Hi there,
I am looking for feedback on a trading idea I have.
If you plot EUR/USD as a 500-pip renko brick chart, it is transformed into mostly an "up" and "down" pattern. In other words, most of the chart appears as 01010101010101. In theory, that should make it tradable - if the brick that just closed was bullish, you go long, and vice versa.
Fake-outs will occur - e.g., when the pattern is 010101110101, but statistically they will be minimal and compensated for using a 1:1 RR, with SL set at the opening price of the previous brick and the TP at 500 pips (the expected close of the new brick)
Backtesting was done using Dukascopy data and JForex software.
What do you think? This seems almost too straightforward (read: good) to be true. One immediate downside to this strategy is that each bar will take weeks to develop, meaning that returns will be limited to a modest 5% a month (assuming there are no fake-outs in that month and assuming that 500 pips equals 5% of equity).
I suspect gains can be increased either by breaking the 5% rule (considering the seemingly high win rate of the system) or by diversifying into other pairs, where similar behaviors seems to exist. I am particularly intrigued by the prospect of violating the 5% rule on this one, considering the long-stretches of wins that the system is prone to, followed by one-off losses (which are themselves inevitably preceded by a win).
What do you think? Like I said, at first glance, this seems too good to be true - so looking forward to you punching holes in this thing.
Cheers,
George
I am looking for feedback on a trading idea I have.
If you plot EUR/USD as a 500-pip renko brick chart, it is transformed into mostly an "up" and "down" pattern. In other words, most of the chart appears as 01010101010101. In theory, that should make it tradable - if the brick that just closed was bullish, you go long, and vice versa.
Fake-outs will occur - e.g., when the pattern is 010101110101, but statistically they will be minimal and compensated for using a 1:1 RR, with SL set at the opening price of the previous brick and the TP at 500 pips (the expected close of the new brick)
Backtesting was done using Dukascopy data and JForex software.
What do you think? This seems almost too straightforward (read: good) to be true. One immediate downside to this strategy is that each bar will take weeks to develop, meaning that returns will be limited to a modest 5% a month (assuming there are no fake-outs in that month and assuming that 500 pips equals 5% of equity).
I suspect gains can be increased either by breaking the 5% rule (considering the seemingly high win rate of the system) or by diversifying into other pairs, where similar behaviors seems to exist. I am particularly intrigued by the prospect of violating the 5% rule on this one, considering the long-stretches of wins that the system is prone to, followed by one-off losses (which are themselves inevitably preceded by a win).
What do you think? Like I said, at first glance, this seems too good to be true - so looking forward to you punching holes in this thing.
Cheers,
George