 pips" from your entry price to the "real" low for this trading day. I ask because I have seen this happen.

How do you "really" know when the actual high or low for the day has been reached, so as to place your buy or sell at the correct price?
  • #10
  • Mar 13, 2007 4:18pm Mar 13, 2007 4:18pm
Quoting BeachBum
You watch the price fall from the opening of your Daily candle 30 pips and rise 50 pips; you buy because you "believe" it is 50 pips above the "perceived" low for the day and........................oops, it has just reached the "real" high for the day (the previously "perceived" low was NOT the "actual" low) and now the price drops "100 pips" from your entry price to the "real" low for this trading day. I ask because I have seen this happen.

How do you "really" know when the actual high or low for the day has been reached, so as to place your buy or sell at the correct price?

You don't know if it is the high or low of the day Beachbum but you know it has moved 50% of the average daily move and got you into the trade it can either carry on going in the correct direction or reverse. If it reverses you enter at 50% from the high or low of the previous trade.

For example your average daily range is 100 and EURUSD is at 3000. The market opens and ranges for a while not going 50 pips either way so you are still out of the market. It drops down as far as 2960 then reverses and moves to 3010 so you are in the first trade long at 3010(50 from low to high or vice versa) it moves up to 3040 but reverses again so you then enter short at 2990 ( 50 pips from the current high) and that you finished for the day until 1900 hours.
  • #11
  • Mar 13, 2007 4:23pm Mar 13, 2007 4:23pm
This is the link to the original thread on Strategybuilder.

http://www.strategybuilderfx.com/showthread.php?t=17300

There are some better explanations on here and some live trading results from the Author Igor.
  • #12
  • Mar 13, 2007 4:24pm Mar 13, 2007 4:24pm
A quick search here at FF will reveal several systems very similar to this one that were abandoned because they simply did not work, for some of the reasons we have both stated. For the past 18 months or so, I have only traded on Daily charts (a scary thought at first glance); first using VP software and more recently with the Daily Fozzy Method. I have looked at a lot of Daily charts on 19 currency pairs, and just don't think this proposed strategy will work, but as in all things, I may be wrong. But I do believe there are better ways to trade the Dailies. JMO!

Quoting mrmikal
You don't...that's the risk of the system. However, I think the prevailing thought here is that a reversal of half of the daily range would be strong enough most days. While I have seen what you're talking about as well, I'm not sure that's a common day. Most days (in theory) I would think that if a pair does move in a direction for at least half of the daily range, then the price would "normally" continue in that direction. I think the main issue we have here is the possibility that the RR on this system may be very low. Since the max risk is technically 100 pips, but probably an average of 50 pips, I don't know whether or not the system can actually win enough.

What seems to happen most trades is that the price will "max out" right around 1/2 of the daily range and then meander...ultimately closing in a loss most days. That seems to be happening in the MetaTrader backtests. Since there isn't really a profit target, it's hard to guage the long-term viability. Right now, the tests have yielded about a 38% winning streak...which means we'd have to have a TP of 2 times the max loss...now since the losses are more dynamic, it's really hard to determine what the TP should be.

I think WLD will give us more clear results. I just need to spend some time thinking about it.
  • #13
  • Mar 13, 2007 4:25pm Mar 13, 2007 4:25pm
I think you'd get killed on Ranging Days.

Quoting schoe
You don't know if it is the high or low of the day Beachbum but you know it has moved 50% of the average daily move and got you into the trade it can either carry on going in the correct direction or reverse. If it reverses you enter at 50% from the high or low of the previous trade.

For example your average daily range is 100 and EURUSD is at 3000. The market opens and ranges for a while not going 50 pips either way so you are still out of the market. It drops down as far as 2960 then reverses and moves to 3010 so you are in the first trade long at 3010(50 from low to high or vice versa) it moves up to 3040 but reverses again so you then enter short at 2990 ( 50 pips from the current high) and that you finished for the day until 1900 hours.
  • #14
  • Mar 13, 2007 4:27pm Mar 13, 2007 4:27pm
Quoting BeachBum
A quick search here at FF will reveal several systems very similar to this one that were abandoned because they simply did not work, for some of the reasons we have both stated. For the past 18 months or so, I have only traded on Daily charts (a scary thought at first glance); first using VP software and more recently with the Daily Fozzy Method. I have looked at a lot of Daily charts on 19 currency pairs, and just don't think this proposed strategy will work, but as in all things, I may be wrong. But I do believe there are better ways to trade the Dailies. JMO!

Thats ok thats why I posted it there are greater minds than mine on these boards and i'm sure some that can improve it or simply tell me its not viable, I can then forget it and move onto thinking about something thats more effective and suits my lifestyle better.
  • #15
  • Mar 13, 2007 4:28pm Mar 13, 2007 4:28pm
Quoting BeachBum
I think you'd get killed on Ranging Days.
Actually you don't it keeps you out of the market on most ranging days and limits your trades to only two.
  • #16
  • Mar 13, 2007 4:44pm Mar 13, 2007 4:44pm
ok i read the igor thread on strategybuilderfx.com and if i have anything to add is this:

open multiple positions and use TS.

if u plan to trade 1 lot, try trade three 0.3 lots and set TP at different levels. SL should all be the same though.

TS should be 28 pips
  • #17
  • Mar 21, 2007 10:15am Mar 21, 2007 10:15am
Thanks Don that sounds sensible.

This thread never really got going I don't know why as I am sure this is a good system.

The EA I attached doesn't seem to work properly. Pleae could somebody write one that does and I will update the results on this thread of the pips made.

Many thanks.
  • #18
  • May 29, 2017 2:34pm May 29, 2017 2:34pm
Quoting schoe
I would like to introduce a method I have seen on another board but for some reason it was dropped and hasn't been used for some time. I think it has great potential and if it catches one of the EA programmers attention I am hoping they can produce a reliable EA as it is perfectly suited to that type of trading. It is called the dynamic daily range strategy. Firstly you attach the following indicator to your daily chart this will give you an average daily range for the pair you attach it too. Then you simply divide by 50% so for example lets say...
I use this kind of system too but mine works on weekly range.
  • #19
  • Mar 6, 2019 5:45am Mar 6, 2019 5:45am
I used to trade on daily charts but the main problem is that at the end of the day brokers seriously increase spread so we trade at a huge disadvantage. I now prefer trading on 8 hours charts since I can get a few trades a day and with decent spread. Does anyone know of a broker that doesn't increase its spread at the end of the day?
Attached Image (click to enlarge)
Click to Enlarge Name: AUDNZD-4H8.png Size: 66 KB
  • #20
  • Last Post: Mar 6, 2019 5:55am Mar 6, 2019 5:55am
Quoting schoe
I would like to introduce a method I have seen on another board but for some reason it was dropped and hasn't been used for some time. {file}
I think your strategy will work on low ATR pairs but could really be dangerous on high ATR pairs. The attached indicator can provide you with ADR and ATR for up to 20 pairs so it could be useful in identifying low ATR pairs using your strategy.
Attached File(s)
File Type: ex4 ADR_ ATR_20_Pairs_v3_Sal.ex4   9 KB | 589 downloads
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