Three Bar Scalp Method w Probability | Forex Factory

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Attachments: Three Bar Scalp Method w Probability
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Three Bar Scalp Method w Probability

  • #1
  • First Post: Edited Sep 18, 2007 9:22am Sep 12, 2007 1:15pm | Edited Sep 18, 2007 9:22am
I've cooked up quickly a system. I've got the ideas from various places on the forum and then performed some calculations and certainly looks promising.

So the setup.

RSI(8)
ATR(14)

Go long: enter on the open when the previous close is higher than the close of the bar before of the previous bar and provided that the open is at the same level as the close. The RSI(8) is above 50.
Exit short: End of the day.
SL: 25% of the ATR(14)

Go short: enter on the open when the previous close is lower than the close of the bar before of the previous bar and provided that the open is at the same level as the close. The RSI(8) is below 50.
Exit short: End of the day.
SL: 25% of the ATR(14)

I have include some calculations in Excel but it does not take into account the whipsaws.

Rationale.
The probability that the 3rd bar (trade day) will close higher is 62.77% for the Gu and that the 3rd bar will close lower is 60.53% viewing the last 7 years.

Any comments?

ps: Probably this thread will die out fairly quickly I am just curious regarding your opinions.
ps: English is not my native language so sorry for the mistakes

Edit: The zip file contains an excel sheet with the calculations.

Edit: Clarification: We enter long on the 3rd bar open when bar 2 close is higher than bar 1 and RSI(8) is above 50. Short is reverse.

Edit:

Quoting bullrock
Method variation:

Pull to breakeven the SL when 25% of the ATR(14) is in gain.
Use 3 units.
Exit unit 1 when 50% af the ATR(14) is hit.
Exit unit 2 at the end of the day when in profit if not in profit leave until BE or SL is hit.
If signal is positive on the opening of the next candle leave unit 3 in play and move SL to breakeven and start with extra 3 units again.

Regards
Bullrock
Attached File(s)
File Type: zip ThreeBarScalp.zip   396 KB | 2,644 downloads
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  • #2
  • Sep 12, 2007 8:02pm Sep 12, 2007 8:02pm
What are the time frames for your trades?

Do you have any charts for examples?
  • #3
  • Sep 12, 2007 9:03pm Sep 12, 2007 9:03pm
ok a few comments, first off if you are using a daily candle, its hard to call it a scalp, but if you do thats fine, lets look at the merits of the strategy. I have attached a screen shot of aug 23 till now, the red arrows are possible short entries, but the rsi was not below 50. So I wouldnt have taken them. (you might want to add level of 50 to your rsi setup instructions) The white arrows appear to be valid long entries by your 2 rules. They all appear profitable by the close at end of day rule, with the exception of the final candle which just started.

profit on the arrows would have been
(roughly)
+40
+80
+60
todays TBD.

so that would have been +180 pips in about 20 days, Almost the glorious 10 pips a day that everyone is searching for. Now of course I realize that 2 weeks of looking back at a chart is not sufficient for anyone to quit their day job, but my purpose is to say "Hey here is what I see, am I missing anything obvious?" thanks and looking forward to hearing from people.
  • #4
  • Sep 12, 2007 9:04pm Sep 12, 2007 9:04pm
ok hopefully the pic attached this time
Attached Image
  • #5
  • Sep 12, 2007 9:47pm Sep 12, 2007 9:47pm
Quoting mcmep11
ok a few comments, first off if you are using a daily candle, its hard to call it a scalp, but if you do thats fine, lets look at the merits of the strategy. I have attached a screen shot of aug 23 till now, the red arrows are possible short entries, but the rsi was not below 50. So I wouldnt have taken them. (you might want to add level of 50 to your rsi setup instructions) The white arrows appear to be valid long entries by your 2 rules. They all appear profitable by the close at end of day rule, with the exception of the final candle which just started.

profit on the arrows would have been
(roughly)
+40
+80
+60
todays TBD.

so that would have been +180 pips in about 20 days, Almost the glorious 10 pips a day that everyone is searching for. Now of course I realize that 2 weeks of looking back at a chart is not sufficient for anyone to quit their day job, but my purpose is to say "Hey here is what I see, am I missing anything obvious?" thanks and looking forward to hearing from people.
The RSI is in the setup instructions. Without the RSI the probability of success for the shorts is below 50% which reduces the odds...
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  • #6
  • Sep 12, 2007 9:48pm Sep 12, 2007 9:48pm
Quoting WHTenn
What are the time frames for your trades?

Do you have any charts for examples?
Sorry about this but this would be a day trading strategy.
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  • #7
  • Sep 12, 2007 9:51pm Sep 12, 2007 9:51pm
I will post a couple of examples soon just unfortunately I am terribly busy these days. Please accept my apologies.
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  • #8
  • Sep 12, 2007 9:58pm Sep 12, 2007 9:58pm
Quoting mcmep11
ok a few comments, first off if you are using a daily candle, its hard to call it a scalp, but if you do thats fine, lets look at the merits of the strategy. I have attached a screen shot of aug 23 till now, the red arrows are possible short entries, but the rsi was not below 50. So I wouldnt have taken them. (you might want to add level of 50 to your rsi setup instructions) The white arrows appear to be valid long entries by your 2 rules. They all appear profitable by the close at end of day rule, with the exception of the final candle which just started.

profit on the arrows would have been
(roughly)
+40
+80
+60
todays TBD.

so that would have been +180 pips in about 20 days, Almost the glorious 10 pips a day that everyone is searching for. Now of course I realize that 2 weeks of looking back at a chart is not sufficient for anyone to quit their day job, but my purpose is to say "Hey here is what I see, am I missing anything obvious?" thanks and looking forward to hearing from people.
The daily candle have been just used for quick calculations otherwise this is aday trading strategy. Unoptimised. No break even. No Take profits. No Multiple Units.
I've been also thinking about to ignore the same signals when you are in a trade. Say you have 8-9 bars that go up consecutively.

The strategy could be as follows:
Unit 1 behaves as per the original rules that is exit at the end of the day.
Unit 2 will stay if the next day is the same signal.
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  • #9
  • Sep 12, 2007 10:54pm Sep 12, 2007 10:54pm
A quick live test:
Broker OANDA

RSI(8) 56.38

EUR/JPY:
Entry:
Long @ 158.711
SL @ (2.0390 * 25% = 50.97 approx 51 pips. ->) 158.201

Observation/Problem: We are below a sliding trendline.
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  • #10
  • Sep 12, 2007 11:25pm Sep 12, 2007 11:25pm
4hr is at a major resistance, if it breaks you should be golden, (as if your current +20 pips isnt enough).

oh yeah, is this on the daily time frame?

did i get it right in my image?
  • #11
  • Sep 13, 2007 12:46am Sep 13, 2007 12:46am
Quoting mcmep11
4hr is at a major resistance, if it breaks you should be golden, (as if your current +20 pips isnt enough).

oh yeah, is this on the daily time frame?

did i get it right in my image?
It is a hybrid. It is a daily strategy in terms of signals but every day is different that means we exit EOD and we reenter at the beginning of the day.. Because of my broker it is 5am GMT. But the calculations in excel have been performed 10pm GMT (RoyalFX on Metatrader)
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  • #12
  • Sep 13, 2007 12:51am Sep 13, 2007 12:51am
Method variation:

Pull to breakeven the SL when 25% of the ATR(14) is in gain.
Use 3 units.
Exit unit 1 when 50% af the ATR(14) is hit.
Exit unit 2 at the end of the day when in profit if not in profit leave until BE or SL is hit.
If signal is positive on the opening of the next candle leave unit 3 in play and move SL to breakeven and start with extra 3 units again.

Regards
Bullrock
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  • #13
  • Edited 1:06am Sep 13, 2007 12:54am | Edited 1:06am
EUR/JPY position
SL moved to BE
+63 pips
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  • #14
  • Sep 13, 2007 2:26am Sep 13, 2007 2:26am
EUR/JPY +90 pips
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  • #15
  • Sep 13, 2007 5:05am Sep 13, 2007 5:05am
The EUR/JPY position is still holding...
From tomorrow I will regularly post the LIVE results of my account.. I will always select 2-3 pairs that gives signal and trade those... Will post all the observations too...

Have fun
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  • #16
  • Sep 13, 2007 5:51am Sep 13, 2007 5:51am
Moved previous SL to 159.21 below previous support level locking in 50 pips... And we have hit +100 pips . Not too bad for start.
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  • #17
  • Sep 13, 2007 7:13am Sep 13, 2007 7:13am
Maybe I am lucky today :surprised
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  • #18
  • Sep 13, 2007 7:15am Sep 13, 2007 7:15am
Moved SL to 159.64 below previous S/R level
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  • #19
  • Sep 13, 2007 8:26am Sep 13, 2007 8:26am
SL has been moved 160.10 previous S/R level... so far so good. We will see how this thing behaves tomorrow.
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  • #20
  • Sep 13, 2007 9:15am Sep 13, 2007 9:15am
Quoting bullrock
A quick live test:
Broker OANDA

RSI(8) 56.38

EUR/JPY:
Entry:
Long @ 158.711
SL @ (2.0390 * 25% = 50.97 approx 51 pips. ->) 158.201

Observation/Problem: We are below a sliding trendline.
So here we go the entry was 158.711
SL has been hit @ 160.10
That's approx 139 pips for today.
Will continue the expereiment tomorrow.
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