Analysis of range break with trend retracement
This method works with following conditions:
- H1 and 8 recent bars with 100 pips range (80 pips in case of USDJPY)
- BUY in case of the trend goes beyond the range and SELL in case of below range.
It’s that simple method.
The beyond/bellow judge is not the instantaneous but it shall be judged when the candle is fixed.
Source:Simple method to try the range break
System trade for MetaTrader4
This method could be programmed for MT4 within 10 minutes or so.
Backtest by USDJPY
※ Period: 01-Jan-2014 to 06-Feb-2015 [RangeBreakEA.ex4]
※ Spread 1.0pips
Well, not too good result with this pair…
Backtest by EURUSD
※Period: 01-Jan-2014 to 06-Feb-2015
※Spread: 1.0pips
Well, this result is also not too good.
It could be that the stoploss value is too tight or perhaps too wide (the range and the first movement’s strength could give strong influence for the strategy)
Conclusion
At first, I had the impression that this could be something. However the backtest result made me think that this won’t work as it is but yes it could work with some easy optimization. So let’s give It a try.
Optimization
Let’s limit the trading hour; UTC 06:00 to 16:00 (15:0 to 01:00 in JPN hour). Stoploss as 40pips, range bars as over 16.
※ Period: 01-Jan-2010 to 06-Feb-2015
※ Pair : USDJPY
I find some improvement but not as I have thought, well it seems not so easy as my first impression. In addition, I must say that the backtest result before 2010 is not better either.
What about M5?
On the other hand, my impression was telling me some possibility with M5 time frame.
Let’s give it a try again with M5…
※ Period: 01-Jan-2010 to 06-Feb-2015
※ Pair: USDJPY
※ Stoplos 12pips, Trakeprofit 40pips, Trading time UTC 03:00 to 07:00, range bars over 20, range 8pips.
The result is much better than the result with H1. In addition, the result of backtest before 2010 is also positive. The PF1.26 doesn’t’ make me motivate so much; i won’t be a nice EA as it is now. However, it could be much better EA if we add more trading judge indicators, trailing stop, and/or strategies like fundamentals analysis.
Expansion by Bollinger band
Similar method could be done using Bollinger band and I must say that it would be much more popular to use Bollinger band. When Bollinger band expand from squeeze is the entry timing.
※ Bollinger band is not Holy Grail; often it shows the fake entry timing so it is not so easy that this strategy give you the promising benefit.
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