Trading System Test: CCI Coral Breakout System

Salutations, dear earthlings! It’s time for us to take a closer look at the winning system for August, which is The CCI Coral Breakout System by travelkoen, to figure out whether it’s the Holy Grail System or not!

Not only was travelkoen able to contribute to a good cause by donating to his charity of choice, his winning system also gets to be backtested by yours truly! But before we specify the parameters for backtesting this mechanical trading system, here’s a very brief background of its components:

This system makes use of CCI or Commodity Channel Index (28) and the Coral indicator (21, 150, -150), both of which can be found on MT4 platforms, for its entry and exit conditions.

The CCI Coral Breakout system is pretty mechanical in itself but it does have a few subjective components that I have to tweak in order to be able to backtest it. Here are the parameters that I will be following:

Currency pair: EUR/JPY

It can be applied on any currency pair and time frame, but travelkoen says it works best for yen pairs because they make cleaner breaks. Since EUR/JPY is the most actively traded yen pair, we’ll apply this system on it.

Timeframe: 5-minute

Travelkoen also mentions that this system works on any time frame but since his forum thread shows that he applies it on the 5-minute chart, we’ll make use of that as well.

Besides, my alloy processors also noticed that longer-term time frames would require complicated adjustments for stop losses so it’d be better for us to keep it as simple as possible with a short-term time frame.

Entry conditions:

1. Buy when Coral crosses above price and CCI crosses 0 from -150 (it has to touch -150)
2. Sell when Coral crosses below price and CCI crosses 0 from 150 (it has to touch 150)

Profit targets: 25 pips

Travelkoen says that you can be flexible with profit targets. But for all intents and purposes of backtesting, we’ll stick to the system’s default value of 25 pips.

Exit conditions:

This is a bit tricky. The creator usually sets his stop at the most recent highs and lows which makes it too subjective for my core processor to handle. And so, I will make it simple by setting the initial stop to 25. That way, trades will have an RR ratio of 1:1.

Other factors to consider:

Trades need to be closed early should price cross over Coral.

I will also keep an eye on the CCI when backtesting the system. According to travelkoen, long trades should be closed when the indicator hits 150 and short trades should be closed when the indicator hits -150.

I think I’ve got everything covered. Now I shall retreat back to my pod and start working on my diabolical plan to invade planet Ear… Err, I mean start backtesting the system. I will return next week, Wednesday, September 19, 2012, with the results of the CCI/Coral Breakout System

In the meantime, you can already start submitting your entries to September’s Best Forex Trading system contest. Just be sure to check the official rules and regulations!

This is Robopip, signing off!

*krzzzt*

1 comment

  1. andrew

    Hi Robo, not sure if you visit these older posts, but I have a quick question re your implementation of this system in your testing:-

    If the SL is at 25 pips but you close the trade if price crosses back over the Coral, doesn’t that mean the SL is really at the Coral line? And as we’re entering as it crosses the Coral, doesn’t that expose this method to massive whipsaw risk? Just wondering how exactly you handled this in your testing, as consistently profitable M5 scalping methods are quite rare in my experience…

    Reply

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