Two Systems Journal

I have two systems on my hands-both of them seem to work.

I've been trading the first, lets call it the "Quarters Trading System" (name changed to "Three Fours"), with good results. Trading it live for a penny a point, sometimes 2 pennies, and its been making me good pips. But it takes a bit more time than I would like, and I have this other thing that I want to trade, more just during peak hours. I basically want to limit my time spent on forex so I can spend more time on my other work activities, mainly building websites.

So, what I'm going to do in this journal is post the paper traded results of the Quarters system each day, and also show the live results from the other system, which I can trade a few hours once or twice a day.

Lets call the other system Micro-Happs, because thats essentially what it is. Its an intra-day trading system for the Eur/USD, which uses the same 60/40% mathematical relationship of my larger Happs charts, but its miniaturized for catching 20 to 30 pip intraday moves.

Unlike the Happs charts, this is not an indicator-this chart was made by hand.

Ultimately my goal in this journal is just to verify that these are indeed profitable systems, and then later I can move one or both of them up to the trading systems thread. So each day trade results will be posted-paper results for the Quarters system, and live results from the Micro-Happs system.

But lets get into more formal explanations and rules:
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Three Fours System:

This is kind of like Sixths trading, but for intraday. Its premise is that rejections off the previous day's high or low tend to produce strong moves back into the main trading area, and it attempts to capitalize on that tendency.

I divide my chart up into quarters. The 0% line is the low of the previous days trading. The 100% line is the high of the previous day's trading. Between these lines you have the 25%, 50%, and 75%.
Furthermore, below the 0% line you have the -25%, -50%, -75%, and negative 100%. Above the postive 100% line you have the 125%, 150%, 175%, and 200%.

This creates a total of 12 boxes on your chart. I create these boxes just by using altered fib settings.

When price hits the 0% you set a pending buy at the 25% line.
When price hits the 100% you set a pending sell at the 75% line.

If price hits the 0% and continues down to the -25% without first moving up to the 25% line to trigger your buy, then the pending buy is simply moved down to the 0% line. And so on to -50%, -75%, and -100%. At -125% no -100% pending is set. A -75% pending, and a 175% pending are
the limits for setting pending trades.

Opposite for the positive numbers. Ie if it hits 125% without first triggering your sell at 75%, simply move the pending sell up to 100%. And so on up to the 200% level.

Those are the entry rules. SL can be 1.5 boxes. TP can be 1/2 taken at one box, and other half set to BE+2 at that point. If and When 2nd half gets 80 points into profit, trail it with a 30 point stop. For pairs with small ATR's, this 80 point number can be reduced. Still working on this.

Every point I make with each half of the entry will be counted as 1/2 pip. So we get real numbers at the end of the day.

Trading Times for Three Fours:

The system starts at 8PM EST. This is the start of the Asian session and marks the start of the new trading day on the East Coast. At that point you can put the Three Fours boxes on your charts according to the previous day's high and low data, and wait for the trades to set themselves up.

Trades are closed at 3PM EST the next day, 19 hours later. Not much happens from 3PM to 8PM. Over time you might get a break even result at best by leaving trades in past this point. So is better to give it a rest and close up shop for a little while each day.

Stop taking new trades after 1PM EST. There is no point opening a trade at 2PM that you're going to close at 3PM.

Revisions for Three Fours:

The only revisions made so far have to do with the exit rules for the second half of the trade. I found that putting a tight trailing stop on the second half of the trade too soon was costing me some pips on the big runners.

So second half TP rules were changed to BE+2 at 1 box, then trail with a 30 point stop once its 80 points into profit. Otherwise close it at the end of the day, 3PM EST.

Aside from that 3 pairs which showed no profit were removed from trading: GJPY, UCAD, and EURAUD. So the field is down to 10 from 13.
To see stats on profitiability of individual pairs after the first 7 trading days check this post:

http://www.forexfactory.com/showthre...33#post4634933

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Micro-Happs System:

This chart as I said has been done by hand, and I worked it out mathematically. It uses the two phase, 60%/40% relationship for its structure, each phase having a mid. Yellow lines are the mid of the big phase, light brown lines are the mod of the small phase. Red lines are set between the yellow and brown lines.

Entry points are the Red lines. Occasionally you can enter on one of the yellow or brown lines, but for the most part, you really only want to enter on the red lines.

In addition to this the Red/Green TDI indicator is used. Exact rules for entry are as follows:

For a Long:

1)Both wavy TDI lines are above the middle line of the TDI indicator, which I've highlighted with a light blue horizontal line.
2)The green wavy line is above the red wavy line.
3)Price penetrates a red line on the Micro-Happs chart from below.

For a Short:

1)Both wavy TDI lines are below the middle line of the TDI indicator.
2)The red wavy line is above the green wavy line.
3)Price penetrates a red horizontal line on the Micro-Happs chart from above.

TP: try to get at least to the next red line on the other side of the yellow or brown mid. If momentum is good then just ride it.

SL: use common sense, its a 20-40 point goal per trade, so....

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Ok so I'll put up some charts and yesterday's results for the Quarters system. Tomorrow I can start posting result for both.
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Quarters System Results for 5/12/11

EOD is 3PM EST-no trades past this point til 8pm EST
Spread factored in...

Quarters being traded on the following pairs:

EU, EAud, EJ, GJ, GU, GC, GNZD, AU, ACad, AJ, NZUsd, NZJpy, UsdCad

EU: triggered long, EOD close +5
EA: triggered long, 1/2 taken at 1 box, half closed at BE+2, total +13
EJ: trigger long, 1/2 taken at 1 box, half closed EOD, total +20
GU: triggered long, close EOD -30
GC: Not triggered
GJ: triggered long, close EOD at BE
GZ: triggered long EOD, ignore (not triggered)
AU: triggered long, closed EOD +10
AUDCAD: triggered long, 1/2 taken 1 box, 1/2 hit trailing stop, total +36
AJPY: triggered long, 1/2 taken 1 box, 1/2 stopped BE+2, total +23
NZUSD: triggered long, 1/2 taken 1box, 1/2 hit trailing stop, total +54
NZDJPY: triggered long, 1/2 take 1 box, 1/2 hit trailing stop, total +17
USD/CAD: triggered short, closed EOD +12
_____________________________________________________________

Grand total: +158 pips
Avg: +11.2 pips per pair, +15.8 pips per pair traded
9 winners, 1 loser, 2 not triggered, 1 parity

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Thoughts on these results:

Win ratio does seem to be high so far. Just one full stop loss would have dragged it down quite a lot though. The only observations I can make so far is that I'm losing some pips with the trailing stop. Wild swings stop 2nd half out before pushing higher. Taking half then setting rest to BE+2 with a 75 point target, or otherwise close at EOD might be a more profitable way to go. See how future trades go first.

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There is no real template to provide with the Quarters system. Just alter your fibs for the inputs I described earlier, and set them on the previous days range, 0 at the low point, 100% at the high. Thats it, your set.

I'll provide one anyway-I'm just not sure that the fib settings I include will carry over into the template if your fib settings aren't the same. But just in case they do, I'll inlcude one so you can see how the fib settings have been altered. If they don't carry over, then you'll have to alter you're own fib settings and apply the fibs to the chart yourself.

The Quarters template example is for the AUD/CAD.

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The Micro-Happs chart of course does have a template, which I guess I'll provide...

On the Micro-Happs template there are a number of squares and vertical lines which I've placed to show valid entry points. Blue square for long, red square for short, and one Kakhi colored square to show a long entry that was no good. After you get the idea, just go to the objects list on your chart and delete the vertical lines and squares. Do Not delete any horizontal lines. You will need those. Also Micro Happs is a 5 Min chart system, so put it on the 5 MIN EU chart.

Probable Ideal Times for trading Micro Happs:

Possibley Asian session. Probably not Frankfurt open. London Open, and USA open good. You basically need good energy to take you through the lines, but not crazy trading like Frankfurt can get. Sometimes Asian has it, sometimes not. Lon/O and USA/O have it.

The yellow and brown mids on the micro-happs chart are like stopping points when momentum is bad, and acellerators when momentum is good. So to trade Asian session, I reccomend you observe first and make sure there is enough activity going on, or otherwise only go for very small scalps, ie red line to the mid, instead of red line to the next red line.

Please Remember these are not fully verified systems, only promising ones. I myself trade them for only a penny per point. I suggest if you want to trade them to either demo or to trade for no more than 1 penny per point until these have been more proven, and you get the hang of them.

Ex charts, indi, and template posted below. Top Chart is Micro-Happs Example, bottom chart is Quarters system Example.

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Quarters Results for 5/13/11

EU: triggered long, 1/2 taken at first box, trailing stop hit on 2nd, total +58
EA: not triggered
EJ: not triggered
GU: triggered long, closed EOD -26
GC: triggered long, 1/2 taken first box, 2nd hit trailing stop, total +46
triggered long 2nd time, 1st 1/2 taken at box, second closed EOD, +18
GY, triggered long, hit full stop -75
GZ, not triggered
AU: triggered short, 1/2 taken a 1st box, 2nd hit trailing stop, total +82
AUCAD: triggered short, 1/2 taken 1st box, second closed EOD, total +20
AUD/JPY: triggered long, closed EOD +18
NZUSD: triggered long, closed EOD -5
NZJPY: triggered long, closed EOD -8
UCAD: triggered short, 1/2 taken first box, 1/2 closed EOD, total +26

Daily Total: +154

Running Total: +417

Observations: GY was up 25 points before falling down to hit its stop. Maybe instead of locking pips in at 1st box I should just lock at X pips. Thats a 100 point swing. Making that change will most likely cost me in other situations though. Something to think about.

Having too narrow a trailing stop cost me again today on EURO, a good 150 points. Changing trailing stop rule on 2nd half of trade to BE+2, and/or 30 point trailing stop at +80 pips profit/or close at EOD if all else fails to close it.

GC closed in profit twice, hehe.

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Micro-Happs Results:
This system gave some 11 trade signals on EU today, getting 10 out of 11 of them correct. The only one it didn't get right is when EU finally pulled back from its drop.

Anyway, predictively its up about 240 points today. I was only awake for part of that, having slept through the L/O. I wound up trading about +80 overall. I must say I'm impressed with its overall performance, and its ability to keep me out of tight consolidation trades. I didn't take as many pips as I could have for lack of confidence.

The best comments I can make about this system is that if you have to squint your eyes in order to tell whether or not a trade is giving a valid signal, let it go. Have patience, take nice clear signals, and trade with confidence. Avoid slow moving markets, like when Asia is slow, and also Frankfurt if its too crazy. Sometimes Frankfurt behaves though, and it can be good.

A simple way to do it would just be to trade it between 3AM to 7AM EST, and/or 8:30 AM to 12:30 PM EST. These are the best and most profitable times.

Running total for Quarters +312

Eu: triggered long, 1st 1/2 closed 1 box, 2nd hit trailing stop, total +75
EJ: not triggered
GU: triggered long, 1st 1/2 closed 1 box, 2nd closed BE+2, total +16
GC: not triggered
GJ: not triggered
GNZD: triggered short, 1/2 close 1 box, 2nd trailing stop, total +80
AU: triggered long, 1/2 close 1 box, 2nd close EOD, total +45
AUDCAD: triggered long, 1/2 close 1 box, 2nd close EOD: total +39
AJPY: not triggered
NZUSD: triggered long, 1/2 taken 1 box, 2nd closed EOD: total +27
NZJPY: triggered long, 1/2 taken 1 box, 2nd, closed EOD: total +20
EURAUD: triggered short, closed EOD -13
UCAD: triggered short, closed EOD -26

Daily total: +263
Running Total: +575

Observations: new rule for closing 2nd half seems to be working out OK so far. Noticed that it might be more efficient to trail entries by 1/4 instead of placing them at rigid levels. IE, price hits 100% then moves up to 112% then back down, instead of entering at 75%, enter at 87% (112-25=87). Not sure about it though. Would have worked today. Will wait to see some more future trades before deciding. Otherwise, very good day with plenty of big winners, and no big losers.

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Micro Happs, I took 2 quick trades at L/O for +39 and called it a day.

See 1st post for latest chart template.

Hi Steve,

Excellent stuff !

I really likr the quarters method

Would the quarters method not be a good candidate for automation ?

ie Mr Hopwood ?

Hi Ian,

I think it would, yes. I did suggest it on one of Steve's threads, however I guess he didn't agree, or at least at first glance, since he chose to ignore the post.

It may be that he only wants to code systems which have a proven track record of success-not just "ideas". Although I had traded it live for about a week before suggesting it.

So I guess thats part of the reason for this journal, to prove its tradeability over a longer period of time. It works great, but its hell to trade manually since it takes up 19 out of 24 hours in the day. An EA would be a Godsend for that reason.

Anywho, always hope for the future. Til then I'll just keep doing what I'm doing. Gives me a chance to refine some of the entry and exit methods anyway. Thanks for posting-

Used a fib tool to hammer the red lines into shape, at least within a 2,000 pip radius or so. Updated in post 1.

Kind of complicated yesterday-wild day. Assuming the system is allowed to open more than one trade on one pair in a day (as if it was being run on an EA, the results are follows):

Eur/Aud: 1st round, triggered short, 1/2 taken 1 box, 2nd closed BE+2, total +19
2nd round: triggered short hit full stop -37
3rd round: triggered short, 1/2 taken 1 box, 2nd closed EOD, +28
total for Eur/A is +12
USD/CAD: triggered short, hit full stop -36
2nd round: triggered short, 1/2 taken 1 box, 2nd closed EOD, +29
total for UCAD is -7
EU: Not triggered
EJ: triggered short, 1/2 taken 1 box, 2nd closed BE+2, total +23
GU: triggered short, 1/2 taken 1 box, 2nd hit trailing stop, +37
GC: triggered short, 1/2 taken 1 box, 2nd closed EOD, +55
GY: not triggered, exceeded all pendings
GZ, triggered first box, 1/2 taken 1 box, 2nd 1/2 hit trailing stop: +65
AU, triggered long, 1/2 taken 1 box, 2nd 1/2 closed EOD: +42
AUCAD: triggered short, closed EOD -35
AJPY: triggered short, 1/2 taken 1 box, 1/2 hit trailing stop: +35
NZUSD: not triggered
NZJPY: triggered short: 1/2 taken 1st box, 2nd closed BE+2, +6

Daily Total: +233

Running Total: +808

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My thoughts on these trades: Yesterday was a crazy day for the markets with lots of swings and really put this system to the test. Obviously it came through very well. Still waiting for its first losing day.

Aside from that I'm seriously contemplating taking GJpy off the roster. Its lost a big position in the past, and yesterday it went off the charts, although it didn't do any harm. It might just be too volatile for the good of this system. GNZD on the other hand, which is a huge mover, has made a ton of pips so far. That one stays, even with its 11 pip spread. Give GY a couple more chances to make some pips.

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Micro-Happs, didn't trade it yesterday, EU was too crazy for me.

Hi Steve!

I really like these simple ideas of trading :-)

Today I watched the price moving between your Quarter lines...it seems to be a good strategy...but really difficult to follow manually...especially because some trades have to be placed during night time...

Hi Chris,

Thanks for posting. I think you're comment hit the nail on the head. Thats why I stopped trading it live after a week. Staying up those kinds of hours will take it out of you. It needs an EA.

However the idea of trading it on 13 pairs-its just to provide overall protection to make it more likely that each day will be a positive day. But it doesn't have to be traded this way. You could take the top 5 most profitable pairs, and then just trade them when the opportunity arises. I've been thinking about doing that.

Anyway seems like the best that can be done til some coding happens.

Cheers-

Hi Steve,

I am sure when the other Steve has a look at these results he will be very interested .

Thanks for posting your results , they are very good.

cheers
Ian

E/Aud: triggered short, 1/2 taken 1 box, 2nd close EOD, +21
U/CAD: triggered long, 1/2 taken 1 box, 2nd close BE+2, +10
EU: triggered short, 1/2 taken 1 box, 2nd close BE+2, +19
EJ: not triggered
GU: triggered long, 1/2 taken 1 box, 2nd close BE+2, +15
GC: triggered long, close EOD, -5
GJPY: triggered long, close EOD, +11
GNZD: triggered long, close EOD, -42
AU: triggered short, 1/2 taken 1 box, 2nd close BE+2, +12
AUCAD: triggered short, 1/2 taken 1 box, 2nd close BE+2, +6
AJPY: not triggered
NZU: triggered short, closed EOD -12
NZJPY: triggered short, hit full stop -46

Daily Total: -7
Running Total: +801

Thoughts on these trades:

Ok first losing day, -7, not too bad if thats any kind of benchmark for the downside potential. Most likely a position trade manager would have been able to make a winner out of it, but I'm logging everything according to strict mechanical rules in order to guage the general potential for profitability.

One thought is that its pretty senseless to allow trades to get opened after 1PM EST, since all open trades get closed at 3PM EST. So in the future 1PM is the latest for opening trades, while all trades get closed at 3PM.

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One trade taken on Micro-Happs chart which landed in profit. Kicked up on me, but I knew that without a solid close over 4277 my trade was still good. I'll post the entry.

Hey Steve.. great systems. Just to clarify, you close all at 3pm. est, and then calculate the previous days' range based on 3pm-3pm? Then no trades until 8pm ?

Trades are potentially open from 8PM to 3 PM the next day. The whole thing starts at 8PM which is the daily opening time for the East Coast.

Previous days daily range is calculated from 8 PM of one day til 8PM the next day. You use the entire day to calculate the entire day's range.

Just don't keep trades open from 3PM to 8PM, since the market slows to a crawl during these hours. Hope that's clear.

Thanks, Steve

Another Zany day yesterday, lets see how it worked out.

EU: triggered short 3 times, each time took profit at 1 box, 2nd close BE+2, total +36

AU: triggered short twice, 1st hit full stop, (-40)
2nd time profit taken 1 box, 2nd closed BE+2, total -25

USDCAD: triggered long twice, first hit full stop,(-41) 2nd time
profit taken at one box, 2nd close BE +2, total -30

EUR/AUD: triggered long twice, first hit full stop, 2nd closed profit taken 1 box, 2nd half close EOD, total -8

EJPY: triggered short twice, first profit taken 1 box, 2nd close BE +2, 2nd close EOD, total +12

NZUSD: triggered short twice, both times 1st half taken 1 box, 2nd close BE +2, total +18

GU: not triggered

GC: triggered short 1/2 taken 1 box, 2nd close BE+2, total +15

GJPY: triggered short 1/2 taken 1 box, 2nd close BE+2, total +15

GNZD: triggered long, 1/2 taken 1 box, 2nd close EOD, total +80

AUDCAD: triggered long twice, 1st time hit full stop, 2nd profit taken 1 box, 2nd half close BE +2, total -19

AUDJPY: triggered short, 1/2 taken 1 box, 2nd close BE+2, total +18

NZDJPY: triggered short, 1/2 taken 1 box, 2nd closed EOD, total +17

Daily Total: +129
Running Total: +930

Thoughts on these trades:

Good comeback in the later part of the day. I thought the day was screwed at after the first few hours. GNZD continues to show its overall profitability. EU I believe is now the only undefeated pair, hasn't missed a trade. I've actually started trading my money again on EU quarters trades, since they have been so reliable. EU is like 7 for 7.

But there's your six day total. Each pip being worth 2 cents on a hundred dollar account would have shown an 18.6% increase in the last six trading days.

Here are the Quarters results from yesterday's exciting activity:

EU: (1st round)triggered short, 1st 1/2 taken 1 box, 2nd hit trailing stop, (+38)
(2nd round) triggered long, 1st 1/2 taken 1 box, 2nd close EOD (+28)
EU total +64
USDCAD: (1st round) triggered long, 1/2 taken 1 box, 2nd hit trailing stop, (+28), (2nd round) triggered short, 1/2 taken 1 box, 2nd close EOD (+14)
UCAD total, +42
AU (1st round) triggered short, 1/2 taken 1 box, 2nd close BE+2, (+9),
(2nd round) triggered short, same result (+9), total +18
GU: triggered short, 1/2 taken 1 box, 2nd close BE+2, +11
EAUD: triggered long, hit full stop, -39
EJPY: (1st round) triggered long, hit full stop, (-40), 2nd round triggered long, 1st 1/2 taken 1 box, 2nd close EOD, (+9) total -31
NZU: (1st round) triggered short, hit full stop (-33), 2nd round triggered short, 1st half taken 1 box, 2nd close BE+2(+10) total -23
GC: 1st round, triggered short, 1/2 taken 1 box, 2nd hit trailing stop (+40), 2nd round triggered long, 1/2 taken 1 box, 2nd close EOD (+36), total +76
GY: triggered short, 1/2 taken 1 box, 2nd closed BE+2, +8
GNZD: not triggered
AUCAD: 1st round triggered short, hit full stop (-22), 2nd round triggered short, 1/2 taken 1 box, 2nd close BE+2 (+4) total -18
AJ: not triggered
NZJPY: triggered short, 1/2 taken box, 2nd close BE+2, +7

Daily Total: +117
Running Total: +1,047

Thoughts on these trades: over the weekend I'm going to look at the statitistics I've collected on individual pairs, and see which one's I can get rid of, namely the ones in a negative yield up to this point. Some of the JPY and CAD crosses don't seem worth it, with big spreads and small ranges. Anyway I'll make some decisions over the weekend based on the stats.

EU is now 9 out 9 positive trades. That will be a keeper. Wishing everyone a safe and relaxing weekend.

Here are the stats, as promised. If you add it all up I seem to be missing 39 pips somewhere compared to the regular running totals. Close enough. From most to least profitable:

#1)

EU: +5, +58, +75, -, +19, +36, +64
Total: +257

#2)

GC: -, +46, -, +55, -5, +15, +76
Total: +187

#3)

GNZD: -, -, +80, +65, -42, +80, -
Total: +183

#4)

AU: +10, +82, +45, +42, +12, -25, +9
Total: +175

#5)

AUJPY: +23, +18, -, +35, -, +18, -
Total: +94

#6)

NZU: +54, -5, +27, -, -12, +18, -23
Total: +61

#7)

EJPY: +20, -, -, +23, -, +12, -31
Total: +34

#8)

AUCAD: +36, +20, +39, -35, +6, -19, -18
Total: +29

#9)

GU: -30, -26, +16, +37, +15, -, +11
Total: +23

#10)

NZJPY: +17, -8, +20, +6, -46, +17, +7
Total: +14

#11)

UCAD: +12, +26, -26, -36, +10, -30, +42
Total: -4

#12)

EAUD: +13, -, -13, +12, +21, -8, -39
Total: -14

#13)

GJPY: -, -75, -, -, +11, +15, +8
Total: -31

So there it is. UCAD, EAUD, and GJPY are gone. From here on out I'll only be working with 10 pairs. If those at the bottom of the list of the pairs which are left don't show continued success then I'll weed them out also. But for now, running with 10.

Also someone wrote to me, and asked me if this system was in any way related to the Quarters method by Ilian Yotov, who has released some youtube vids, and teaches over at FXstreet.

After having looked over Mr. Yotov's system, I can say that my system and his have about as much in common as chocolate cake and prime rib.

Be that as it may, seeing as how Mr. Yotov's system and more importantly its name is so well known, in order to avoid the possibility of any such confusion in the future, I will be refering to this system from now on as "Three Fours". Easy enough. Three Fours it is.

Hi Netant, fair request. I'll try to put all the revisions together in the first post a bit later, though there aren't too many. -Thanks

EU: long, close EOD, +23
GC: not triggered
GZ: short, 1/2 taken 1 box, 2nd close BE +2, +17
AU: triggered long, 1/2 taken 1 box, 2nd close BE+2, +13
AJ: not triggered, exceeded all pendings
NZU: triggered long, hit full stop, -37, triggered long 2nd time, 1st 1/2 taken 1 box, 2nd closed EOD, +23, total -14
EJ: triggered long, 1/2 taken 1 box, 2nd close EOD, +54
AUCAD: not triggered
GU: not triggered
NZJ: triggered long, 1/2 taken 1 box, 2nd closed EOD, +12

Daily Total: +105
Running Total: +1,152

Observations: AU missed triggering a long by 1/3 of a pip which would have lost. Then it came back and triggered a long which won. Its important, for better or worse, to make sure the lines get hit to the pip before you set Three Fours trades into action.

Oh yeah, EU is now 10 for 10 correct trades.


Micro-Happs: would have made anybody a lot pips yesterday. I traded the GZ off the Three Fours, and made some other scalps for +40 pips. These systems have served me well, and I haven't had a losing day in a good while.