Dreamliners’ MPAS (Mechanical Price Action Strategy) System

Greetings fellow traders,

I’ve been Forex trading for just over 4 years now, and would like to present a system of trading that I’ve just developed. Please don’t ask for live trading results as I have none so far, only lots of back-testing which shows a successful method. Here are the benefits of this system:

 

1. One hundred percent mechanical, no discretion needed. All traders should get the same results (except with regard to differing brokers’ quotes, timeframes, etc.)
2. Price Action only (naked trading)—only range bars. No lagging indicators used.
3. Range bars used (time-element removed, only price is shown).
4. Successful in both trending and ranging markets.
5. Reward to Risk is 2-1 (minus spread) on trending aspect, ranging is even better.
6. Tested on GBP/USD only but because it is Price-Action based, will work on any pair.
7. Alert system used to notify when to place trades.
8. Set and Forget once trades are placed.
9. Alert system used to notify outcome of trades.
10. Can be traded at any time, any session.

See next posts for rules of this thread and the posting of the actual trading system.

Before I give the system, here are the rules for this thread, if you wish to participate:

 

1. No questions about how to set up the offline range bar. Please do a “search” on Forex Factory for Range Bars, Offline Charts, or even Google “Range Bar Forex Trading” and “Offline Charts” if you need assistance in setting up this indicator, or if it does not work right for you. I do not wish this thread to get bogged down with people asking questions about MT4, Range Bars, Offline Charts, etc. when all this information is readily available by a simple search on Forex Factory or Google. Please help to keep the discussion simply about the method itself. NO QUESTIONS ABOUT OFF-LINE CHARTS, RANGE BARS, etc.
2. No discussion of adding indicators allowed. If you wish to try different indicators then you are making a new system and should start a new thread. So many systems start off well and then get bogged down by numerous people adding numerous indicators. I do not wish for that to happen here. You may have your favorite indicator that you know would go great with this system; no problem, just start your own thread and invite us all to view it.
3. This system could no doubt use an EA just fine. However, I want to avoid all discussions about EAs on this thread, because, once again, threads get bogged down with “the latest EA, version 4.0.884.331” and so on. If you develop an EA for this system, please start a new thread and let us know that you’ve started a new thread for the EA version of this method. I personally have never found even one EA that is profitable, and I’ve tried many.
4. No negative posting allowed, no name calling allowed, no swearing/cussing, no “ad hominem” attacks. We are all adults here, let’s be civil and kind and courteous to each other.

Also, before showing this system, I want to give credit to Zamanib. His thread is located here. He also provides the range bar indicator on that thread as well as a few other indicators for his method. He is an excellent trader and I encourage you to visit his thread when you can.

Now, here is the system on the next post:

1. Set up your off-line charts with GBP/USD 30 pip range bars. Again, this thread is not for technical support on how to set up off-line charts or range bars. Please search Forex Factory or even Google for that. Let’s keep this thread free from questions about how to set up off-line charts and range bars.
2. At the open of a new bar, set an alert notification (see next post for the alert system I am using) for 10 pips lower than the open price and another alert for 10 pips higher than the open price.
3. If your low alert is triggered (see next post for the alert system I am using) set a limit buy (or Buy Stop, whichever you prefer to call it) at the open price of the current candle—the candle that triggered the alert. If your high alert is triggered set a limit sell (or Sell Stop, whichever you prefer to call it) at the open price o the current candle--the candle that triggered the alert.
4. Set your target at 20 pips and your stop loss at 10 pips (or both at end of bar price). You will be exiting either at the end of the current range bar or at your stop loss.

The exact opposite is done for longs.

I treat each bar individually, doing the above steps for each bar, and let the market tell us if we are ranging or trending.

Please do a back-test of this method and you will see profitable trades on nearly every bar. Also examine the attached screenshot and look at just a sampling of the pips that can be made. The highlighted bars are not the only profitable trades, they are just a few examples. Please don't ask for examples of trades that would have lost, there is really no way to tell in back-testing. This will no doubt come out when we begin to trade live.

Now here are some questions/problems/unknowns/issues:

 

1. Spread: Do we actually change our limit orders to account for spread? Such as setting our buy stops a few pips (the amount of the spread) higher? Or do we just leave it alone and let the market enter us a few pips lower than the opening price?
2. Back-testing Inter-Bar Activity: This is an unknown because it is very difficult to back-test using actual time. You must match up the range bars’ time with an online chart and it gets to be difficult and confusing, at least for me. Losses might be had when a bar reaches 10 pips lower than the previous bar’s close, then ascends back up to the open so as to fill your limit long, then descends and closes down. During backtest we would not notice this.
3. News-Trading. So far all back-testing I’ve done disregards news events. And yet we know that many brokers increase their spreads significantly during news events, and this could take out our stop loss. Do we then not trade around news time?

I’m sure there are other questions/problems/unknowns/issues. That is why I started this thread. This system has enough merit to at least post, and then others will no doubt have questions or thoughts that we can discuss together so as to continue the thread, and hopefully have a profitable system for all on this forum.

I know Metatrader has a built in notification for certain price levels, however I have never been able to make it go to my cell-phone, not even on an email address I have set up on my cell phone (not to mention SMS which Metatrader does not seem to do). So I have looked all over the Internet for a price-level alerting system. For awhile I was using Alert FX but they are now out of business (though they have told me that they are going to be starting a subscription based service soon).

I have found a service that works very well; it connects directly to Metatrader for the alerts. It gives alerts (both sound and voice) on the computer, and can easily send SMS or email alerts to a cell phone. I set it to alert me of the price levels I wish, it uses Metatrader quotes, and gives me a sound or voice notification on the computer as well as a notification on my cell phone. I can then enter my trades appropriately.

I do not wish to post the URL of this service as I do not know if Forex Factory allows the posting of URLs that recommend a product, so instead I will tell you to simply search for “Easewe Forex Alerter”. The service is free for 20 days and then there is a cost of $29.00 if you wish to purchase.

I want it to be known that I am in no way associated with this alert service, nor is any of my family, nor are any of my friends, nor do I receive any compensation whatsoever for anyone who uses/purchases this service. I am merely a trader who has needed an alert service so that I do not have to watch the markets all day and all night, so I went searching for something and found it. Again, I know nothing about this company and am not associated with it in any way, and I receive no “referral fee” nor “affiliate fee” nor any other compensation. I merely use it myself.

[quote=Dreamliner;4263065]

Beautiful trade system this seems to be.
I will try it on EURUSD & GBPUSD next week using my live trading account.
At the end of that week I will report some of the results.

Merry Christmas everybody.

Hi Dreamliner,

Thanks for sharing...

So you basically wait for price to clear 1/3 of the bar size (10 pips) before either entering long or short (depending on trend or range environment)?

I'm wondering about entering both since you have a 2:1 RR the idea is that one side will win and net you 10. This is assuming that there will be reaction to push in one direction at the open of each bar after the 1/3 alert occurs.

I think this goes back to choosing the right bar size and if your bar size is correct(optimal)... the pair will react better to reaching this bar opening/closing prices... which would lead to more TP's. You're hoping volume will kick in and send it to the direction you desire (opposite for ranging and in direction for trending). In trading both at once all you care about is volume pushes it in any direction straight without a decent retrace.

Mathematically in the single strategy you have 1 chance and hope it will continue in the path of the background without a 10 pip retrace and in the dual strategy you have 2 chances and hope it will continue in a path without a 10 pip retrace but you pay for the extra chance with half profit... hmm not sure which is better would need to test this.

If the bar size is set up wrong to something that the pair does not respect I suspect you would get alot of whipsaw that would lead to both buys and sells to lose in either direction.
Example... people believe EU runs in 30 pip increments right now.

That's just thinking outloud... might be better to stick to manual discretion to detect trend/range and choose a strategy accordingly.



Thanks,
Jag

Thank you Istvan, we will be looking forward to your results. Thanks for letting us know. Have a very Merry Christmas and a Happy New Year.

[quote=istvan;4263103]

Thanks Jag, good stuff, thanks for sharing.

haha I updated my post a few times.. I have a tendancy to do that maybe its the perfectionist in me I really should stop it...

I wonder how hard it would be to do range bars in JForex so we can backtest it with proper historical data.

Interesting system thanx for sharing..
i heard about similar system for commodity market but I didnt know it is possible to setup MT4 with Range bars.

Could you please post a setup for offline chart and range bars?
:-))) im kidding I wil do my homework and google it:-)

Thanx again and Merry Christmas

Thanks Carolco, for your thoughts. That's funny!

I really didn't mean to be a hard-nosed person about the offline charts and range bars, it is just that I have seen threads entirely hijacked by "technical support" issues regarding range bars and offline charts; just didn't want that to happen here.

Thanks again for your humor!

Merry Christmas!

I absolutely understand your efforts to have you thread clean. I would do the same..

And I cross fingers to let it be so..

have a plenty Christmas presents!!

:-)

I would like to ask You did you backtested another ranges? (f.e. 15, 50 or 100 range)? Knowing nothing about this system Still I feel 30 range bars for GU would be the best option and for EU I would choose 25 Range bars..

I did no backtesting with other size bars, though because this is price-action triggered I would think it would work just the same. I only chose 30 because just 10 pips a day doubles the account in 2 months and I'm only interested in short term. Also, I think there is less chance of there being "back-tested curve fitting" with smaller ranges.

If you'd like to go to 50 or 100 or even 20 or 25 you would just adjust the numbers slightly. It's easy to do on the range bar, just change the setting to whatever figure you would like to see.

Dreamliner, I am sure that I speak for many who applaud your stand on keeping the thread clean.

Since we have just started I will just post this one piece of 'thread litter'. Please feel free to delete it after reading.

Looking forward to a good thread/system

loss- today on this system

How many bars have you traded so far? I never trade holiday season.

Well I decided to go against my trading plan and trade on a market holiday. I just really wanted to get a feel for the live mechanics of this system. I determined in advance to only trade 1 bar since it is a holiday.

The bar opened at 1.5425, then went to a low of 1.5416 (only 9 pips instead of the desired 10). So I entered a limit order to buy at the open and the market came up and triggered the buy order. From there it took several hours (this is a market holiday all over the world) and my target was hit at the close of the bar. The target was 1.5446. So here are the trade results:

Entered at 1.5425
Stop loss at low of bar 1.5416 (9 pips plus spread)
Target at 1.5446 (21 pips minus spread)

Total so far in live trading: 18 pips (21 minus spread of 3).

Your screenshot does not explain why you entered on a specific bar, and not those that you would have gain loss.