GBP/JPY
Time Frame
4HR
Bar
Bar opening at 1:00am GMT and closing at 5:00am GMT. That is the bar closing at midnight, or 12:00am, In Eastern Standard Time.
Time to Implement
15 minutes per pair per day.
Method
This is a breakout method.
- Calculate the range of the bar by subtracting the high from the low.
- Calculate entry size, shown below.
- Place an order to buy five pips above the high of the bar.
- Place your stop loss five pips below the low of the bar.
- Place your take profit order three times the distance between your stop loss and entry.
- Place an order to sell short five pips below the low of the bar.
- Place your stop loss five pips above the high of the bar.
- Place your take profit order three times the distance between your stop loss and entry.
- Wait for your stop loss to be hit, or take profit to be hit.
- Cancel any orders that were not triggered at the same time 12:00 EST on the next day.
Logic
Breakouts are obviously beneficial in regards to price action. We all know that. My favorite part of this strategy, beyond the great risk-to-reward ratios, is the size of the stop. The stop is calculated based on the range, and that range is made equivalent to ones desired risk per trade. This is beneficial because it is constantly shifting according to the volatility of the market.
Entry Size
Do not risk more than 2% per trade per pair traded. If one were to risk 2%, hypothetically, for both the long and short orders, and the range of the 4HR bar is 75 pips on the GBP/JPY, given the current exchange rate of 131.801 for the GBP/JPY, and an exchange rate of 1.64211 for the GBP/USD, and a base currency of U.S. Dollars, the calculation would go as follows for a $100,000.00 account.
- .02 x $100,000.00 = $2,000.00
- I'd suggest using http://www.forexcalc.com for the rest.
- Position size for each trade = 214,035
- Compound daily.
Potential Changes
- Trailing stop equal to the distance between entry order and stop order, calculated by subtracting the high from the low and adding ten pips.
- Potential move to break even once a 1:1 RR is reached.
- Potential move to break even once a 2:1 RR is reached.
- Use a 2:1 R:R instead of 3:1.
- Use a 1:1 R:R instead of 3:1.
- Additional pairs, particularly GBP crosses.
Notes
- Never reenter in the same direction.
- Place a maximum of two trades per day per pair, one long and one short. Preferably just one though.
- Cancel orders 24 hours later.
History
- I've only visually tested this system historically, but it seems to be incredibly profitable across the pair mentioned here, as well as many others.
- It looks like it wins 50%-60% of all trades and averages about 30 trades per month per pair.
- Visually it is easy to calculate percentage gain per month, as pips, apart from the range, are rather irrelevant. You either lose one unit of profit or make three units of profit each trade, obviously non-compounded.
Questions & Help
- I need someone to develop an EA that can test this strategy and fine tune it given the potential changes above, proving it's long-term profitability and shaping it as much as possible. I am a manual trader and don't even use MT4, so any help would be greatly appreciated.
- Also, what would one suggest I do regarding hedging? Managing sub-accounts is a pain. Some potential answers are:
- Only trade in the direction of previously open trades.
- This might actually help us filter out some false breakouts, just look at this past month.
- Sub-accounts, even if they are a pain they are worth an average of 30% a month.
- Some odd sort of closing and reopening so that we can work with FIFO? I'd rather not even think through the depths of this notion, but again it would be worth 30% a month if that's what it takes.
- Only trade in the direction of previously open trades.
Finally
It seems that this sort of method is profitable for traders across the board, in a ton of time frames, pairs, markets even, as well as sessions. Many similar methods are mentioned on this forum. I think it is safe to say it, and systems like it, provide an edge. As a result, it would be great if we had an EA that allowed us to do the following.
- Choose any time frame.
- Choose any bar.
- Choose pip buffer.
- Choose breakout or reversal.
- Choose to only enter on a retrace, for example a certain number of pips or a certain percentage of the current bars range.
- Choose between a trailing stop, a hard stop, a move of our stop at after a certain pip value, or percentage value, think risk-to-reward or a certain percentage of the current bars range.