Last week, I started to follow a thread started by bazza that seems to have some great potential. It can be found here: http://www.forexfactory.com/showthread.php?t=181945
Considering that I've modified the original rules, and the fact that the conversation hasn't really picked up in that thread, I thought I'd go ahead and start a journal of my forward-testing, and leave the original thread to either further discuss the development of the system, or, if there is no further interest in it, to die peacefully. I've dug up one of my demo accounts, and will trade this method exclusively in it for the purposes of this forward test.
Here are the rules that I'm trading by:
Considering that I've modified the original rules, and the fact that the conversation hasn't really picked up in that thread, I thought I'd go ahead and start a journal of my forward-testing, and leave the original thread to either further discuss the development of the system, or, if there is no further interest in it, to die peacefully. I've dug up one of my demo accounts, and will trade this method exclusively in it for the purposes of this forward test.
Here are the rules that I'm trading by:
- EUR/JPY on H1 Charts.
- Looking at the 23:00GMT and 00:00GMT candles, enter long at the breakout of the higher of the two highs, or short at the breakout of the lower of the two lows. Let's not have a long discussion about what the 23:00 and 00:00GMT candles are - I will post charts with each day's trade, and it will be clear.
- If a breakout does not occur by the close of the 02:00GMT candle, there is NO TRADE for the day.
- If the trade is triggered, set the initial stop loss at 100 pips, and calculate lot size so that this is equal to 2% of the account balance (max 2% loss if SL is hit).
- Once the trade has entered, close half (for 0.5% profit) at +50 pips, and set a 100-pip trailing stop. In effect, this makes break-even the absolute worst that can happen once we've gotten to +50 - if the trade reverses at exactly +50 and goes back to stop out at -50, the net result is 0.
- When the trade reaches +100 pips, tighten the trailing stop to either 50-pips, or the high/low of the previous H1 candle (low if you're in long, high if you're in short) - whichever is more favorable to your position (largest gain if SL is hit). In the worst case, again, this will result in a minimum guarantee of 1% profit should the trade immediately reverse at +100 and take out the SL which is now at +50 (or better).
- At this point, the trade will only close when the stop is hit. Continue to trail the stop by 50 pips. Each time a new candle forms, make the new stop the high (or low) of the previous candle if it is more favorable than 50-pips.
- Only trade once per day. If the trade stops out, and takes out the other side of the "breakout" along the way, I will not enter a second trade.
- Close any trade that is still open at 15:00GMT.
Yes, I have developed an EA to trade this (since a lot of the action happens when I'm not able to be in front of a PC here in the eastern US), and no, I am not planning to share it at this point.
First trade will be on Monday, and will be recorded here. I will provide detailed information about when the trade was entered and exited, and how it progressed, along with charts. I will not be posting "signals" in real-time, again, since I will most likely not be near a computer when the trades actually trigger.
Starting balance for the demo account being used is $942.71. I will be tracking total gain, with the goal being 5% increase per month.