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4H Box Breakout

  • #901
  • Jul 13, 2009 4:31pm Jul 13, 2009 4:31pm
I think this breakout system is extremely powerful as it stands,,,,Per the original rules,,,But for the sake of preservation of capital,,,And this might have already been discussed in previous posts,,,Taking partial profit at the first or second level and and the remainng balance at breakeven,And let the balance at that point run,,, might protect you from the larger drawdowns,,,We all know how volatile the forex markets are,, and letting a nice profit turn into a sizable loss is frustrating at very least,,,I am talking about both yen pairs,,,,Thats just a more conservative approach to think about,,,Especially when you have live cash on the line,,,Also ,,,maybe analyizing the initial 4h bar spread,,,the gpy/jpy was over 170 pips ,,,,Is it realistic to think that tp 4 could reach +670 pips? This is all subjective ,,,,based on probobilities and the law of averages,,,etc,,,,,,, I still like Aces orignal rules though,,,,,Breakout systems are very simple,,,So keep it simple and decide on a comfort level regarding your risk profile,,,,thx
  • #902
  • Jul 13, 2009 5:11pm Jul 13, 2009 5:11pm
I have been trading this method live for about one month now and have turned $3k into $14k with a few mods to the original method. Today is a good example or how the original method can really hurt if left along. The good short reversed and got stopped out with a big loss. A new long entry has been made and if the trade goes south again, another stop out will occur.

Ace has suggested the the Pending Buy today should be eliminated. Possibly but my short trade has me in profit by 125 pips today. Let explain how.

GbpJpy is very volatile as we all know and can take a good run then make a sizable reversal and then run again. Here is what I do by using an example of a typical long trade.

1. Using the original method we have a Long Pending trade order at say 150.00 GBPJPY. SL at 148.50 as per the original 4hr box concept.
2. The trade hits the pending order and opens a long trade at 150.00.
3. The trade runs to 150.50, I move the SL to BE (150.00) and add a 75 pip Trailing Stop.
4. The trade runs to 151.50 and my trailing stop has moved the SL to 150.75
5. The trade reverses and goes down to 150.25. I am closed at 150.75 with a 75 pip profit.
6. At the closing of my trade at 150.75 I immediately put a Pending Buy order in at 151.00 (25 pips above my close), 50 pip SL, 75 pip trailing stop. When the trade moved down to 150.25, I moved the pending Buy order down to my original trade exit or 150.75.
7. If the trade keeps going down I close the pending buy on Friday (probably Thursday as there would no time to profit before Friday close).
8. If the trade starts going back up, it re-enters at my original SL close of 150.75 and I let it run until it reverses again.
9. I keep doing this reversal re-entry during the week until about Thursday noon PST.
9. I let the open trades run through to Friday then close and start over again on Sunday. Close any Pending orders probably Thursday noon as there won’t be enough time to profit if you enter then (this needs to be reviewed).

Using this method, I do not need TP and I catch the full run of the week. My biggest risk is at the first entry of the trade if it reverses really quickly. I may close that trade manually if it happens and take a wait and see attitude. If the price goes to the mid point of my box I will re-enter appropriate new Pending orders.

This really needs an EA to back test but manually it is working wonders for me with NO LOSES for any week this month.

The 50 pip SL, 75 pip Trailing stop may be too small but you get the basic concept. Nearing the end of the week I would move the SL to a smaller value. Also, if we are in a fairly tight ranging market, keep the SL smaller and in strong volative trends, make them larger.

Also, the Risk/Reward ratio is hugely in our favor now.

Dave R.
  • #903
  • Jul 13, 2009 5:25pm Jul 13, 2009 5:25pm
Hey, nice trading Dave. Well done. I hope we see some backtesting on this. Sounds like it's been a huge winner for you. Beats twiddling my thumbs for 6 days waiting to get back in
  • #904
  • Jul 13, 2009 5:40pm Jul 13, 2009 5:40pm
Quoting droland
I have been trading this method live for about one month now and have turned $3k into $14k with a few mods to the original method....
Mind posting some charts, at various times to illustrate your variation?
  • #905
  • Jul 13, 2009 7:03pm Jul 13, 2009 7:03pm
Hi dave,

Is the the concept of AH from Jacko? What if the market is choppy and get touching your re-entry point and reverses to SL for more than one times? This is still possible. So would you impose a maximum number of re-entry (say max retry for the 2nd time in the same direction)?


Quoting droland
I have been trading this method live for about one month now and have turned $3k into $14k with a few mods to the original method. Today is a good example or how the original method can really hurt if left along. The good short reversed and got stopped out with a big loss. A new long entry has been made and if the trade goes south again, another stop out will occur.

Ace has suggested the the Pending Buy today should be eliminated. Possibly but my short trade has me in profit by 125 pips today. Let explain how.

GbpJpy is very volatile as we all...
  • #906
  • Jul 13, 2009 7:14pm Jul 13, 2009 7:14pm
Quoting Ace284
Mind posting some charts, at various times to illustrate your variation?
OK, take today for example. Looking at the chart attached, my pending SHORT hit at 149.36. At 100 pips (see the blue line at 148.36), I moved BE to my open price. I can't remember exactly the trailing stop but after hitting 147.54, the trade reversed and took me out at my trailing stop with a 125 pip profit.

I wasn't awake when that happened so when I got to the computer, I immediately put in a pending SHORT order at my last SL close. When the price moved to about center point of the box, I moved my pending SHORT back to the original box SHORT pending order position.

Obviously the new pending short hasn't been hit but the trade is now in the BUY trade. Since this is against a one month down trend, I am moving to BE at 50 pips with a 75 pip trailing stop. That trade is currently happening.

I hope that is more clear.

Dave R.
Attached Image (click to enlarge)
Click to Enlarge Name: example djr.gif Size: 75 KB
  • #907
  • Jul 13, 2009 7:36pm Jul 13, 2009 7:36pm
Quoting droland
I have been trading this method live for about one month now and have turned $3k into $14k with a few mods to the original method. Today is a good example or how the original method can really hurt if left along. The good short reversed and got stopped out with a big loss. A new long entry has been made and if the trade goes south again, another stop out will occur.

Ace has suggested the the Pending Buy today should be eliminated. Possibly but my short trade has me in profit by 125 pips today. Let explain how.

GbpJpy is very volatile as we all...
Preservation of capital is your topic. I dont want to get on the wrong side here but when some claim to add over 400% to there account, regardless of size in what has been some of the choppiest weather we have encountered, GBP/JPY is certainly no exception, and to top it off you use a trailing stop, one of the most ineffective ways to manage a trade in the long run, once again especially on the GBP/JPY which can swing 150 pips in an hour no problem.

The only reason I say so is that you would need to have leveraged or risked a great portion of your account on these trades to turn 3k to 14k in a month. Even at 5% of risk on account you would need to have held some serious winners over the month (even combined with 400:1).

I am interested in watching your progress. I too trade Opening Range Breakout and I am quite conservative, last week was the best week by far with the most offered for long tail traders in a long time. Trailing stops usually get eaten for breakfast and redigested for lunch in choppy markets even though they shorten the risk over time, but it is those shortened risks that can also shorten profits. It almost sounds very similiar to Jackos anti hedging strat (without the waiting for retrace before entering).

Still, interested to see how things work out for you.

Razor
  • #908
  • Jul 13, 2009 7:56pm Jul 13, 2009 7:56pm
Quoting Razor_trader
Preservation of capital is your topic. I dont want to get on the wrong side here but when some claim to add over 400% to there account, regardless of size in what has been some of the choppiest weather we have encountered, GBP/JPY is certainly no exception, and to top it off you use a trailing stop, one of the most ineffective ways to manage a trade in the long run, once again especially on the GBP/JPY which can swing 150 pips in an hour no problem.

The only reason I say so is that you would need to have leveraged or risked a great portion...
Hi Razor.

You are correct. I used a very high ratio and certainly did not mean that everyone should do this. I don't normally go so high but I had a small account and the smallest trade I can do at Dukascopy was 1 lot.

Certainly with larger funds the risk on accounts should be much smaller.

That doesn't change the principal of the above method however. You can afford a higher risk since the probability of a large loss is much smaller with this method yet almost the full profit of the run can be acheived. Really choppy markets would hurt but I can choose to stay out of those markets.

Dave R.

I will certainly keep everyone informed.

Dave R.
  • #909
  • Jul 13, 2009 8:13pm Jul 13, 2009 8:13pm
droland, whats your risk per trade?
  • #910
  • Edited 9:08pm Jul 13, 2009 8:29pm | Edited 9:08pm
Quoting droland
Hi Razor.

You are correct. I used a very high ratio and certainly did not mean that everyone should do this. I don't normally go so high but I had a small account and the smallest trade I can do at Dukascopy was 1 lot.

Certainly with larger funds the risk on accounts should be much smaller.

That doesn't change the principal of the above method however. You can afford a higher risk since the probability of a large loss is much smaller with this method yet almost the full profit of the run can be acheived....
How exactly would have tackled last weeks situation. The price moved to 2x and then retraced about 200 pips. Your trail stops would have surely been activated. The price later went to 6x.

See the potential problem with your method is that it requires a lot of decision making. Because now we're entering a stage where, emotions and greed can amplify and can ruin your trading. I would keep testing, until solid levels are created from your method. Or atleast very similar rules from week to week, because if these rules aren't in place, you could potentially end up losing. I like the fact that you're taking the time to explain your approach but just remember that this is a weekly strategy, which means that 200 pips here and there doesn't mean a whole lot if you look at the big picture.

If anyone finds themselves punching the wall after 50 or 100 unrealized pips dissolves, then they should invest some time into getting their emotions straight. Again I say this because, retracements are normal market behavior, in the 4H case, 100-200 pip retacement is pretty natural.

Keep up the good work Droland.
Attached Image (click to enlarge)
Click to Enlarge Name: retracement.gif Size: 41 KB
  • #911
  • Jul 13, 2009 9:14pm Jul 13, 2009 9:14pm
Quoting 11andy11
droland, whats your risk per trade?
If I am putting up funds and simply letting the system run, I would not go over 2% normally as there is a very large stop loss.

For me, I start out with the high SL but quickly move to BE and protect profits along the way so I calculate my real AVERAGE SL risk at about 50 pips. With a $15k account, I would trade 1 lot which, if it hit my average stop loss of 50 pips would be $500 on a $10 pip (but less on the GBPJPY pip price). If I really like the trade I may double that but I would watch it like a hawk and probably move my SL faster.

Please don't get me wrong. I am still working this out. I am not an expert. I really wish I could program this concept into an EA to do some back testing.

I am trying to keep Ace's concept but improve the Risk/Reward ratio.

Working so far but as Razor says, lets see how things go. There is still a hard road ahead.

Dave R.
  • #912
  • Edited Jul 14, 2009 1:38pm Jul 13, 2009 9:34pm | Edited Jul 14, 2009 1:38pm
Quoting Ace284
How exactly would have tackled last weeks situation. The price moved to 2x and then retraced about 200 pips. Your trail stops would have surely been activated. The price later went to 6x.

See the potential problem with your method is that it requires a lot of decision making. Because now we're entering a stage where, emotions and greed can amplify and can ruin your trading. I would keep testing, until solid levels are created from your method. Or atleast very similar rules from week to week, because if these rules aren't in place, you could potentially...
Hi Ace.

Assuming there was no interim SL closings lets assume I was running a 100 pip trailing stop. At 230 pips, the reverse occured and I would be stopped out at 130 pips (230 less my 100 pip SL). I now have a 130 pip profit.

I enter a Pending SHORT at the 130 pip mark and just waited. When the price came back down, I would be in the short again at the SAME price I got out and I would have ridden the price down to 6X. There is no decision making. A possible decision would have been to move the Pending SHORT order up closer to the turn around but that gets scary as you say.

My method is dead simple. Minimal thinking. You do have to decide how large or how small the SL and trailing stop should be. I haven't worked that out completely yet but experience will provide better answers.

dr
  • #913
  • Jul 14, 2009 12:25am Jul 14, 2009 12:25am
Quoting droland
Hi Razor.

You are correct. I used a very high ratio and certainly did not mean that everyone should do this. I don't normally go so high but I had a small account and the smallest trade I can do at Dukascopy was 1 lot.

Certainly with larger funds the risk on accounts should be much smaller.

That doesn't change the principal of the above method however. You can afford a higher risk since the probability of a large loss is much smaller with this method yet almost the full profit of the run can be acheived. Really choppy markets would hurt but...
Cool understand, hope you continue to do well. This is a very robust system that can be catered for by all or any TP method with varing success, but as has been proven by a number of very successful Volitilty Breakout or Opening Range breakout traders (tony crabel springs to mind immediatly) over a very long period of time

Razor
  • #914
  • Jul 14, 2009 1:52am Jul 14, 2009 1:52am
Very astute ideas on preserving your profits and trading capital,,,Thanks for all your inputs,, as we all need to refine our methods of squeezing the most pips out of a trade!,,What a great problem to have!!,,,We are having this conversation because breakout trading is very profitable and can be a set and forget technique with minimal computer time,,,,This thread will be here a long time based on the fact that it is time tested,,,whether forward or backward,,,,The only way we can lose momentum is if the yen pairs flatline and go braindead!! Aint going to happen,,,,I guess my point is be patient and let the trade develop into a solid gain,,,,Then take some profits and set your SL to BE then adjust it according to developing support levels,,,This is one of the best trading systems on FF,,,,And I am excited to see how traders take advantage of its full potential!!!,,,thx
  • #915
  • Jul 14, 2009 2:03am Jul 14, 2009 2:03am
Dave

I am new to this method and had my first go yesterday on GBPJPY, although I can see where ACE says be wary of the big swings with this pair, I subscribed to a method similar to yours on my first attempt in taking 1/2 profits at T1 for 140 pips and then took another 60 pips using a trailing stop on the retracement. I'm still very much in the preservation of capital stage so didn't want to hand back all of my profits on my first go. The great thing that I can see about this method is that we can all make slight mods to suit our own trading styles. I shall look closer at re-entering as you have been doing.

Dave the Coffeeman
  • #916
  • Jul 14, 2009 2:46pm Jul 14, 2009 2:46pm
Quoting Ace284
ATR(16) can be directly translated to the average range of the past 16 bars.
Again, keep in mind that range is the high minus low of the bar.

For instance, on a 1 hour chart, the past 16 candles had an average range of 50 pips. For GBP/JPY, this will be shown as 0.5000.

If the average true range was 100 pips, then it would read 1.0000
750 pips = 7.5000
754 pips = 7.5400
2520 pips = 25.2000

Essentially you move the decimal two places to the right and it will be the range. This is only for the JPY pairs, for the other pairs, there is a slight...
Ace, I just want to say thanks for taking the time to explain that all for me =) I understand it now and can see how it can play into this weeks chart. As I understand a TP4 and TP3 will be pretty difficult to reach and TP4 probably impossible, but TP2 is still within reach I think. So, yeah thanks again for explaining the ATR =)
  • #917
  • Jul 14, 2009 4:59pm Jul 14, 2009 4:59pm
Once again, Ace love the system. I saw in an earlier post regarding 2006 performing poorly using this system. I went back and looked and didn't paper trade it but just eyeballing entries and exits and it appears that 04,05,06 did pretty bad utilizing this system. Can you or anyone else comment on this and its possible impact in regards to future liquidity (or why it had a lack of liquidity during this time period) on specifically the gbpjpy pair?
  • #918
  • Jul 14, 2009 5:55pm Jul 14, 2009 5:55pm
droland, can you please verify this image correctly shows how you would have traded with your re-entry methods during the week of June 22?

These trades were made by an EA I'm working on and I want to make sure it's following your rules before I continue work on it.

It uses a 75 pip trailing stop. Original s/l follows original rules. Re-entries have a s/l set at 50 pips. All re-entries are entered 25 pips away from where the previous trade was stopped out at.

It placed 7 trades with 5 winners and 2 losers.

Thanks!

Attached Image (click to enlarge)
Click to Enlarge Name: gbpjpy (week of june 22) - Details.gif Size: 17 KB
  • #919
  • Jul 14, 2009 8:18pm Jul 14, 2009 8:18pm
Quoting 11andy11
Once again, Ace love the system. I saw in an earlier post regarding 2006 performing poorly using this system. I went back and looked and didn't paper trade it but just eyeballing entries and exits and it appears that 04,05,06 did pretty bad utilizing this system. Can you or anyone else comment on this and its possible impact in regards to future liquidity (or why it had a lack of liquidity during this time period) on specifically the gbpjpy pair?
Breakout methods have been popular over the years because they are quite robust. They allow for the change in momentum and give traders an opportunity to catch the change. There are, with all systems, times when the method may not work aswell as other times. The key is, if your system is robust and has a proven time period of greater than 1 year (most I prefer are over a couple of decades because it would show how they work in all climates, booms and busts) then it is up to you the trader to remain systematic. Traders who look for the 'In' system usually end up where they dont want to be, broke. This is because while the system may be a winner to 1 trader, it wont neccesarily be a winner to you. A number of factors limit traders from trading someone elses methodology, the main being comfort and trust.

If you are not comfortable trading the system 'systematically' and you dont trust that it will provide you with 'long term' rewards (short term big returns almost always end up in spectacular busts) then you are not going to trade it for very long.

The benefit of breakout trades is that there are so many available, from long Time frames, to short time frames. Finding one that is robust and suits your style is the challenge. Remember that backtesting is up to the trader. If you just peruse blankly and quickly over charts you are going to get much limited results and formulate the wrong decision. Backtesting needs to be as methodical as your future trading is going to be. To forumate a 'conclusion' by not taking the time is reckless and it will more than like lead to you just trading because everyone else is saying its great. It may suit everyone else, to you it may not.

Take care.

Razor

BTW if you want to backtest systems then download Forex Tester. It is a great tool that can save you alot of time.
  • #920
  • Jul 15, 2009 12:09am Jul 15, 2009 12:09am
Thanks Razor for the input. I did spend several days last week methodically backtesting this system on paper for about 2.5 years.
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