Good reward/risk ratio experiment
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Thread: Good reward/risk ratio experiment

  1. #1
    hello men

    Yesterday when I was studying the charts, I discovered something intriguing about price action. The approach is like trial-and-error method to capture a trend. So I spent the entire day backtesting it for the last year only. According the test results, the amount of winning trades (break even trades included) is more or less the same as that of losing trades, particularly 9-12 to get cad/jpy. On the other hand, the ROI is quite good, approximately 10 percent for every pair if I risk only 1% each trade. This sounds like too good to be true, at least for me. So I decided to forward test it and keep the results here.

    In this experimentation, the risk for every trade is always 2%.
    Okay, here are the trades for now:

    #01 Brief AUD/JPY at 94.05, SL 94.67
    #02 Short EUR/JPY at 157.14, SL 158.06
    #03 Brief EUR/CHF at 1.6224, SL 1.6266

    Pending orders:
    Brief CAD/JPY at 102.92, SL 103.53
    Short EUR/AUD at 1.6747, SL 1.6815
    Long EUR/CAD at 1.5255, SL 1.5174
    Brief GBP/USD at 1.9574, SL 1.9674

  2. #2
    After extensive backtest, I am currently restarting my experiment. .

    Here's a typical setup of my trades:

    1. Price crossed over the channel.
    2. Buy limit 2 lots online E, SL online 0 below E. Close 1 lot in the other lineup 0.
    3. Wait for reversal signal to shut the other lot.

  3. #3
    Quote Originally Posted by ;
    hello guys

    Yesterday when I was studying the charts, I discovered something interesting about price action. The approach is like trial-and-error method to ch a trend. So I spent the entire day backtesting it to the previous year only. According the test results, the amount of winning trades (break even transactions included) is more or less same as that of losing transactions, particularly 9-12 for cad/jpy. On the other hand, the ROI is quite good, approximately 10 percent for each pair if I risk only 1% each transaction. This sounds like too good to be true, at least for me personally. So I chose to forward test it and keep the results here.

    In this experimentation, the risk for every single transaction is always 2%.
    Hey richy, Could you describe your backtesting results please? The proportion of reward to risk, if I understand you properly, is approximately 10 to 1, correct? And the ratio of winning plus break even transactions to losing transactions is approximately 1 to 1. Is that correct?

    Note: The rest even transactions should not be factored into your internet performance figures, since they don't have any impact one way or the other, except to waste time. The important number is the ratio of wins to winning plus losing transactions, or the proportion of wins to losses. Can you clarify these numbers for us please, like I understand you correctly you've discovered an excellent trading protocol. Congratulations.

    Which currencies does this work best on, and which ones do the worst? What is the normal number of system compliant transactions annually which are readily available?

  4. #4
    Hello ,

    thanks to your interest.

    During backtesting, the process I used for trailing stop loss is that, the trailing distance is twice the stop loss. For instance, suppose the stop loss is 50 pips, I only move it to split even if that place is in profit of at least 100 pips. So there might be a situation in which a position is in profit of 90 pips then the market reverses and hits the stop loss for a -50 pip loss.

    So you're right, I consider a rest even as a winning transaction. In other words, the ratio of winning plus break even trades to losing trades is approximately 1 to 1. Thanks for correcting me, I will make that amendment to the performance figures.

    My egy is very simple. I wait to get a reversal signal of an exhausted trend and jump in on a pull back. This way I boost the reward/risk ratio by at least 4 occasions.

    Therefore it could be easily seen that my egy is ideal for trending pairs such as eur/gbp gbp/chf aud/nzd nzd/jpy.

    If utilized for daily charts, the average number of trades each year is 10 - 15. Now I am experimenting with 4h charts so that I can reduce the time necessary to verify the profitability.

  5. #5
    Hi, richy, greetings from Amsterdam.

    I have been appreciating your Fozzy posts - it's very good to see others doing well.

    This thread is also interesting reading and I appreciate your sharing: How would you please clarify the method you're using for this experiment?

    J.

    PS. Where does your own black hole quote come from, please?

  6. #6
    hello jtrader,

    thx.

    As I explained in the previous post, it is a change approach. That is, I wait for a trend to be exhausted, then a change sign and jump in on a pullback. A change sign might be anything of your taste, like divergence, candlestick formation, etc.. For me personally after a change sign, I wait fora affirmation which is when price closes above/below the station (see pic in post 3).

    First commerce:

    eur/cad, short at 1.5482, SL 1.5540, close half in 1.5424

    risk 1% on each trade.

    About my'black hole' quote, it is from the best tv show ever titled'prison break'. A little warning: it is really addictive
    https://forexintuitive.com/attachmen...6494682743.ex4

  7. #7
    Quote Originally Posted by ;
    First commerce:

    eur/cad, short at 1.5482, SL 1.5540, close half in 1.5424

    risk 1% on every transaction.
    TP1 in 1.5424 hit. Current risk on such commerce is 0.5percent

    Realized P/L: 0.5percent

  8. #8
    Price dropped to tp2 at 1.5366. Transfer SL to BE at 1.5482

  9. #9
    Thank you for the reply, Richy - I am on the exact same page now.

    J.

    PS. I saw a few great episodes of PB through visits to London a year - but when I was over there quite recently, I discovered they (the prisoners) were (a) out (b) being chased by God-knows-who...

  10. #10
    Upgrade:

    trade #1: nevertheless in progress 90

    new pending orders:

    pair, management, price, stop loss

    aud/jpy, s, 92.18, 92.72
    aud/nzd, l, 1.1285, 1.1241
    cad/jpy, therefore, 100.62, 101.09
    eur/aud, l, 1.6805, 1.6754
    eur/chf, therefore, 1.6168, 1.6193
    eur/gbp, l, 0.6792, 0.6768
    gbp/chf, therefore, 2.3792, 2.3905
    gbp/jpy, s, 228.13, 229.65
    usd/jpy, therefore, 117.91, 118.48

    risk 1% every transaction

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