Entry signal on NZDUSD, full-bodied candles

A low volatility candle appeared on the NZDUSD over the weekend. The NZDUSD is running into some resistance, so it will be interesting to see how this plays out.

Full-bodied candles

 

I'm currently backtesting a new system based on full-bodied candles. Essentially, the open and close of a full-bodied candle should occur within the top and bottom quarters of the candle. I'm building a database on the USDCHF which will also contain RSI(14), ATR(14) and ADX(14) values to see if there is any relationship between these variables and profitability.

 

I have noticed that full-bodied candles can be profitable when their range is between 100% and 150% of ATR(14), trading with the trend. The sample size was 100, from the USDCHF between 2001 and 2006. Our entry would be the break of the candle's high or low, and our stop loss would be the opposite end of the candle. With a 1.5-to-1 reward-to-risk, profit factor was 1.36, which is okay. The profit factor for all R:R ratios above 1 are also positive, so thus far this is looking promising. 

50% ATR backtest on GBPJPY

Good results from the GBPJPY backtest. Expectancy was 28.5% after spread. Sample size was 171 trades.

The next step is to collate the results from all five currency pairs I've tested, eliminate duplicated trades and create a composite equity curve.

50% ATR backtest on USDCAD

Below is the equity curve for the USDCAD from 2001 to mid-2012, using a 1.67:1 R:R ratio, 2% risk and a $10,000 initial balance.

This is from using my daily range < 50% ATR(14) breakout system. Expectancy was 24.1% after 123 sample trades, which is acceptable.

50% ATR backtest on AUDUSD

The result of the AUDUSD backtest is pretty bad. With a 2.5 reward-to-risk, expectancy was an unremarkable 1.43%.

However, if we reduce our reward to 1.67R, expectancy climbs to 10.88%. With a 1.67R reward, the expectancy for the USDJPY is 26.68%, and the EURUSD 31.15%.

The equity curves for 1.67R are below:

50% ATR backtest on USDJPY

I spent most of my Sunday backtesting the USDJPY with the system I described in the previous entry. Gathered around 250 sample trades from 2001 to mid-2012.

An equity curve is presented below, using 2.5 reward-to-risk and 2% risk per trade. This yielded a win% of 37.35% per trade, with an after-spread expectancy of 27.65%.