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Buy/Sell Line for Daily Chart

  • #1
  • First Post: Mar 25, 2013 4:55pm Mar 25, 2013 4:55pm
I have been looking for a system based on daily charts because I have a full-time job and can only look at the charts 2-3 times per day max. I read the thread started by 60minuteman titled "Buy sell line trading", and liked the idea of using price action for entries. Even though his thread was not mainly focused on daily charts, I did some backtesting on EUR/USD daily chart for the past 3.5 years and found it to be worth pursuing.

Here are my backtest results from the start of September 2009 through the end of February 2013 using IronFX demo data (because they do not have Sunday candles):
109 trades
45 wins
22 breakeven
42 losses
Take profit is always 2 times the stop loss amount
7,074 pips
48R (which means it made a total of 48 times what was risked on each individual trade)

Here are my rules for trading which are slightly different than 60minuteman's:
Look for buys if the candle has closed above the 50 simple moving average and if the 50SMA value is higher than the value 4 candles back.
The signal candle will be a candle that has closed higher than the previous candle's open, and that previous candle must have an open that is equal to or higher than its close.
Another type of signal candle will be one that has the lowest low of the last 3 completed candles and has a close that is in the upper 25% of the candle height. If this candle does not have a close in the upper 25% but the following candle does, then that candle will be the signal candle.
Set a buy order 0.1 pip plus spread above the high of the signal candle.
If the order is not triggered by the end of the day, then cancel the order.
The stoploss will be 0.1 pip below the low of the signal candle.
Move the stop to breakeven after price has advanced the same number of pips that you are risking.
The take profit is always 2 times the amount of the stoploss.
For sells, the rules are the same just vice versa.
I did not use any S/R lines or any discretion because I wanted as little bias in the backtesting as possible.

My main reason in starting this thread is to find someone who might be interested in making an EA of this system for the purpose of backtesting. I don't have a lot of time to backtest since I work a lot and do the backtesting manually. I would like to find out if this system is profitable with other currency pairs. I'll attach my spreadsheet of the results for your information. I'll try to post some pics of examples later.
Thanks.
Attached File(s)
File Type: xlsx EU Backtest.xlsx   19 KB | 1,025 downloads
  • #2
  • Mar 25, 2013 8:20pm Mar 25, 2013 8:20pm
Here are 2 examples of trades:
Attached Image (click to enlarge)
Click to Enlarge Name: eurusddaily.png Size: 45 KB

The green arrow signifies a signal candle that had the lowest low of the last 3 candles and closed in the upper 25% of the candle height. The red moving average line is the 50SMA which has a higher value than 4 candles back. The green horizontal line is the entry buy which triggered on the candle after the signal candle. The stop was moved to breakeven on the Jan 10 candle after advancing the same number of pips that were risked. The green check mark is the take profit level which is twice as much as the stop loss.
The yellow arrow signifies a signal candle that had a close higher than the open of the previous candle (also the previous candle had a close lower than its open). The red 50SMA is higher than 4 candles back. The yellow horizontal line is the entry buy which triggered on the candle after the signal candle. The yellow x mark is the stop out level.
  • #3
  • Mar 26, 2013 11:32am Mar 26, 2013 11:32am
Can you describe more clearly about "value is higher than the value 4 candles back." thanks for shared wendavol

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  • #4
  • Mar 26, 2013 11:49am Mar 26, 2013 11:49am
Quoting pepesan
Can you describe more clearly about "value is higher than the value 4 candles back." thanks for shared wendavol
What I mean is that after the signal candle has completed, you look at the 50SMA to be sure that it is higher than it was 4 days ago. For example, if our signal candle is Friday and we are looking to buy then we make sure the 50SMA is higher than is was on Monday. Vice versa if we are looking to go short. I made this rule because I was trying to find an objective way to say that the 50SMA has a good slope. I know it is probably not the best way to determine if the 50SMA is moving up or down nicely, but I was trying to make a mechanical rule I could follow for doing the backtest. Rather than just looking at the chart and saying "ok that 50SMA looks good". Thanks for the question.
  • #5
  • Mar 26, 2013 4:38pm Mar 26, 2013 4:38pm
I am interested for this daily trading thread.

FX_California
  • #6
  • Mar 26, 2013 6:14pm Mar 26, 2013 6:14pm
Hi Wendavol,

How much do you typically risk in regard to risk% vs account balance? .5%, 1%, 2% or higher. I like the method and it doesn't look as though there is much draw down over the time period tested. I too am looking for a strictly mechanical method of trading the daily's. Unfortunately I am not a programer so I cannot add in that respect, but I'm sure there are those out there who could accomplish this script relatively easy.
  • #7
  • Mar 26, 2013 7:09pm Mar 26, 2013 7:09pm
Wendavol,

Thanks for sharing your method and your backtest results. I have a programming background and have written some EA's, indicators, etc. On the face of it, this doesn't look that difficult.

An initial question is regarding your entry setting. You have indicated that buy entries are 0.1 pip above the high of the signal candle plus the spread, etc. Is this correct? 1/10th of a pip? how did you measure this? A pip for the eurusd is 0.0001 of the stated price. Perhaps you are using a 5-digit MT4 platform?

I'll proceed on the basis of using 1 pip plus spread above the signal candle high, with the initial stoploss 1 pip below the signal candle's low.

Cam
Chicago
  • #8
  • Mar 26, 2013 7:20pm Mar 26, 2013 7:20pm
I'm sure that there are other signal candles appearing after you have entered a trade and before it hits either SL or TP.

Do you ignore these trade entries or do you take them along with the original trade?
  • #9
  • Mar 26, 2013 7:58pm Mar 26, 2013 7:58pm
Quoting earret
Hi Wendavol,

How much do you typically risk in regard to risk% vs account balance? .5%, 1%, 2% or higher. I like the method and it doesn't look as though there is much draw down over the time period tested. I too am looking for a strictly mechanical method of trading the daily's. Unfortunately I am not a programer so I cannot add in that respect, but I'm sure there are those out there who could accomplish this script relatively easy.
I typically just risk what I am comfortable losing. I was trading with a demo account for 2 months using 5% risk per trade. I was trading 8 currency pairs. I had a long losing streak the second month.

I just started backtesting on CADJPY and the first year was a loser. I tried altering the rules about the lowest low of past 3 candles to the lowest low of past 5 candles instead and vice versa if looking for a short. I also applied the rule to both types of entries and so far it makes my EURUSD and the first year of my CADJPY backtest profitable. This makes sense because you are waiting for a pullback and then buying the break of a bullish candle or selling the break of a bearish one. What I'm aiming for is a system that can be profitable on most if not all currency pairs, so there may be changes to the rules in the first post. Definitely still a work in progress.
  • #10
  • Mar 26, 2013 7:59pm Mar 26, 2013 7:59pm
Quoting cballew
1/10th of a pip? how did you measure this? A pip for the eurusd is 0.0001 of the stated price. Perhaps you are using a 5-digit MT4 platform?
If you are going to code something, just add the "Point" to the high/low. It will be a 1/10th of a pip if it's on a 5-digits or a full pip if it's a 4-digits broker.
MT4/MT5 EAs/Indicators/Alerts coder
  • #11
  • Mar 26, 2013 8:01pm Mar 26, 2013 8:01pm
Quoting cballew
Wendavol,

Thanks for sharing your method and your backtest results. I have a programming background and have written some EA's, indicators, etc. On the face of it, this doesn't look that difficult.

An initial question is regarding your entry setting. You have indicated that buy entries are 0.1 pip above the high of the signal candle plus the spread, etc. Is this correct? 1/10th of a pip? how did you measure this? A pip for the eurusd is 0.0001 of the stated price. Perhaps you are using a 5-digit MT4 platform?

I'll proceed on the basis of using...
Yes, I'm using a 5 digit platform. Basically the idea is to buy the break of the high of the signal candle. So if you have a 4 digit broker, then it would be 1 pip. Thanks for taking an interest!
  • #12
  • Mar 26, 2013 8:02pm Mar 26, 2013 8:02pm
Quoting billbss
I'm sure that there are other signal candles appearing after you have entered a trade and before it hits either SL or TP.

Do you ignore these trade entries or do you take them along with the original trade?
Yes, I took all signals regardless of whether or not there was already an active trade.
  • #13
  • Mar 28, 2013 11:26am Mar 28, 2013 11:26am
Good thread... interested
  • #14
  • Mar 28, 2013 7:21pm Mar 28, 2013 7:21pm
I am attaching an EA. I've tried to match your manual backtest results, Wendavol, but did not achieve this. I will share the program and its output for others here to review and make suggestions.

 

  1. buy when candle closes above a rising SMA(50)
  2. signal candle closes higher than prior candle's open and prior candle's open is >= its close
  3. signal candle may also be lowest low of last 3 completed candles and close in upper 25% of its range
  4. buy stop entry = signal candle high + 1 pip + spread; cancel if not triggered by EOD
  5. stoploss is 1 pip below signal candle's low
  6. move stop to breakeven when price advance = pips at risk
  7. take profit = 2 * pips at risk
  8. rules for sell stop entry is the reverse of a buy stop


The EA allows user to choose a Fixed Lot size (some value other than zero) or a Fixed Risk size which is a function of # pips at risk and percentage of Account Balance. Options for email alerts or popup alerts are available. The EA is set to measure lows for the past 3 candles inclusive of the signal candle.

Comments, suggestions are welcome.
tradefunctions file is saved in the libraries folder within experts. EA won't function without this.

Attached Image (click to enlarge)
Click to Enlarge Name: Wendavol's Daily Trade Program.gif Size: 9 KB
Attached File(s)
File Type: mq4 Wendavol Daily Trading Program v1.mq4   12 KB | 856 downloads
File Type: xlsx EU Backtest with EA results.xlsx   43 KB | 689 downloads
File Type: mq4 tradefunctions.mq4   15 KB | 782 downloads
  • #15
  • Mar 28, 2013 8:55pm Mar 28, 2013 8:55pm
Quoting cballew
I am attaching an EA. I've tried to match your manual backtest results, Wendavol, but did not achieve this. I will share the program and its output for others here to review and make suggestions.
[list][*]buy when candle closes above a rising SMA(50)[*]signal candle closes higher than prior candle's open and prior candle's open is >= its close[*]signal candle may also be lowest low of last 3 completed candles and close in upper 25% of its range[*]buy stop entry = signal candle high + 1 pip + spread; cancel if not triggered by EOD[*]stoploss...
Thanks cballew for this EA! Regarding the different results, did you use data that did not have a Sunday candle? I'm going to try this EA on the data I used for my manual backtest and get back to you with my findings. Thanks again for your work!
  • #16
  • Mar 29, 2013 2:37am Mar 29, 2013 2:37am
Quoting cballew
I am attaching an EA. I've tried to match your manual backtest results, Wendavol, but did not achieve this. I will share the program and its output for others here to review and make suggestions.
[list][*]buy when candle closes above a rising SMA(50)[*]signal candle closes higher than prior candle's open and prior candle's open is >= its close[*]signal candle may also be lowest low of last 3 completed candles and close in upper 25% of its range[*]buy stop entry = signal candle high + 1 pip + spread; cancel if not triggered by EOD[*]stoploss...
Great work... I'll start to backtest as soon as i can.

Have you consider also this 2 rules?

1) If this candle does not have a close in the upper 25% but the following candle does, then that candle will be the signal candle.
2) The order must be triggered in the very next candle

Many thanks for the EA
  • #17
  • Mar 29, 2013 3:45am Mar 29, 2013 3:45am
Quoting lucariga
Great work... I'll start to backtest as soon as i can.

Have you consider also this 2 rules?

1) If this candle does not have a close in the upper 25% but the following candle does, then that candle will be the signal candle.
2) The order must be triggered in the very next candle

Many thanks for the EA
Yes it seems that these 2 rules were taken in consideration in the code.
MT4/MT5 EAs/Indicators/Alerts coder
  • #18
  • Mar 29, 2013 4:58am Mar 29, 2013 4:58am
Quoting Wendavol
Thanks cballew for this EA! Regarding the different results, did you use data that did not have a Sunday candle? I'm going to try this EA on the data I used for my manual backtest and get back to you with my findings. Thanks again for your work!
My broker is FXCM and on his MT4, sunday candle is present. How can i skip Sunday data?
  • #19
  • Mar 29, 2013 8:44am Mar 29, 2013 8:44am
Quoting lucariga
My broker is FXCM and on his MT4, sunday candle is present. How can i skip Sunday data?
My broker is IBFX and also contains Sunday market data. The EA is written to avoid using Sunday data in its calculations.

Having said this, I am not sure how Wendavol's IronFX data file will work in a backtest as I'm unfamiliar with IronFX's file format.

I know that my own backtest from Sep-1-09 through yesterday was rife with data errors due to not having EUR/USD 1-minute data all the way back to 9-1-09. That is a separate issue from skipping Sundays.

While developing the EA, I was able to match trades from Wendavol's backtest for the past 12 months.
  • #20
  • Apr 1, 2013 12:29pm Apr 1, 2013 12:29pm
Quoting cballew
My broker is IBFX and also contains Sunday market data. The EA is written to avoid using Sunday data in its calculations. Having said this, I am not sure how Wendavol's IronFX data file will work in a backtest as I'm unfamiliar with IronFX's file format. I know that my own backtest from Sep-1-09 through yesterday was rife with data errors due to not having EUR/USD 1-minute data all the way back to 9-1-09. That is a separate issue from skipping Sundays. While developing the EA, I was able to match trades from Wendavol's backtest for the past 12 months....
I attempted to backtest the EA, but there were loads of errors and it would not continue. I guess my data source is bad. Anyway, I've been watching some of Steve Primo's videos from fxstreet and I liked the idea of using the RSI(5) as an additional filter. I started backtesting using the RSI on the CADJPY which had previously been a loser using the strategy on the first post, but is now a winner. I have not finished backtesting yet, but I will post results when I'm done.
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