I spent most of today backtesting a new idea on the AUDJPY 1H charts and it seems to show a little promise.
The sample size is only 100 so it's much too early to give it a green tick. What we're looking for is a 'shaved candle' where the short wick makes up less than 10% of the candle's size. Plus the candle must be at least moderately big. For purposes of the backtest, the candle's range must be over ATR(24). (ATR(24) simply means the average range of the last 24 candles).
Here are a few examples:
For the backtest, I put the entry as the break of the short wick + a 1 pip buffer, and my stop loss as the opposite end of the shaved candle with a 1 pip buffer.
This is the equity curve at 1% risk per trade, with a reward-to-risk of 1.75:1.
It looks okay. But with it being on the 1H chart, the frequency of trading is relatively high. I only backtested two months to get 100 trades, so that's over a trade per day. I'll become more confident once I've compiled 300 samples, which might take 3-4 days.
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