Advanced Strategy # 1 - The Midnight Strategy

Post your new strategies, discoveries or just ideas for development

Advanced Strategy # 1 - The Midnight Strategy

Postby COLGEN » Sun Feb 21, 2010 2:22 pm

Hello everyone!!!

I noticed when browsing the forum that nobody had picked up on Advanced Strategy #1 (The Midnight Strategy) and taken it forward as a topic.

I've pulled together my own version of the strategy from going through all of the comments etc on the original webpage and have decided that I should post it on here as it may well be of help to other users, or people who are just trying to sift through the pages and pages of comments for the real nuggets of information. There's no point in this just sitting on my PC when I can share it with the people who introduced me to the strategy!

I'm not able to regularly visit and update the forum, and probably am not the best person to answer queries on the strategy. Everyone will find their own path for trading it - choosing their own indicators, own filtering techniques etc - and I respect that. All I am aiming to do is offer the beginner an easier path into the strategy for their own benefit.

I've also had a few conversations with Edward on this and shall post these also - it answers some of the questions that I had and should also help future users to adapt their own strategy:

Dear Edward,
Hello and thank you so very much for both the website and forum - it's a really great place to learn.
If you don't mind me asking, as I am sure you are bombarded with questions like this each day, which of the numerous strategies on the site do you trade?
I've read through many of the strategies and, unfortunately, the original 'shape' of the strategy is often so distorted by user comments and lack of original strategy owner input that it is difficult to follow (Advanced #14 as an example from last nights reading).
One further question that I have is regarding the lack of real backtesting to support the strategies. I'm reading a lot of opinions, ideas, and other fantastic 'tweaks' that could be made, however not seeing an awful lot of data that supports a strategy. Maybe it's just the accountant in me that's crying out for some more spreadsheets...but could the strategies be supported with back/forward test evidence a little more?
Anyway, I'm convinced that the forex journey is the path to financial independence for me and my family, and any help that you can offer on preferred strategies would be immensely appreciated.
Thanks and Kind Regards
Colin

Hi Colin,

thank you for your feedback.
I do get a lot of similar questions, but that's not a problem for me :)

I trade a combination of strategies - my own soup, so to speak, which consists of the following strategies:
- http://forex-strategies-revealed.com/ad ... ight-setup
- http://forex-strategies-revealed.com/ad ... stochastic
- http://forex-strategies-revealed.com/ad ... s-breakout (this one is traded as is, without changes)
- combination-strategies-t140.html (this one is very close to mine, a good example to look at)
- http://forex-strategies-revealed.com/tr ... 9ema-entry
- plus, I always trade with horisontal support/resistance levels and trend lines - all these are drawn manually - my own view and analysis of the market.

From the latest, the recent Step trend indicator collection got me interested. I'm testing it at the moment:
http://forex-strategies-revealed.com/develop/step-trend

Hope this helps you to focus on the specific strategies.

Speaking of data, spreadsheets etc. All my strategies went through forward testing. I don't back-test them, and that's probably why I don't have such quick spreadsheets to publish. When I was trading those strategies some years ago, at that time I didn't know that I'll be running a website one day, thus again, unfortunately, I didn't save the data.

Getting a feedback or spreadsheets from other traders is even more difficult. Almost every visitor leaves our website with some ideas to test and trade upon. All traders get some sort of results, many improve the systems, but few come back to share it with the rest. Another major factor is that you won't find many people who is willing to share their Holy Grail discovery with everyone, even if it's just a slight tweak, not to mention provide any data about the achieved results (without sharing the trading rules, it won't make sense anyway...)
That leaves me doing all the work, which time-wise is not possible for me, unfortunately.

That's how it goes.
I hope you enjoy your Forex journey and learn a lot of new things at our website and forum!

Best regards,
Edward

Thank you, Edward, for your kind reply.

I am constantly impressed by the generosity of you, your team, and the contributors to this site / forum.

Would you mind if I picked your brains a little further on one of your favoured strategies - the Daily Midnight Strategy? I've spent the past few days reading, editing, reviewing the charts and I believe that it is a strategy that would suit my emotional needs from trading...and hopefully my financial needs too!

I've 're-written' the strategy, pulling out the various comments / suggestions from the forum that made sense to me but there still are some questions that I can't quite answer. Surprisingly, nobody has opened a thread on this strategy in the forum, hence my need to ask someone like yourself. Maybe, once I'm trading it, I could take up the banner on the forum...

I do hope that I'm not imposing upon you with further questions as I can only imagine the time it must take you to juggle your family, work, trading and website management. I really do appreciate that you take the time to help us poor 'newbies' to find our feet. :D :D

Questions:
1. In terms of 'filtering' trades, you mention that monthly pivot points are a battleground to avoid, and offer a useful tip to do so. Does the same 'no-trade-zone' apply to each R1, S1 etc? Would it perhaps also apply to S/R, Fib areas too?
2. The 90pip limit for bar size seems close to 50% ADR, based on the ADR's you quote from 2007. Would you stick with the 90pip limit on bar size permanently, based on your experience, or would you regularly update this based on an ATR figure. If ATR is the preferred method, would it need to be on a longer term basis than 20 days?
3. I read that the strategy should now include setting the stop loss at 50% of the length of a "really tall candlestick". I know that this is a really obvious question to ask, but what would you define as "really tall" - >ADR20, >a multiple of ADR20, a fixed pip amount?
[I know that the best answer is probably to find this out for myself by testing, but so far I'm not sure I see why you would deviate from the original 'low-3' approach]
4. Regarding 'stars' and 'hammers', it appears to me that on balance a trade in the opposite direction is most effective. You've clearly been trading this approach for much longer, therefore would you agree that a 'reversal' trade should be placed against each star / hammer?
5. The 100pips 'target' again seems very like 50% of the ATR, therefore would it be reasonable to 'bank' a trade the following midnight if it is <100 but >50% ADR based on the current ADR20?
6. Finally, regarding multiple pairs, I respect the reasons why you would perhaps suggest concentrating on a single pair, however it does look like there are sometimes limited trading opportunities on a particular pair if it is ranging or stuck around S/R, Pivots, Fibs. Do you trade your version of the strategy across multiple pairs, or do you continue to focus on a single pair?

I hope that you can find the time to answer this message and that I'm not wasting your time... :oops: ...but I can definitely see possibilities in this strategy and think that I'll start trading it.

I offer my heartfelt thanks once again for your support, and wish you every success in everything that you do.
Kind Regards
Colin

Hi Colin,

I'll try to answer your questions:

1. In terms of 'filtering' trades, you mention that monthly pivot points are a battleground to avoid, and offer a useful tip to do so. Does the same 'no-trade-zone' apply to each R1, S1 etc? Would it perhaps also apply to S/R, Fib areas too?


Yes, when mentioning those monthly pivots, I meant not only the PP, but also R1, S1, 2, 3 etc. You can carry it on to the Fibs too, assuming that there are good visible Fibs that stand out and thus will most likely be used by the majority of traders.

2. The 90 pip limit for bar size seems close to 50% ADR, based on the ADR's you quote from 2007. Would you stick with the 90pip limit on bar size permanently, based on your experience, or would you regularly update this based on an ATR figure. If ATR is the preferred method, would it need to be on a longer term basis than 20 days?


I review the pip limit from time to time, but rarely change it. For example, the 90 pips requirement for GBPUSD stays effective since 2007. Our goal is to avoid being stopped out on a short size bar, so when I look for the minimum pip value for a pair, I evaluate the history data and examine the ranges of the lowest ADR values for the past 1-1.5 years. Based on this values I pick my minimum pip requirement for each currency pair. It's always a subjective decision, I have no rules for picking the exact amount of pips or using exact percentage values.

3. I read that the strategy should now include setting the stop loss at 50% of the length of a "really tall candlestick". I know that this is a really obvious question to ask, but what would you define as "really tall" - >ADR20, >a multiple of ADR20, a fixed pip amount?


A "really tall" candlestick is based, again, on my subjective judgment - there is no fixed amount of pips or ADR values. It is rather a visual comparison of the last 100 or so daily candlesticks, where you can see the approximate length of a tall candle. For example, the daily GBPUSD candle on Feb 18, 2010 was a tall one.

4. Regarding 'stars' and 'hammers', it appears to me that on balance a trade in the opposite direction is most effective. You've clearly been trading this approach for much longer, therefore would you agree that a 'reversal' trade should be placed against each star / hammer?


It wouldn't be right to say that for each star and hammer, but rather we should say: "a 'reversal' trade should be placed against each star candlestick in an uptrend and each hammer candlestick in a downtrend."

5. The 100pips 'target' again seems very like 50% of the ATR, therefore would it be reasonable to 'bank' a trade the following midnight if it is <100 but >50% ADR based on the current ADR20?


It may seem like 50% ATR, but in reality it doesn't not dependent on it, although probably should to some extend. It's a good point. I choose a value that is simply higher that the minimum pip requirement we set for an entry candle.
What you said, is reasonable, however, I would rather prefer to let a trade run further if I have anything below 100 pips for GBPUSD.

6. Finally, regarding multiple pairs, I respect the reasons why you would perhaps suggest concentrating on a single pair, however it does look like there are sometimes limited trading opportunities on a particular pair if it is ranging or stuck around S/R, Pivots, Fibs. Do you trade your version of the strategy across multiple pairs, or do you continue to focus on a single pair?
My recommendation for focusing on a single pair targets mostly novice traders (which majority of traders are). it helps you to focus and learn the behaviour of a single pair, instead of jumping back and forth among 5-10 different pairs, which doesn't add much of a knowledge. Once you've studied one pair, you can definitely add another one and so on. I would use up to 3 pairs in the beginning.

Best regards,
Edward


So there you go!!!

I hope that this post might help someone pick up the midnight strategy as one of their own.

My own take on things? Don't let three losses in a row be sufficient to put you off the strategy...it has merit, but filtering (or whatever else you do to recognise choppy range bound periods) will be your saving grace. The strategy looks to work well in strong trending conditions...but you should always remember that even in a range, price will still go up and down...and you can be on-board that train by using this strategy.

I wish you all many pips with your chosen strategy...whether it's this one or another!!!

Colin
Attachments
Advanced system #1.doc
Updated Version of Advanced System #1
(216.5 KiB) Downloaded 1729 times
Riding the choppy seas on a ship of hope
User avatar
COLGEN
 
Posts: 3
Joined: Wed Feb 03, 2010 11:56 am
Location: SCOTLAND

Re: Advanced Strategy # 1 - The Midnight Strategy

Postby Traveller » Wed Mar 17, 2010 9:02 am

Thanks Colin,

enjoyed the reading,

All I am aiming to do is offer the beginner an easier path into the strategy for their own benefit.


that's all what's needed for those willing to learn. 8)
User avatar
Traveller
 
Posts: 48
Joined: Mon Oct 19, 2009 7:29 am

Re: Advanced Strategy # 1 - The Midnight Strategy

Postby davidg29 » Thu May 20, 2010 11:49 pm

Is anyone using this strategy?
davidg29
 
Posts: 2
Joined: Thu May 20, 2010 11:47 pm

Re: Advanced Strategy # 1 - The Midnight Strategy

Postby drew » Fri May 21, 2010 10:57 am

Hey davidg29,

I just printed out the posted word document from Colin and I was going to try this strategy Sunday Night May 23 EST. I tried the original and only did OK, I have been sniffing out other Daily Trading Strategies, but I will give this one another shot. Edward says he uses it so it must be worth something.

I will post my results late Monday Night.

Thanks!

Drew
drew
 
Posts: 4
Joined: Thu May 20, 2010 9:10 pm

Re: Advanced Strategy # 1 - The Midnight Strategy

Postby davidg29 » Sun May 23, 2010 7:37 am

Thanks Drew.
davidg29
 
Posts: 2
Joined: Thu May 20, 2010 11:47 pm

Re: Advanced Strategy # 1 - The Midnight Strategy

Postby drew » Sat May 29, 2010 11:23 pm

DavidG,

Just wanted to update you that I got side tracked. I am now testing out the trend line strategy. It is going quite well. :mrgreen:

http://forex-strategies-revealed.com/ad ... g-strategy

Thanks,
Drew
drew
 
Posts: 4
Joined: Thu May 20, 2010 9:10 pm

Re: Advanced Strategy # 1 - The Midnight Strategy

Postby SharpForex » Tue Jan 25, 2011 9:23 pm

Update!
I have been testing the Midnight Setup on my live account since 17 Jan 2011, and can confirm that this strategy offers excellent potential. To date I have made 18 trades resulting in 4 losses and 14 winners, for a 17.8% increase on my account funds (2.22% per trading day). I have been employing this strategy across all currency pairs using ATR to calculate range and using 50% of this as my profit target. If you are looking for a simple and effective startegy, Edward is definitely on a winner with this one.
Cheers!
SharpForex
 
Posts: 15
Joined: Fri Jan 14, 2011 4:32 am
Location: Melbourne, Australia

Re: Advanced Strategy # 1 - The Midnight Strategy

Postby Rom » Fri Jan 28, 2011 11:54 pm

Hi SharpForex

Thank you for sharing these interesting results.

Below is my rough estimate of performance with few trades (and a reasonable amount of discretion). With twice number ot trades return per month increases something like 80% compared to below.

On a small account I would rather use 7.5% as risk level and expect 12% per month with a small number of trades.

Personally I am inclined to use the Midnight strategy for entering a directional position. When I expect AUDUSD to apreciate, as I do, I would like to stay in a long position rather than using TP: The strategy answers how to enter and what SL to use on entry. In case of a strong trend these estimates will be invalidated.

Code: Select all
                             DATA
                     StartDate: 20110101
                       EndDate: 20110201
                  ProfitTrades: 6
                    LossTrades: 4
                 SumProfitPips: 600
                   SumLossPips: 400

                      Midnight setup
              Trades per month: 10,00
            Multiple contracts: False
                Average profit: 100,00 pips
                  Average loss: 100,00 pips
             Profitable trades: 60,00%

                      Leverage: 4,50
             Net P&L per trade: 20,00 pips
                  Profitfactor: 1,50
 Average loss/stdDev per trade: 100,00 pips

              Sustainable risk: 4,15% of capital
              Return per month: 6,11%
                 Annual return: 74,38%
       Average annual drawdown: -20,63%

    Performance at 20.00 pips per trade gives us these risk options:

                               Monthly      Probability   Probability   Probability   
      Risk-     Defaults/      return       annual return annual return annual return
      level       month    (when not broke)   > 100%        > 500%        > 10000%     
   ----------------------------------------------------------------------------------
      0,92%       0,00%          2%             0%            0%            0%           
      1,38%       0,00%          3%             3%            0%            0%           
      1,85%       0,00%          3%             11%           0%            0%           
      2,31%       0,00%          4%             20%           0%            0%           
      2,77%       0,00%          5%             27%           0%            0%           
      3,23%       0,00%          6%             33%           0%            0%           
      3,69%       0,003%         6%             39%           2%            0%           
      4,15%       0,00%          6%             42%           3%            0%           
      4,62%       0,012%         6%             45%           5%            0%           
      5,08%       0,045%         8%             45%           8%            0%           
      5,54%       0,14%          9%             46%           10%           0%           
      6,00%       0,20%          9%             46%           12%           0%           
      6,46%       0,43%          12%            47%           15%           0%           
      6,92%       0,55%          12%            46%           16%           0%           
      7,38%       0,91%          12%            46%           18%           0%           
      7,85%       1,34%          13%            46%           19%           0%           
      8,31%       1,53%          14%            44%           20%           0%           
      9,23%       3,09%          14%            42%           22%           0%           
      10,15%      3,86%          16%            38%           21%           1%           
      11,08%      5,97%          17%            32%           20%           1%           
      12,00%      7,73%          19%            29%           19%           1%           
      12,92%      8,59%          22%            25%           18%           2%           
      13,85%      10,28%         23%            22%           16%           2%           
      14,77%      12,88%         24%            19%           14%           3%           
      15,69%      15,25%         25%            15%           13%           3%           
      16,62%      16,75%         27%            11%           10%           3%           
      17,54%      17,92%         27%            9%            8%            3%           
   ----------------------------------------------------------------------------------


regards
Rom
 
Posts: 574
Joined: Sun Feb 07, 2010 10:35 am

Re: Advanced Strategy # 1 - The Midnight Strategy

Postby SharpForex » Sat Jan 29, 2011 12:32 am

Hello Rom

Thanks for your input and analysis. It does seem to confirm the potential of this strategy, but I must admit to a "horror" day on Friday...ouch!
The stop-loss and take-profit required for this strategy is the concern, so I have now adjusted my trading plan accordingly:

a. Buy - set stop at 25% of previous day range below the entry;
b. Sell - set stop at 25% of previous day range above the entry; and
c. TP - now set to 50% of previous day range rather than ATR.

I think this strategy provides a simple and precise entry point, which is its major advantage. Because my plan considers 50% of range it does not always meet the 100pip profit target. I too have considered using the strategy as a position trade entry point, then adjusting stop-loss until triggered.

Cheers!
SharpForex
 
Posts: 15
Joined: Fri Jan 14, 2011 4:32 am
Location: Melbourne, Australia

Re: Advanced Strategy # 1 - The Midnight Strategy

Postby Rom » Sat Jan 29, 2011 12:55 am

Submitted by gibson on October 16, 2007 - 19:23.
here is an idea. vegas, a hot trader on one of the forums, gave some very interesting advice, and said you should stop trading until you understand what he is saying, "trading is all about getting free trades."
what that means is that you move your stop to break-even or break-even plus 10 pips as soon as you are up 10 or 20 pips. then you let the trade run without worry.

I noticed this reply on Midnight setup. I like it. In the moment we have a free trade risk is zero.

This gives us some freedom.
We can add full size positions on without any added risk

When we are heavily loaded the main question becomes, not to enter new positions, but when to exit? According to strategy we should use trailing SL. In case of several (4%) positions SL will be the same price for all positions on same pair. Better to differentiate SLs in that case, so some few pips do not mean everything?

.
Rom
 
Posts: 574
Joined: Sun Feb 07, 2010 10:35 am

Next

Return to Forex trading strategies and systems