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Retracement Strategy Results

Posted 2/13/2016

I wanted to show how accurately my robot is working this past week, based on the predicted probabilities and then I compared them to the Pipnotic levels.

The Trade Setup for a Long:

Use Close price of candles, not high & low of the candles to compute the fractals, and use a fractal strength of 4 on a 15m chart. That means for a Swing High, there must be 4 candles to the left, and 4 candles to the right, that “closed” lower than the highest closing candle. For a SWL, there must be 4 candles left and 4 candles right that closed higher than the lowest closing candle.

1. Look for an Up Swing that is within a 25 - 55 pip range on the 15m chart, with the #4 Close fractals.
2. Look for the MF to be up on the 15m chart, with the #4 Close fractals. (not normal MF)
3. Look for the MACD to be crossed over on a 1H chart.
4. Look for price to be above the 4H, 8 EMA. (4H Trend bias up)

If all these conditions are met when that 4th candle after the SWH closes, then the robot will put in two LE Orders at the 70% retracement level.
10 pip stop
10 pip 1st target
50 pip 2nd target

I backtested from 1/3/16 to 1/29/16 and the best outcome was with a 70% retracement and these targets. The probabilities were:

76% of hitting the 1st target, 1:1 at 10 pips.
33% of hitting the 2nd target at 50 pips
33% of coming back to break even on the 2nd half.
34% of being stopped out for the full stop, at 10 pips.

Actual Real Results of 4 trades were as follows:

Trade #1: Feb. 8th, Both halves stopped out for full SL
Trade #2: Feb, 9th, Hit 1st target, 2nd half stopped out the full SL
Trade #3: Hit the 1st target, 2nd half stopped out for BE (stop was moved)
Trade #4: Hit 1st target for 15 pips, 2nd target for 50 pips. (Manually increased stop to 15 pips for natural stop and reduced the risk accordingly.)

Therefore, of the 4 trades:

75% hit the 1st target at 10 (15) pips.
25% hit the 2nd target at 50 pips
25% was break even
25% was stopped out.

Close enough!

Below is a screen shot showing all 4 trades as Red or Green arrows on the screen. I’ve marked out the Pipnotic levels as boxes around accumulation bars, on the 15m and 1H chart. 
15m are Pale Green
1H box is White

Looking at the levels, I thought the 1st trade looked good, but it was stopped out in short order. The 2nd and 3rd trades I probably wouldn’t have taken had I been awake at the time. The last one was sweet!