Come forth, my human friends, for I have the results of the Simple Day Breakout system! Could it be the Holy Grail of trading systems that we have all been searching for?
If you remember, forum member kbfc00's Simple Day Breakout system snagged the most votes in October's Best Forex Trading System contest. What is it about? As the name suggests, it's a breakout system. Basically, one has to set buy and sell orders are set at previous day highs and lows.
It was intended to be traded on the 4-hour timeframe, but my processors couldn't handle the larger timeframe. Instead, I decided to backtest it on GBP/USD using the hourly chart.
With my fiber-optic eyes, I examined the system's performance from March to October of this year. Here are my findings:
Is the system profitable? Yes. But I have to say that its 4.42% return for 8 months didn't get my wires short-circuiting out of excitement. I'm sorry to say that I'm not really impressed.
The system has a high win rate of 65.33% which makes me think that it ought to have gotten a higher return. However, from my observations, I noticed that the 20-pip target limited its profits, capping its overall gains.
Risk Tolerance: 18/20
My freshly-oiled titanium alloy processors have alerted me that the system's stop loss method is appropriate for day trades and it does very well when it comes to cutting losses early. However, since the stops are a bit tight, I'm worried that the actual results could differ from the backtesting figures as we'd have to factor in the pip spread.
The system is fairly easy to implement because the entry and exit rules are pretty straightforward. The system simply makes use of previous highs and lows in setting stops and has a clearly defined profit target, which isn't too complicated for a newbie to try out.
What I'm a bit concerned about is the fact that you probably have to watch the charts very closely while trading using the system. You'd have to be able to manually adjust your stop unless you're able to program an EA for the system - something that a newbie might not be able to do right away.
Total Score: 39/50
Combining my assessment for profitability, risk tolerance, and newbie-friendliness, the Simple Day Breakout system was able to garner a total of 39 points! Not bad!
You might want to try this system out for yourself or program an EA for it if you can as it yields pretty decent numbers for such a simple system.
If you've got a mechanical trading system that you think could perform way better, put it up for the test by submitting it to the November Best Forex Trading System of the Month contest. Perhaps you could help bring us closer to finding the elusive Holy Grail system!
That's all I got for now! This is your friendly robot trader, signing off!
*beep beep boo beep*
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