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4H Box Breakout

  • #2,501
  • Edited 3:28pm Aug 25, 2009 3:15pm | Edited 3:28pm
Yes, I find this system to be VERY effective with any 4H trend trading style, I havn't done any extensive testing on any other time frames. But since I devised this advanced trailing stop system, my personal R:R is somewhere around 1:9-11 depending on the month, but I also go more in depth for my own personal use with this system that allows me to profit from every market condition, such as up trend, down trend, ranged (unless the range is so small it's not worth it) and I also have noticed it's effective in safeguarding or capturing major news movements as well, but I'm sure the 1H would be most effective with capturing major news movements.

I learned about forex about 6 months ago, I have been reading and reviewing every bit of information I can get my hands on, soaking it up like a sponge. After a few months of reading everything I could (I generally sleep about 6 hours a day, and am currently trading forex, but was unemployed beforehand so I had A LOT of time on my hands) and quickly came to the conclusion the best R:R is found in trends, so I researched everything I could about trend trading, and what the most effective system were and how to trade them, being a perfectionist I felt I could devise a universal trend advanced trailing stop. Prior experience has told me that my "perfectionism" often leads me to failure when persuing the contruction of such things, but this particular task appears as tho it has come to frution.

I encourage any trend trader to test this system with their own personal trading style to see if it lives up to my original intention. But once again, I ask that this particular system be kept within the confines of ForexFactory. I am willing to share my findings with you folks because I have learned a great deal of of this field that helped me devise this system from those who have contributed their systems in the past.
  • #2,502
  • Aug 25, 2009 3:25pm Aug 25, 2009 3:25pm
Did everyone get stopped out this week or is there anyone still floating?
  • #2,503
  • Aug 25, 2009 3:28pm Aug 25, 2009 3:28pm
Quoting bhamble
My experience is that this method works well in moving markets. The key is determining which weeks the market will move and which weeks the market will range. I think a good awareness of current world affairs and a working knowledge of the news reports due out that week and how they are likely to move the markets can be beneficial when determining trailing/BE stops and targets for that week. Getting too mechanical and inflexible will always result in inconsistent results with changing market conditions.
That's easier said then done. Take my word for it. It may seem like a clear cut solution to trading but the fact is, an average trader must study worldwide news for decades and test how that news affects the market each time.

In my opinion, the inconsistency comes when a trader decides to trade foreign news. Last year, U.S stock markets fell and a ton of American stock investors lost money. And that was in their OWN country. Forex is unregulated, so there is little chance that we can get a pass behind the scenes to see what investors and banks around the world are doing. Most of the time we don't actually know what direction the market will go when news comes out. Thats why multiple times on the forum, you will be advised to stay out of the market when its news hour because again, its difficult to predict the movement. Let alone setting Targets and BE stops for the 4H Box Breakout system.

Overall, I would not bring news into this system, unless multiple countries have bank holidays at the start of the week.
  • #2,504
  • Aug 25, 2009 3:31pm Aug 25, 2009 3:31pm
Quoting Jesper
Did everyone get stopped out this week or is there anyone still floating?
Yes, stopped out at BE earlier.
  • #2,505
  • Aug 25, 2009 3:39pm Aug 25, 2009 3:39pm
Hi Pharoah
Tks for sharing .
Can you show in your charts the actual exit points of this week on GY & EY trades ?
What would have been the outcome of using your method in pips ?
Tks
David

Quoting Pharoah
I most certainly can.

Attachment

As you can see in this chart, the price retraced enough that it could have stopped out ALOT of you at a rather disappointing take profit (compared to what the market did this week). With this technique, you can have easely earned yourself almost 3 times the amount of the breakout box size (and if you re-entered at the crossover of the price and Red Simple MA to recieve an even larger profit.

Attachment

in this image, the price broke out on the bottom twice, it got stopped out one...
  • #2,506
  • Aug 25, 2009 3:58pm Aug 25, 2009 3:58pm
Quoting david4u
Hi Pharoah
Tks for sharing .
Can you show in your charts the actual exit points of this week on GY & EY trades ?
What would have been the outcome of using your method in pips ?
Tks
David
This week would have this result using my method on those pairs.

GY

Attached Image (click to enlarge)
Click to Enlarge Name: GY.jpg Size: 160 KB


This trade is still going strong at a total of 177 pips profit, with a trailing stop of +73.3 pips profit, and climbing.


EY

Attached Image (click to enlarge)
Click to Enlarge Name: EY.jpg Size: 159 KB


This trade would have stopped out at BE, so no loss.
  • #2,507
  • Aug 25, 2009 4:11pm Aug 25, 2009 4:11pm
Quoting Ace284
That's easier said then done. Take my word for it. It may seem like a clear cut solution to trading but the fact is, an average trader must study worldwide news for decades and test how that news affects the market each time.

In my opinion, the inconsistency comes when a trader decides to trade foreign news. Last year, U.S stock markets fell and a ton of American stock investors lost money. And that was in their OWN country. Forex is unregulated, so there is little chance that we can get a pass behind the scenes to see what investors and...

Ace, but good part that we open our trades on Sundays and usually we have no important news till Tuesdays.
  • #2,508
  • Aug 25, 2009 4:14pm Aug 25, 2009 4:14pm
Pharoah
What is your buffer ?
looks smaller than 20 ...
Can u explain "with a trailing stop of +73.3 pips profit" ?
Tks
David

Quoting Pharoah
This week would have this result using my method on those pairs.

GY

Attachment

This trade is still going strong at a total of 177 pips profit, with a trailing stop of +73.3 pips profit, and climbing.


EY

Attachment

This trade would have stopped out at BE, so no loss.
  • #2,509
  • Aug 25, 2009 4:21pm Aug 25, 2009 4:21pm
Quoting Pharoah
This week would have this result using my method on those pairs.

GY

Attachment

This trade is still going strong at a total of 177 pips profit, with a trailing stop of +73.3 pips profit, and climbing.


EY

Attachment

This trade would have stopped out at BE, so no loss.
When I see moving averages on charts, I usually turn a blind eye. Why? because moving averages are lagging indicators. In my experience they look fine in hindsight, but when you trade them in real time, its a different story.

Not saying they don't work but, real time testing or simulation is mandatory for trading with moving averages.

Download this simulator and test away. Its off Ronald Raygun's page, and i'd have to say that its helped me judge MANY systems that use moving averages, signal arrows etc. Helped my trading by a hundred times. Read the manual, throw it on your Metatrader 4 and trade the past in real time to get a feel for moving averages.

Pharoah, i'll give it a go in the simulator as well.
Thanks
  • #2,510
  • Aug 25, 2009 4:47pm Aug 25, 2009 4:47pm
Quoting david4u
Pharoah
What is your buffer ?
looks smaller than 20 ...
Can u explain "with a trailing stop of +73.3 pips profit" ?
Tks
David
Nope, the buffer is at 20.

What I mean by the trailing stop of 73.3 pips profit is if you look at the GY chart, the trade is still active, has not hit the BE point, once the black MA moves over the BE point, the trailing stop starts to follow the black MA, which is at this point 73.3 pips in the profit. so right now, if the trend had a massive reversal, my trade would stop out at 73.3 pips in profit.
  • #2,511
  • Aug 25, 2009 4:52pm Aug 25, 2009 4:52pm
Quoting Ace284
When I see moving averages on charts, I usually turn a blind eye. Why? because moving averages are lagging indicators. In my experience they look fine in hindsight, but when you trade them in real time, its a different story.

Not saying they don't work but, real time testing or simulation is mandatory for trading with moving averages.

Download this simulator and test away. Its off Ronald Raygun's page, and i'd have to say that...
yeah, MA's can be a pain like that, but this is the beauty of my system, shifts are friends with my system, because where the price crosses over, has already been done, it IS a past point of the moving average.

Red = Shift 1, black = shift 5 which means there is no lag

But I do fully agree when talking about real time not shifted MA's, and like anything man made, I'm sure there can be errors, I just havn't really found anything negative.
  • #2,512
  • Edited 5:34pm Aug 25, 2009 5:31pm | Edited 5:34pm
Quoting Pharoah
I've actually been thinking about this system, and how to help increase the R:R in the traders favor, and I have devised something that I believe all of you here could benefit from.

1. Follow all original rules except stoploss and takeprofit rules, COMPLETELY IGNORE THEM.
2. Create a smooth moving average, call it "BE MA" and set it's parameters to 3, 1 (Period 3, shift 1) make this MA red.
3. Create another Smooth Moving Average, call it "PRO MA" and set it's parameters to 2, 5 (period 2, shift 5) and make this MA Black.

When the price...
Pharoah

So once you enter a trade you monitor the red MA until it hits the BE point. Then when the black MA crosses the BE point your stop follows the black MA.

Are you physically moving the SL up or down to follow the MAs? (I'm thinking of some of the movable SL and TPeas out there) I'm trying to understand how you functionally use the MAs to trail the price other than just watching them 24-7.

Thanks,
Sandy
  • #2,513
  • Aug 25, 2009 5:43pm Aug 25, 2009 5:43pm
Quoting nubchai
Pharoah

So once you enter a trade you monitor the red MA until it hits the BE point. Then when the black MA crosses the BE point your stop follows the black MA.

Are you physically moving the SL up or down to follow the MAs? (I'm thinking of some of the movable SL and TPeas out there) I'm trying to understand how you use the MAs to trail the price other than just watching them 24-7.

Thanks,
Sandy

as it's simple, I take the figure on a new open bar, check where the simple MA is at the same point above or below the new bar, and set my stop there, 4 hours later, I go back and check, and update my stop accordingly, with this technique, you only ever have to check your charts once every 4 hours for maybe 5-15 minutes updating stoplosses. And because they are shifted, the MA point isn't going to be going anywhere anytime soon, as a matter of fact, once the price breaches the BE and the black line breaches the BE, you'll be able to predict where your next stop loss is going to be placed for the next 2 or more bars accurately.

And yes, I will post an screenshot displaying exactly how to use my system.


Attached Image (click to enlarge)
Click to Enlarge Name: flow.jpg Size: 162 KB


The black line I have drawn in addition to the MA's is how the system reacts near the BE point.
  • #2,514
  • Aug 25, 2009 5:53pm Aug 25, 2009 5:53pm
Quoting Pharoah
I feel as though I must make 1 final note on this advanced trailing stop system.

As far as I am aware, I am the original creator of this trailing stop system, and with that said, I wish for this trailing stop system to not breach outside of ForexFactory's walls. This system is exclusive to forexfactory members and WILL be in use in upcoming EA's both commercial and freely distributed to a select number of members within the Forex Factory community.

But I'm glad if my system can help any of my fellow community traders.
Pharoah. I apologize. I have given your basic idea to the Yahoo Group before you posted this restriction. Ron Thompson has produced an excellant EA but may or may not incorporate this idea.

Dave R.
  • #2,515
  • Aug 25, 2009 5:56pm Aug 25, 2009 5:56pm
Quoting droland
Pharoah. I apologize. I have given your basic idea to the Yahoo Group before you posted this restriction. Ron Thompson has produced an excellant EA but may or may not incorporate this idea.

Dave R.
would you be so kind as to edit the post and remove it if that is possible?

I understand I should have posted my restriction of my system earlier than I did. But if you could remove it, that would be muchly appreciated.
  • #2,516
  • Aug 25, 2009 6:01pm Aug 25, 2009 6:01pm
Quoting Pharoah
would you be so kind as to edit the post and remove it if that is possible?

I understand I should have posted my restriction of my system earlier than I did. But if you could remove it, that would be muchly appreciated.
The forum goes out as emails but I will attempt to delete my original at the source.

dr
  • #2,517
  • Aug 25, 2009 6:08pm Aug 25, 2009 6:08pm
Quoting droland
The forum goes out as emails but I will attempt to delete my original at the source.

dr
Thanks for your understanding. And it wouldn't be such a problem but I am building a couple EA's that a number of member here are going to get for free but my main goal is to allow the user's here at ForexFactory exclusive rights and complete knowledge of my system to fully utilize it to it's maximum potential, as I have learned a great deal from you folks here and see it only fitting that those who helped (weither they knew it or not) be entitled to my findings.

However, I am currently trading on a VERY small live account and am looking to build up my account to a more manageable level by destributing my EA via other sources than here. (I state this to imply that I have absolutely NO commercial intent other than contracting of programmers within the ForexFactory Community) At this point, I can't afford to have this technique leaked out beyond here. I posted my findings mainly because I value and respect the opinions of the members here, and hope that people here can benefit from it.
  • #2,518
  • Edited 6:13pm Aug 25, 2009 6:11pm | Edited 6:13pm
Quoting Pharoah
as it's simple, I take the figure on a new open bar, check where the simple MA is at the same point above or below the new bar, and set my stop there, 4 hours later, I go back and check, and update my stop accordingly, with this technique, you only ever have to check your charts once every 4 hours for maybe 5-15 minutes updating stoplosses. And because they are shifted, the MA point isn't going to be going anywhere anytime soon, as a matter of fact, once the price breaches the BE and the black line breaches the BE, you'll be able to predict where...

Thanks Pharoah I see. You did say both MAs are smoothed right? As opposed to simple MAs.
  • #2,519
  • Aug 25, 2009 6:13pm Aug 25, 2009 6:13pm
Quoting Ace284
If the 50% mark does work then we would effectively increase our RISK:REWARD from 1:4 to 1:8. That'd be something of beauty. To expand on that, perhaps the initial stoploss can be placed at the top or bottom of the candle that broke the box. Thats something i've been noticing because during ranging weeks, when TP1 is not hit, the price usually moves to other side of the box and we take the full hit. We can minimize that with the approach I just mentioned....
Hi Ace and everyone,

To me simplicity is key, the more simple the better in my opinion. I also have been looking to see how we can minimize loss as I believe it is more important than the profit gains. I have been visually looking the the charts and I agree with you ACE that moving stop loss above or below of the breakout candle is more profitable but also it takes away the fact that we can be away from our monitors............Now as mentioned before, by placing the initial stop loss half way in the box, then it is something we can do as we have been which is have our entries and stops and targets and that way we only have to manage the trade without waiting to see which bar is going to breakout of the box.

As far as the 100 pips and then to BE seems as a good strategy and I have not had the time yet to look at that factor but it does seem it can help in reducing our losses thus having a higher risk to ratio.

Thanks everyone for their contribution
Keeping Life Simple
  • #2,520
  • Aug 25, 2009 6:13pm Aug 25, 2009 6:13pm
Quoting nubchai
Thanks Pharoah I see. You did say both MAs are smoother right? As opposed to simple MAs.
Yes, they are smooth moving average, this helps balance out any spike in the MA that could throw off it's flow, also, the MA is set to Median Price (HL/2)
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