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Very simple strategy GBP/USD

  • #1
  • First Post: Apr 20, 2020 6:54pm Apr 20, 2020 6:54pm
Hey guys, I have recently started back testing a strategy and wanted to get your thoughts on it. It uses the aroon up and down set to a period of 30, 26 EMA and 100 EMA.

I will look at the chart at 9AM GMT and the trade will only execute at this time. I will be using 1H time frame. Depending on what the aroon is showing for the previous candle, it will indicate a buy or a sell opportunity, so if the green is higher than the red it is a buy opportunity and vice versa. What determines whether I get into a buying opportunity is if the 26ema is below the 100ema at this time. The opposite would have to be true for a sell signal. TP is 150 and SL is 25 from the close of the previous candle. Only one trade can be open at anytime.

I have only backtested this from 06/01/20 to 10/04/20. This was carried out last week which is why it only went up to the 10/04. The results were 7 wins and 8 losses which gave a profit of 850 pips. I will be testing this further for 2019 and see if it gives good results. May also look at trying this on other pairs as well

Just wanted to see what your thoughts are on this and if anyone wants to explore this strategy further with me as well.

I am still quite new here and this is my first time posting a strategy, let me know I have missed anything out or you don't understand
  • #2
  • Apr 21, 2020 6:40am Apr 21, 2020 6:40am
Quoting akamrp
Hey guys, I have recently started back testing a strategy and wanted to get your thoughts on it. It uses the aroon up and down set to a period of 30, 26 EMA and 100 EMA. I will look at the chart at 9AM GMT and the trade will only execute at this time. I will be using 1H time frame. Depending on what the aroon is showing for the previous candle, it will indicate a buy or a sell opportunity, so if the green is higher than the red it is a buy opportunity and vice versa. What determines whether I get into a buying opportunity is if the 26ema is below...
Could you post pictures if possible?
  • #3
  • Apr 21, 2020 1:35pm Apr 21, 2020 1:35pm
Quoting leweg1
{quote} Could you post pictures if possible?
Attached Image (click to enlarge)
Click to Enlarge Name: GBP_USD_20200421_19.34.png Size: 157 KB


Here is the first trade for the period I have backtested. The 26ema is the black line and the 100 ema is the dashed blue line. This was a sell opportunity and shows the entry and the exit which was at the TP
  • #4
  • Edited 1:54am Apr 22, 2020 1:12am | Edited 1:54am
Quoting akamrp
{quote} {image} Here is the first trade for the period I have backtested. The 26ema is the black line and the 100 ema is the dashed blue line. This was a sell opportunity and shows the entry and the exit which was at the TP
Ok thanks, so there isn't a set distance between the Aroon lines as long as one is above the other and EMA's cross you take the trade simple as that? Do you trail stop loss or just let it run until TP or SL ?

Do you look at anything else when taking a trade i see ATR on your charts?

Did you Short on the Green candle (circled) or did you sell after when the next Red candle had printed and closed? i also noted that trade was 148 pips if shorted the Green circled candle?

i looked back at your GBPUSD trade here's mine, do you have you EMA's offset at all?
Attached Image (click to enlarge)
Click to Enlarge Name: Aroon.png Size: 72 KB
  • #5
  • Apr 22, 2020 5:50am Apr 22, 2020 5:50am
Quoting leweg1
{quote} Ok thanks, so there isn't a set distance between the Aroon lines as long as one is above the other and EMA's cross you take the trade simple as that? Do you trail stop loss or just let it run until TP or SL ? Do you look at anything else when taking a trade i see ATR on your charts? Did you Short on the Green candle (circled) or did you sell after when the next Red candle had printed and closed? i also noted that trade was 148 pips if shorted the Green circled candle? i looked back at your GBPUSD trade here's mine, do you have you EMA's...

Whatever colour on top for the aroon will determine whether it is a buy or a sell opportunity.

At the moment it is to just let it run to either TP or SL. Keeping it simple as possible.

ATR is just there, but I have no use for it at the moment.

I have not done anything to the EMA it is just the standard EMA on the IG web trade browser. EMA 26 and EMA 100.

The green candle at the open is the candle used to determine the trades at 9am, as that candle would close at 9am and this is where I shorted, on my chart it closed at 13166, when it closed the candle lowest point was 13013.5 which is just over 150 pips but the TP is 150 pips. I will post a few more examples later on today from my backtesting
  • #6
  • Apr 22, 2020 7:44am Apr 22, 2020 7:44am
Quoting akamrp
{quote} Whatever colour on top for the aroon will determine whether it is a buy or a sell opportunity. At the moment it is to just let it run to either TP or SL. Keeping it simple as possible. ATR is just there, but I have no use for it at the moment. I have not done anything to the EMA it is just the standard EMA on the IG web trade browser. EMA 26 and EMA 100. The green candle at the open is the candle used to determine the trades at 9am, as that candle would close at 9am and this is where I shorted, on my chart it closed at 13166, when it closed...
i mean this works well, i like the simple concept of it. i'll get some backtesting in see what it looks like. i've gone back 2 weeks from yesterday and out of 8 trades 4 where winners and the other 4 losers with a 1:6 R:R @1% risk per trade you would have lost 4% but gained 24% not bad at all!
  • #7
  • Apr 22, 2020 7:51am Apr 22, 2020 7:51am
Quoting leweg1
{quote} i mean this works well, i like the simple concept of it. i'll get some backtesting in see what it looks like. i've gone back 2 weeks from yesterday and out of 8 trades 4 where winners and the other 4 losers with a 1:6 R:R @1% risk per trade you would have lost 4% but gained 24% not bad at all!

Yea, Its really great risk to reward ratio, I am gonna test for 2019 on GBPUSD/

Im not sure how it will work on other pairs, The RR may have to be adjusted for other pairs as there are less movement with some pairs.

For now would be GBPUSD only.

Did you manage to figure out why your trade was different from my example? If you could post some pictures too that would be great.
  • #8
  • Apr 22, 2020 11:00am Apr 22, 2020 11:00am
Quoting leweg1
{quote} i mean this works well, i like the simple concept of it. i'll get some backtesting in see what it looks like. i've gone back 2 weeks from yesterday and out of 8 trades 4 where winners and the other 4 losers with a 1:6 R:R @1% risk per trade you would have lost 4% but gained 24% not bad at all!

I don't think you are doing it right, I have just looked at the last 2 weeks. I only saw 3 trades, they were all losses. I think you are just taking trades at 9am each day, which was was the strategy I was doing first, this strategy is originally based of that one
  • #9
  • Apr 22, 2020 11:48am Apr 22, 2020 11:48am
Quoting akamrp
{quote} Did you manage to figure out why your trade was different from my example?
well i noticed your end of day is different to mine but it wouldn't be that it would just be different closing price on which the EMA's calculate on

Quoting akamrp
{quote} I don't think you are doing it right, I have just looked at the last 2 weeks. I only saw 3 trades, they were all losses. I think you are just taking trades at 9am each day, which was was the strategy I was doing first, this strategy is originally based of that one
let me know if its right or wrong?
Attached Image(s) (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 195 KB
Click to Enlarge Name: Screenshot3.png Size: 197 KB
  • #10
  • Apr 22, 2020 12:26pm Apr 22, 2020 12:26pm
Quoting leweg1
{quote}well i noticed your end of day is different to mine but it wouldn't be that it would just be different closing price on which the EMA's calculate on {quote} let me know if its right or wrong? {image} {image}
It is wrong, the aroon is just a indicating the trade direction but the 26ema and 100 ema would confirm whether to take the trade or not, 26ema has to be below 100ema for a buy and for a s ell it would be the opposite, If these are not met, there is no trade.

I guess, the aroon is identify a trend happening and the EMA would possibly identify the beginning of a trend.
  • #11
  • Apr 22, 2020 12:34pm Apr 22, 2020 12:34pm
Quoting akamrp
{quote} It is wrong, the aroon is just a indicating the trade direction but the 26ema and 100 ema would confirm whether to take the trade or not, 26ema has to be below 100ema for a buy and for a s ell it would be the opposite, If these are not met, there is no trade. I guess, the aroon is identify a trend happening and the EMA would possibly identify the beginning of a trend.
Ohh i was doiong the opposite, 26 under 100 is sell 26 above 100 buy if Aroon also met condition
  • #12
  • Apr 22, 2020 12:48pm Apr 22, 2020 12:48pm
Quoting leweg1
{quote} Ohh i was doiong the opposite, 26 under 100 is sell 26 above 100 buy if Aroon also met condition

Yh, I thought so. It is the opposite for this strategy at the moment. The downside to this is that it does not get into any trades in a big trending move
  • #13
  • Apr 22, 2020 12:52pm Apr 22, 2020 12:52pm
Quoting leweg1
{quote} Ohh i was doiong the opposite, 26 under 100 is sell 26 above 100 buy if Aroon also met condition
I know i was doing it the wrong way to how you set out, i've back tested up until beginning of March out of 28 trades taken 18 where losses 10 where winners, so again if 1% risk per trade, 18% in losses 60% in wins so roughly 42% gain give or take ? -Doing it the incorrect way i started with
  • #14
  • Apr 22, 2020 5:01pm Apr 22, 2020 5:01pm
Quoting leweg1
{quote} I know i was doing it the wrong way to how you set out, i've back tested up until beginning of March out of 28 trades taken 18 where losses 10 where winners, so again if 1% risk per trade, 18% in losses 60% in wins so roughly 42% gain give or take ? -Doing it the incorrect way i started with

That is interesting, there was a lot of movements in march as well, I would wonder how this would work for previous month and previous year. Originally, my strategy just started with the aroon up and down and trade based on that, but it was only at a 50pip TP and 25 SL so a 1:2 RR. Then I started adding some other indicators in to see what would work better.

If you get round to testing Jan and Feb let me know how it goes, Otherwise I will try do this tomorrow evening. I am going to post 2 more charts to the way that was mentioned at the start.

Imagine you could get 40% each month constantly, you would be rich in no time lol. But best not to get your hopes up and also needs more back testing. I have also thought about maybe banking half at the TP and maybe let the other half run a bit longer as some trades could benefit from this
  • #15
  • Apr 22, 2020 5:03pm Apr 22, 2020 5:03pm
Here are the next 2 trades, there have only been 1 trade for each of these weeks

Attached Image (click to enlarge)
Click to Enlarge Name: GBP_USD_20200422_22.54.png Size: 169 KB


This one was a lost really quickly

Attached Image (click to enlarge)
Click to Enlarge Name: GBP_USD_20200422_22.56.png Size: 177 KB


Next trade took a bit longer but we got there in the end for a profit at the TP
  • #16
  • Apr 23, 2020 12:59am Apr 23, 2020 12:59am
Quoting akamrp
{quote} That is interesting, there was a lot of movements in march as well, I would wonder how this would work for previous month and previous year. Originally, my strategy just started with the aroon up and down and trade based on that, but it was only at a 50pip TP and 25 SL so a 1:2 RR. Then I started adding some other indicators in to see what would work better. If you get round to testing Jan and Feb let me know how it goes, Otherwise I will try do this tomorrow evening. I am going to post 2 more charts to the way that was mentioned at the...
i did back test Jan and Feb, both months were negative months, if you started trading January 2nd you would have only started making a profit by 2nd week of March, i did start thinking if price got halfway to TP put SL at B/E this helped with a few trades that were lossers, then started looking into 30pip SL and 120pip TP also 90pip TP which also had a positive effect on losing trades, i will do some further back testing into 2019 see if Jan and Feb 2020 were just bad months to trade.
  • #17
  • Apr 23, 2020 4:15am Apr 23, 2020 4:15am
Quoting leweg1
{quote} i did back test Jan and Feb, both months were negative months, if you started trading January 2nd you would have only started making a profit by 2nd week of March, i did start thinking if price got halfway to TP put SL at B/E this helped with a few trades that were lossers, then started looking into 30pip SL and 120pip TP also 90pip TP which also had a positive effect on losing trades, i will do some further back testing into 2019 see if Jan and Feb 2020 were just bad months to trade.

Ahh, Ok. How much were they in the negative by?

I have done testing from May 2019 to December 2019, Results are 9 wins and 23 losses, which at a 1% risk would give you 31% gain for the 8 months tested. I am going to look at trying something else, maybe changing the TP or maybe adding another/changing a indicator to try and cancel out some losses.

I see that you are from Oxford on your profile, I am from London. Are you a full time trader? Are you also spread betting?
  • #18
  • Apr 23, 2020 5:24am Apr 23, 2020 5:24am
Quoting akamrp
{quote} Ahh, Ok. How much were they in the negative by? I have done testing from May 2019 to December 2019, Results are 9 wins and 23 losses, which at a 1% risk would give you 31% gain for the 8 months tested. I am going to look at trying something else, maybe changing the TP or maybe adding another/changing a indicator to try and cancel out some losses. I see that you are from Oxford on your profile, I am from London. Are you a full time trader? Are you also spread betting?
I believe it peeked at minus 18% then went positive into March and April, thin volume start of year i presume? no 150 pip pushes for this strat.

I mean 31% for 8 months is great considering you get 1% a year from the bank lol.

Ahh not to far then mate, i do indeed, yes i have a SB account
  • #19
  • Apr 23, 2020 5:36am Apr 23, 2020 5:36am
How long have you been doing it full time for? Currently, I am doing it while I do work which is for my own business anyway, hence the reason I am looking for something not too complicated. I have looked into forex about 10 years ago but never traded with real money, only in demo and I gave up. I wouldn't say I learned anything then, but then I got back into it a year ago, I have only started trading with real money since the beginning of this year.

Quoting leweg1
{quote} I mean 31% for 8 months is great considering you get 1% a year from the bank lol
That is very true, I am trying to look for something that could give approx 10% per month, as I think that is quite possible and not too much.

I think maybe the TP of 150 is quite massive, and we are getting quite a lot of movement right now in that pair.
  • #20
  • Apr 23, 2020 6:13am Apr 23, 2020 6:13am
Looking at my results so far, May 2019 to december 2019 and then beginning of Jan to about mid april. Thats nearly a year of back testing and its given a total of 16 wins and 31 losses, at a RR of 1:6 with risk being 1% thats a total of 65% up on a account.

If your risk is 2% thats 130%, you have more than doubled your account.

Either way, thats actually not a bad result for a year considering how simple this method is, with this method it literally takes less than a minute to look at the chart everyday and see if there is a trade or not.
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