Trading System Test: 4H Scalping Method

Once again, congratulations to the 4H Scalping Method for being named Best Forex Trading System for the month of July! The question is, will it stand up against my grading framework?

I’ve gone through the forums and it appears that the system has actually been a long-time fan favorite, but was only submitted recently. One problem was that mechanics and trading rules were presented in the form of a 42-page document. As is the case with most humans, it was deemed TL;DR (too long; didn’t read) and many didn’t bother with it.

The good news is that forum user phil838 decided to pick one of the strategies and simplify it for everyone else. According to him, he’s had a 70% win rate using that simplified strategy, which is actually rather quite impressive.

What I find even more interesting is how the system doesn’t make use of any technical indicators at all!

Backtesting Parameters

Pair: GBP/JPY

Timeframe: 4-hour

Backtesting period: February 2012 to July 2013

Indicators: None

Entry Rules:
Draw scalp lines at recent swing highs and lows. Place buy stop orders ten (10) pips above the swing high for long trades, and sell stop orders ten (10) pips below the swing low for short orders.

In order to establish the swing high or low, the preceding trend must be of at least four (4) candles and the succeeding trend should be four (4) candles as well.

Exit Rules:
Set a stop loss of 50 pips and a profit target of 50 pips.

As for risk management rules, I have decided to set the risk per trade at 1% of the account.

Note that the specified 10-pip buy/sell stop order above/below the scalp line and the scalp line qualifications have been added by yours truly in order to make the system less subjective. With that, the results may not 100% accurately reflect the results that phil838 or Nick B have gotten but it could still be a good approximation.

For now, I will retreat to my pod to crunch the numbers. Next week, I will be posting the backtesting results and the grades of the system based on my framework for mechanical systems. Stay tuned!

  • AlphaCentauri

    Hi, can this method work on Binary trading? Thanks!

    • Robopip

      Greetings. I haven’t tried it on Binary Options platforms but this system uses a longer term time frame so it might work.

      Try forward testing it first and read the Binary Options vs. Forex section of the School (link to babypips.com) before you trade it live.

      • AlphaCentauri

        Thanks.

  • Moecayman .

    ok so i gave this method a try earlier today and guess what, here are the details

    buy GBP/JPY;@ 150.730 and TP @ 151.105 about 37 pips, Now since i am a noob i took the profit early when the guide said to TP 50 SL 50, that was like 9 hours ago, had i waited (or atleast set a SL in profit) maybe i would have made alot more, especially since rate now is 151.665… :((( but definitely promising :)

    • Robopip

      Many cheers for you, Earthling. Good luck on your next trades using this system and don’t forget to keep us updated on whether it’s more profitable if you strictly follow the rules.

  • http://hillsboroughforex.blogspot.com/ M FAROOQ

    Nice post…