FlexBox indicator

I've been interested in breakout strategies for some time. I like them because they are price-driven with little or no lag involved and reflect the reality of the market - there are trends and periods of relative inactivity between trends during which price does not gain or lose much. Many popular strategies have been developed using boxes and breakouts (Big Ben comes to mind), in fact my primary trading strategy is based on daily highs and lows which is, for all practical purposes, a box.

I developed the FlexBox indicator to take advantage of breakouts in a more flexible way without making the assumption that "boxes" form according to a predictable schedule.

The FlexBox indicator is posted below and can be used on any timeframe. First, a few thoughts on how to use it:

Entries - Enter a trade at the close of a bar outside the box. Wait for the current bar to close completely.

Stoploss - Place a stoploss at the opposite side of the box from the breakout (or add a few pips if the box has a small price range).

Exits - Exit when the entry rule is met for a trade in the opposite direction.

The indicator is already compiled so simply copy it to your experts/indicators folder and place on the chart from there. It's unfortunate to be compelled to post compiled code on this forum but there have been several instances of the intellectual property of members being sold on EBay and I don't want that to happen to me.

The user-accessible parameters are:

ROCPeriod - Boxes are formed based on an imbedded ROC indicator. The default here is 2 but I have tried values up to 5 without changing the results much - boxes just start a bit later.

BoxThreshold - This is important. After experimentation I've settled on a default of 12.0 but this may need to be smaller for timeframes shorter than 1 hour (which is the timeframe I recommend).

BoxMinBars - The number of bars in a box before it actually appears on the chart. Default is 3 because it works for me.

BoxColor - self-explanatory.

I have not traded live yet with this indicator but have done a lot of "eyeball" testing and feel that the indicator is interesting enough to share. I hope to learn more by reading the comments of others than I can learn by myself.

A few requests:

Please post questions/comments to the thread directly so we may all learn from them rather than by PM - my mailbox is too full already.

PLEASE do not post "how do I put an indicator on a chart..." questions. Metatrader is very well documented in its help screens and these questions are also answered in the stickies in the beginners forum.

Please, no charts larger than 600x600 (how to post charts is also covered in a sticky - you can do it from within MT4, no external websites needed).

No, there is no EA yet. I'll get to that in due course if I determine that the indicator is effective enough to be worth the effort. That's where all of you come in...

Attached chart shows a recent trade. Entry at the red arrow, exit at the red x equals 165 pips...

These trades immediately preceded the chart shown in post #2

Congratulations and not to take anything away from your strategy but it has been around awhile in many different forms. One that I know of is in the John Carter book Mastering the Trade, he calls it a box play. You could also say it is similar to Darvas Box which goes back to the fifties.

But getting it here free is better than buying the book or paying for indicators from his website.

Although J Carter has many great trading ideas (mostly stocks related) in his book.

I like this indicator. Thanks for posting it. The default settings look good on cable, but what do you suggest for other pairs?

I don't know yet. I've looked at several different currency pairs using the default and all appear tradable. My suggestion is, tinker with the BoxThreshold parameter for your favorite pair and share your conclusions with all of us.

Just in case no one noticed, there is a 33 pip loss trade buried right in the middle of the long box at the top of post #2. This probably should have been one long box (saving the loss) and is something I'm working on. FlexBox is still in a very early stage of development.

LouG

From your observations, can the strategy be used during anytime? Any ideas how this performs when the market is ranging?

Technically, what's going on within the boxes is ranging (up and down 30-40 pips) - during which time I would sit back and see what happens since this indicator is generally coded to be "always in" (except when you are stopped out). It may be possible to trade within the boxes themselves but I have not looked into that yet.

Theoretically the indicator will work on any timeframe but the BoxThreshold will have to be adjusted.

Adjusted to what? I dunno, try it. I tried a setting of 10.0 on a M15 chart and it looked pretty effective.

What's pretty effective? Narrow boxes that are well-separated pricewise. See charts in post 2 & 3.

First off, thanks for sharing the indicator. It definately looks like it has potential.

Quick clarification on the entry... from the charts it looks like entry is the open of the candle following the breakout candle... is that correct?

Thanks and good trading all.

Yes, that's correct. For practice, the chart below (from left to right) contains 2 profitable trades and 1 loser - can you spot them?

Whoops, the beginning of the first profit trade was truncated on the left side - you'll have to trust me on it (or open the chart on your machine and look for yourself).

Can u set the indicator to generate an alert, and also a directional arrow?

Sure. Good practice.

The way I'm reading it is you have the first winning trade (long) coming out of the first box and trades through the small second box for a nice gain.

The losing trade is short coming out of the third box.

And the second winner is long again coming out of the 4th box.

That's my interpretation anyway. Let me know if I'm misreading anything.

Not having seen how this indicator performs in real time leads me to a question. It takes 3 bars for the box to appear. After the box appears, does the box height stay constant or does it change as price moves higher/lower?

Close. The first trade was truncated by MT4. The other two are:

The box will get larger but eventual size is limited by the BoxTreshold. Smaller number equals more narrow boxes (but more of them). The box size is driven by a Rate Of Change (ROC) indicator which is expessed as a percentage so it can work with all currency pairs.

Those are good ideas - maybe later, after the actual trading details are firmed up. That's priority one right now.

Isn't it risky that you exit a trade based upon the third box since there is no way we can tell if the trend will continue in that direction not unless you use some other technique to project the price using chart patterns or something.

When one waits for the candle to break outside of the box before taking a trade, and price has moved up considerably, would you still take the trade? This may be caused by some news event or during the start of a session.

There is no rule regarding an exit in the third box. Exit is indicated by a breakout in the direction opposite of the existing trade.

I don't know that there is any way to predict whether a trend will continue or not. We do know that when the trading range decreases for a certain period (which is what Flexbox tries to delineate) a breakout will occur. The direction and magnitude of this are unknown. The intention of Flexbox is to maximize trend following while minimizing losses by keeping stops close.

Price really cannot move up considerably without creating a breakout if the value of BoxThreshold is kept low (15 or less).

I'm actively looking at oscillators which may act as a companion filter to aid in the entry/exit decision.

Lou,

CHeck out Igrok "Beat the odds in forex trading" on the daily range templates. He is using sort of box method too.