Shock and Retrace on m1

A bit of a distraction from the Trend work but I was asked by FXCM to provide some data for the Shock and Retrace strategy. They preferred more trades so suggested using the m1 timeframe. To be honest, the strategy was not designed for such short timeframes but the idea is solid and still is applicable to small timeframes.

I think for it to be more successful, currency pairs with high liquidity are probably better. My thinking here is that the more market players to close the gap after an extreme move, the better.

So, I’ve been doing some optimizations on the strategy and I’ve found the results to be rather promising. Recently I’ve been interested in extremely high risk/reward ratios and trailing stops. I think these can be especially applicable if you are going to be trading on such a fine timeframe.

Many of the results were excellent, but I suspected a bit of curve fitting at play. I decided to add some of the more modest configurations to the suite of strategies I have running in the live environment. Here is one of the configurations I have found so far for example:

EURJPY.m1

  • Bars: 2
  • Consecutive Bars: Yes
  • Change Threshold: 45 Pips
  • Wait for Reversal: Yes
  • Limit Type: None
  • Stop Type: Smart Stop
  • Stop in Pips: 60
  • Trailing Stop: Yes
  • Backtesting Results:
    • 01/01/2008 – 01/11/2013 … 495 Trades, 204 Profit, 291 Loss…. (41% Win)
    • Expectancy: 2.04… Profit Factor: 1.43… Amount: 10,000
    • Opening Balance: 7000… Final Balance: 14824… Max Fall: 1014

USDJPY.m1

  • Bars: 1
  • Consecutive Bars: Yes
  • Change Threshold: 23 Pips
  • Wait For Reversal: Yes
  • Limit Type: Risk Reward Multiplier – 2.0
  • Stop Type: Smart Stop
  • Stop in Pips: 40
  • Trailing Stop: No
  • Allow Multiple Positions: Yes
  • Backtesting Results:
    • 01/01/2004 – 01/11/2013 … 775 Trades, 298 Profit, 477 Loss… (38% Win)
    • Expectancy: 1.99… Profit Factor: 1.24… Amount: 5,000
    • Opening Balance: 7000… Final Balance: 10999… Max Fall: 523

Also an interesting point: The large number of trades has given me a good chance to analyze the performance of the strategy and it appears many loss trades are done when trading against the long term trend, if there is a trend. I guess it could be possible to enhance the strategy if I include a confirmation on trend direction.

Something to add to the to do list.

Posted in Backtesting, FXCM, Retracement, Strategies and tagged , , , .

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