The Compounding System | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

The Magic of Compounding 75 replies

How long can I use compounding? 37 replies

few newbie questions - compounding 8 replies

What is compounding, and how can I apply it to scalping strategy? 3 replies

Compounding Interest puzzle 6 replies

Attachments: The Compounding System
Exit Attachments

The Compounding System

  • #1
  • First Post: Edited Sep 10, 2014 9:17am Aug 25, 2014 11:07pm | Edited Sep 10, 2014 9:17am
Hi

I have one system and i am going to do manual testing every day. All traders are welcome to participate in this testing.

Probability Game Strategy

 

  1. Use M5 Chart
  2. Only EU pair is recommended
  3. NY Time 08:00 close Candle (Modification: This system based on PA so we can modify it by looking first candle (open and close price). If open price is smaller than closed price it is buy and if open price is greater than closing price then it is sell.) In simple words if candle is sell candle then it is sell and if it is buy candle it is buy order
  4. Candle close at 1.32594 (consider it is buy)
  5. At the closing value of candle. Add/subtract 10 pips to closing value and it is TP.
  6. I am not fan of putting Hard SL so if price go below 10 pips from closing value so value will be (1.32594) , close the trade with loss and open Short position at 1.32594 and subtract 10 pips from this value and set TP. If price go up again at 1.32694 then close the short position and open long position with above given rule.
  7. It is important to remember that first position should open with 0.1, second with 0.2, third with 0.4 and fourth with 0.8
  8. Use broker which offer you 2 or less than 2 pips spread. you can check Exness or Alpari (it is totally your choice)
  9. On the screenshot, red line is representing the candle close on M5 chart and it is also showing closing value of candle. Second screenshot is showing green line as TP.
  10. Criteria to identify the successful days is that our TP should hit in maximum of 4-5 trades.
  11. Remember this is very risky system

Attached Image(s) (click to enlarge)
Click to Enlarge Name: untitled.JPG Size: 67 KB
Click to Enlarge Name: untitled1.JPG Size: 49 KB
Love for all; Hatred for none.
  • #2
  • Aug 26, 2014 10:54am Aug 26, 2014 10:54am
August 26, 2014:

As per rules, M5 candle close at 1.31917 so

- Long at 1.31917 with 0.1 (Red line shows the candle which closed at 1.31917)
- TP is 1.32017 (TP is green line)


Take Profit is achieved and there was no need to open any other position.
Attached Image (click to enlarge)
Click to Enlarge Name: untitled.JPG Size: 75 KB
Love for all; Hatred for none.
  • #3
  • Aug 27, 2014 10:11am Aug 27, 2014 10:11am
August 27, 2014:

Today is best example to explain the compounding system.

As per rules, M5 candle close at 1.31797 so

- Opened Long position at 1.31797 with 0.1 (SL hit at 1.31697)
- Because SL hit at 1.31697 so open short position at this value (but SL hit for this position at 1.31797)
- Because SL hit at 1.31797 so open long position at this value
- Our TP hit at 1.31897


Take Profit is achieved and there was no need to open any other position.

Results:

First Long position = -10 Pips
Second Short position = -20 Pips
Third Long position = 40 Pips

End Result : -10-20+40=10 Pips
Attached Image (click to enlarge)
Click to Enlarge Name: untitled.JPG Size: 86 KB
Love for all; Hatred for none.
  • #4
  • Aug 28, 2014 1:59pm Aug 28, 2014 1:59pm
August 28, 2014:

Another successful day for this compounding system.

As per rules, M5 candle close at 1.31812 so

- Opened Long position at 1.31812 with 0.1 (SL hit at 1.31712)
- Because SL hit at 1.31712 so open short position at this value with 0.2

- Our TP hit at 1.31612


Take Profit is achieved and there was no need to open any other position.

Results:

First Long position = -10 Pips
Second Short position = +20 Pips


End Result : -10+20=10 Pips
Attached Image (click to enlarge)
Click to Enlarge Name: untitled.JPG Size: 88 KB
Love for all; Hatred for none.
  • #5
  • Aug 28, 2014 3:40pm Aug 28, 2014 3:40pm
your system looks really nice!!!
looking forward to see some more upcoming trades

btw, do you have any experience how this system performs in ranging phases?
  • #6
  • Aug 28, 2014 5:05pm Aug 28, 2014 5:05pm
Quoting Mr.Ma
your system looks really nice!!! looking forward to see some more upcoming trades btw, do you have any experience how this system performs in ranging phases?
If you check the history of EU pair, ranging phase is 20 pips and our TP is 10 pips so we are good in ranging phase. By the way, i totally forgot to mention that i recommend only EU pair for this strategy.
Love for all; Hatred for none.
  • #7
  • Aug 28, 2014 8:19pm Aug 28, 2014 8:19pm
So how many compounds do you go to and when do you call it quits?

If you got .1 then .2 and then .4 and then .8 and then .16 and still lost, then you have effectively wiped out most of the winnings up to that date
Winners add to winning trades!
  • #8
  • Aug 29, 2014 7:19am Aug 29, 2014 7:19am
I just had a quick visual backtest...

what would you think about, maybe to add an 200 SMA as a filter.
for example, price below -> start with short; price above -> start with long ??
  • #9
  • Aug 29, 2014 11:20am Aug 29, 2014 11:20am
Quoting marshalmax
So how many compounds do you go to and when do you call it quits? If you got .1 then .2 and then .4 and then .8 and then .16 and still lost, then you have effectively wiped out most of the winnings up to that date
Yes , thats why i called this system very risky. I am testing this system and if it goes successfully for 30 days then i consider it as good system. Criteria to identify the success of this system is that TP should hit in maximum of 4-5 trades.
Love for all; Hatred for none.
  • #10
  • Aug 29, 2014 11:22am Aug 29, 2014 11:22am
Quoting Mr.Ma
I just had a quick visual backtest... what would you think about, maybe to add an 200 SMA as a filter. for example, price below -> start with short; price above -> start with long ??
Yes i thought about it and you can add it as filter but i will continue testing in same way as i am doing.
Love for all; Hatred for none.
  • #11
  • Aug 29, 2014 11:25am Aug 29, 2014 11:25am
August 29, 2014:

4th successful day for this compounding system.

As per rules, M5 candle close at 1.31895 so

- Opened Long position at 1.31895 with 0.1 (SL hit at 1.31795)
- Because SL hit at 1.31795 so open short position at this value with 0.2

- Our TP hit at 1.31695


Take Profit is achieved and there was no need to open any other position.

Results:

First Long position = -10 Pips
Second Short position = +20 Pips


End Result : -10+20=10 Pips
Attached Image (click to enlarge)
Click to Enlarge Name: untitled.JPG Size: 87 KB
Love for all; Hatred for none.
  • #12
  • Aug 29, 2014 11:38am Aug 29, 2014 11:38am
Quoting Mr.Ma
I just had a quick visual backtest... what would you think about, maybe to add an 200 SMA as a filter. for example, price below -> start with short; price above -> start with long ??
I wanted to ask , how was your quick visual backtest for this strategy.
Love for all; Hatred for none.
  • #13
  • Aug 29, 2014 12:01pm Aug 29, 2014 12:01pm
Quoting aahmad29
{quote} I wanted to ask , how was your quick visual backtest for this strategy.
It was quiet okay!
considering that you need a big account for trading this strategy!
We definately have to take the New York open for trading it. London open would work as well most of the times but if you look at the LO on the 19th of August... this would have been a killer fo the account
  • #14
  • Aug 29, 2014 12:10pm Aug 29, 2014 12:10pm
Quoting Mr.Ma
{quote} It was quiet okay! considering that you need a big account for trading this strategy! We definately have to take the New York open for trading it. London open would work as well most of the times but if you look at the LO on the 19th of August... this would have been a killer fo the account
Yes only NY open and money management is very necessary. I know many traders have small accounts and wasted all money without money management. If we want small loss then there would be small profit.

For me i am using ,

$1000 = 0.01 (i am happy with my small profit)
Love for all; Hatred for none.
  • #15
  • Aug 29, 2014 12:15pm Aug 29, 2014 12:15pm
Quoting Mr.Ma
{quote} It was quiet okay! considering that you need a big account for trading this strategy! We definately have to take the New York open for trading it. London open would work as well most of the times but if you look at the LO on the 19th of August... this would have been a killer fo the account
Hi are you sure about Aug 19 LO because on my chart it hits TP in 2nd trade. but we are not using LO
Love for all; Hatred for none.
  • #16
  • Aug 29, 2014 12:22pm Aug 29, 2014 12:22pm
Hello everyone

What I would suggest is to avoid NY open when there is a red news within first hour of NY open. The reason behind it is obvious: Red news= most likely slippage. You may miss you SL by 10-40 pips an never get to open opposite trade. Also maybe buy if price is above daily open and sell when below DO.

Just my 2c.
  • #17
  • Aug 29, 2014 12:24pm Aug 29, 2014 12:24pm
Instead of slow forward testing this strategy it would be relatively easy to build an EA around the theory and backtest it for a few years to see how often the account gets margin calls or blows up. This approach would be much faster and more informative.

I would be very surprised if this Martingale approach were the "Holy Grail" of all Forex riches, but "Hey, you never know..."

Attached Image
  • #18
  • Aug 29, 2014 1:02pm Aug 29, 2014 1:02pm
Quoting aahmad29
{quote} Hi are you sure about Aug 19 LO because on my chart it hits TP in 2nd trade. but we are not using LO
aahhh... was my fault... did look at the Frankfurt open, sorry for the confusing!
depending on the spread on LO it could have been a winner on the first trade!
when spread is more than 0.3 pip then the second trade was the green one
  • #19
  • Aug 29, 2014 5:18pm Aug 29, 2014 5:18pm
Quoting rew2k7
Hello everyone What I would suggest is to avoid NY open when there is a red news within first hour of NY open. The reason behind it is obvious: Red news= most likely slippage. You may miss you SL by 10-40 pips an never get to open opposite trade. Also maybe buy if price is above daily open and sell when below DO. Just my 2c.
Thanks for participation. I am still testing with NY open but i am also considering two suggestions and probably we can add it later.

First suggestion comes from Mr.MA about using SMA200 to decide about first trade
Second suggestion is from rew2k7 and i want to modify this suggestion in future. If any major news coming at NY open then we can use LO.
Love for all; Hatred for none.
  • #20
  • Aug 30, 2014 11:16am Aug 30, 2014 11:16am
Ladies and Gentlemen,

I just finished a backtest using the simple basic method aahmad29 was providing us in post #1!
I did run the backtest on an Armada Markets MT4 with 0.1 pip spread and the fxblue trade simulator starting from the 1st of august to the 29th of august.
I wanted to see how this system is performing this month because as we all know august is the month of the year with the lowest volatility.
As you can see, I set up a $1000 account and my risk on every first trade was fix with 1%.
The maximum compounds were 3 trades! which is really good in my eyes!
And there where only 2 trades which were running during the night.

You can check the results here:

http://www.fxblue.com/users/Jeffray/stats

or here:

Attached Image (click to enlarge)
Click to Enlarge Name: ResultGraph.gif Size: 8 KB


Attached File(s)
File Type: rar StrategyTester.rar   4 KB | 636 downloads


Just a sidenote at the end. I found it very difficult to click the sell button at the same time when my SL got triggered, so I helped myself with setting up a pending order with TP & SL right on the SL of the current running trade. When TP got hit I deleted the pending order, if SL got hit and the pending order got
triggered I did the same again and did setup a new pending order with TP & SL right on the SL of the running trade! Thats it :nerd:

When aahmad29 agrees I would like to run a backtest for august on EU again using London Open.
Plus another backtest with Gold (XAUUSD) for august as well. Because a quick visual backtest looked also quiet nice!
But I will publish it only if it is ok for you buddy, because the strategy is based only on EU!!! And I don't want to flood your thread with unnecesarry stuff

And now... Enjoy the rest of your weekend everybody
0 traders viewing now