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5:1 Ratio

  • #1
  • First Post: Mar 29, 2007 6:03am Mar 29, 2007 6:03am
Hi everybody.

Last two months I was thinking about system based only on a good money managment and good RRR. Without any tools.

My pair is Cable because is volatile what is important for this system.
Every day in certain hour (7:30, GMT+1) I open a trade in direction of last day. My SL is -20 pips from open and TP 100 pips. I move SL to BE after 40 pips.

The main part of this system is money managment. When the RRR is 5:1 I can have 5 losing trades in row only 6th trade I will open trade with more lots. Here is the chart of position sizing.

Trades Lots
1. 1




2. 1




3. 1




4. 1




5. 1




6. 1,5




7. 1,5




8. 2




9. 2,5




10. 3




11. 3,5




12. 4




13. 5




14. 6




15. 7




16. 8,5




17. 10




18. 12




19. 14,5




20. 17,5




21. 21




22. 25





With these position sizing I can cover all previous loses.
Since 28.7.06 (which is 171 trading days) in my backtesting were maximum 12 losing days in row and next day covered all loses. Circle is finished after good trade (TP 100 pips hit).
Risk is never biger than 1% of account on begining of circle.

The percentage of good trade is around 19%. So with every 5 losing trades is one good trade.

I am testing it live now with my micro account. Today was fifth losing trade in row so tomorrow I am opening with 1,5 lot. Will see what this system can do.

Any comments welcome.

Many pips to all
Peter
  • #2
  • Mar 29, 2007 6:15am Mar 29, 2007 6:15am
Questions

1) do you trade on Sundays? I can't imagine that you'd be successful in hitting 100 pips on those days very often.

2) do you keep trades open until they reach either TP or SL?

2a) If you DON'T, then how do you count partial profits/losses where you don't reach either TP or SL?

Quoting petvel1985
Hi everybody.

Last two months I was thinking about system based only on a good money managment and good RRR. Without any tools.

My pair is Cable because is volatile what is important for this system.
Every day in certain hour (7:30, GMT+1) I open a trade in direction of last day. My SL is -20 pips from open and TP 100 pips. I move SL to BE after 40 pips.

The main part of this system is money managment. When the RRR is 5:1 I can have 5 losing trades in row only 6th trade I will open trade with more lots. Here is the chart of position sizing.

Trades Lots
1. 1




2. 1




3. 1




4. 1




5. 1




6. 1,5




7. 1,5




8. 2




9. 2,5




10. 3




11. 3,5




12. 4




13. 5




14. 6




15. 7




16. 8,5




17. 10




18. 12




19. 14,5




20. 17,5




21. 21




22. 25





With these position sizing I can cover all previous loses.
Since 28.7.06 (which is 171 trading days) in my backtesting were maximum 12 losing days in row and next day covered all loses. Circle is finished after good trade (TP 100 pips hit).
Risk is never biger than 1% of account on begining of circle.

The percentage of good trade is around 19%. So with every 5 losing trades is one good trade.

I am testing it live now with my micro account. Today was fifth losing trade in row so tomorrow I am opening with 1,5 lot. Will see what this system can do.

Any comments welcome.

Many pips to all
Peter
  • #3
  • Mar 29, 2007 6:50am Mar 29, 2007 6:50am
I'm sure that if you use a simple moving average cross you will get better % of winning trades. Use a big enough time frame (>=4h).
  • #4
  • Mar 29, 2007 6:59am Mar 29, 2007 6:59am
Quoting mrmikal
Questions

1) do you trade on Sundays? I can't imagine that you'd be successful in hitting 100 pips on those days very often.

2) do you keep trades open until they reach either TP or SL?

2a) If you DON'T, then how do you count partial profits/losses where you don't reach either TP or SL?

1. No first trade is on Monday.

2. Yes I keep it open and if nothing is hit I will close it next day at the time when I open a new trade. Only Friday I will close trade at 10PM.
This happened only 11 times and it was only positive pips.

2a. If TP or SL is not hit I am taking it like another lose in row.
  • #5
  • Mar 29, 2007 7:09am Mar 29, 2007 7:09am
Quoting Scientist
I'm sure that if you use a simple moving average cross you will get better % of winning trades. Use a big enough time frame (>=4h).
Which periods of MA can be the best?

Thank you
  • #6
  • Mar 29, 2007 8:19am Mar 29, 2007 8:19am
I have backtested this on 10 years of daily data.

The results are relatively poor.

The maximum # of losses for 1 full year is 20.

The maximum # of losses for 2-5 years is 30.

The maximum # of losses for 6 years is 36.

The maximum # of losses for 7-10 years is 62.

I did back test the rest of the data that I had and it came up with 120 maximum number of losses for about 18 years...so, not so good.

The winning percentage is only 13%.

You'll definitely need improve the winning percentage.
  • #7
  • Mar 29, 2007 8:51am Mar 29, 2007 8:51am
Quoting mrmikal
I have backtested this on 10 years of daily data.

The results are relatively poor.

The maximum # of losses for 1 full year is 20.

The maximum # of losses for 2-5 years is 30.

The maximum # of losses for 6 years is 36.

The maximum # of losses for 7-10 years is 62.

I did back test the rest of the data that I had and it came up with 120 maximum number of losses for about 18 years...so, not so good.

The winning percentage is only 13%.

You'll definitely need improve the winning percentage.

Sorry I dont understand it right.
You mean there is 20 losses in row?

Thanks
  • #8
  • Mar 29, 2007 9:18am Mar 29, 2007 9:18am
That is correct...consecutive losses.

Quoting petvel1985
Sorry I dont understand it right.
You mean there is 20 losses in row?

Thanks
  • #9
  • Mar 29, 2007 11:00am Mar 29, 2007 11:00am
Quoting petvel1985
Which periods of MA can be the best?

Thank you
Crosses of EMA is better..

EMA(20) and EMA(34) ... good performance in almost all timeframes.

Combine this with CCI(50) for trend and CCI(14) for take position.
  • #10
  • Mar 29, 2007 11:18am Mar 29, 2007 11:18am
Are you saying use this information in conjunction with the described system, or is this a separate system?

Quoting pablorpl
Crosses of EMA is better..

EMA(20) and EMA(34) ... good performance in almost all timeframes.

Combine this with CCI(50) for trend and CCI(14) for take position.
  • #11
  • Edited 12:15pm Mar 29, 2007 11:24am | Edited 12:15pm
Quoting mrmikal
Are you saying use this information in conjunction with the described system, or is this a separate system?
It's a separate system
  • #12
  • Mar 29, 2007 11:29am Mar 29, 2007 11:29am
Quoting mrmikal
That is correct...consecutive losses.
Thank you for your observation. Can you tell me what are the dates of these losses. Since when it start till first good trade.

Thank you
  • #13
  • Mar 29, 2007 11:42am Mar 29, 2007 11:42am
I'm not sure why that matters, but in 2006 we had 20 consecutive:
Start = 07/27/2006
End = 08/21/2006

For 5 years we had 30 consecutive:
Start = 11/04/2005
End = 12/12/2005

For 10 years we had we had 62 consecutive losses:
Start = 06/08/2000
End = 09/05/2000

And over an 18 year period we had a 120 consecutive losses:
Start = 12/22/1993
End = 06/13/1994

So, there you go.

Quoting petvel1985
Thank you for your observation. Can you tell me what are the dates of these losses. Since when it start till first good trade.

Thank you
  • #14
  • Mar 29, 2007 11:58am Mar 29, 2007 11:58am
Quoting mrmikal
I'm not sure why that matters, but in 2006 we had 20 consecutive:
Start = 07/27/2006
End = 08/21/2006

For 5 years we had 30 consecutive:
Start = 11/04/2005
End = 12/12/2005

For 10 years we had we had 62 consecutive losses:
Start = 06/08/2000
End = 09/05/2000

And over an 18 year period we had a 120 consecutive losses:
Start = 12/22/1993
End = 06/13/1994

So, there you go.
Thank you again. I backtested it since 28.7.06 and first winning trade was 4.8.06 and another one 9.8.06. Maybe I did some mistake.
  • #15
  • Mar 29, 2007 12:14pm Mar 29, 2007 12:14pm
I'm using daily data, but I'm also assuming that the low would probably be hit before the high...this may not always be the case...I'm sure it's entirely possible that the high could be hit before the stop. However, I'm basing my estimates on the most pessimistic outcome.

Quoting petvel1985
Thank you again. I backtested it since 28.7.06 and first winning trade was 4.8.06 and another one 9.8.06. Maybe I did some mistake.
  • #16
  • Mar 29, 2007 12:21pm Mar 29, 2007 12:21pm
Quoting mrmikal
I'm using daily data, but I'm also assuming that the low would probably be hit before the high...this may not always be the case...I'm sure it's entirely possible that the high could be hit before the stop. However, I'm basing my estimates on the most pessimistic outcome.
I understand. I was using 30 min charts for each day. So maybe the possibility is a bit higher.
  • #17
  • Last Post: Mar 29, 2007 12:22pm Mar 29, 2007 12:22pm
I switched the parameters to be the most optomistic and of course, they improved...working with daily data, it's impossible to tell what was hit first, the stop loss or the take profit...I suppose it could be somewhere in the middle, but honestly it sounds a bit risky.

over a 10 year period, the maximum number of consecutive losses, we get only 25...

over a 1 year period, the maximum number of consecutive losses is 13.

It should be noted, however, that we cannot assume which was hit first...the TP or the SL...I'm going to assume that it's somewhere half-way inbetween the most optimistic and pessimistic views. However, the pessimistic view is the worst possible outcome which is usually what system testers use to calculate risk...

I have to say, the risk is high.

Quoting mrmikal
I'm using daily data, but I'm also assuming that the low would probably be hit before the high...this may not always be the case...I'm sure it's entirely possible that the high could be hit before the stop. However, I'm basing my estimates on the most pessimistic outcome.
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