Testing the breakout.

Hey guys and girls,

I thought about this a lot last night, and to be honest, I have never really back tested the breakout method. So, I was thinking of doing some research on this. I mean, up until now, I just did it, never really thought about it.

So what I am thinking is this: Maybe a few of us could scan for the last couple of years for triangles and rectangles in a particular few major pairs. Also, some data would have to be included.

I was thinking that maybe we could note triangles/rectangles in a couple of time frames in a pair. (Perhaps daily, 4hr, 1hr, 30 min, and 15 min.) I would also include weekly, but I am assuming none of us here are willing to risk that much heartburn and terror.

I would collect info like the time of day, the amount of pips gained, whether or not it pulled back to the triangle before taking off, and the success rate. That way, your results could be posted as such: (AND REMEMBER THIS ISN'T DATA COLLECTED, JUST A "DUMMY EXAMPLE")

*** Also maybe a count of how many for and against the overall trend.


NZD/USD:

Time Frame Success Rate: % of time pulled back: Av. Pips
4 hr triangle: 78% 39% 109
1 hr triangle: 68% 54% 78
15 min. tri: 61% 88% 31
4 hr rectangle: 65% 88% 50


and on and on.....also, along with pips, maybe we could track something like the average return in relation to the width of the highest point of triangle and lowest. (i.e. 230%, or whatever)

Anyone interested in this? And if so, I am willing to post my results on a specific pair. (doesn't matter to me, as I am just as happy to make money in Kiwis as I am Francs or Dollars.)

I figure if we can get 5 or 6 pairs tracked, we could be onto something. I know that triangles DO WORK, but I am sure some are more likely than others...Who knows, we may all decide that EUR/CHF is the way to go.

As a side note, please leave info about indicators out of it at first, if we feel a filter is needed, then we can talk about it. But I am more or less just interested in price and profit. MACD or whatever, can do whatever it wants.

I have been trading only using trend lines and the Fibo lately, and have seen some promising results. As I go on in my learnin' and skoolin', I have found that indicators only keep me out of trades, and a lot of the times they are GOOD trades......so like I said, if you want to help that would be great, but please leave out what the MACD or ADX, or even the ABC is doing!

I will be posting my research for all to see soon. I will probably start with something like the EUR/USD, since everyone in the known universe is trading that. ALL pairs are welcome, no matter how ridiculous they are. (So all you Mexican Peso/Ecuador Whatever It's Called, are welcome too. )

Great.....
what are your entry and exit rules?
You are looking just for triangles ......why not double top or double bottom...what about sloping S&R lines?

For me a perfect brakeout trade is one that goes with a trend..... after corection---corective tops make down-sloping line and brake of that is my perfect entry.....

althought ....great tread......some proactive thinking you we got there...

...and of course viceversa... becouse you know what they say....
Bulls climb stairs but bears jump through the window....

For now, I am only looking at rectangles and triangles, just because there is so much data to compile as it were. But.....I certainly would also be interested in double tops, etc. as well.

And although I agree 100% about a perfect breakout being a continuation of the trend, I am going into this with a neutral bias. (or as neutral as a human can be.)

As for rules, right now I typically try to wait until a retest of the breakout. I am going to let the data determine the rules for now on.....assuming there is enough of a difference in results.....

This week I really do not have time to this but I will get to it next week.
I will take all triangles in GBP/USD on 4h, 1h, 30 min 15min chart.
we are just loking for succes ratio of a brakeout ang average pips that brakeout made...
Am I correct?

First of all, thank you.

And I am looking into success ratio. whether or not it pulledback to breakout. And also a ratio. Ratio being in relation to width of rectangle or triangle. For example, say you have a 30 pip wide triangle that goes up....

I would be interested in measuring the width (30)
And how many pips in ratio....if it went another 60 pips above breakout, it would be 200%
Average pips is good too.
Also, make note if it is with long term trend as well....i believe that's key as well.


One thing I can say so far about 4hr triangles in EUR/USD, they have extremely promising results so far. The first year I have tested has been really, really, good.

The beauty of a 4hr triangle, is that it takes a few days to form normally, so therefore, it stores alot of energy, normally its a move that last for quite some time.

I will be posting my results in a PDF in the next few days I hope. If not, by the weekend at latest.

After I do EUR/USD, I will probably move on to USD/CAD

O.K.
I`ll be back when I am done with analysis.....

Just an update, I have two years of EUR/USD data figured out, will post soon on this board, another day or two......very promising results.

Hi Clockwork71 ...sorry I know this is wrong thread to ask question, but me too new to be able to help you for now ..

You said everyone in universe trade Euro...but somehow I found Euro is very volatile compare to Yen...the chaning trend of Yen seems more predictable and me have more success ..

Btw I depend alot on Bollinger Band to trade, supplemented by RSI & MACD.. do you think this is OK..

Thank You alot

Clockwork71,

Your scanning filters are too wide, you gotta narrow down the entry criteria. Breakouts, like anything else, only work in a moreless consistent fashion if all the ducks fall in line. First off all, is there a clear trend? is the breakout taking place in the direction of such trend? how well defined is that range/triangle? is the breakout spurred by any news announcement? etc. You need to establish those variables in advance in order to have any degree of significance in your research.

I believe that all systems can work, if you have a "feel" for them. There are several different ways to go about this. As long as you see a reasonably consistent return on whatever your signal is to buy or sell, I would stick with what you are doing.

True, and yes.....I am tracking if it is within the daily/weekly trend. (For example the 4hr breakout, which is where I am finding the greatest success so far.)

For example...

I have found with the couple of years I have gone through on the 4hr, if it is with the overall trend, the return potential is going to be roughly twice as much.

And I am also keeping track of how long in time the triangle is...

Also, if it occurs before 2/3 of the length of triangle (as per classic TA.)

I am trying to be as detailed as possible....also finding that pullbacks are very, very, common. Almost like a second chance to get in.

But, like I said, I am still researching, and hope to have some results posted tomorrow.

BTW, someone was asking about your training on here WTB.....although you know I am not a student, I have watched your videos, and said that I would recommend you.

I am interested but it will be a few days before I commit to it. Interested in EurJpy. If someone is ready to get started now on the EurJpy then go ahead I can do another one.

Cool, thanks goodthings....the more the merrier here. I too sometimes play that pair.

Take your time, as accuracy is important, no rush.

clockwork Chris

4 hour triangles going with the overall trend, (i.e. daily, weekly, monthly) are roughly good for twice as many pips, when compared to triangles going counter-trend.

For example, in 2001, of the identifiable triangles that I have tracked... (keep in mind this particular year is odd in the fact that it was right before we started to trend up, and I have several triangles listed as in a "flat" trend....were going down, but grinding in comparison to now. I suspect the findings will change quite a bit the following years.)

4hr triangle with trend - produced on average a 132.2% gain. 221 pips on average.

(gain is relative to the width of the triangle. for example, if the triangle is 100 pips tall, this would be a 132 pip gain from BREAKOUT.) Please keep in mind that this assumes you were to hang on for every pip before it broke the uptrend, downtrend, etc.

4 hr triangle against trend - produced on average 81% gain. 111 pips.

4 hr as market goes relatively flat (roughly August 15th). - 122% 212 pips.

As another side note - For whatever reason, I seem to be finding that triangles WITH the trend tend to be wider, so therefore a 130% tends to actually be a larger amount of pips. I am certainly going to have to add my findings about this in my final report. I am not sure as to what phenomenon causes this.

Also, as trend was starting to change, thus causing a relatively "flat" market, I noticed that the gains were getting large. I believe this has something to do with the lack of conviction to stop price from going one direction or another.

As far as pullbacks, Almost all do. I found that very interesting to say the least. Although, in reflection it should not surprise anyone, as it is commonly accepted that a trendline break almost always does a retest at one point or another.

I will keep you updated.