I just finished backtesting exceptionally large daily pinbars on five pairs: the USDCHF, GBPUSD, EURGBP, NZDUSD and USDCAD. I defined 'exceptionally large' as any pinbar that had a range higher than 1.5 * ATR(14).
From the results, it looks as if a reward:risk ratio of 0.67:1 seems optimal, although all R:R ratios look great. The following is a snapshot of the profit factors for each pair at 0.67:1 reward:risk.
While the profit factors look good, you should notice the lack of actual trades in the backtest. From 2001 to the end of 2013, I only found 68 pinbars that had a range greater than 1.5 ATR(14) on the daily charts. This was from five pairs. Based on these figures, we can expect around five signals per year, or one signal every two and a half months. I still have 13 pairs to backtest, so if we trade 18+ pairs, we may get a signal once or twice a month, which is better. I hope to get the backtest completed by next weekend.
Hi Kevin. If you want to have a chat about trading that would be cool. I am a fellow trader, no trying to sell anything, would be good to talk to someone doing the same thing. Email me at jon_latham@hotmail.com.
ReplyDeleteCheers.