4H Breakout With Custom Stop Loss

Rofl, comical.

I have decided to re-write the instructions so they are easier to understand, I'm a rambler and tend to confuse myself when explaining things.

The revision of how the rules are laid out should prevent any further confusion, as what is considered at SPECIFIC times, will be included in the proper place, such as entry, this will include all conditions to consider AT entry to determine stoploss variation, I will then re-organize how each condition will act, and how all conditions end in one of 2 ways, Trailing Stop, or MA stop.

I will attempt to pump out this revision before the market opens, wish me luck.

Great idea, Pharoah. I think you hit the nail on the head . . . your system may be great, and obviously I'm now spending time to find out, but the rules as written are probably the hardest part of the system to understand.

I was actually in the process of re-writing them myself just for my own use so I could know what to do and when to do it, but maybe you'll save me the work.

Thanks a lot Pharoah, that will help a lot, as I too have been struggling with the rules for this system.

If it will help, I will do a re-write for you.

Best of luck.

ok everyone, review, see if this makes more sense, if it does, I will modify the first post.

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I have modified my Smart Stop system to complement the 4H Box Breakout Strategy created by Ace284, Many thanks go to Ace for this fantastic Entry system.

Chart Setup


This system works on any ???/JPY pairs, but work best on GBP/JPY and EUR/JPY
Time Frame: 4H
Indicators:
RED Moving Average
Period: 2
Shift: 2
Method: Smooth
Apply To: Median Price (HL/2)

BLACK Moving Average
Period: 2
Shift: 5
Method: Smooth
Apply To: Median Price (HL/2)

Trade Setup

When the first 4H candle of the week closes, calculate your buffer zone by adding 20 pips to the High of the first 4H closed candle, and subtracting 20 pips from the Low of the first 4H closed candle. Place a Pending buy order according to your money management rules at the upper buffer line, and place a Pending sell order according to your money management rules at the lower buffer line.

Entry Conditions

Condition 1: Follow the MA’s

Buy order: If a buy order is triggered and the Red MA is below the high of the first 4H candle of the week, Set the stoploss to the Red MA.

Sell Order: If a sell order is triggered, and the Red MA is above the low of the first 4H Candle of the week, set the stoploss to the Red MA.


Condition 2: Set a trailing Stop

Buy Order: If a buy order is triggered, and the Red MA is above the high of the first 4H Candle of the week, set a trailing stop to 50%-75% (your own personal risk preference, but never more than 75%, otherwise it’s pointless to reduce 100% stoploss) Breakout Zone (including buffers).

Sell Order: If a sell order is triggered, and the Res MA is below the low of the first 4H Candle of the week, set a trailing stop to 50-75% (reasons for this found in buy order) Breakout Zone (including buffers).

Rules When a trade is in play

Once a trade has been triggered, and you have determined what condition you must follow.


Condition 1:

Buy order: So your trade has triggered, and the Stoploss is set to the Red MA. Update the stoploss at the open of every new bar to match the position of the Red MA. Because this acts like a manual trailing stop, if the Red MA retraces, do not update until the Red MA retraces again, and passes the last highest position the stoploss was adjusted to.

Once the stoploss is equal to Break Even or greater, set the stoploss to Break Even.

Once the Black MA passes over the Break Even point, Adjust the stoploss to follow the Black MA. Because this acts like a manual trailing stop, if the Black MA retraces, do not update until the Black MA retraces again, and passes the last highest position the stoploss was adjusted to.


Sell order: So your trade has triggered, and the Stoploss is set to the Red MA. Update the stoploss at the open of every new bar to match the position of the Red MA. Because this acts like a manual trailing stop, if the Red MA retraces, do not update until the Red MA retraces again, and passes the last highest position the stoploss was adjusted to.

Once the stoploss is equal to Break Even or greater, set the stoploss to Break Even.

Once the Black MA passes over the Break Even point, Adjust the stoploss to follow the Black MA. Because this acts like a manual trailing stop, if the Black MA retraces, do not update until the Black MA retraces again, and passes the last highest position the stoploss was adjusted to.


Condition 2:

Buy order: So your trade has triggered, and the Stoploss is set to be a Trailing Stop. Keep track of where the Red MA is located while the trailing stop is inside the breakout box.

If the trailing stop crosses the Red MA before reaching Break Even, adjust the Stoploss to the Red MA and follow Condition 1 Buy rules from Red MA on.

If the trailing stop reaches Break Even before crossing the Red MA and after crossing the Black MA, set the Stoploss to Break Even, follow Condition 1 Buy Rules from Break Even on.

If the trailing Stop reaches Break Even before crossing the Red MA and before crossing the Black MA, Keep the trailing stop active, once it crosses the Black MA adjust stoploss to Black MA and follow Condition 1 Buy Rules from Black MA on.


Sell order: So your trade has triggered, and the Stoploss is set to be a Trailing Stop. Keep track of where the Red MA is located while the trailing stop is inside the breakout box.

If the trailing stop crosses the Red MA before reaching Break Even, adjust the Stoploss to the Red MA and follow Condition 1 Sell rules from Red MA on.

If the trailing stop reaches Break Even before crossing the Red MA and after crossing the Black MA, set the Stoploss to Break Even, follow Condition 1 Sell Rules from Break Even on.

If the trailing Stop reaches Break Even before crossing the Red MA and before crossing the Black MA, Keep the trailing stop active, once it crosses the Black MA adjust stoploss to Black MA and follow Condition 1 Sell Rules from Black MA on.

For all conditions!!!!

If your orders have not been stopped out by the end of the week, close all orders before market close.

Close 1/2 Position

I recommend closing half a position once it reaches a profit of 100% Breakout Box (including Buffers) and letting the other half run it’s course.


If your broker allows hedging!


If your broker allows hedging, you can reduce some of the loss by placing hedge orders to protect your original order. Hedge orders have a Stop Loss of buffer size and a Take Profit that is equal to the Stop Loss of the original order, I do not recommend placing a hedge while a trade is in profit (actually BE is where I recommend). NOTE: If the original order’s trailing stop is equal to Break Even - buffer or in the Profit Zone, do NOT place this order at all. Only Place this order if the original orders trailing stop is GREATER than breakeven - buffer (we’re trying to protect money, not throw it away).

Note: the Take Profit for the Hedge follows the EXACT rules for the Custom Stop Loss System, including all conditional rules.

NOTE: Stop Losses are updated ONLY at the open of a new bar, This help to rid of any repaints.
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OK, you asked for feedback . . . here goes. If I was looking at this for the first time, I'd still be confused. It's an improvement, but sometimes it's lacking in detail because you already know the system . . . in other cases, there's too much detail.

Case in point: "Follow the MA's" You need to explain what and why. For example, "Set your SL based on the MA's".

You're just inviting needless questions here. You know what you mean and I know what you mean, but will someone just starting out know the "50%-75%" refers to 50-75% of the 4H Box? Maybe, maybe not.


I have a question regarding the area I changed to bold print Frankly, I have no idea what it means, so I doubt a newbie would either. Again, you're inviting needless questions. When you mention "retraces" two times, what does that mean exactly? I'm also a bit puzzled by the last part when you mention the Red MA "passes the last highest position the stoploss was adjusted to". Passes in what direction? If you're a little more specific here, I think you'll be spared a lot of questions later.

Sorry for the brutal honesty, but for some reason the rules sound much more complicated than they actually are. To capture people's attention, I think the rules need to appear as simple as possible.

Why don't you start a "Write Pharoah's Rules" contest? You could treat the winner to an all-expenses paid, around the world trip once you hit the big time with this system. Or, maybe you could just buy the winner off with a simple "thank you". I think we'd all like to see your system work well.

Second Revision With Images!!! Let me know if the images, and explanations of the images clear up any confusion.


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I have modified my Smart Stop system to complement the 4H Box Breakout Strategy created by Ace284, Many thanks go to Ace for this fantastic Entry system.

Chart Setup


This system works on any ???/JPY pairs, but work best on GBP/JPY and EUR/JPY
Time Frame: 4H
Indicators:
RED Moving Average
Period: 2
Shift: 2
Method: Smooth
Apply To: Median Price (HL/2)

BLACK Moving Average
Period: 2
Shift: 5
Method: Smooth
Apply To: Median Price (HL/2)

Trade Setup

When the first 4H candle of the week closes, calculate your buffer zone by adding 20 pips to the High of the first 4H closed candle, and subtracting 20 pips from the Low of the first 4H closed candle. Place a Pending buy order according to your money management rules at the upper buffer line, and place a Pending sell order according to your money management rules at the lower buffer line.

Entry Conditions

Condition 1 Ruleset: Follow the MA’s; Set the stoploss according to the MA's

Buy order: If a buy order is triggered and the Red MA is below the high of the first 4H candle of the week, Set the stoploss to the Red MA.

Sell Order: If a sell order is triggered, and the Red MA is above the low of the first 4H Candle of the week, set the stoploss to the Red MA.

Example Image for Condition 1:


In this image, Note the black circle, and the Red circle For now, forget the Purple Circle. You'll notice that when a trade is triggered (as outlined in the Black circle), the Red MA is under the first 4H Candle of the weeks High (as oulined in the red circle). This is a valid setup to follow Condition 1 Rules.


Condition 2 Ruleset: Set a trailing Stop

Buy Order: If a buy order is triggered, and the Red MA is above the high of the first 4H Candle of the week, set a trailing stop to 50%-75% of the Breakout Zone (including buffers). The % is your own personal risk preference, but never more than 75%, otherwise it’s pointless to reduce 100% stoploss.

Sell Order: If a sell order is triggered, and the Res MA is below the low of the first 4H Candle of the week, set a trailing stop to 50-75% (reasons for this found in buy order) Breakout Zone (including buffers).

Image Example for Condition 2:


In this image, Note all circles (red,black, and purple)
You'll notice when the trade is triggered for the first time this week (as outlined in the purple circle) the red MA is where it needs to be to qualify for Condition 1 (as outlined in the Red Circle). The second trade of the week (as outlined in the Black Circle) you'll notice that the Red MA is above the first 4H Candle of the weeks high (also outlined in the Black Circle) this would cause the trade to qualify for Condition 2.

Rules When a trade is in play

Once a trade has been triggered, and you have determined what condition you must follow.


Condition 1:

Buy order: So your trade has triggered, and the Stoploss is set to the Red MA. Update the stoploss at the open of every new bar to match the position of the Red MA. Because this acts like a manual trailing stop, if the Red MA retraces, do not update until the Red MA retraces again, and passes the last highest position the stoploss was adjusted to.

Once the stoploss is equal to Break Even or greater, set the stoploss to Break Even.

Once the Black MA passes over the Break Even point, Adjust the stoploss to follow the Black MA. Because this acts like a manual trailing stop, if the Black MA retraces, do not update until the Black MA retraces again, and passes the last highest position the stoploss was adjusted to.


Sell order: So your trade has triggered, and the Stoploss is set to the Red MA. Update the stoploss at the open of every new bar to match the position of the Red MA. Because this acts like a manual trailing stop, if the Red MA retraces, do not update until the Red MA retraces again, and passes the last highest position the stoploss was adjusted to.

Once the stoploss is equal to Break Even or greater, set the stoploss to Break Even.

Once the Black MA passes over the Break Even point, Adjust the stoploss to follow the Black MA. Because this acts like a manual trailing stop, if the Black MA retraces, do not update until the Black MA retraces again, and passes the last highest position the stoploss was adjusted to.


Condition 2:

Buy order: So your trade has triggered, and the Stoploss is set to be a Trailing Stop. Keep track of where the Red MA is located while the trailing stop is inside the breakout box.

If the trailing stop crosses the Red MA before reaching Break Even, adjust the Stoploss to the Red MA and follow Condition 1 Buy rules from Red MA on.

If the trailing stop reaches Break Even before crossing the Red MA and after crossing the Black MA, set the Stoploss to Break Even, follow Condition 1 Buy Rules from Break Even on.

If the trailing Stop reaches Break Even before crossing the Red MA and before crossing the Black MA, Keep the trailing stop active, once it crosses the Black MA adjust stoploss to Black MA and follow Condition 1 Buy Rules from Black MA on.


Sell order: So your trade has triggered, and the Stoploss is set to be a Trailing Stop. Keep track of where the Red MA is located while the trailing stop is inside the breakout box.

If the trailing stop crosses the Red MA before reaching Break Even, adjust the Stoploss to the Red MA and follow Condition 1 Sell rules from Red MA on.

If the trailing stop reaches Break Even before crossing the Red MA and after crossing the Black MA, set the Stoploss to Break Even, follow Condition 1 Sell Rules from Break Even on.

If the trailing Stop reaches Break Even before crossing the Red MA and before crossing the Black MA, Keep the trailing stop active, once it crosses the Black MA adjust stoploss to Black MA and follow Condition 1 Sell Rules from Black MA on.

For all conditions!!!!

If your orders have not been stopped out by the end of the week, close all orders before market close.

Close 1/2 Position

I recommend closing half a position once it reaches a profit of 100% Breakout Box (including Buffers) and letting the other half run it’s course.


If your broker allows hedging!


If your broker allows hedging, you can reduce some of the loss by placing hedge orders to protect your original order. Hedge orders have a Stop Loss of buffer size and a Take Profit that is equal to the Stop Loss of the original order, I do not recommend placing a hedge while a trade is in profit (actually BE is where I recommend). NOTE: If the original order’s trailing stop is equal to Break Even - buffer or in the Profit Zone, do NOT place this order at all. Only Place this order if the original orders trailing stop is GREATER than breakeven - buffer (we’re trying to protect money, not throw it away).

Note: the Take Profit for the Hedge follows the EXACT rules for the Custom Stop Loss System, including all conditional rules.

NOTE: Stop Losses are updated ONLY at the open of a new bar, This help to rid of any repaints.

Important Image Example!!!!
When I state "Retrace, and retraces again" what I'm stating here, is when the MA gets a new high, drops below that new high, and than proceeds to go above that New high, producing New Highs. Here are 2 Examples.


In this image, Note all 3 circles. A trade is triggered (as outlined in the Black Circle) and a stoploss is set according to the Red MA (as outlined in the Red Circle), but the Red MA drops below it's highest high from when that trade opened (as outlined in the Purple Circle), This is where you do NOT update your stoploss, leave it at the MA's last highest high of the trades timeframe.


In this image, Note the Purple, and the Red Circle. A Trade is triggered (as outlined in the Purple Circle) and a stoploss is set according to the Red MA (As outlined in the Red Circle) but then the red MA drops below it's highest high of the trades timeframe (also outlined in the Red Circle). This is where you do NOT update your stoploss, leave it at the MA's last highest high of the trades timeframe.
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hi pharoah,

i'm not sure if this ea from albchr in james 16 thread would fit your requirement of close half position, but i post that link for you anyway

http://www.forexfactory.com/showpost...ostcount=32485


regards

That's perfect for the take partial. Thanks harihebat, I will post that EA into the original post.

Thanks Pharoah for the effort.

Beside all rules in your ist post, I have some other questions which I want to ask personally for my situation.

(1) I know your system do apply for re-entry trade, if I have no time to take re-entry, how can I make full use of this system compare to Ace's?
(2) Do you have any excel spreadsheet like a journal? I am using Ace's now, can that be used in your system?

Sorry for the newbies questions again.

1. The re-entries are ONLY at your own discretion, the reason for this, is because while Ace's system has a core 1:4 Risk:Reward ratio. Without Re-entries, my system has a core Risk:Reward of 1:7 (because of the tight stoploss before Breakeven)

Re-entries only add to that in alot of cases, in some it does not, but in some it does. So re-entries are purely at your own discretion, it does not hinder the overall performance of the core system.

2. No, I don't have a spreadsheet like ace's, I've never used the one from Ace's, tho I'm sure it would work. The only additional aspect to my system over Ace's is the re-entries, and if your looking for a % of successful re-entries, and what they brought in overall to see if it warrants re-entry, I imagine you'll have to add that to the spreadsheet. But because even the re-entries use my smartstop system, even they have a impressive Risk:Reward.

Thanks man, I will study the system again.

The images help immensely . . . there's power in a picture.

Hi Pharoah,

You state that you would not place a hedge trade until price is at BE. I'm trying to figure out why you would do this? If you're at BE why not just close the trade. If it price goes negative just wait until it comes back to your original entry point and re-enter at that point. If you enter a hedge position against your original entry the best you will do is BE so I'm not seeing any benefit to taking a hedge position. Maybe I'm not understanding wht you are doing with the hedge?

The only way this trade can be profitable is if the trade goes in the original price direction and you place the original TP further away than you have the hedge positions SL.

The reason for this is because in some cases, the price ranges on the buffer mark, if you close the trade, than you won't get a proper entry into the next breakout on that same side, if you hedge it, than your original order is still open, which would remove any confusion as to when to enter, or if you should enter, it's just an additional buffer to prevent loss while still keeping a trade in play.

Again, if the hedge order has a SL that equals the original orders TP then this becomes BE. So how does it keep the original order in play? The only way this can happen is if the hedge orders SL is less then thew original orders TP. Sorry..maybe I'm just being a bit slow here!

The Hedge is like a grace period for price action, that's almost the only way I can put it.

If a trade falls back to BE, but you know there might be something coming, why would you close out that position at BE, and possibly risk missing that big move after a few bars of ranging right on the buffer line, and you getting fed up with placing order after order just waiting for that big move. Place a hedge order that follows the same rules as the order it's heding for takeprofit, approx 30 pip stoploss, now, that little range period right on the buffer line isn't so frustrating, and if it goes against you, you're covered, if it goes in favor of you, the hedge will close with a manageable loss considering the conditions.

Think of it as removing a very frustrating buffer line range part of breakout strategy trading.

sry bro. i not so understand ur method.
Can you make it short.
Can i know wat is the signal for buy or sell?
sorry i still new ...hope u can explain a bit to me ...thanks

So what I said is correct, the original order has a TP larger than the hedge orders SL. I can see where that makes sense and the worst you might do is to have a BE trade.

Exactly, it's just to prevent any clutter trades on buffer line ranges.

hey pharoah..... you mentioned possibly wanting this coded..... if so, we can start the ball rolling, if not just let me know.....

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lets concentrate only on the entrys, nothing else at this point,

at the begining of the new week your wanting the ea to place

a buystop 20 pips above the first 4 hour bars high

and

a sellstop 20 pips below the first 4 hour bars low.....

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each week we repeat the process.....

is this correct.....h