Three black crow backtest continued - USDJPY 2000-2009

I spent the latter half of today backtesting the USDJPY from the years 2000 to 2009, using the same three black crow / three white soldier candle pattern I identified in the previous post.

The results aren't quite so positive. A reward-to-risk ratio of 2 provides a meek positive return on risk, and higher reward-to-risk ratios return negative results. I've provided a comparison between the USDCAD and USDJPY below.

Overall, I would say that this strategy is viable with a reward-to-risk ratio of 2. Because of such a large stop loss, this strategy will require you to keep your trades open for weeks to provide a 2x reward.

Three black crows / three white soldiers backtest: USDCAD 2000-2009

I just finished a backtest on the three black crow / three white soldier candle pattern. This candle pattern is quite basic. It consists of three consecutive bearish or bullish candles. Three black crows represent a bearish pattern as seen below, while three white solders are the complete opposite (bullish).

The three candles must be of the same "colour" for it to be considered 3BC or 3WS.

For this backtest, I focused on the USDCAD pair with a 21 EMA to measure the trend. The years 2000 to 2009 were tested, as well as the first half of 2010. I thought about extending the backtest all the way to 2011 but too many orders would've been left open by the end of the backtest.

Stop loss will be located at the start of the first candle, and entry will be triggered at the break of the third candle.

RESULTS

Trading with the trend yielded superior results. In order to prevent cluttering of this post. I'm not going to bother posting the results of trading against the trend.

Final results have been tabulated by year and R:R ratios and are displayed below. 99 trades in favour of the trend were initiated.

Those are nice results. Trading with a reward-to-risk ratio of 6 would have yielded a beautiful average return of 50% on risk. However, that isn't a number that I'm comfortable using. A reward-to-risk ratio of either 2.5 or 3 seems ideal for me.

I'll backtest another currency pair to validate these results.