BB Gann System

Easy BB Gann System for mechanical traders here: http://www.forexfactory.com/showthre...49#post7771149

Hard but probably more profitable BB Gann System for discretionary traders below:

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Hey Fellow Pipmakers!

I first introduced the BB Gann system in Eitan's 'The Science MRI System' thread in this post:
http://www.forexfactory.com/showthre...28#post7759828

Quite a lot of what follows is rehashed from that original post.

I strongly suggest you take a look at Eitan's SMRI System, it's mechanical and quite profitable:
http://www.forexfactory.com/showthread.php?t=503148

The BB Gann System came about as an accident almost. I was checking out a few of Eitan's older systems, when I noticed something interesting about the Stochastic 8,1,1 he was using in his MTS system: it appeared that whenever there was a quick, straight move from the BUY to the SELL area (or vice versa), price seemed to go some distance toward that direction afterwards.

Of course taking trades blindly based only on this fact didn't lead to very great results. So I tried to combine it with some of the SMRI indicators and some other ideas that I had in my trading kit (I've made approximately some 50 systems in my time as a trader, but none were anything to write home about!)

I'm also not a very big fan of discretionary systems, so I tried to make mine as mechanical as possible, with clear entries, TP and SL. Unfortunately, I haven't succeeded in doing this to my satisfaction: the system is still more discretionary/subjective than I would like.

Note that this system, though its foundations are laid already, is still a work in progress. We're still backtesting on several pairs and trying to come up with the best rules for trading them (not doing curve-fitting, mind you!)

I will keep this first post updated with the latest rules.

For now the rules are as follows:

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SELL RULES:

1] Stochastic has gone from Buy region to Sell region, i.e. from 75 level to 25 level, even better if it's gone from 85 to 15. The cleaner/straighter/nicer/faster/less zigzaggy the move the better.

2a] CCI 34 has gone from overbought to normal levels (i.e. has crossed upper 100 level downwards) AND there's a valley before the last peak (examples of valleys and peaks are shown in the pic at the end of the post)

OR

2b] CCI 34 has gone from normal levels to oversold (i.e. has crossed lower 100 level downwards) AND there's a valley before the last valley (possibly indicating a lasting downtrend) (when I say 'before the last valley' I mean before the valley currently being formed)
Note: When setups agree with rule 2b, it's usually because there's a strong downtrend, which means that price will probably cling to the lower band, which will violate rule 3 below. It's good in such cases to wait for price to retrace a little bit before entering. It's also good for price not to be far from MA. If price is too far from MA, that may indicate exhaustion of the trend, and an imminent reversal, at least toward MA resistance.

3] Price action (henceforth PA) has crossed middle Bollinger Band (henceforth BB) downwards or is near it (or, if everything else is looking well, at least there's some room between current price and lower extreme BB, though this latter rule may be violated when BBs are too narrow because a breakout is about to occur, commonly referred to as the Bollinger squeeze)

4] PA hasn't breached or punctured the lower extreme BB (again, this rule may be violated in case of Bollinger squeezes, or when everything else is looking really nice!)

5] Gann HiLo indicator's blue line is currently above the PA

Red Moving Average 60 (henceforth MA) plays no super significant role, other than 1) to help the trader identify the current trend (when there are consecutive CCI valleys, when Stoch tends to zigzag around the Sell area, when Gann HiLo is below the red MA, and when PA is below the red MA, then we're most probably in a downtrend), 2) to set possible TP & SL and 3) to indicate possible support and resistance areas.

SELL SL & TP:

Fractals Method (or Method 1): Last Fractal high is the SL and TP is identical: so if last Fractal high is 50 pips, TP is also 50 pips.

BB Method (or Method 2): Higher extreme BB is the SL. Lower extreme BB is the TP.

Fractals&BB Method (or Method 3): Last Fractal high is the SL and lower extreme BB is TP. This usually leads to a negative Risk Reward (RR) ratio.

BB&Fractals Method (or Method 4): Higher extreme BB is SL and last Fractal high determines TP. This is usually a positive RR ratio.

MA Method (or Method 5): SL is either last Fractal high or higher extreme BB, but TP is MA, because it may act as a resistance/support. This option might be preferable in cases when PA has been rejected by the MA in the recent past.

Good thing about placing your TP and SL according to the BBs is that they adjust to the market: as the BBs move -- maybe they become tighter, maybe they become wider -- you move your TP accordingly, tightening it or widening it respectively. It is recommended that you keep your original SL untouched, but that you move your TP according to the BBs. That way, if we picked the wrong direction, we can get out with a small profit or break even (BE).

Below is a pic of an ideal Sell Trade according to rule 2a:



BUY RULES - Reverse of the above:

1] Stochastic has gone from Sell region to Buy region, i.e. from 25 level to 75 level, even better if it's gone from 15 to 85. The cleaner/straighter/nicer/faster/less zigzaggy the move the better.

2a] CCI 34 has gone from oversold to normal levels (i.e. has crossed lower 100 level upwards) AND there's a peak before the last valley

OR

2b] CCI 34 has gone from normal levels to overbought (i.e. has crossed upper 100 level upwards) AND there's a peak before the last peak (possibly indicating a continued uptrend) (when I say 'before the last peak' I mean before the peak currently being formed)
Note: When setups agree with rule 2b, it's usually because there's a strong uptrend, which means that price will probably cling to the upper band, which will violate rule 3 below. It's good in such cases to wait for price to retrace a little bit before entering. It's also good for price not to be far from MA. If price is too far from MA, that may indicate exhaustion of the trend, and an imminent reversal, at least toward MA support.

3] PA has crossed middle BB upwards or is near it (or, if everything else is looking well, at least there's some room between current price and higher extreme BB, though this latter rule may be violated when BBs are too narrow because a breakout is about to occur, commonly referred to as the Bollinger squeeze)

4] PA hasn't breached or punctured the higher extreme BB (again, this rule may be violated in case of Bollinger squeezes)

5] Gann HiLo indicator's blue line is currently below the PA

MA plays no super significant role, other than 1) to help the trader identify the current trend (when there are consecutive peaks, when Stoch tends to zigzag around the Buy area, when Gann HiLo is above the red MA, and when PA is above the red MA, then we're most probably in an uptrend), 2) to set possible TP & SL and 3) to indicate possible support and resistance areas.

BUY SL & TP:

Fractals Method (or Method 1): Last Fractal low is the SL and TP is identical: so if last Fractal low is 50 pips, TP is also 50 pips.

BB Method (or Method 2): Lower extreme BB is the SL. Higher extreme BB is the TP.

Fractals&BB Method (or Method 3): Last Fractal low is the SL and higher extreme BB is TP. This usually leads to a negative RR ratio.

BB&Fractals Method (or Method 4): Lower extreme BB is SL and last Fractal low determines TP. This is usually a positive RR ratio.

MA Method (or Method 5): SL is either last Fractal low or lower extreme BB, but TP is MA, because it may act as a support. This option might be preferable in cases when PA has been rejected by the MA in the recent past.

Below is an (almost) ideal pic of a Buy Trade according to rule 2b:



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These are the essential rules of the BB Gann System, but it is highly recommended that you go through our backtests (BT) (I will post soon), mentally taking every trade one by one, reading the explanations for each trade, to familiarize yourself with this method and become as proficient as possible at trading it.

Though this system was developed on and for the H4 chart, some casual/visual BT shows it might be profitable on all timeframes, even down to the M5. But this is as yet unsubstantiated.

So far the system seems to work best on GBP pairs, as well as volatile pairs like EURAUD.

Lastly, I would like to thank (in no particular order!) the people who have either worked on this system itself or who have supported me in other ways, or just people I know! :

Soros (my positive thinking instructor), Arso (who has done more BT for this system than anyone else, myself included!), Eitan (without whom this system probably wouldn't exist), RockRobb, Sriniff (an awesome programmer), flyer415, reso09, nickcnew, Ata-Turkoglu, priceaction7, spufuz, ginger, pips777, carlosar13, BobMorane, pending, Vigovski, Cariddi, Adam84, Blackeagle, RockerZeus (who modified the CCI indicator we are using), and, just, everyone!!

Oh and here's the template for this system! (I renew whenever possible. You know it's new when it has close to 0 downloads!) :



Indicators you might be missing:





The rest are included in MT4.

Hi Alex,

Nice to see your own thread,will be following with interest.

Nick

Cong.............best wishes
subscribed...

Happy to see that you made a thread out of this! Im subscribed!

Me to, thanks Alex.

Congrats brother! Thank you for sharing this awesome system. It has just born and already give impressive results.

I will share the BT soon.

Alex please confirm you agree with the following or just tell us your feeling.

The objectif of Alex is to BT all the pair with this system and then introduce improvements.
The advantages are:
- We will have really soon the expected results given by this system for all the pairs
- We have a solid basis of comparison for the improvement we, in this thread, could imagine.

Of course if we work as a team, the results could be achieve very quickly. I mean in stead of BT 24 pairs each of us, if we are let's say 8 (or more!) we back test only 3, cross check the results it would be really quick. Then we would decide strategy changes and BT again.

This could be extraordinary efficient and profitable for all of us.

If any of you is interested, please let Alex knows.

Warm regards.

The BT results for GBPJPY for the year 2014 so far reposted (I include invalid trades and explanations for learning purposes) :

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2 Jan 2014 No trade because rule 2a is violated. However, everything else is looking pretty good, and last CCI peak is lower than the one before (meaning that CCI made a lower high), whereas PA made a higher high, which indicates a divergence. If taken, trade would make +161 pips if the Fractal method was used (henceforth Method 1), +90 pips if BB method was used (henceforth Method 2)

8 Jan 2014 A 'maybe' trade, an ABO trade I guess! because Stoch is zigzagging too much and PA is close to MA which is a possible resistence;
-135 Method 1, barely touched TP; +61 Method 2. For 'maybies' or ABOs Method 2 is recommended.

10 Jan 2014 +75 Method 1, +106 Method 2

14 Jan 2014 +179 Method 1, +208 Method 2. This is a case in which we may have considered placing out TP at the red MA.

16 Jan 2014 No trade. Didn't satisfy conditions/rules 2a or 2b.

23 Jan 2014 +176 Method 1, +174 Method 2

28 Jan 2014 Rule 5 wasn't satisfied. The Stoch has made a rather protracted journey from the Sell to the Buy area, indicating lack of momentum. However, it was a straight journey. PA is close to middle band but not that close. It is therefore advisable in these circumstances to use the tightest possible TP, which in this case is the red MA, in which case we make +104 pips.

29 Jan 2014 Ideal Stock movement. +229 Method 1, +86 Method 2. SL can be placed at middle bollinger band in this case, to lower risk, and equalize RR ratio.

3 Feb 2014 Maybe trade: we are in a strong downtrend, but PA has reached extreme BB. +239 usnig Method 1 (has already reached extreme of BB so we can't use Method 2, unless we use middle band as SL and use an equal TP)

14 Feb 2014 +118 Method 1, +51 Method 2 (we can put the stop at middle band)

18 Feb 2014 No trade because price has broken significantly through the BBs (rule 4).

24 Feb 2014 +142 Method 1, +87 Method 2. Since Gann doesn't confirm, and last peaks and valleys were dwarfs, perhaps we should place TP at the red MA.

27 Feb 2014 No long trade because price breached BBs, and there was a lot of zigzagging (i.e. uncertain, vaccilating) movement in the CCI earlier.

3 Mar 2014 Uncertain: price is near BB extreme, and was also preceded by a gap in PA. Most conservative Method should be used in this case:
-144 Method 1, +33 Method 2

10 Mar 2014 +161 Method 1, +106 Method 2

13 Mar 2014 8h00 Gann doesn't confirm, but I'll take it for fairness' sake: -112 Method 1, -107 Method 2.

13 Mar 2014 20h00 No trade, punctured extreme band significantly. However, with conservative money management, it would've been profitable. I find the BB-Gann method is quite forgiving to invalid trades.

18 Mar 2014 -109 Method 1, probably +19 using Method 2 (initial TP wasn't hit, but we moved our TP in accordance with the BBs)

3 Mar 2014 Uncertain because 2a or 2b rules weren't satisfied. Everything else looks good however, and CCI has long been in a downward trend, unlike PA, indicating possible divergence. +68 Method 1, +78 Method 2

8 Apr 2014 -97 Method 1, +35 Method 2 (yes, TP was reached, move the vertical line if you can't see it)

10 Apr 2014 Probably no trade: too close to extreme band, and it's been a while since Stock went below. But would've been profitable nonetheless if conservative Method 2 was used.

23 Apr 2014 Uncertain. BB extreme was punctured and candles show tails below.

28 Apr 2014 +100 Method 1, +15 Method 2

30 Apr 2014 -62 Method 1, +14 Method 2 (move vetical line if you can't see that TP has been reached)

1 May 2014 +73 Method 1, +16 Method 2

6 May 2014 Uncertain, took a while for CCI to confirm Stoch movement, indicating possible lack of momentum.

9 May 2014 Uncertain. Would've been profitable.

14 May 2014 Uncertain. Would've been profitable. (This is to illustrate that uncertain trades aren't always losing trades.)

27 May 2014 +56 Method 1, +11 Method 2

30 May 2014 +50 Method 1, +136 Method 2

12 Jun 2014 +82 Method 1, +63 Method 2

26 Jun 2014 -31 Method 1, -45 Method 2

7 Jul 2014 +50 Method 1, +51 Method 2

17 Jul 2014 +49 Method 1, +42 Method 2

1 Aug 2014 Uncertain: very zigzaggy Stoch movement. +53 Method 1, +63 Method 2

5 Aug 2014 -65 Method 1, -88 Method 2

6 Aug 2014 Uncertain. Would've been profitable.

13 Aug 2014 Uncertain: huge volatile candle, most conservative Method should be used. -13 Method 1, +28 Method 2

15 Aug 2014 Uncertain: Stoch barely touched 25 level.

29 Aug 2014 Uncertain, Stoch was slow to move, but price is safely in the middle band, even if it's a BB squeeze. +52 Method 1, +27 Method 2

3 Sep 2014 +91 Method 1, +114 Method 2

9 Sep 2014 +189 Method 1, +159 Method 2

15 Sep 2014 +67 Method 1, +79 Method 2

22 Sep 2014 Trade still open if TP was Method 1, +51 if TP was Method 2.

TOTAL: +1213 pips according to the riskier Method 1, and according to the most conservative calculation (i.e. all 'maybes' and 'uncertains' were ignored).

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BT template:



You should go through the template while reading the notes in order to better understand the system.

I don't know if we need to BT all pairs. Forex pairs are highly correlated, so I think doing BT for 10 (diverse) pairs would be sufficient. Then we can make improvements and BT the same pairs, and if things look good we will BT more pairs, or go back another year.

My greatest wish for this system would be to make it as mechanical as possible! Meaning, in every case there should be no doubt about what we should do. Any help toward doing that would be very welcome!

Subscribed

subscribed. Nice job AlexCy.

I would be glad to help BT this in simulator, as long as you can have some patience in waiting for results. I have a day job so I can do most testing on the weekends.

What I initially like especially much with this system is that its "born" from Eitans system, witch we all know is great.
Then I also like the RR ratio. I usually don't like less than 1:1.
Very interesting also with TP that adapts to the BB. That will be very interesting.

Have you considered using partial TP for example take half profit according to the rules and move stop to BE and aim for a second TP?

Very nice. Congrats! Looks like a solid but simple method.

BB Gann CADCHF BT for year 2014 so far:

Not counting uncertains, and taking the least of the TP values in every case, for Method 2 (the BB Method) the result was: +253 pips

Here is the trade-by-trade analysis:

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15 Jan 2014 Uncertain. Very nice Stoch move. Price a bit close to the outer band, so it's wise to place our TP at the MA, or opt for the Retrace Method.
-62 Method 1, +20 Method 2, +35 TP at MA, +49 Retrace Method

21 Jan 2014 Uncertain. Violates rule 2a. But nice straight Stoch move. And two consecutive peaks normally indicate an uptrend, but we are below MA which means we are probably not in an uptrend (you will notice that when we are in an uptrend we are almost always above the MA).
+42 Method 1, +42 Method 2, +20 Retrace Method

30 Jan 2014 Uncertain. Violates rule 2a. But nice, straight Stoch move, and CCI indicates divergence.
+95 Method 1, +98 or +16 Method 2, +65 Retrace Method

4 Feb 2014 Uncertain. Stoch didn't reach 25, but it's very close and the line is straight. -65 Method 1, +5 or +20 Method 2

4 Feb 2014 Uncertain. Same problem as previous. -74 Method 1, -18 or BE or -100 Method 2

11 Feb 2014 Ideal. +75 Method 1 (maybe barely touched TP), +64 Method 2

13 Feb 2014 Ideal. +71 Method 1, +63 Method 2

19 Feb 2014 Uncertain. A big Z at the Stoch. -54 Method 1, -50 Method 2, -70 APB

19 Feb 2014 No trade. Price breached BBs significantly.

7 Mar 2014 Ideal. +57 Method 1, +61 Method 2

11 Mar 2014 Stoch was a bit protracted. Some distance from middle band. -40 Method 1, -70 Method 2

19 Mar 2014 Uncertain. Price punctured outer band. -98 Method 1, -60 or BE Retrace Method

20 Mar 2014 +39 Method 1, +52 Method 2

31 Mar 2014 Almost ideal except that Gann doesn't confirm, barely. -69 Method 1 (+16 Method 1 if we move our TP to the new Fractal), +38 or BE Method 2

14 Apr 2014 Got unlucky with the SL again. -44 or BE Method 1, +61 or +13 or BE Method 2 ... Henceforth I will be referring to this situation as the Wicked Wick

21 Apr 2014 Uncertain. Protracted Stoch move and very small peak and it seems we are in a range. But we are below MA and it's a Sell trade.
-27 Method 1, -23 Method 2

25 Apr 2014 Uncertain. Price halfway between middle and outer band. +36 Method 1, +29 Method 2, +21 Retrace Method

1 May 2014 -61 Method 1, approximately +44 Method 2

30 May 2014 Price too far away from MA to go any further. CCI has been showing lower highs whereas PA has been showing higher highs, which indicates divergence and trend exhaustion.

13 Jun 2014 Uncertain. Somewhat protracted Stoch move with a Z. -41 Method 1 because of Wicked Wick! -37 Method 2

19 Jun 2014 Again, unlucky, PA took out our SL and then went merrily in our direction as if nothing happened. -37 Method 1, -36 Method 2

24 Jun 2014 Quite good except there's some more-than-desirable distance from the middle band. -23 Method 1, +11 or BE Method 2

2 Jul 2014 Quite good. +39 Method 1, +46 or +14 Method 2

7 Jul 2014 Uncertain. A huge Z in the Stoch. +39 Method 1, +62 or +8 or +21 Method 2

15 Jul 2014 Uncertain. Was almost ideal on 15 Jul 0h00, now it's finishing the job a bit belatedly. +23 Method 1, +51 or +57 Method 2

21 Jul 2014 Uncertain. Very small peak and protracted Stoch move. Gann doesn't confirm (but almost does) and price is above MA. -37 Method 1, -24 Method 2

24 Jul 2014 Uncertain. Rather protracted Stoch move. +28 Method 1, +31 Method 2

19 Aug 2014 -26 Method 1, -21 or -31 Method 2
Let me explain this a bit. Here we are clearly in a range. How do we know this? Well, for one thing, when we are not in a range fractals tend to move around a lot. When we are in a range, fractals stay on the same level. See pic below. So, what do we do when we are in a range? We wait for price to retrace, then we take the trade. And since we are above the MA in this case, we don't take Short trades.



26 Aug 2014 Possible retrace trade, but retrace doesn't occur.

2 Sep 2014 No trade normally because of rule 2a, but you might wanna risk it because CCI indicates divergence and everything else is looking quite nice.
+21 Method 1, +23 Method 2

15 Sep 2014 +71 Method 1, +92 Method 2

24 Sep 2014 Method 1 still open, +17 or still open Method 2

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BT template:

Why you take a trade on CADCHF on 15.09.2014? I don't see any condition? I see condition on 11.09.2014?

I don't like the practice of partial TP. It doesn't make sense to me. To me it just means opening two positions, each with a different TP philosophy.

I mean, you've described two different scenarios here. If one of them, according say to a BT, outperforms the other, then why use both? Why not just use one with double the lots?

And yes I agree with you on the Eitan point! If anyone is reading this and has not checked out Eitan's SMRI system, please stop reading immediately and go check it out! Though sadly, you'll have a lot of reading to do!

You've got it backwards! Buy Rules, Rule 2a.

Don't worry about it, Arso also made this mistake in a couple of trades, and I did it also and then realized it when I double checked my BT (as I always do).

Perhaps you're too used to the SMRI, that takes trades when we enter an oversold or overbought zone. The BB Gann was initially made with the express purpose of complementing the SMRI, therefore it had to take the opposite trades, it had to enter when price went into the normal zone, instead of the hot zone!

what you think with normal level for CCI on 2a?

ecaus on 11.09.20014 I see clear sell enter and all condition but on 15.9 for me is not clear no and no sell..

Buy Rule 2a: We enter a buy trade when CCI goes from oversold to normal AND there is a peak before the last valley (15.09.2014 satisfies this condition)

Sell Rule 2b: We enter a sell trade when CCI goes from normal to oversold AND there is a valley before the currently forming valley (11.09.2014 doesn't satisfy the underlined portion)

I'm not saying it's a bad place to take a trade, it's just not according to the rules of this system. It's the kind of trade the SMRI is designed to catch (but didn't, in this case).

Dude! Thanks for sharing your approach. I was able to take a couple of elements to improve some things I'm working on. Excellent!