I first saw Claudia’s thread just before Christmas and was very sceptical as it didn’t contain any of the elements I understood to be essential to understanding the market and therefore learning how to trade it. I thought it necessary to be able to identify the trend; the minor and major support and resistance levels; the fib levels and fib extension levels; count the waves, see the moving average cross-overs etc etc etc. I also thought you had to ‘run your winners and cut your losers’. This strategy seemed to simply consist of a 1:1 risk reward strategy and relied purely on a better than 50% win rate to ever make a profit.
So it seemed like a route to financial suicide, but I was very intrigued with Claudia’s relaxed attitude and read the whole thread through. I then decided to actually watch this pair at 7am and placed demo trades from 17th December 2009 to date, when I could. I have recorded the results in the attached spreadsheet for any-one interested. As the results so far (only on demo trading) are a two in three (66.6%) win ratio I have decided to forward test with a tiny account at minimum stakes (£100 @ 50p a point) which gives me 10 live trades. I appreciate this isn’t a very significant sample size, but I can’t really afford to loose much more, if I get a few winners (recent history indicates that I will) then I hope to have a more significant sample size to analyse than 10 trades, but only time will tell. Apologies Claudia as this is really not ‘shoe shopping’ stakes, but I hope you don’t mind me posting on your thread.
Whilst Claudia has shared her rules a few times, I have some slightly more detailed ones, which I hope will mean I am never in the position of having to think or even worse make a decision at 7am, my trade orders will just be placed ‘on auto-pilot’ and I will sign off, record the results later on and analyse them a couple of times a month (if my account lasts that long)
Rules:
Times are GMT at present and will change to BST when daylight saving commences in March. In simple terms it’s always 7am UK time
1 Identify highest open or close of GBPUSD for all candles printed between midnight and 6am
2 Identify lowest open or close of GBPUSD for all candles printed between midnight and 6am
Open or close being the extreme of the ‘body’ of the candle
The 6am candle will still be printing at this time, so if it is marking one, or even both, of the extremes it will not be possible to place the trade until the 7am bar has begun to print
3 Place a ‘buy’ order at the high value with a stop loss at 20 pips and a take profit at 20 pips, time out at 9:30am (+2.5 hours)
4 Place a ‘sell’ order at the low value with a stop loss at 20 pips and a take profit at 20 pips, time out at 9:30am (+2.5 hours)
5 Record trade results (win, lose, not opened)
6 Analyse results every 10 opened trades & calculate win ratio (last 10, last month, so far this year)
If the 7am candle close creates the high or low for the range and therefore the order can not be placed, I will enter at the market price at 7am and set my take profit and stop levels as per the rules (ie +20 -20 from the close level, not my entry level), thus I might not get 20 points and I lose more than 20 points in these scenarios. I appreciate I could decide not to take a trade at all, or wait for the price to come back into the range and then set my order, but this is how I have decided to deal with this scenario for now
I will also allow both trades to open if they are triggered before the 9:30am cut off. This could mean I take two losses on one day, but I am interested in collecting as many trade results for this strategy as I can at this stage, so this will get me more results and if my subsequent analysis reveals that the second one to open is statistically more likely to be a loser I may revise this rule
If this strategy is good for me and I stick firmly to the rules I should see my analysis reveal a better win ratio, I will then increase my stake size gradually, but never so that I am exceeding 10% of my account balance (ie 10 losing trades). Should I reach a point where I am risking £2.50 (ie £50) per trade, I will revise my 10% risk downwards – thus giving me even more losing trades in a row of ’support’. But lets get back to reality and see what happens to my £100 @ 50p a pip over the next few weeks or even months!
Hypothetically 50 trades @ 60% success yields 100% return on investment:
50 X 60% win X 20 pips X 50p = £300
50 X 40% lose X -20 pips X 50p = - £200
total £100
However, this assumes the first 20 trades aren’t all losers
:clover:to all followers of Claudia's thread
