System Review: Experimental Breakout/Ranging Double Strategy

Now this has got to be one of the wackiest trading systems I have encountered, even for alien standards!

Initially, one would think that Pipcompounder’s Experimental Breakout/Ranging Double Strategy is really simple, as it only makes use of one indicator called the Envelopes indicator. However, the system actually has comprises of taking two components – a breakout trade and a bounce trade.

For the purposes of backtesting, I only took bounce trades off of the 1-hour EUR/USD chart. If you want to know more about entry and exit rules, you can go through my previous post from last week.

Moreover, I would like to point out humans, that I went with a constant 7-pip stop for all trades, as the rules indicated that the spread be taken into consideration when placing stop-loss orders. Because my operating system has still not been upgraded, I also did not implement Pipcompounder’s trailing-stop suggestion, wherein you move your stop to your entry point when prices move 5 pips in the direction of your trade.

This is an important aspect of the mechanization of the system, as it appears to have had an immense effect on the results.

Now, brace yourselves for the moment of truth. Here is my diabolical plan to invade your–Err, I mean, the results of the mechanized Experimental Breakout/Ranging Double Strategy:

Experimental Breakout/Ranging Double Strategy

Profitability: 16/20

If you look at it in terms of pure profitability over the 4 month period, I would say that this system is pretty impressive, as it was able to score a net gain of 18.14%. What’s more alerting is that it was able to do this even though it only won 6 out of 39 recorded trades! What is that baseball term that Cyclopip always uses? Home run? Yes. This system aims for “home runs”.

One change that might make the system even more profitable is if we figure out a way to lock in profits. There was one instance where the 7 pip stop was enough and the market moved a great distance but it didn’t quite reach the other band and eventually stopped out.

Risk tolerance: 12/20

One thing about this system is that the stop loss is way too tight. As mentioned above, it only had a win rate of 15.38%. It losses a majority of trades thanks to “noise” in the markets.

Furthermore, it had a painful drawdown of 16%, which may be too much for most traders to stomach.

Newbie-friendliness: 6/10

Buy at the lower band and sell at the touch of the upper band. How much easier can it get?

Perhaps the only factor that might intimidate newbies from testing out this system is that it makes use of the Envelope indicator which isn’t that popular. However, if you do your homework and read up a bit about it, you should be fine.

Taking account the spread in setting stops might also confuse those who have not had their fair share of trading the forex market just yet.

Total score: 34/50

Profitable, limits risk, and newbie-friendly, the Experimental Breakout\Ranging Double Strategy garnered a score of 34/50!

Although the system’s numbers are already pretty impressive, there is still a lot of room for improvement. For instance, it doesn’t have a way of locking in profits. I also wonder how it would fare when applied to another pair. Try it out yourselves!

With that, the search for the Holy Grail System continues! Join our quest by sending in your entries for the April Forex Trading System of the Month.

Participating is as easy as 1-2-3 since you just need to create a thread explaining your system’s rules and posting a link to that thread in our Best Forex Trading System of the Month for March forum.

May the forex force be with you!

  • San Diego Hotel Meeting Space

    Is here Somebody who use something like this?

    Or can Some body show me threads in this topic?