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Geico strategy---so simple a caveman can do it!

  • #21
  • Sep 15, 2007 2:16pm Sep 15, 2007 2:16pm
I just did a two year backtest with AmiBroker.

I used the system rules as presented except for the trailing stop.

Over two years it lost 1002 pips.
Using the 10 pips trailing stop it lost 2697 pips.

The best parameters were a 10 pip threshold, a 38 pip SL and a 30 pip PT.
That combination made 464 pips over two years.

I don't not believe this is a profitable system.

Adding trailing stops to your SL and PT only hurts the bottom line.

The 464 pip profit that was obtained by changing the parameters is not enough to bother with. It equates to about 20 pips a month.

Adding trailing stops or trading multiple lots and scaling out will only hurt your bottom line.

If you have a very profitable base system, things like scaling out and trailing stops may help in smoothing out the equity curve. It will have fewer large valleys even though you will still have less bottom line profit.

It is possible that the AmiBroker code I wrote to test this system has a bug in it. Don't take these results as the final word.
  • #22
  • Jun 17, 2008 5:20pm Jun 17, 2008 5:20pm
Quoting FX-Petra
I will give this some thought, Bullrock. As I look back over my trades I see at least 6 or 7 days that a 20 pip trailing stop would have turned good trades into GREAT trades. This is something that I will consider... maybe 10 pip stop loss until it gets to 20 pips, then changing to 20 pip stop. I will really have to go over my trades to see how this would affect my performance. You have given me a good idea to explore....thanks!!
You could try to use multiples of the Average True Range for your initial stop loss, then adjust your position size to meet your risk requirements.

Your take profits could be a combination of a multiple of your intial stop, combined with a trailing stop. What I do is when I am up by 1x my risk, I will place stop at .5X intitial risk, when I am up 2x I will place my stop at breakeven and continue to trail it like that until the move looks to be exhausting itself. Then I will place a trailing stop at 1 or 2x the ATR whichever makes the most sense. This allows me to let my profits ride, while cutting my losses nice an short. Also allows me to breakeven if the trade goes against me right away.

By using the ATR I find that the markets volatility is telling me where to place my stop and exit, not a rigid stop and exit. Stops and exits should make sense based on CURRENT price action. a 50 point fixed stop might work now but in a year things could be way more volatile and a 50 point stop won't work so well.

My 2 bits friend. Keep it simple! I've spent a lot of time thinking about my exits, they are the keys to the kingdom...
FX Specialist
  • #23
  • Jun 17, 2008 5:36pm Jun 17, 2008 5:36pm
Quoting FX-Petra
Why 6am est?--- well, I hand tested 3 years of Eur/Usd (took me 2 weeks!) and I found this to be the most "neutral" point of all the candle closes, as it relates to the NY session. 1am est was also a good time was also a good time, but man, I gotta sleep sometime--I also have a full time job! 6am also makes intuative sense. London has been open for a while, and NY will join the party soon. There are not very many stong 6am candles with a big range, but when they do occur it is very likley that the trend will continue into the 7am candle

While I cannot comment on the validity of this strategy, the above statement shows that you have certainly done your homework. As such, I would say this system could work.

I agree with Mr. Trend, the profitable systems are almost always simple. This certainly would qualify as simple. The question is can the user hang on to it to gain the expectant pips/profit? That part is where a lot of your profits will come from.

A belief in your method is crucial to success. Without it, it will be "Shake-out City". I would however, urge you to use price action as well. If you know that a MAJOR support area is just below, you won't want to short something, no matter what your system tells you, for example....

Good luck!
Clockwork
  • #24
  • Jun 17, 2008 7:28pm Jun 17, 2008 7:28pm
Quoting FX-Petra
This is my first post, but I have enjoyed this forum for almost 2 years-- it is the best of its kind on the net!!!

I have been trading a simple Eur/USD system for almost 10 months (180 trading days) on my mini account. It has been profitable, my average is just over 9 pips per day. I am considering using it in my regular account, but I thought you guys might have a look and give your opinion. I am a little embaressed at how simple it is, but it has been producing consistent profits. I have tried things a lot more sophisticated, but they have lost me a lot of money!
Geico Trading--
1. Start with the price at the 6am est candle close
2. Straddle that price with entry 20 pips above and sell 20 pips below. If no
entries hit by 10:30 am est, I am out-- no trades for the day.
3. No limits set, stops are 40 pips away from entry
4. Once a trade is in the money by 10 pips I engage a 10 pip trailing stop--
let it run until stopped out.
5. If trade is still open at 12pm est, I close it at market.
6. I match my pip size so that a 40 pip loss will cost me 3% of my account.


I know that this is ridiculosly simple----have I just been lucky? Will this eventually cost me another 30K (the size of my regular account?) I would appreciate any comments you have--- there is a lot of talented people that post on this forum

Thank you for share your system with us

I have few question and forgive my english i'm brazilian

About this question:
1. Start with the price at the 6am est candle close

So you use 1H timeframe and open your orders at 7:00am Est or you get the values of the 5:00am Est ?

Waiting your reply and again , thank you
  • #25
  • Jun 17, 2008 8:26pm Jun 17, 2008 8:26pm
Quoting mabenn
You could try to use multiples of the Average True Range for your initial stop loss, then adjust your position size to meet your risk requirements.

Your take profits could be a combination of a multiple of your intial stop, combined with a trailing stop. What I do is when I am up by 1x my risk, I will place stop at .5X intitial risk, when I am up 2x I will place my stop at breakeven and continue to trail it like that until the move looks to be exhausting itself. Then I will place a trailing stop at 1 or 2x the ATR whichever makes the most sense. This allows me to let my profits ride, while cutting my losses nice an short. Also allows me to breakeven if the trade goes against me right away.

By using the ATR I find that the markets volatility is telling me where to place my stop and exit, not a rigid stop and exit. Stops and exits should make sense based on CURRENT price action. a 50 point fixed stop might work now but in a year things could be way more volatile and a 50 point stop won't work so well.

My 2 bits friend. Keep it simple! I've spent a lot of time thinking about my exits, they are the keys to the kingdom...
yup i think ATR is the best and easiest way to calculate SL, thx bro
Lazy Forex
  • #26
  • Nov 11, 2008 11:23pm Nov 11, 2008 11:23pm
use any bar you want, the price at 6AM is the price at 6AM.
use a line. The price is still the same at 6AM

Quoting BrasilForex
Thank you for share your system with us

I have few question and forgive my english i'm brazilian

About this question:
1. Start with the price at the 6am est candle close

So you use 1H timeframe and open your orders at 7:00am Est or you get the values of the 5:00am Est ?

Waiting your reply and again , thank you
  • #27
  • Nov 11, 2008 11:31pm Nov 11, 2008 11:31pm
Sorry it repeated
  • #28
  • Jan 4, 2009 7:15pm Jan 4, 2009 7:15pm
FX-Petra

Once you have set your 20 point pip spread from the close of the 6:00 am candle, when the price hits that mark do you automatically go in or do you wait for that candle too close before going in. Hope you understand what I mean.

BTW, thanks for the thread. I have just joined the forum
  • #29
  • Feb 13, 2012 2:36pm Feb 13, 2012 2:36pm
Sorry for reviving an old topic, I find this method interesting, can anyone shed some light? Sorry again I am a newbie in trading :S
  • #30
  • Feb 13, 2012 9:55pm Feb 13, 2012 9:55pm
Hi

I am wondering if someone would be kind enough to let me know what GMT hour is 6 est.

Many thanks
Ezzy
What you do is a reflection of you....what I do is a reflection of me.
  • #31
  • Feb 13, 2012 10:13pm Feb 13, 2012 10:13pm
Dear Ezzy,

EST is GMT-5 I think.
I am having problem understanding the method though :S

Regards
  • #32
  • Feb 13, 2012 11:56pm Feb 13, 2012 11:56pm
Thanks Scalp, much appreciated.

Ezzy
What you do is a reflection of you....what I do is a reflection of me.
  • #33
  • Feb 14, 2012 12:07am Feb 14, 2012 12:07am
These types of methods work well when the market is behaving in a certain way. At the time, several years ago, this method would have worked for quite some time.

It may work now as well. However, usually the market has gone through several changes so that these methods will not work forever.

This may be a good study reference. The thing to do now, is to find a current trend that you can exploit.
  • #34
  • Last Post: Feb 14, 2012 12:32am Feb 14, 2012 12:32am
Thanks bro Price.
Appreciate your input, I am a scalper looking for a short timeframe strategy that works... But thats just me... hehe

Anyway, thanks for your input Price. <3
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