gbp/jpy Strength Indicator strategy Back Testing

This thread will be dedicated to back-testing Auslanco-GBP/JPY Strength Indicator strategy based on my own rules. I will eventually be testing this strategy In my live account. I will also try to analyze trades live as they happen when my schedule permits.

I would like to start by thanking Auslanco for his amazing contributions to this forum. I will be using auslanco's strength indicator strategy with my own rules.

My Chart

http://www.fileden.com/files/2006/7/30/148326/aus.jpg

Summary of my understanding based on my 1H chart above: Using 4h chart determine Bear or Bull trend using QQE Strength Indicator. If green is below purple trend is bearish. If green is above purple trend is bullish. The red line in relation to the QQE SI does not matter on the 4h chart….all we are looking for is the cross of the lines indicating trend change. We can however use the angle of the lines to determine the strength of the trend. If the trend on the daily chart lines up with the 4h and 1h then we are looking for 300 pips. If just the 4h and 1h line up we are looking for 200 pips. In a bullish trade the stop loss is always 100 pips below the price where the green line on the 1h QQE SI crosses the red 50 line. Vice versa for bearish trade.

After determining a bullish trend on a 4h chart we need to make sure the 4h candle has formed above the Gann HiLow Activator line shown above in gold. If the 4h candle directly above where the QQE green line crossed the purple line (forming our bullish trend) has not formed above the Gann line we wait for the next 4h candle to form above before continuing to the 1h chart for confirmation.

On the 1h chart we first confirm our bullish trend by making sure the green line has crossed above the purple line on our QQE indicator and that the green line has crossed above the red 50 line. The exact spot where the green line crosses the red line in a bullish trend is where we are looking to buy. Before we can open our buy trade we need to make sure the 1h candle has crossed above the Gann line. Our entry will be the beginning of the second (confirmation) candle after the cross-over candle has closed. The closer our entry is to the 1h 5sma the better the entry.

RULES:

Since I can no longer update post #2 I will be updating my rules on this post from here on out.

Trading with 2 mini lots every trade with a 5k account balance. SL 100pips when in 100pips profit set 90pip TSL or manually close trade when 1h qqe trend changes. Whenever entry is further than 20pips from 1h 5sma enter ½ position or 1 mini lot. Enter full position when right @ 5sma. I will enter a maximum of 2 positions for each 4h trend change. I will backtest this strategy for approx 1year from now and post my results here. 3.23.07 NEW RULE: If the angle of the 4h momentum is flat or trending oposite the 4h QQE I will not continue to look for entry on my 1h charts. 3.24.07 NEW RULE: If I ever see 300+ pips profit I will change my TSL from 90 to 50.

Auslanco’s Strength Indicator

Trading with 2 mini lots every trade with a 5k account balance. SL 100pips when in 100pips profit set 90pip TSL or manually close trade when 1h qqe trend changes. Whenever entry is further than 20pips from 1h 5sma enter ½ position or 1 mini lot. Enter full position when right @ 5sma. I will enter a maximum of 2 positions for each 4h trend change. I will backtest this strategy for approx 1year from now and post my results here. 3.23.07 NEW RULE: If the angle of the 4h momentum is flat or trending oposite the 4h QQE I will not continue to look for entry on my 1h charts. 3.24.07 NEW RULE: If I ever see 250+ pips profit I will change my TSL from 90 to 50.
_________________________________________________________


3.14.07
4h cross bull qqe@16:00 Formed above Gann @17:00
1h cross@18:00 confirmation entry @18:00 @ 224.21
100+ pips high @ 225.59 TSL=224.69 hit TSL @ 19:00 = +48 pips

Manually I would have opened another position @ 224.59 with same TSL and new 100pip SL @223.59

100+ pips high @ 3.15 @ 2:00 @ 227.51 TSL =226.61

High= 227.51 and with TSL would have closed @ 226.61 = +202 pips except that I would have closed this trade early@ 3.15 @ 7:00 @ 226.69 where 1h qqe trend changes = +210 pips +48=

+258 pips.
_________________________________________________________

3.23.07
4h cross bear qqe@12:00 Formed below Gann @9:00
1h cross@11:00 confirmation entry @12:00 @ 231.59
100+ pips low @ 230.43 TSL=231.33 hit TSL @ 13:00 = +26 pips

Manually I would have opened another position @ 231.58 with same TSL and new 100pip SL @232.58.

100+ pips low @ 230.77 TSL=231.13 hit TSL @ 16:00 = +45 pips

TSL hit both times=

+71 pips.
_________________________________________________________

3.26.07
4h cross bull qqe@12:00 Formed above Gann @9:00
1h cross @9:00 confirmation entry @9:00 @ 231.42
100+ pips high @ 232.70 TSL=231.80 hit TSL @ 19:00 = +38 pips

I would have closed this position manually @17:00 @ 232.00 due to the 1h qqe trend change.

Manual close @ 1h qqe trend change=

+38 pips.
_________________________________________________________


3.27.07
4h cross bear qqe@12:00 Formed below Gann @13:00
1h cross@15:00 confirmation entry @15:00 @ 232.24
100+ pips low @ 228.74 TSL=229.64 hit [email protected] @19:00= +260pips

TSL hit @ same time 1h qqe trend changed=

+260 pips.
_________________________________________________________

3.29.07
4h cross bull qqe@4:00 Formed above Gann @12:00
1h cross @9:00 confirmation entry @9:00 @ 229.99
100+ pips high @ 231.88 TSL=230.98

I closed this position manually @3.30 @3:00 @231.47 due to the 1h qqe trend change.

Manual close @ 1h qqe trend change=

+148 pips.
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Nice....strategy....I like your...MA setting.. simple method..

Im not sure why but my SI did not come with the dotted line. Can someone tell me why?

Interesting system, simple and easy ;]

Hey Kevy, thanks for your starting this thread. I am already demo tradin Aulsanco's original strategy without modification.

Btw how about forward testing the strategy and posting results in here and meanwhile disucss our tradeS?

n yeah Thanks to Aulsanco for sharing his system with novice traders.

What pairs do you use it on?
I noticed your chart was GBP/CHF.

Thanks

Hey Phreak,

I am all about forward testing this strategy here. I was thinking I would complete the 1 year of back testing before I started trading live just to make sure everything jives, but I see no reason why I cannot post charts and my entry/exit points in here based on my rules as I see them happen. I will start looking for our next 4h trend change on Tues London session.

The reason I like this strategy Auslanco made is it will keep me away from a lot of the bad trades I make based on Forex A.D.D. I have a pretty firm grasp on my emotions and a pretty solid money management strategy, but the one thing I realized I lack so far is the self control to not be in a trade. I have a hard time not trading and the more trades I make especially on the P/J where I have a larger spread the more risk I introduce to my trading. Auslanco’s system if followed correctly only allows for approx 4-6 good trades per month. This is just an estimation I make by looking at the setups I see where the 4h trend change happens based on the 4h QQE. I will be analyzing each setup that comes along on the P/J and I will post why I would enter a trade or why I would abstain.

PS: Before I go any further I would just like everyone to know that I am a noobie @ forex trading. I have traded off and on over the past 2 years in demo and never was able to be consistently successful. I went live 2 months ago. This is my attempt at a sincere disclaimer. I do not want anyone trading this live unless you are an experienced trader and know the characteristics of the GBP/JPY. I will not be trading this live until I am satisfied with my demo results.

-Kevin

Hey Bill,

I will only be trading this system on the GBP/JPY charts for now. The demo chart above was my mistake, and when I realized it 1/2 through I was too far and lazy to switch to the P/J chart. All the charts I post from now on will be only GBP/JPY charts. If you however want to take on the task of trying this stategy on other pairs feel free to hIjack this thread and post your results here. One thing you may want to change if you trade another pair is the Trailing Stop Loss rule I have. I use a 90pip trailing stop loss with the P/J after I see 100 pips profit. You may want to set a 60 pip trailing stop on the GBP/USD after you see 70 pips profit for example.

-Kevin

Here is my 4h Chart

http://www.fileden.com/files/2006/7/...us-chartv2.jpg

As you can see from the chart above based on the rules from the 6th of March till today March 23rd there were a total of 5 possible trades. In the next post I will be confirming my entries and exit on the 1h chart based on the rules.

Here is my 1h Chart with trade #1

http://www.fileden.com/files/2006/7/...326/trade1.jpg

Once the 4h confirmed the 1h was already below the 50 line and had tuned bullish. I decided to wait until the 1h turned back bearish @ 3.10 @18:00 and since the QQE was still pretty close to the 50 line I felt there was plenty of room to continue down. A couple other bearish indicators are the angle of the Stochastics, Momentum and CCI which are all bearish. The CCI also crossed zero line a couple candles back.

According to the rules I am suppose to wait until the 1h candle crosses the Gann line and then enter the trade on the next confirmation candle as close to the 5sma as possible, but the entry candle formed well below the Gann line so this was my confirmation candle and I entered right as the candle crossed the 5sma.

The best entry would have been @ the 50ema due to how the P/J interacts with the 1h 50ema.

3.10.084h cross bear qqe@11:30 Formed below Gann @8:00
1h cross@5:00 confirmation entry @18:00 @ 205.98
100+ pips low @ 203.57 TSL=204.47
Closed manually @ 204.40 @ 1h QQE trend change = +155pips
TSL was right @ the 1h QQE trend change=

+155 pips

the 5 ma doesn't sit in the same place. plus, if the market went down like 50 pips, then the ma went like 10. so, it's not exact. prove your system with results.

I thought it might be beneficial to post my chart clear of the extra junk:

http://www.fileden.com/files/2006/7/...hout-crap2.jpg

Well we have a potential trade right now...This is what I see:

4H QQE turn bullish @ 3.21 @00:00

4H candle foremed above Gann @ 3.21 @00:00

1H QQE cross 50 line @3.24 @3:00

1H candle formed above Gann and became our confimation candle @197.06

The safer entry according to Auslanco would be the start of the next candle nearest the 5sma @ 197.18

The last thing to check is if angle of the 4h momentum is flat or trending opposite the 4h QQE we do not enter and this is the case.

For right now I will not enter this trade

Some other things I see on this potential trade right now are:

1H CCI crossed zero line and is still above it, but starting to turn down.
1H Stochastics is up @ a steep angle, but 3/4 to the top into possible overbought area.
It is Easter and volume is low.
1H momentum shot steeply up @ the initial entry area and has now turned flat.

At the very minimum I want to see the 4H momentum turn more sharply up and then look for a pullback to enter near the 5sma. If I cannot get within 20 pips of the 5sma on the pullback I will enter 1/2 position or 1mini instead of 2, and the other 1 mini when it retraces back to 5sma. This is also contingent upon many other factors that may change my mind about entering this trade.

Hey Oksana

I will try my man. This is all demo right now. No live trading. I encourage you and anyone else to help me prove or disprove it based on the rules I have set up. If the rules do not work and the system does not work I will try to adjust some of the rules a little and progress from there. The only way I can prove it with results is by posting here live as the trade is happening. I am still new to forex so this may be rubish, but I was encouraged by the first 3 weeks of back testing I have done. If you have any advice that may help lay it on me.

-Kevin

PS: I am using the 5sma based on Auslanco's System and all I know is in a trend it likes to come back and touch off the 5sma which is usually the best entry point for the trade. I just finished reading Auslanco's thread for the first time on this strategy 3 days ago so I don't know how he came up with 5sma but it seems to work fine so far.

A couple other things I see in this potential trade is:

The weekly and daily charts are strong bearish trends.
We are below the 50 and 200ema's on the 4h.
We are sitting right on the 1h 50ema.
In order to really break into a good bullish trade we will need to break strong through the 1h 50ema IMO.
The last weekly candle to close left a long wick in the same direction of the down trend. This is a sign of a possible reversal into a good sized bullish candle.

Here is my 1h Chart with trade #2

http://www.fileden.com/files/2006/7/30/148326/1h2.jpg

4H QQE turn bullish @ 3.11 @8:00
4H candle foremed above Gann @9:00
4h momentum is in sinc with 4h trend
1H QQE cross 50 line @12:00
1h confirmation entry @12:00 @ 205.03
100+ pips high @ 207.52 TSL=206.62 hit TSL @ 16:00

+159 pips

There was room to get more pips on this trade when it retraced back down to the 5sma, but based on my rules I only trade 2 mini lots per 4h trend change and since I got in right @ the 5sma on my original entry I entered a full position of 2 mini lots. If my original entry was 20+ pips above the 5sma line I would have enterered 1 mini lot and then entered the other when the next candle came back down to touch the 5sma @ 206.03.

Here is my 1h Chart with trade #3

http://www.fileden.com/files/2006/7/30/148326/1h3.jpg

4H QQE turn bearish @ 3.13 @00:00

4H candle formed below Gann @00:00

4h momentum is in sync with 4h trend
1H QQE already crossed 50 line @3.12 @19:00
1h confirmation entry @3.13 @00:00 @ 206.28

100+ pips high @ 204.96 TSL=206.06 hit TSL @ 3:00


+22 pips

This chart is example of an entry on the 1h that is not right at the QQE cross of the 50 line. At the actual entry the 1h stochastics, CCI, and momentum are rather flat, but the 4h momentum is a strong bearish signal.

Based on the sad looking 1h stochastics, CCI, and momentum in retrospect I may not have entered this trade. There is a possibility that if I did not enter this trade I migth have entered later on close to where I got stopeed out. The entry would have been 205.91 where it touches the 5sma. This entry the 1h stochastics, CCI, and Momentum look much better and the 4h momentum is still a strong bearish signal. The only downside to entering @ 205.91 is the green 1h QQE line is quite a bit below the 50 line. The cautious person would not have traded this one at all.

This trade was kind of a bummer. If you look at the chart it hit the TSL 3 pips before it turned around to fall another 312 pips straight down. When I see this type of trade get past the system the greed starts to show it’s face a little.

If anyone is reading this and saying to themselves how can he know for sure that within a 200 pip candle on a 1h chart that it didn’t retrace back 90 pips and stop out before continuing the trend? The answer is this:

Whenever there is a 1h candle that is more than 90 pips I load the strategy tester on my MT4 platform to watch the price action of that particular candle to find out whether or not it does in fact stop out or not.

Well we had that solid break through the 1h 50ema I wanted and now we are sitting on the 1h 200ema. A nice little 150+ bullish candle is a pretty strong up trend sign for me. There is a lot of resistance here so I hope to see a bounce off the 200ema down closer to the 1h 5sma for my entry. I have to use patience to not get in too early.

What I see:

The 4h momentum has turned sharply up like I wanted to see and is in sync with the 4h QQE.

Another thing that makes this resistance so strong is the 4h 50ema is sitting at same place the 1h 200ema is.

It is my guess thant we may see this shoot up straight from here to the next resistance level @ 201.81 which is a double top and also a 4h 61.8 fibo level, but I am waiting for a big pullback to the 1h 5sma myself.

The 1h QQE is just now crossing back up after a little dip.

One other clue I missed last night was we broke through a major 4h trend line to the upside.

The 15m and 30m stochastics are showing a hook which is a good sign of the 1h following suit and eventually dropping for the retrecment I am looking for. It may take a while for this to happen since somtimes when hitting a major resistance like this with a 150+ pip candle the market has lost it's steam and needs to regroup. So we may see some sideways movement(consolidation) here as well.

Bottom line is I am not buying here. Anytime I see a candle on the p/j that has 150+ pips to It I treat it as it's own entity and I place fibos right on it. I am willing to miss this move to be cautious and enter at the right time.

Often time the p/j will follow the u/j and the u/j does not have the resistance the p/j has so i will be watching this currency to give me feedback of what the p/j might do.

My entry level will be between the 1h 5sma @198.50 and the 50% fibo line @198.80.
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UPDATE: This trade is too far gone. I will wait for the next 4h QQE cross to bearish trend to look for the next possible entry.

Here is the trend break I mentioned earlier:

http://www.fileden.com/files/2006/7/...rend-break.jpg

You can see the momentum was in the opposite direction as the QQE bullish trend so I stayed out of this trade. This was a sweet little trend line break though. The top three arrows are not showing the direction of the market; they are showing the tops where the trend line was placed. The last arrow is showing the break and the expected direction.

The 3rd arrow from the left is a strong resistance area and a possible target if we continue this bullish move.