Tuesday, August 13, 2013

Week in Review: 5th August 2013 to 11th August 2013

Last week was pretty quiet. I only opened one trade, which closed in profit. 


USDCAD - 1W - Set two-bar Reversal system

I was actually quite fortunate with this trade. A two-bar reversal pattern appeared on the USDCAD weekly chart. I took profit using a 0.25:1 reward-risk before price re(?)-reversed 4 pips later.

Presenting new trading system - "Al-Kutbay"

I finally finished designing this system last week after formalising its rules. I've named it "Al-Kutbay" after the Nabataean god of commerce. 

It's based on the neutral doji pattern, where the body (open and close) of the candle occurs within the 38.2% - 61.8% levels of the candle's range. A graphical example is below.

This candle is unremarkable on the lower time frames. However, it does seem to possess some potency on the weekly timeframe. I tested it over 17 currency pairs from 2001 to early 2013, generating 431 trades. Entry was the break of the high or low of the doji, with my stop loss positioned at the 61.8% retracement level of the doji. I then tried to optimise my profit target. The results of different profit targets, or R:R ratios, are below:

A reward-to-risk ratio of 0.25 seemed to provide the greatest profit factor. The win rate per trade was 86.54%.

The following is an equity curve from 2001 to early 2013, assuming a $10,000 starting balance, and 2% risk per trade.

0.25:1 reward:risk

R^2 is 0.92, which is very good. 

One thing to bear in mind with small reward:risk ratios is increased sensitivity to losses. However, you exchange this in return for greater robustness in choppy markets.

All that's left is forward testing to see how it goes. 


  1. Thanks for sharing your data, it's always very interesting hearing about inverted risk-reward ratios.



    1. Hi George, thanks for visiting! I'm not aware of many traders who use inverse R:R ratios, so I'm proceeding with my trades quite cautiously. :)

    2. Hi Kevin, yeah they're really rare. I had a friend who played around with them but struggled because he didn't put enough prep in so never really trusted the setups. The complete opposite to you whose clear left no stone unturned. best of luck with it, I look forward to seeing your progress.:)


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