80-85% net winning percent. Should I move on demo? | Forex Factory

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80-85% net winning percent. Should I move on demo?

  • #1
  • First Post: Jun 22, 2013 8:57am Jun 22, 2013 8:57am
Hello,
I am new to Forex. For couple of weeks I have been extensively backtesting the Engulfing Bars at daily timeframe in the direction of the current major trend (I do not use it as reversal rather as continuation). I keep my reward:risk ratio to be 3:1. I often get 20 correct & 10 incorrect. So 20 correct * 3 = 60 profitable trades and 10 lossing trades. So by these numbers my NET PROFITABLE trades get to around 80-85% profitbale trades. I get 100 NET profitable trades per month on backtesting after winning trades*3 & deducting all losing trades. I want to ask that:
1. Is this accuracy good enough to start the demo and than live trading?
2. What should my risk per trade? Should it be 2% or 1% of account capital? (I am against risk higher than 2% per trade)
3. Can my aspirations of buying a Rolls Royce Phantom & lavishly living in Kensington & Chelsea, London be met one day if I keep this success for a few years?

Thank you,

Regards,
Aariz
  • #2
  • Jun 22, 2013 9:54am Jun 22, 2013 9:54am
Quoting aarizahmad
Hello, I am new to Forex. For couple of weeks I have been extensively backtesting the Engulfing Bars at daily timeframe in the direction of the current major trend (I do not use it as reversal rather as continuation). I keep my reward:risk ratio to be 3:1. I often get 20 correct & 10 incorrect. So 20 correct * 3 = 60 profitable trades and 10 lossing trades. So by these numbers my NET PROFITABLE trades get to around 80-85% profitbale trades. I get 100 NET profitable trades per month on backtesting after winning trades*3 & deducting all losing trades....
Well after your two weeks of experience you feel you can take on the central banks around the world and beat them - then the answers are yes. 2% of account is ok but if you haven't got a few million in the account don't bother. Jeez.
  • #3
  • Jun 22, 2013 11:37am Jun 22, 2013 11:37am
Quoting claudia1
{quote} Well after your two weeks of experience you feel you can take on the central banks around the world and beat them - then the answers are yes. 2% of account is ok but if you haven't got a few million in the account don't bother. Jeez.
Thanks Claudia,
Yes, I can understand what you meant! Your tone to a newbie is really applaud-able
  • #4
  • Jun 22, 2013 3:20pm Jun 22, 2013 3:20pm
As long as you have a good money management strategy, worst case you won't lose that much. I personally don't like the idea of demos unless I'm backtesting a strategy. Going forward, I always trade live. If it's a new strategy, I usually put a few hundred into a live account and test with that. I say go for it as long as you don't go all in on one single trade. Remember, you don't have to be a genius to beat the central banks/money managers. If you have a strategy that works and you follow good risk management practices, no central bank can seperate you from your money.

I would suggest starting with 1% risk and as you get more confident, feel free to up that to 1.5% and then 2%.

Yes, you can absolutely make a killing trading. But for that, you will have to either start with a nice chunk of capital or keep at it for a long time. I'd suggest the following:

1. Start with a small account even if you have a lot of money. I'd say $1000 and prove to yourself that your strategy works live. This will also give you the confidence in the face of adversity.
2. If you don't have more capital to add on to the $1K, go out, get another job and save up money. I'd say 20-30K would be a good start.
3. Never forget that anything can happen at any time. So, you should never ever risk too much no matter how sure a trade looks.

You'll be well on your way to buying that Rolls Royce.
  • #5
  • Jun 22, 2013 11:24pm Jun 22, 2013 11:24pm
Hello,
with the odds of 60% is very good and even 1:3 RR what else can you ask! I even trade with 20-30% win rate. And please post your trades and your rules. It would be quiet interesting to see whether you can fulfill 1:3 RR with 60% win rate system
  • #6
  • Edited 5:44am Jun 23, 2013 3:37am | Edited 5:44am
Thank you card & Togu

Togu, I use Engulfing Bar & Morning Star, Evening Star formations. Following are the rules that I follow:

1. I consider the Engulfing bar when 2nd candle body engulfs the body of the candle 1st candle. The shadows are disregarded from consideration (open & close of 1st bar engulfed by the open & close of 2nd bar)
2. The 3rd long bar of Morning Star must completely engulf the 1st long bar. So, you can consider it as the variation of Engulfing Bar with 1 or 2 smaller candles in between first & last candles.
3. There MUST, MUST be nothing to the left of the Engulfing Bar/ Morning Star or Evening Star (should never be in the range). And there must be a clear up/down trend preceding the signal bars.
4. If there is an Engulfing Bar or Morning/Evening Star in the direction of major current trend, the trade is triggered.
5. For longs I put the Stop Loss at the lowest shadow of 2 bars of Engulfing & lowest shadow of 3 bars of Morning Star. And for take profit I put the 3 times the Stop Loss.

My winning percent is 50-55%, I get this high percent because I always trigger a trade only when I see clear up/down trand & nothing to the left of signal candles. so I make sure that I am definately into a strong trend. But as I have 1:3 RR I am at good money making position. There are fewer trades per pair per month on daily charts. I usually get 1-2 trade per pair per month. But with Oanda there are 114 pairs so I can get dozens of trades per month.

P.S. I have got this system from Jhonathan Fox of Forex School Online. He also uses Pin Bar formation. But I have always failed to use Pin Bar in my testing. Whereas, Engulfing Bars rock!

Thank you

Regards
  • #7
  • Jun 23, 2013 7:27am Jun 23, 2013 7:27am
Engulfing bar is different from morning and evening stars. It can be regarded two different systems. Am I right? but I know these two are the PA patterns. I have some basic questions as follows:
1. What pair? if EURUSD alone, then it may be little easier to gauge the win rate and loss ratios. (ofcourse after live testing)
2. What time frame?
3. How do you determine SL and TPs? are these predetermined or is calculated from engulfed bar's open and close?

Quote
3. There MUST, MUST be nothing to the left of the Engulfing Bar/ Morning Star or Evening Star (should never be in the range). And there must be a clear up/down trend preceding the signal bars.
4. If there is an Engulfing Bar or Morning/Evening Star in the direction of major current trend, the trade is triggered.

3. How do you know if there is a trend? Do you have some method or just naked eye as an indicator?
4. Engulfing/ Morning, Evening stars are trend reversals. No? please correct me if I'm wrong! if they're trend reversals how do we trade only in the direction of major trend?

And finally let's put some charts as we train ourselves from next week.

Thanks
  • #8
  • Edited 8:49am Jun 23, 2013 8:22am | Edited 8:49am
Quoting Togu
Engulfing bar is different from morning and evening stars. It can be regarded two different systems. Am I right? but I know these two are the PA patterns. I have some basic questions as follows: 1. What pair? if EURUSD alone, then it may be little easier to gauge the win rate and loss ratios. (ofcourse after live testing) 2. What time frame? 3. How do you determine SL and TPs? are these predetermined or is calculated from engulfed bar's open and close? {quote} 3. How do you know if there is a trend? Do you have some method or just naked eye as an...

Yes, Engulfing Bar &morning and evening stars are different. But the way I use them is similar. This is a single system that uses 2 PA formations.
1. Not just EURUSD but I have been testing on many, many pairs & getting 50-55% winning rate at 3:1 settings.
2. I used to use 4 hour but now I am on daily TF.
3. My SL & TP are not rigid or pre-determined. But I take the close of Engulfing bar or morning/evening star to the lower most shadow (for long) as SL & 3 times the TP.
4. Yes, you are correct they are trend reversal, but I use them as trend continuation. The bar that engulfs must be IN THE DIRECTION of current major trend.
5. Yes, I will put some charts in a few hours. So that you may understand the concept of this system.

Thank you
  • #9
  • Jun 23, 2013 8:32am Jun 23, 2013 8:32am
Thanks for your answers, it clears up a lot of things. How about using Inside bar as well? Did you consider this before?
  • #10
  • Jun 23, 2013 8:40am Jun 23, 2013 8:40am
Here you see a clear down trend:
Attached Image (click to enlarge)
Click to Enlarge Name: down trend.png Size: 29 KB
  • #11
  • Jun 23, 2013 8:43am Jun 23, 2013 8:43am
Now, here the Engulfing Bar occurs.
Attached Image (click to enlarge)
Click to Enlarge Name: EB.png Size: 26 KB
  • #12
  • Jun 23, 2013 8:45am Jun 23, 2013 8:45am
TP = SL * 3 is hit in the following few days:
Attached Image (click to enlarge)
Click to Enlarge Name: EB Final.png Size: 24 KB
  • #13
  • Jun 23, 2013 8:47am Jun 23, 2013 8:47am
Quoting Togu
Thanks for your answers, it clears up a lot of things. How about using Inside bar as well? Did you consider this before?
Well dear, I have considered Inside Bars. But they are not as powerful as the Engulfing Bars & Morning /Evening Stars. Please let me know if you understood my system or not. I can also upload more charts so that you may understand better.
  • #14
  • Jun 23, 2013 8:50am Jun 23, 2013 8:50am
Quote
2. What should my risk per trade? Should it be 2% or 1% of account capital? (I am against risk higher than 2% per trade)

if ur money is tight, then you can do some basic math. If you generate 300 pips in one month then it could be your 30% gain, in other words 100 pips yield 10%. I was trying to live test PA system similar to yours but only using inside bar, but maybe I can use your system along with mine. I was considering this: whenever I see IB whether it's Sunday's and when it breaks I'd enter with 50 pips SL with 100 pips TP. This is just to see the win loss ratio, if it satisfies my needs I will tweak little bit to find more additional trading opportunities (scale in when we're profit)
  • #15
  • Jun 23, 2013 9:00am Jun 23, 2013 9:00am
Quoting Togu
{quote} if ur money is tight, then you can do some basic math. If you generate 300 pips in one month then it could be your 30% gain, in other words 100 pips yield 10%. I was trying to live test PA system similar to yours but only using inside bar, but maybe I can use your system along with mine. I was considering this: whenever I see IB whether it's Sunday's and when it breaks I'd enter with 50 pips SL with 100 pips TP. This is just to see the win loss ratio, if it satisfies my needs I will tweak little bit to find more additional trading opportunities...
Togu, please do test my system from tomorrow. You have 5 years of trading experience. You are in better position to add more filters to it and make it even better. Please, go to MT4 and go through the charts and do the manual back testing. I will also be starting my demo from tommorow. After 1 week or even a month we can concile the results.
  • #16
  • Jun 23, 2013 9:02am Jun 23, 2013 9:02am
I couldn't really tell which was the engulfing bar.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: gbpusdmdaily.png Size: 25 KB
Click to Enlarge Name: EB.png Size: 20 KB
  • #17
  • Jun 23, 2013 9:12am Jun 23, 2013 9:12am
Quoting Togu
I couldn't really tell which was the engulfing bar. {image} {image}
Here, there are 2 engulfing bars. 1st to the left did not worked. Whereas, the 2nd worked out.
Attached Image (click to enlarge)
Click to Enlarge Name: EB edited.png Size: 30 KB
  • #18
  • Jun 23, 2013 9:17am Jun 23, 2013 9:17am
Buddy, this is not a valid EB. Reason is written on the chart.
Attached Image (click to enlarge)
Click to Enlarge Name: Togu EB.png Size: 46 KB
  • #19
  • Jun 23, 2013 9:18am Jun 23, 2013 9:18am
Quoting aarizahmad
{quote} Here, there are 2 engulfing bars. 1st to the left did not worked. Whereas, the 2nd worked out. {image}
How do you consider that as engulfing? that candle's high doesn't even engulf the previous bar's high. no?
  • #20
  • Jun 23, 2013 9:24am Jun 23, 2013 9:24am
Quoting aarizahmad
Buddy, this is not a valid EB. Reason is written on the chart. {image}
oh ok. I remember you were saying you don't mind the wicks and shadows right. so 2nd bar's body must fully engulf the 1st bar in order to be called legit engulfing bar.
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