Let's Create a Simple System for Beginners.

[Mysticforex 13]

Even though the Thread says "Beginners", I am starting it in the Forex section because it's what I am most familiar with.

 

I would like participation from beginners and veterans alike. Lets see if we can put together something where a beginner would be able to make a few Pips a week. Let's keep it as simple as possible ( K.I.S.S. ). Let's try to use as few indicators as possible. Let's have a least a 2:1 R/R. We won't discuss position size, or % of return/loss on account ( if the thread is active, these things can come later ).

 

If someone thinks they can improve on it, please make a suggestion.

 

NOTE TO BEGINNERS ! Do not trade these systems. If you think they have potential, then back test them on at least 100 trades. Then forward test them ( DEMO ) on at least 100 trades.

 

Here's my submission. It's a simple breakout called the NY Box. I didn't create it, it's been around for while.

 

 

EUR/USD. 5 min chart. Draw a box over the candles from 6 am to 8 am. Make sure you include the high and the that was reached during that time period. When a candle closes above or below the Box, Trade in that direction. Let's use a 10 pip S/l and a 20 Pip TP.

Todays Box would have looked like this:

[elgenyo 10]

I'm in for the response.

[SIUYA 11]

"If someone thinks they can improve on it, please make a suggestion."

 

try adding guideline number 1

 

"only take positions in the direction of the trend when it enters the box."

 

The trend being subjective - but in my case a visual look at your chart tells me in the example, it was down, so only take shorts if they break below the low of the box.

[Mysticforex 13]

"If someone thinks they can improve on it, please make a suggestion."

 

try adding guideline number 1

 

"only take positions in the direction of the trend when it enters the box."

 

The trend being subjective - but in my case a visual look at your chart tells me in the example, it was down, so only take shorts if they break below the low of the box.

 

I don't think it will become too complicated if we add 2 MAs, say 200 sma and 50 sma.

Then obviously if the 50 sma is higher than the 200 it is trending up, etc.

[Mysticforex 13]

I will post today's Box at 08:05 EDT. With the addition of the 200 sma and a 50 sma.

The trade would only go in the direction of the trend.

[GlassOnion 12]

Waiting with baited breath. ..

[MP Trigger 10]

looking forward to this discussion

[Mysticforex 13]

Here is today's Box. I add a Blue 200 sma, and a Red 50 sma. As you can see the trend is up just barely, Let's see what happens. Remember 10 Pip S/l, 20 Pip TP.

[ywboo3 10]

This sure looks like a great system! Thanks.

 

I tried out today on the EU. However, if price were to break on the downside, it would hit the 1.33 resistance level and hence the potential for big gain may not be there.

 

After experimenting with a few pairs, I find the GU more viable. But has entered on 50% retracement on a demo a/c as the closing candle that break the box was huge. Nearly hit 20 pips. Unfortunately the price went up after that. Still in the trade, see how it goes....

[peterbee77 10]

Far be it for a beginner like me to challenge the wisdom of the masters, but here goes. A way of keeping faith with the KISS concept would be to stringently test any rule proposed to be added, before adding it.

 

Siuya's and Mystic's rule proposes adding a test of trend to the system, being the 50/200 SMA crossover. However, the original system already contains a trend test, implicitly - the 2h box itself. It defines the trend with reference to a breakout beyond the 2h box's High and Low.

 

As today's chart in the above post shows, the box's intrinsic test of trend might be a better test because it is current, rather than looking back too far. Also it is amenable to smaller trend changes, whereas a 200MA has a lot of inertia and will "miss" a lot of a new trend development. Maybe the proposed MAs are too slow for the limited stop-loss / take-profit moves proposed in this system?

 

Hence I propose that the 50/200 MA test remain a "probationary" rule addition at best - to only be added if it can be shown to be better than the simple box trend test.

 

Btw, thanks for starting this thread Mystic. I'm looking forward with much interest to see where it goes.

[Mysticforex 13]

I also think we should impose a time limitation. If the trade does not open by XX time, the Box is void and we wait for tomorrows Box....

 

Also, This Friday is NFP. I don't usually trade on NFP days.

[joshdance 10]

I also think we should impose a time limitation. If the trade does not open by XX time, the Box is void and we wait for tomorrows Box....

 

Also, This Friday is NFP. I don't usually trade on NFP days.

 

Also, it's Good Friday, so no real trading going on.

 

I do not want to be a thread spoiler, so I will make one comment and then observe only. This is NOT personal, and nothing against you Mystic, or anyone else contributing.

 

This thread, while well meaning, is the reason so many beginners struggle; I know I did, and while I take responsibility for my own trading, wasting my time with these kinds of ideas is one thing that kept me from improvement when I first started 5 years ago.

 

You come up with an idea -- a logical one, IMO: to trade a breakout of the 2 hour window before the NY market opens. Okay, simple enough, and logical enough.

 

But wait, we have to optimize it. So, we talk about trend. So we add 2 moving averages. No matter that they're crossing all over each other like a DNA helix, just look for which one has the greater value at 8am.

 

But wait, we need to optimize it more. So we add a time limit.

But what if the range is too large (as it is this morning)? Let's limit the size of the "box" to ... And let's say that we will only buy a breakout when the RSI is ...

 

And on, and on, and on, we go. And in the end we have a "system" which has done nothing but taught people how to mindlessly follow rules, and pay no mind to context, current events (FOMC minutes today anyone?), or market sentiment.

 

At least the box idea was simple -- a bit naive mind you, and bound for failure over the long term, but simple.

 

Now, instead of taking a step back and reexamining their approach to the market, people will see this and want to look for similar ideas--similar in what respect? Similar in the respect that they don't learn the instrument they are trading, but rather they learn to draw their box, and wait for the candle to close, and place their order, and pray/hope.

 

And here is the real issue: you could backtest this strategy, and it may have a 65% win rate in the last 12 months, with a great positive expectancy. But you know what? It doesn't matter, because the person following this "system" has not learned to trade. And when this "system" goes ka-put (and it will, they all do over a large sample size), what does the trader do now? Draw the box from 6:30 to 7:30? Try it on another instrument? Consult more forums and ask for people's ideas on more systems?

 

So my contention is that seeking systems, strategies, setups, and the like--they're all an attempt at a shortcut around the inevitable, namely, learning the market one is trying to trade and extract profits from.

 

I won't make any more posts on this thread because I respect your goal and intentions Mystic, but this was my comment and now I'm done.

[TheDude 10]

Also, it's Good Friday, so no real trading going on.

 

I do not want to be a thread spoiler, so I will make one comment and then observe only. This is NOT personal, and nothing against you Mystic, or anyone else contributing.

 

This thread, while well meaning, is the reason so many beginners struggle; I know I did, and while I take responsibility for my own trading, wasting my time with these kinds of ideas is one thing that kept me from improvement when I first started 5 years ago.

 

You come up with an idea -- a logical one, IMO: to trade a breakout of the 2 hour window before the NY market opens. Okay, simple enough, and logical enough.

 

But wait, we have to optimize it. So, we talk about trend. So we add 2 moving averages. No matter that they're crossing all over each other like a DNA helix, just look for which one has the greater value at 8am.

 

But wait, we need to optimize it more. So we add a time limit.

But what if the range is too large (as it is this morning)? Let's limit the size of the "box" to ... And let's say that we will only buy a breakout when the RSI is ...

 

And on, and on, and on, we go. And in the end we have a "system" which has done nothing but taught people how to mindlessly follow rules, and pay no mind to context, current events (FOMC minutes today anyone?), or market sentiment.

 

At least the box idea was simple -- a bit naive mind you, and bound for failure over the long term, but simple.

 

Now, instead of taking a step back and reexamining their approach to the market, people will see this and want to look for similar ideas--similar in what respect? Similar in the respect that they don't learn the instrument they are trading, but rather they learn to draw their box, and wait for the candle to close, and place their order, and pray/hope.

 

And here is the real issue: you could backtest this strategy, and it may have a 65% win rate in the last 12 months, with a great positive expectancy. But you know what? It doesn't matter, because the person following this "system" has not learned to trade. And when this "system" goes ka-put (and it will, they all do over a large sample size), what does the trader do now? Draw the box from 6:30 to 7:30? Try it on another instrument? Consult more forums and ask for people's ideas on more systems?

 

So my contention is that seeking systems, strategies, setups, and the like--they're all an attempt at a shortcut around the inevitable, namely, learning the market one is trying to trade and extract profits from.

 

I won't make any more posts on this thread because I respect your goal and intentions Mystic, but this was my comment and now I'm done.

 

Hey, I was wondering, do you have any ideas for what sort of PRICE ACTION a system should use? You know, the sort of PRICE ACTION made for a good SET UP?

 

Just asking

[SIUYA 11]

Joshdance - I think you are 100% correct - and maybe, just maybe the thread might help this.

 

Developing a system using computers is the easy part - optimising it to make a fit a time frame, instrument or type of market is even easier. Using it to trade profitably over a long period of time - not so easy.

 

Learning that a lot of this "might" be a complete waste of time is probably not a waste of time.

[joshdance 10]

Hey, I was wondering, do you have any ideas for what sort of PRICE ACTION a system should use? You know, the sort of PRICE ACTION made for a good SET UP?

 

Just asking

 

lol !

[Mysticforex 13]

@ Joshdance...

 

Agree with what you are saying. I am not trying to invent something, I don't think I have ever had an original thought in my life ( at least none that I remember ).

I am trying to get people to think, fan an ember maybe.

[bobcollett 10]

Hi Mysticforex

Why did you pick the time period 6am -8am when the market is flat /low volume.?

Kind regards

bobc

[ywboo3 10]

Tried the method on GU and it earns 20 pips. Done a backtest on a few major pairs that day and it looks promising.

 

Will explore further this NY box.

 

Many thanks, Mysticforex!

[Mysticforex 13]

Hi Mysticforex

Why did you pick the time period 6am -8am when the market is flat /low volume.?

Kind regards

bobc

 

Exactly. And we are hoping to see which way the market breaks once NY opens.

Also, in my first post I stated I didn't invent this, it has been around a long time. That is how it has always been done. Maybe a slight variation or tweak here and there.

 

It's just a framework. Let's see where WE can take it. In a week or two, when we have beaten it to death we can move on to something else.

 

This is a Trader's Laboratory, let's experiment.

[bobcollett 10]

Exactly. And we are hoping to see which way the market breaks once NY opens.

Also, in my first post I stated I didn't invent this, it has been around a long time. That is how it has always been done. Maybe a slight variation or tweak here and there.

 

It's just a framework. Let's see where WE can take it. In a week or two, when we have beaten it to death we can move on to something else.

 

This is a Trader's Laboratory, let's experiment.

 

Hi Mysticforex

And if the market is flat , there is no trend.And thats an important part of Darvas box trading.Now I dont want to move the time to the open because then we will miss the open.So I will move my box to the last swing high/low.Just before the flat market.This could be during the night session or yesterdays close.I like yesterdays close because of my Taylors TT bias.

As joshdance pointed out, we start out with something simple, and I have made it complicated

regards bobc

[Xiao si 10]

This is a great thread, is there anyone that can test the rules as they are applied to see how they would have done historically?

 

I've got DAX data but no FX data on that time frame.

 

The opening range is not just at the US open, the DAX and the FESX open far earlier. i used to look at the first 30 minutes, some use the first 15 minutes on CL. Once you have the system proven on the US open, you could also test it on the EUR open as well. You test these varied times as well.

 

BTW, we are not optimizing yet....we haven't even tested anything.

 

In addition to these times, you could consider another opportunity after the lunch break. The market can seem to reconsider the trend during a bite to eat!

 

Also, i would recommend that to start with, as you mentioned...we take profit at 2 x risk. Then we can look at optimizing a stop later.

 

Just a few ideas.

 

Cheers,

 

XS

[Mysticforex 13]

This is a great thread, is there anyone that can test the rules as they are applied to see how they would have done historically?

 

I've got DAX data but no FX data on that time frame.

 

The opening range is not just at the US open, the DAX and the FESX open far earlier. i used to look at the first 30 minutes, some use the first 15 minutes on CL. Once you have the system proven on the US open, you could also test it on the EUR open as well. You test these varied times as well.

 

BTW, we are not optimizing yet....we haven't even tested anything.

 

In addition to these times, you could consider another opportunity after the lunch break. The market can seem to reconsider the trend during a bite to eat!

 

Also, i would recommend that to start with, as you mentioned...we take profit at 2 x risk. Then we can look at optimizing a stop later.

 

Just a few ideas.

 

Cheers,

 

XS

 

 

European traders could do the same and call it the London Box.

[Mysticforex 13]

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ADP will probably pop this baby.

[Obsidian 10]

ADP in 5 minutes........

[Mysticforex 13]

ADP 209K expected 205K previous 216K