Trade System Bravo

Trade System Bravo is my second ‘work-in-progress’ on developing a trade system with positive expetancy.

The chart is based on 30-minute Heikin Ashi candlesticks. They’re painted grey and black instead of red and green to tone down the emotional force behind traditional candlesticks.

The price band around prices is a Keltner band. These bands are based on Average True Range (ATR) and instead of containing price action, they signal breakouts. When price action closes outside the Keltner channel, it has a higher probability of continuing in that trend. The above chart is today’s EUR/GBP currency pair. The signal for entry is a candle closing completely outside the channel. The stop-loss is the channel boundary plus pip spread plus five pips.

The above chart triggered long entry at 9260, with the stop-loss set at 9235. Based on the definition of the stop-loss, you can see it moves up with price action. System limitations prohibit ‘loosening’ a stop once it is set. So 9235 is the lowest stop-loss permitted for the trade, but not the highest. The stop-loss is currently 9282 based on its breakout.

Indicators in lower studies include RSI and the Trendicator. The Trendicator is my super-secret proprietary indicator that shows trend.

The system’s procedure for entry and stop-loss placement is simple and clear. What is not clear is where to set the limit. A moving stop-loss is one option for setting a limit. On the above trade, it would lock in a 23 pip profit at this point. But is there another exit indicator that can maximize profits? And what would that indicator be? Maybe two Heikin Ashi candles closed against the position? Maybe an RSI value? Maybe a Trendicator value?

Where would you place your limit on the current winner?

Trade System Bravo is a work-in-progress. I’ve traded it twice. Once for about 100 pip profit, another for about 30 pip loss. I have not backtested it yet. And I’m not in the EUR/GBP trade illustrated above. Realize that two trades is obviously a small sample and not statistically valid. I’ve heard 30 is the minimum number of data points to draw statistical conclusions, but obviously the more the better.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: