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4H Box Breakout

  • #3,581
  • Sep 10, 2009 12:09am Sep 10, 2009 12:09am
Quoting 11andy11
stay out of the market. Hindsight is always very clear.
Agree... I think we no need to catch the max movement, buy at the lowest point and take profit at the peak or sell the the top and profit at the lowest point. What we need to do is wait for the confirmation and exit earlier, make sure we are profit, base on your target...
  • #3,582
  • Edited 1:09am Sep 10, 2009 12:37am | Edited 1:09am
Hello,
I love your system Ace, in the last 3 months has worked well for me. I have one change I made (well couple but some were from here, like opening 3 positions the first at TP 1 and then moving the other SL to BE when hit).

I have just started trying another option that I thought I would share, it violates 2 major rules of you system though.
1. Takes more time, not just 30 min on a Monday and run.
2. Not all trades are closed at end of trading Friday.

But besides that it seems to be going well, I would love feedback.

Basically the change is that I do no longer use the SL but open a hedging position instead... at 1/2 the box size (so my max risk is 1/2 the box on any trade).
I then follow along and if turns back I TP on the hedging position and follow it back to my trade, this limits the loss (worst case senario if does not come back I loose 1/2 the box size in pips and close both positions) best case scenario, I win on the trade and the hedging.

I feel this offers 2 good points, one less risk by only risking 1/2 the box size. the other is you can stay in the trade as long as you want, not limited to closing at BOX size and then seeing it swing back because your risk is only 1/2 the box size and you are still in the trade.

Feedback anyone?
  • #3,583
  • Sep 10, 2009 1:08am Sep 10, 2009 1:08am
Quoting Ronald Raygun
For the record, I have been working on that concept. The hard part is properly positioning that pending order.
Thanks Ronald. Your coding would be interesting. I have written some code but I don't have it included in an EA yet.

I agree with the problem of where the Pending Order point should be. I find that I vary it depending on the volatility.

To begin with the entry point should be a variable and once we can watch its action on backtesting we can decide some kind of way of varying the number of pips away from close for the Pending Order depending on some indicator. Perhaps ATR of some kind.

Dave R.
  • #3,584
  • Sep 10, 2009 2:18am Sep 10, 2009 2:18am
Greetings gentlefolk.
There hasn't been much discussion on which candle/bar is the correct one to use of late so I figure that everyone has that problem worked out. But I will now muddy the waters.
I have run the system with my version of stops over the '08 and '09 Interbank FX data. As IBFX includes Sunday trades I used the high of those four hours +25 as the buy and the low -20 as the sell (ie 2000 to 2400 GMT). Then using the same stops etc I did it with the first 4 hours of the week (ie 0000 - 0400 GMT). Then finally I used 0400 - 0800 GMT.
And the winner was - wait for it - 0400 to 0800.
20 - 00 produced the lowest total, 00 - 04 was approx 11% better while 04 - 08 was 21% better than 20 - 00. All had roughly the same ratio of winning weeks to losing. I will now have to go back a couple of more years for more comparisons before deciding which I will trade.
  • #3,585
  • Sep 10, 2009 2:24am Sep 10, 2009 2:24am
Quoting premiumpips
Obviously this week is ranging. So does anyone know how to determine a ranging market before we place our orders? Thanks in advance.

Antonio
If anyone did, Antonio, he probably wouldn't have time to share it with the rest of us. He'd be too busy shoveling the money into his vault.

Remember, this system does not have a high winning percentage. Don't let that deter you, because the fantastic R:R more than makes up for the winning percentage.

It's like the baseball player who manages to get a hit only 3 out of 10 times. He fails far more than he succeeds, but it's enough to make him very rich. Limit your losses in ranging periods by sticking to one or, at most, two trades a week and you'll more than make up for the losses when GBP/JPY really breaks out again.

Just hang in there . . .
Greetings from Guanajuato, Mexico
  • #3,586
  • Sep 10, 2009 2:55am Sep 10, 2009 2:55am
Quoting yen44x
If anyone did, Antonio, he probably wouldn't have time to share it with the rest of us. He'd be too busy shoveling the money into his vault..... .
Hi Thread,

About that and the stat and the range period.
Ace feel that as I undertand. but he thinks to resize his position with the help of Atr for the moment.

In fact, I follow and studies EA seriously since two years and all the EA who are " Follow trend EA", like Ace setup is, have periods without trade.

In other word, they have the method to dertermine a range or a end of trend and they don't change their size when they find that, they stay out the market. and when another "trend period" begin, they enter .

So, they keep them safe during uncertainty.

Perhaps, the target of these thread now is to find the way to know when we are in a trend period or not.
  • #3,587
  • Sep 10, 2009 3:25am Sep 10, 2009 3:25am
Quoting yen44x

Remember, this system does not have a high winning percentage. Don't let that deter you, because the fantastic R:R more than makes up for the winning percentage.
This is correct, as least the data I have from Alpari UK confirms it. This strategy depends on two factors: 1) That Mondays usually form the swing low of the week (if its a buy week) or the swing high (if its a sell week) for the whole week. 2) The 1st 4Hr Segment of every Monday (1st Bar) usually forms the low of the day (if its a buy day) or high of the day (if its a sell day). To maximize on the R:R however, the two conditions must occur simulateneously.

From my daily data (07/23/2001 till 09/09/2009) it shows that the probability of Mondays being the swing low or high of the WEEK is 58.7 %. While data for the 1st Bar of Monday being the low or high of the DAY is 62.3 %. The chance of the two conditions occuring simultaneously is 36.57 %.

In other words, if you place your stop at the other extreme of the 1st Bar on Monday and do not move it at all while you wait for the extreme of the week to be reached (whatever this may be), your best chance of succes is 36.57% or about 1 out of every 3 trades on the average. However, the high R:R can make up for the loss.

To increase the chance of winning a larger number number of trades we can either 1) increase the stop size or 2) reducing the take profit which is what we are doing with the TP1, TP2, etc. The first case increases the risk, unless we are very sure of the potential direction while the second reduces the profit potential.

Would be glad if someone could verify my figures above.


Dave
  • #3,588
  • Sep 10, 2009 3:58am Sep 10, 2009 3:58am
Quoting GKnight
Hello,
I love your system Ace, in the last 3 months has worked well for me. I have one change I made (well couple but some were from here, like opening 3 positions the first at TP 1 and then moving the other SL to BE when hit).

I have just started trying another option that I thought I would share, it violates 2 major rules of you system though.
1. Takes more time, not just 30 min on a Monday and run.
2. Not all trades are closed at end of trading Friday.

But besides that it seems to be going well, I would love feedback.

Basically the change...
Hi Gknight,

I don't understand on how you do it. When you will take your profit and you will close the losing position?

Do you mean you close the profit position after you are sure it bounce back and let the lossing position to run on the other direction. If the pair goes on way only, then you gain nothing....
  • #3,589
  • Sep 10, 2009 5:09am Sep 10, 2009 5:09am
Quoting pips info
Hi Gknight,

I don't understand on how you do it. When you will take your profit and you will close the losing position?

Do you mean you close the profit position after you are sure it bounce back and let the lossing position to run on the other direction. If the pair goes on way only, then you gain nothing....
I will take profit as normal, but if moves against me will only open a hedging position (not use a SL at the other end of the box)... Once turns back I will TP on heading and watch... To see if another hedging position may be needed.
if does not turn back and really going the wrong direction I can close the trade and hedging position for a loss of only 1/2 the box size.

So all is the same as Aces System but I am using a hedging position (instead of a SL) to stay in while risking less pips then by stop loss.
  • #3,590
  • Sep 10, 2009 7:45am Sep 10, 2009 7:45am
2nd 100% SL hit this week... no lucky start for me...

This is my 3rd week trading this system... a lot of negative pips until now...
  • #3,591
  • Sep 10, 2009 9:29am Sep 10, 2009 9:29am
Quoting Inbox
2nd 100% SL hit this week... no lucky start for me...

This is my 3rd week trading this system... a lot of negative pips until now...
Yup, I believe this time of year is horrible for this system. Bad time to start
  • #3,592
  • Sep 10, 2009 12:26pm Sep 10, 2009 12:26pm
Quoting PiPsAddict
You definitely have a point Yen. It is hard to ascertain whether or not the SL would have been taken out based on a 4 Hour candle. If I had used a full 100% SL on the first breakout to the downside, then I would still be in the trade with a draw down. "What If" scenario's aside, this will definitely be a forward testing exercise.
Quoting Inbox
2nd 100% SL hit this week... no lucky start for me... This is my 3rd week trading this system... a lot of negative pips until now...
For those who may have missed it, PipsAddict and I were discussing whether using a 30% SL might have led to some early SL's during the first 4-hour candle on what would later turn out to be a winning trade. That's hard to tell in back testing just by looking at an H4 chart, so I broke the year's results down on M30 charts, and was much more encouraged after doing that.

As far as I could tell, the 30% SL negatively affected only one trade that went on to become a winner. That was on the week of March 23, which would have gone to TP3. That trade would have been stopped out in the early going, but I thought it was noteworthy that a very minor change to a 35% SL would have kept you in the trade.

So, for those leery of a 30% SL, you might still want to consider a 35-50% SL. I can find no justifiable reason for a 100% SL. Remember, on this system, you will have more losing weeks than winning weeks. Doesn't it make sense to limit your losses to the degree possible?

Especially for those of you who suffered two 100% stop losses this week, I have to ask you why you did it. If it's just because "that's the rules", I encourage you to review the thread as well as doing your own back testing. There have been several posts on the lack of success for second trades in a week. Secondly, there has been research regarding the validity of a reduced SL, at least in back testing. Frankly, it's hard to feel sorry for those who choose to suffer two 100% stop losses in a week. This system isn't about being "lucky". It's a mechanical system, so your only role as a trader is to fine-tune the mechanics to the highest degree possible.

I still remember an excellent post by Droland regarding "rules" (post 2101). He said, "My only talent is pushing peoples concept of the observance of rules, acceptance of convention, trusting the past and hoping for the best. The ability of independent thinking is lost to so many people that rules become their god."

I couldn't agree more. Ace has encouraged all of us as well to suggest modifications, not just for the sake of change, but with the goal of improving a great system. Long story short . . . minimize your pain (losses) and maximize your wins. OK, that's my sermon for the week.
Greetings from Guanajuato, Mexico
  • #3,593
  • Sep 10, 2009 12:49pm Sep 10, 2009 12:49pm
Which post has Droloand's variation on it? I tried to ask about his variation a couple of time, but I suppose I was overlooked. I trust that his 2nd trade is in the same direction as the 1st trade... Is that right?

thanks,

Walt
  • #3,594
  • Sep 10, 2009 1:04pm Sep 10, 2009 1:04pm
Quoting jones247
Which post has Droloand's variation on it? I tried to ask about his variation a couple of time, but I suppose I was overlooked. I trust that his 2nd trade is in the same direction as the 1st trade... Is that right?
thanks, Walt
Dave could explain a lot better than me what his variation his. Try going to "Forum Links" on the left side of the page and click on "Members List". Type in "droland" and you'll find every one of his posts ever written. I'm sure you'll find what you're looking for.
Greetings from Guanajuato, Mexico
  • #3,595
  • Sep 10, 2009 1:13pm Sep 10, 2009 1:13pm
thanks...
  • #3,596
  • Sep 10, 2009 1:29pm Sep 10, 2009 1:29pm
My strategy has been modified to place a 2 lot order at entry and take 1 lot off at 190 pip profit and the remaining lot off at 4X Box (or at the end of the week if not hit) for the GBPJPY pair. I use an initial SL of 50 pips and move the SL to BE after 190 pip profit is hit. These changes to my trading plan are a result of forward trading statistics.

My results this week are:

GBPJPY (2 trades):

1st lot LONG = -50 pips
2nd lot LONG = -50 pips

1st lot SHORT = -50 pips
2nd lot SHORT = -50 pips
  • #3,597
  • Sep 10, 2009 1:39pm Sep 10, 2009 1:39pm
Quoting FXLab
My strategy has been modified to place a 2 lot order at entry and take 1 lot off at 190 pip profit and the remaining lot off at 4X Box (or at the end of the week if not hit) for the GBPJPY pair. I use an initial SL of 50 pips and move the SL to BE after 190 pip profit is hit. These changes to my trading plan are a result of forward trading statistics.

My results this week are:

GBPJPY (2 trades):

1st lot LONG = -50 pips
2nd lot LONG = -50 pips

1st lot SHORT = -50 pips
2nd lot SHORT = -50 pips
FXLab . . . I appreciate the fact that you have consistently posted your weekly results, good or bad, and that you have made adjustments based on your forward testing.

Losing's never fun, but thanks to your adjustments, you still lost less trading 4 lots this week in comparison with those who traded 2 lots at a full 100% SL. You're a man with a plan!
Greetings from Guanajuato, Mexico
  • #3,598
  • Edited 2:04pm Sep 10, 2009 1:53pm | Edited 2:04pm
Quoting yen44x

Especially for those of you who suffered two 100% stop losses this week, I have to ask you why you did it. If it's just because "that's the rules", I encourage you to review the thread as well as doing your own back testing. There have been several posts on the lack of success for second trades in a week. Secondly, there has been research regarding the validity of a reduced SL, at least in back testing. Frankly, it's hard to feel sorry for those who choose to suffer two 100% stop losses in a week. This system isn't about being "lucky". It's a mechanical system, so your only role as a trader is to fine-tune the mechanics to the highest degree possible.
sorry please correct me if i am wrong.

I don't really understand why having a reduced SL would lead to a less loss in a trade, while having a full 4hr bar as SL would increase the loss, if one is following the proper money management plan.

the basic of money management is to limit the loss (risk) in a trade to a fixed, pre-determined percentage of your account. this amount is always fixed (e.g. 2%) regardless of the SL size.

Take for example, if the 4hr bar is 100 pips high, for a mini account, 1 lot is $1, so a 100 pips SL (i take out the spread thing for simplicity) would represent $100.

Say you have $10,000 in the account, and 2% of that would be $200. So, in this case, you will buy 2 lot, and the max loss would be $200 if the 100 pips SL is hit.

On the other hand, if you choose to have the so called reduced SL of 30%, i.e. 33.3 pips, that would be $33.3 in the same mini account. So, in this case, you would buy 6 lots which gives you the same risk %, and if the the SL is hit, you still lose 6 x $33.3 = $200.

Ok turn to the TP size, which is what you guys think is the magic thing when coupled with the "reduced" SL. If you target TP3, and you use a 30% SL, you are having a RR of 0.33:3 = 1:9. seems fantastic. however, this scenerio is no long the same as the TP3 in the original system, bcuz you are taking about a 1:9 RR system, not the original 1:3 RR system. So what's the difference?

It's all about the probability of hitting the SL and hitting the TP.

The RR gives you not only the amount you lose or win, but also the PROBABILITY of the SL or the TP being hit.

Theoretically, in the 1:3 RR system, the chance of SL being hit is 3 times higher than the TP being hit (the winning percentage) bcoz the distance of the TP is 3 times longer than the SL.

In the 1:9 RR system, the probability ratio jumps to 9 times.

So, what's the deal??? actually you are tweaking the system towards a much lower winning percentage, but much higher RR thing.

Of course, all these are just theoretical. I would just want to point out that, whether a high RR (but low winning percentage) system would yield more than a low RR system is a myth, but not as definitive as what you are wishing. at least, my back test of the TP1.5 would yield more than the TP3 in 2009 given they tolerate the same drawdown (which is one of the important coefficients which i don't see mentioned enough).

As for the SL with the full 4hr bar, I for one would think it's of some significant bcoz the high / low of the bar may (i say "may") represent an S/R zone, while 30% of the bar may not (again i say "may") represent anything (or just some minor S/R when zooming into some lower TF).

hope i won't do much offence here.
  • #3,599
  • Sep 10, 2009 1:57pm Sep 10, 2009 1:57pm
Quoting yen44x
As far as I could tell, the 30% SL negatively affected only one trade that went on to become a winner. That was on the week of March 23, which would have gone to TP3. That trade would have been stopped out in the early going, but I thought it was noteworthy that a very minor change to a 35% SL would have kept you in the trade.

So, for those leery of a 30% SL, you might still want to consider a 35-50% SL. I can find no justifiable reason for a 100% SL. Remember, on this system, you will have more losing weeks than winning weeks. Doesn't it make...
ahhhh, i'm so sorry that i didn't read these earlier. you are right.

my observation is a little bit different. more than 1 early stop that could've be profitable are stopped due to narrow SL, mine is 50% of box height.

however, overall, especially for August~present, the loss size were significantly reduced, which leads to much better overall profit.

i hate myself for not trying this idea.

thanks again.
  • #3,600
  • Sep 10, 2009 2:07pm Sep 10, 2009 2:07pm
Quoting dannywmk
I don't really understand why having a reduced SL would lead to a less loss in a trade, while having a full 4hr bar as SL would increase the loss, if one is following the proper money management plan. the basic of money management is to limit the loss (risk) in a trade to a fixed, pre-determined percentage of your account. this amount is always fixed (e.g. 2%) regardless of the SL size. hope i won't do much offence here.
First off, no offense at all. Diversity of opinion is a good thing as long as it leads to improvement.

My only comment would be that you are referring to a rule, or as you put it, to a "basic", of money management. Who says that the "basic" is an absolute? For example, what if I choose to trade the same two lots you're trading in the example you cited? If the two lots lead to a loss, you lose 200 pips and I lose 60 more or less. If the two lots end up a winner, our winnings are exactly the same. Is it better to follow the money management "basic" just because that's the rule?

Maybe I missed something in your argument. If so, please feel free to clear it up for me. In the meantime, good luck on your trades.
Greetings from Guanajuato, Mexico
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