Friday, July 20, 2012

Introducing the FRAME system

Yes, I'm still alive. Just because my posts have slowed does not mean I've stopped focused on trading. It simply means I'm focusing my energy on actual trading rather than the blog.

This is the system I've been developing and backtesting for the last month. It's based on Bill Williams' fractals and a 50 SMA (simple moving average), which I shall call the FRAME system. FRActal + Moving averagE = FRAME. Geddit? :)


So far I've tested 100 samples from the EURUSD on the 15M timeframe.


Most of my backtesting has been conducted on the 4H timeframe, with unremarkable results. However, I've spent today testing on the 15M timeframe, with much greater returns.


Activate the fractal and 50SMA indicators on your trading platform.

When price crosses over the 50SMA, look for the first fractal to form opposite the SMA. i.e. If price crosses the 50SMA upwards, look for a fractal at the top of a candle. If price makes a downward cross of the 50SMA, look for a fractal at the bottom of the candle.

Once the fractal forms, that means a retracement is underway. If the retracement does not cross the 50SMA, then you have the setup of a potential trend. Enter on the break of the fractal.

Stop Loss

For the purpose of my backtest, SL = 20 pips. I determined that the average candle on the 15M timeframe is 5 pips, so this SL gives you space to cope with a 3-4 candle retracement after entry.

Take Profit

I'm still determining how to optimise my TP targets, but after 100 sample trades, it seems that a TP of 90 pips seems best. It provides an expectancy of 63.5%, which blows away everything I've tested so far.

Example setup


So far I've only tested 100 trades on the EURUSD from Jan 2001 to March 2001. I'd like to gather 1000 by next week, but so far expectancy is looking real juicy.

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