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Calling all humans! I, Robopip from the land of Beep Bop-Bzzzt-Beep, shall be backtesting the winning system for January’s Best Forex Trading contest. If you remember, forum user aidysproule joined the Hall of Fame when his creation, The Sproule System, garnered the most votes for the month.

To see how amazing his system is, we only need to apply the 100 EMA on the 1-hour timeframe of EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD, EUR/JPY, or GBP/JPY.

For backtesting purposes, I have decided to run this system on EUR/USD’s 1-hour chart and mechanize some of the system’s entry and exit rules.

The entry rules of The Sproule System state that one must enter a long position when the current price is above the 100 EMA and conversely, enter a short position when current price is below the 100 EMA and the previous high is below the 100 EMA. Instead of using the “current price” which is dependent on a lot of factors, I will simply look at the open of the next candle after the signal is confirmed.

In other words, I will look for an upward crossover then wait for a candle’s low to be above the 100 EMA before buying at the open of the next candle. Conversely, I will look for a downward crossover then wait for a candle’s high to be below the 100 EMA before selling at the open of the next candle.

As for exit rules, the system defines a 100-pip profit target so I’ll stick to that. Stop losses are supposed to be adjusted to the current 100 EMA value every hour, which means that the trade should be closed by the next crossover. For the exact price, I will use the 100 EMA value of the previous candle.

I will also risk 1% per position based on the initial stop loss, which is set at the 100 EMA value of the confirmation candle.

But before I start my work and retreat to my pod, I would just like to remind you that my backtesting parameters are just close approximations of the actual system rules since some of them are subjective. And so, in an effort to mechanize the system, there could be some discrepancy in the results which I will post Wednesday next week, February 15, 2012. Stay tuned for that!

Also, be sure to remember to submit your entries for February’s Best Forex Trading System of the Month. Who knows, you may be next in line to join the Hall of Fame!