A Simple Strategy with a Great Gain
Sometimes people look for complicated strategies on the basis that simple ones simply cannot be true. When this happens, the overdose of information that the trader looks for can result in analysis-paralysis. He is then so overloaded with expert advice that he does nothing.
Here is a simple strategy giving a good return. There is no need to be tied to the computer, just use a 15 minute chart and look at it from time to time.
o Trade between 8.00am and 5.00pm unless already in a trade.
o Buy or sell when the candle on 15 minute chart crosses (and closes) the middle Bollinger Band.
o MACD supports the direction of the candle.
o Close when the candle again crosses (and closes) the middle Bollinger Band.
o All spikes are to be ignored.
This is so simple and ignores masses of technical indicators but gives a great result.
During the period 10th January to 14th March 2012, 100 trades were taken and the results noted. The starting capital was €1,000 and the trade size was €50,000 in every trade.
Number Result Average Result Average
Of Trades in Pips in € €
Gains 53 20,237 382 7,745 146
Losses 44 -4,751 -108 -1,806 -41
Neutral 3 - - - -
Total 100 15,486 5,939
In general, the strategy gives a profit in 53% of trades and the average profit is much higher than the average loss. The 100 trades resulted in taking the €1,000 opening capital to €6,939 which is a good return by any standards.
The period picked up some large trades, with five gaining over 1,000 pips each. The total pips for these five trades came to 6,377 and a value of approx €2,456. Without these five large trades, the average pip gain would have been 289 with a value of €110.
Also, it must be said that the strategy performs badly when the market is ranging; generally it return lots of small losses. The 100 trades required a 350 pip stop loss and the risk management was high at the start at 13.7% of capital but as the profit accumulated, the risk dropped to just 1.9%.
The mind has the ability to take into account huge amounts of information. The problem is that people have a tendency to believe that good returns require a complicated strategy. This strategy returns trading to a basic, simple system that works.