European Breakout Grid Trap Strategy

[forextrader-radioman]

Hello traders!

since 1st of November 2011 I use this strategy, I call it

European Breakout Grid Trap Strategy

(Basic idea is from forex-strategies-revealed.com/complex/trapping-the-price )

Place 6 pending orders:
one buy at 15 pips above the actual price
another buy at 30 pips above the actual price
the 3rd buy at 45 pips above the actual price.
Take profit for all 3 pending buy orders is 60 pips above the actual price, stop loss is 60 pips below the actual price.

one sell at 15 pips below the actual price
another sell at 30 pips below the actual price
the 3rd sell at 45 pips below the actual price.
Take profit for all 3 pending sell orders is 60 pips below the actual price, stop loss is 60 pips above the actual price.

It should look like this:

trap_1.jpg

so you see, every 15 pips above and below our actual price, we have a line where some trading action will be executed.

Trading procedure:

When price enters long1 pending order, we add more sell pending orders: one at short1, one at short2 and one more at short3.
When price enters long2 pending order, we add again one more short1, one more short2 and one more short3 pending order.
When price enters long3 pending order, we add once more another short1, one more short2 and one more short3 pending order.

When price arrives at the TP long price, all orders are closed and all pending orders are deleted.

Similar procedure if price is going south.
When price enters short1 pending order, we add more buy pending orders at long1, long2 and long3 level.
When price enters short2 pending order, we add again one more buy pending order at long1, long2 and long3 level.
... and so on ...

Every time, when price triggers a new pending order, we add 3 more pending orders at the opposite side. Again and again until one take profit level is reached.

Lot size: as small as possible because there could be 20 or more trades open at the same time if price is swinging around the middle line.

The time of starting this strategy is most important!

For EURUSD start this at 8:00 CET (which is 07:00 GMT, one hour before London opening)
For GBPUSD start this one hour later at 09:00 CET (which is 08:00 GMT, London opening)

Other pairs and times are possible but not tested. All well moving pairs with low spread should work fine if you can set the pending orders close to a time when there is some price action expected.

(I can make only paper trades because of my day job [almost 12-14 hours/day] so it would be nice to see comments here from other traders)

Greetings from Hamburg/Germany,
Dietmar (forextrader-radioman)

UPDATE
I do not trade it in that way any more, see modified strategy here: http://www.stevehopwoodforex.com/phpBB3 ... 561#p34561

[forextrader-radioman]

Here a screenshot about the results (excel sheet)

Spread for EURUSD is 2, for GBPUSD is 3 pips

[forextrader-radioman]

To make the calculations easy and fast I have modified the fibo tool in Empty4 like this:

[forextrader-radioman]

here an example... (GBPUSD, middle of trap at 08:00 GMT, London-Opening), placed 3 pending buy orders (long1 to long3, see chart) and 3 pending sell orders (short1 to short3) see chart.

Long1 has entry price 15 pips above the 8:00 GMT price, long2 has entry price 15 pips above long1 and long3 has entry price again 15 pips above long2.

all have the same take-prit price, which is again 15 pips above long3 = 60 Pips above the middle of the trap. And all have the same stop-loss price, which is 60 pips below the middle of the trap (and there is also the common take-profit for all three pending short-trades ...)

So short1 is 15 pips below middle of trap, short2 is 30 pips below middle of trap, short3 is 45 pips below middle of trap and take-profit for all three short-pending-orders is 60 pips below middle of trap.

Doesnt matter which way price will move, it is trapped

Now the price action is coming ...


A = Short1 is triggered. Reaction of the trader: add 3 more pending long orders at the same levels. So add one more long1 pending order, add one more long2 pending order and add one more long3 pending order.

B = Short2 is triggered. Reaction of the trader: add again 3 more pending long orders at the same levels. One more long1, one more long2 and one more long3 pending order. You should now have three times long1, three times long2 and three times long3 pending orders (all not triggered yet...)

C = Long1 is triggered. (Yes, all three Long1 pending orders are triggered, because they have all the same settings). Reaction of the trader: add 3 more short pending orders. So add one more Short1 pending order, one more short2 and one more short3 ...

D = Long2 is triggered (and long3, too!) Reaction of trader: add 6 more pending orders (2 times 3 because there are long2 and long3 pending levels triggered). So you add 2 more short1 pending orders, two more short2 and two more short3 pending orders.

E = Take-profit (long) is reached ... all long trades are finished with profit and all short trades are finished with loss (stop-loss reached).

trap_3.jpg

(ignore the MA ... not important for this strategy ...)

Result calculation:

1 x short1 trade = 75 pips loss
1 x short2 trade = 90 pips loss

3 x long1 trade = 3 x 45 = 135 pips profit
3 x long2 trade = 3 x 45 = 90 pips profit
3 x long3 trade = 3 x 15 = 45 pips profit

Spread = 8 x 3 pips = 24 pips loss

so we finished with a profit of 72 pips

After take-profit and stop-loss is reached, delete all not triggered pending-orders.

So you see, this is a very simple but effective trading system. Every time when a pending order is triggered, you have to add 3 more pending orders at the opposite side.

Yes, it could happen that you have 20 oder more trades open at the same time, so you have to use a proper (very small) lot size for each pending order

Killing factor is "price is endless ranging" ... and so you have to make more and more pending orders which all could be triggered! ... with the result that you have to make more pending orders ... and so on ...

Last friday and the day before, there was holiday (thanksgiving) ... so a bank holiday with less volume ... less moving price ... not good for this system! ...

See the result-list above ... there are some days with loss or less profit trades ... that could happen ...

But if you stick to the rules (15 pips difference between lines, not more, wise placing of the trap, close to a breakout) then you should make nice profit ...

all the best,
Dietmar (forextrader-radioman)

[forextrader-radioman]

for fast pending orders I have 6 scripts ... 3 for the long and 3 for the short pending orders ... and one to delete all not triggered pending orders ...

so I have to edit the 6 pending orders only once a day (per forex pair) ... set entry price, TP and SL, thats it ... after that I only "drag and drop" the pending orders into the chart ...

[DragosDanescu]

Interesting, will have a look.
Thank you!

[DragosDanescu]

Thank you, Dietmar.

So far: 138 pips per day.

Would you please be kind enough to share the
percentage wins;
average win size/average loss size; and
your chart time frame.

I think, complimented with appropriate position sizing algorithm(s), this could run and run.

Khalid

M5, from the pick attached.

[forextrader-radioman]

well, time frame is not relevant ... I use M5 but only because of better overview (distance of the relevant lines).

winning and losing days and trades are clear to see up there in 2nd screenshot

I use 0.05 lot per pending order because that is the smallest lot size, offered by my (second) broker TadawulFX. As I wrote up there, take lot size as small as possible because it could happen that you have 20 to 30 trades (or even more!) trades running at the same time (if you trade 2 pairs)...

, Dietmar

[garyfritz]

Interesting strategy, Dietmar, and *excellently* described! Danke!

Question: instead of always placing long1 at middle + 15, have you ever tried placing it 15 from the latest short?

E.g. at point A short1 got triggered, and you placed longs at long1/2/3. What if you placed the longs at middle, long1, long2? Then at B short2 is triggered, then place your longs at short1, middle, long1?

That would give you a tighter "trap" around the price, and you would scale into your positions more gradually. If you kept your TP at the same point, it would increase your TP profits a lot.

Similarly, middle - 60 pips seems like a big stop, especially after you've hit long1, long2, or long3. At long3 you're risking a total of 60+15 + 60+30 + 60+45 pips -- ouch!! Why not tighten the stop as the price moves one direction or the other? (Actually now that I think of it, short1 would hedge long1, correct? So basically you only risk 15+15 + 30+30 + 45+45. But you've limited your profits if you go short.)

I would be tempted to say short1 is the stop for long1, and the new short1 (placed at middle) would be the stop for long2, etc. That also avoids hedging so we in the US could do it too. But I'd have to test that to see if it would break your results. Which are quite impressive!

Gary

[forextrader-radioman]

Interesting strategy, Dietmar, and *excellently* described! Danke!

you're welcome

Question: instead of always placing long1 at middle + 15, have you ever tried placing it 15 from the latest short?

No ... in my opinion it is not good to place the trap so tight, that should result in more and more trades ... good ones and bad ones ... and more spread to pay ...

Why not tighten the stop as the price moves one direction or the other?

hmmm ... because I never know, which take profit will be taken finally ... long or short? ... who knows, my crystal ball indicator is not proper working to release

I would be tempted to say short1 is the stop for long1, and the new short1 (placed at middle) would be the stop for long2, etc.

yes, I am interested in that (and any else) improvement ... give it a try and post it here ... so we can see and discuss about it ...

Greetings from (rainy) Hamburg/Germany,
Dietmar (forextrader-radioman)