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Fib-Breakout-Math-Hedge

  • #1
  • First Post: Aug 26, 2008 9:41am Aug 26, 2008 9:41am
Fib-Breakout-Math-Hedge

Fib #'s are 1, 2, 3, 5, 8. 13, 21, 34, etc ( the last 2 numbers combine for the next number ).
Mini #’s would be .1, .2, .3, .5, .8, 1.3, 2.1, 3.4, 5.5, etc.

Use the breakout of your choice. This example will use a simple price breakout of 25 above/below price for a channel of 50 pips. Any tf, any price.

If the upper channel is broken first you enter (1) long with a 100 tp (double your channel) and 150 sl (which is triple your channel). If all goes well you end up with 100 pips in the bank.

If it goes against you and enters the lower channel you go short with (2) lots with a 100 tp and 150 sl. If this trade hits the tp (lower channel) you end up with a –150 for the long and +200 for the short for a net of +50.

All trades end with the tp of the upper or lower channel.

If it ranges and heads towards the first trade when it breaks thru the upper breakout again you enter with (3) lots going long for a total of 4 longs and 2 shorts and at the tp you end up with -300 for the shorts and +400 for the longs for a net of +100.

If the 3 lot trade reverses and breaks thru the lower channel you are now going short with (5) lots for a total of 7 shorts and 4 longs, when it hits the short tp you end up with –600 for the longs and +700 for the shorts.

The deeper you go into the series the more profit is generated, at 8 lots to the tp you have a +150, at 13 lots you are +200, at 21 lots you are +300, at 34 your +450.

You in effect hedge your long/shorts until tp has been hit and your dd is between the channel, I have only been to the 8 fib # twice in the last 2 months with around +300 pips per week for the 1 pair (eur/usd) that I have been trading. The dd on the the #8 level was -400 until it gave me my profit of +100.

With this system I don't have to sit in front of the charts all day, all I do is put in a pending order for the next # in the series and check back every few hours.

Any thoughts?
  • #2
  • Aug 26, 2008 11:08am Aug 26, 2008 11:08am
Historically (past 10 years) how far as it gone?
  • #3
  • Aug 26, 2008 11:37am Aug 26, 2008 11:37am
Quoting qz10cq
Fib-Breakout-Math-Hedge

Fib #'s are 1, 2, 3, 5, 8. 13, 21, 34, etc ( the last 2 numbers combine for the next number ).
Mini #’s would be .1, .2, .3, .5, .8, 1.3, 2.1, 3.4, 5.5, etc.

Use the breakout of your choice. This example will use a simple price breakout of 25 above/below price for a channel of 50 pips. Any tf, any price.

If the upper channel is broken first you enter (1) long with a 100 tp (double your channel) and 150 sl (which is triple your channel). If all goes well you end up with 100 pips in the bank.

If it goes against you and enters the lower channel you go short with (2) lots with a 100 tp and 150 sl. If this trade hits the tp (lower channel) you end up with a –150 for the long and +200 for the short for a net of +50.

All trades end with the tp of the upper or lower channel.

If it ranges and heads towards the first trade when it breaks thru the upper breakout again you enter with (3) lots going long for a total of 4 longs and 2 shorts and at the tp you end up with -300 for the shorts and +400 for the longs for a net of +100.

If the 3 lot trade reverses and breaks thru the lower channel you are now going short with (5) lots for a total of 7 shorts and 4 longs, when it hits the short tp you end up with –600 for the longs and +700 for the shorts.

The deeper you go into the series the more profit is generated, at 8 lots to the tp you have a +150, at 13 lots you are +200, at 21 lots you are +300, at 34 your +450.

You in effect hedge your long/shorts until tp has been hit and your dd is between the channel, I have only been to the 8 fib # twice in the last 2 months with around +300 pips per week for the 1 pair (eur/usd) that I have been trading. The dd on the the #8 level was -400 until it gave me my profit of +100.

With this system I don't have to sit in front of the charts all day, all I do is put in a pending order for the next # in the series and check back every few hours.

Any thoughts?
yes some thoughts...

This system has been known and tested by many people for quite a long time.
It fails in the "holy grail" category of systems that are never losing (except the day when they lose everything).
The issue with that system is that the price can oscillate many times between the 2 Tps. And then at some point you get a margin call.
If in 2 months you have reached the level 8, in one year you will maybe reach level 12 or 15, and then in 5 years you will reach level 20. If you wait long enough the event that makes the magin call will finally occur.
The problem is whatever profit you have made before you will lose everything.

For instance in your case how many levels can you sustain before a margin call?
It is not very difficult to make an EA for this strategy and to see when and how often it failed in the past.
  • #4
  • Aug 26, 2008 11:51am Aug 26, 2008 11:51am
Quoting jlpi
yes some thoughts...

This system has been known and tested by many people for quite a long time.
It fails in the "holy grail" category of systems that are never losing (except the day when they lose everything).
The issue with that system is that the price can oscillate many times between the 2 Tps. And then at some point you get a margin call.
If in 2 months you have reached the level 8, in one year you will maybe reach level 12 or 15, and then in 5 years you will reach level 20. If you wait long enough the event that makes the magin call will finally occur.
The problem is whatever profit you have made before you will lose everything.

For instance in your case how many levels can you sustain before a margin call?
It is not very difficult to make an EA for this strategy and to see when and how often it failed in the past.
hey that case have a constant capital all the time and withdraw profits every now and then to put the capital back to beginning , that way the time u lose ur account , u would actualy have made more than ur initial capital ... this way u manage that possibility of account ruins by not progressing ur size as ur account grows ...
To Live is the rarest thing in the world , Most people exist , that is all
  • #5
  • Aug 26, 2008 12:00pm Aug 26, 2008 12:00pm
Quoting maheswara
hey that case have a constant capital all the time and withdraw profits every now and then to put the capital back to beginning , that way the time u lose ur account , u would actualy have made more than ur initial capital ... this way u manage that possibility of account ruins by not progressing ur size as ur account grows ...
Yes that kind of way to withdraw profits regularly is also advised for martingale techniques but the keypoint is the ratio between the speed of the growing balance against the frequency of margin call events.
Of course the more profit means higher leverage and means more often margin calls.
The issue is sometimes you may get 2, 3 or more margin call events before you had time to double the capital and then your reserve will melt very quickly.
Of course with a backtest we could better talk based on numerical examples.
  • #6
  • Aug 26, 2008 1:31pm Aug 26, 2008 1:31pm
Thanks guys for the replies. I'm playing this system to the 13 fib # which means I lose 1000 pips when it loses. So far I'm +2700 for the 2 months forward testing without a loss. At the 8 fib # you would be out 600 pips, at 21 your out 1650, at 34 -2700 and at 55 your out 4400. I don't mind losing as long as I come out ahead at the end. I understand that all martingale systems lose in the end, I personally like martingale systems but do know they are losers. I also demo this system with the channel being the previous days high/low. I don't go as deep into the #'s and I also take profit's instead of letting the trade go into the channel which is where the dd is. I stumbled onto this 50 channel just playing with the fib #'s to see how far I could go before a margin call. The 50 channel is a set and forget where as I still look at the charts all the time playing the daily high/low making sure profit dosn't turn in to dd. For the last few weeks I've just been playing the 50 channel but the daily one was almost as profitable and if I wouldn't second quess myself to death it would probably be more profitable. Checking the charts every few hours to make sure my pending trades are in place is not bad but if one of you wizards out there can make an EA we could be doing this on a ton of pairs instead of the one I'm doing now (eur/usd). Thanks.
  • #7
  • Aug 27, 2008 3:02am Aug 27, 2008 3:02am
Quoting qz10cq
Thanks guys for the replies. I'm playing this system to the 13 fib # which means I lose 1000 pips when it loses. So far I'm +2700 for the 2 months forward testing without a loss. At the 8 fib # you would be out 600 pips, at 21 your out 1650, at 34 -2700 and at 55 your out 4400. I don't mind losing as long as I come out ahead at the end. I understand that all martingale systems lose in the end, I personally like martingale systems but do know they are losers. I also demo this system with the channel being the previous days high/low. I don't go as deep into the #'s and I also take profit's instead of letting the trade go into the channel which is where the dd is. I stumbled onto this 50 channel just playing with the fib #'s to see how far I could go before a margin call. The 50 channel is a set and forget where as I still look at the charts all the time playing the daily high/low making sure profit dosn't turn in to dd. For the last few weeks I've just been playing the 50 channel but the daily one was almost as profitable and if I wouldn't second quess myself to death it would probably be more profitable. Checking the charts every few hours to make sure my pending trades are in place is not bad but if one of you wizards out there can make an EA we could be doing this on a ton of pairs instead of the one I'm doing now (eur/usd). Thanks.
just wondering. If you take the previous day high/low as a channel, I guess it is around 100 pips for EURUSD, so your TP is like at 200 pips. That makes it quite far. Then it can be quite a long time before you can close the trade.
  • #8
  • Aug 27, 2008 8:57am Aug 27, 2008 8:57am
Quoting jlpi
just wondering. If you take the previous day high/low as a channel, I guess it is around 100 pips for EURUSD, so your TP is like at 200 pips. That makes it quite far. Then it can be quite a long time before you can close the trade.

Exactly jlpi, it was slow but profitable, many days would go by between trades then the second guessing comes in when I would finally go into profit and I stop myself out with +20 instead of letting the system go to completion. Sometimes the channel was a lot larger than 100 but one good thing is that you did not go very deep into the sequence, it does a lot of bouncing between the channels while it is ranging but your not losing your just drifting. Then the 50% fib level came into play with your channel being the high/low and the 50% fib line as your breakouts which also is profitable. For the last few months I have been trying to break the system with a 25 pip above/below price for the 50 channel I'm now playing. My goal would be to get an EA and play several pairs with a trades equity tp of say 100 which then would close all trades and restart all trades at the #1 fib level. This way you never go very deep into the fib # sequence for any one pair. An equity sl would be good also so you don't blow up your accout.
  • #9
  • Sep 2, 2008 10:14am Sep 2, 2008 10:14am
Had 2 more wins sence last post. One went to the 13 level (1.3 lots) and profit was +300. Other win went to the 3rd level (.3 lots) and +100. Currently my channel is (eur/usd) 1.4475/1.4525 and I'm on my second trade .1 sell, .2 long with a .3 sell oder pending. Dosen't seem to be a hard manuall system to play and with over 3000 in profit for the past couple months it seems to be profitable. Have extended my personal system to the 34 level sence I almost broke the system at 13 level. If I lost my 34 level I would be out 4800 and if it won I would be +450, at the 34th level I would not add any more trades and let price move to either tp or sl. I will update this thread as I win or lose.
  • #10
  • Sep 4, 2008 11:51am Sep 4, 2008 11:51am
Just took profit at the 1.4375 (eur/usd) the sequence hit 2.1 lots and the profit was +300 pips. Next channel is 1.4325/1.4375. Would have gotten into the channel sooner but I'm doing it manually, if it bounces back above the 1.4350 I'll adjust the 50 pip channel to where it should be which is 1.4350/1.4400 or 25 pips above/below the last take profit which was 1.4375. Just noticed the post above has a profit of 200 at the 13 fib # not the 300 posted.
  • #11
  • Sep 4, 2008 7:32pm Sep 4, 2008 7:32pm
Took profit at 1.4225 on the second level of the sequence for a +50, lost the first trade long for -150 won the second short trade for a +200 with all trades ending with the short tp of 1.4225. New channel 1.4250/1.4300. I quess I'll be using this as a sort of log for myself.
  • #12
  • Sep 4, 2008 10:42pm Sep 4, 2008 10:42pm
LOL -- sounds like you're getting loney here.
Interesting idea. I traded a grid similar to this idea a few years ago and can't really remember why I quit -- probably because I couldn't get it to work the way I envisioned.

And I think somewhere on the forum here there's a guy who trades eurjpy with something very similar to what you're doing. He uses a fib prgression in his lot sizes and keeps reversing until his tp is hit.

I'll give your idea some thought and post a question or two later.

Quoting qz10cq
... I quess I'll be using this as a sort of log for myself.
  • #13
  • Sep 4, 2008 10:45pm Sep 4, 2008 10:45pm
yeah.... you remind me of me 1.5 years ago.... (except the stupid fibs)

http://www.forexfactory.com/showpost...5&postcount=19

Quoting qz10cq
Any thoughts?
  • #14
  • Sep 5, 2008 1:40am Sep 5, 2008 1:40am
Quoting BenQ
LOL -- sounds like you're getting loney here.
Interesting idea. I traded a grid similar to this idea a few years ago and can't really remember why I quit -- probably because I couldn't get it to work the way I envisioned.

And I think somewhere on the forum here there's a guy who trades eurjpy with something very similar to what you're doing. He uses a fib prgression in his lot sizes and keeps reversing until his tp is hit.

I'll give your idea some thought and post a question or two later.
Thanks Ben, any ideas would be appreciated. If u can remember the thread to the guy trading similar. We all know the fib #'s work, just putting them to work for us is the trick.
  • #15
  • Sep 5, 2008 2:45am Sep 5, 2008 2:45am
Quoting tdion
yeah.... you remind me of me 1.5 years ago.... (except the stupid fibs)

http://www.forexfactory.com/showpost...5&postcount=19

You must be an exceptionally smart person. Been into the fib #'s sence my casino days playing roulette/craps/blackjack with a fib progression that was a constant winner.

It was hard for me to be in the casino all that time waiting for my fib progression to win and start the sequence over again. I find it hard to sit in front of this screen watching 2 TF, 2 lagging indicators all line up so that I can jump into a trade that is just better than 50% winners.

Luv ur old post with the 10 pip channel. A constant 20 pips daily with proper money management turns us into big time winners on there money. An EA which could play several pairs and close all when equity level reaches XX would be the answer? Your dd is between the channels while your waiting for the tp and I've had a dd of around 1200 (50 channel) which is stressful. A 20 pip channel would be a lot less dd and get you out of the trades quicker.

Starting at the London open and closing around 12 noon (est) would also help profits, but for now I'm trying to bust the system.
  • #16
  • Sep 7, 2008 10:40pm Sep 7, 2008 10:40pm
Took profit at 1.4400 on the 1.3 lot level for +200, traded thru the NFP report Friday and the strange opening today. Don't like going this deep into the system but do like the profits. Next channel is 1.4375/1.4425.
  • #17
  • Sep 8, 2008 7:23am Sep 8, 2008 7:23am
Took profit of +50 on the second level at 1.4275. New channel is 1.4180/1.4230. I should have been another +50 right now but I went to sleep before the London open with the presets and woke to a +50 profit.
  • #18
  • Sep 8, 2008 3:59pm Sep 8, 2008 3:59pm
Took another +50 when sell tp was hit at 1.4080 on second level. New channel 1.4100/1.4150.
  • #19
  • Last Post: Sep 10, 2008 4:45pm Sep 10, 2008 4:45pm
Well I broke the piggy bank on this last sequence. My demo which started at 3000 and was up to 5200 after 2 1/2 wks. had a margin call and ended up losing 4800. Sequence went another 2 #'s to the 8.9 level and would have netted +1100 on a mini account. I could have been out of the sequence a couple of times with +100 but wanted to complete the series. I orginally started this system out with the channel being the previous days high/low instead of the 50 channel. That way it didn't go deep into the series but I found myself taking profits when I could and never completing the sequence. I tried to break the bank with the 50 channel and eventually did. I feel a smaller or larger channel would be the answer. A larger bank roll won't hurt either. An EA playing several pairs and having an equity tp of say 100 then start all pairs back to the 1 level could be the ticket. Playing a micro account starting at .01 instad of .1 is probably in my future with a 1000 start. I'll keep you guys informed.
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