Tuesday, September 29, 2015

RESEARCH: Morning breakouts on the AUDJPY

I spent this afternoon backtesting morning breakouts on the AUDJPY. 

This is based on the 4H timeframe. Basically, I looked for candles at 00:00, with a range less than 1*ATR(6). I use ATR(6) as this gives me the average candle size for the last 6 candles, or the last 24 hours (6*4 = 24 hours). 00:00 = NY Close. 

I looked for small candles as this is based on my observation that small candles tend to precede large candles. I entered on the break of the high or low of the small 00:00 candle, with my stop loss located at the opposite end of the candle. Example is below:

(click to enlarge)

Results after 100 sample trades (from early to mid 2013):

It showed promise of profitability, especially with bigger reward-to-risk ratios.

I did a bit of optimisation, and looked at which weekdays performed better. The backtest showed good results, except for Wednesday. If I omitted trades on Wednesday, I get the following results (from 76 sample trades):

This is a significant improvement. 

This isn't a trading system (yet), but it's showing some promise. 

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