Harmonic Currency Pair Cross Index | Currency Futures


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Harmonic Currency Pair Cross Index

  #25 (permalink)

Edmonton, Canada
 
 
Posts: 187 since Apr 2011
Thanks: 12 given, 162 received


JetTrader View Post
I had some time to grab this one. Let's see how this goes.

CD intercept to D with C Stop and Reversal Short for recovery. Target D to D extension. Entry 4365.4. Stop and Reversal 4361.7 to BE.

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Back from the movie (the Green Lantern was better than Thor by the way).

The Harmonic went invalid with the extension of point "C" which triggered the Stop and Reversal at 4361.7. Recovery trade ran down to 4344.8, for a 16.9 pip Reversal MFE. So, the Harmonic trade had a 29 pip MFE and the Reversal trade on Harmonic failure had a 16.9 pip MFE. When I'm running forward tests and capture all MFE/MAE data for Limit and Stop optimization of the signal later. Harmonic MAE was 20.6 pips and Reversal trade on Harmonic failure had an MAE of 5.7 pips. Overall MFE/MAE ratio for the entire structure was 22.95/13.15 for a 1.745 Risk Profile. Not a bad risk profile, but not a stellar one either. Overall P/L on the trade structure was 0 pips. That's how I analyze all of my test trades, both back-tests and forward-tests.

Pros:

In back-testing these CD Intercept to D trades, I've noticed that using point "C" as the Stop & Reversal to BE level, works really nicely and provides a fairly comfortable degree of break-out momentum, sufficient to cover the cost of the failed Harmonic from its entry level just above "C." So, that worked out nicely to move the equity curve back to BE on the trade.

I also like the 29 pip MFE on the initial Harmonic entry, even though point "D" was never reached. The XA range was 74.9 pips, making the Harmonic MFE 38.7% of the XA range, which fits under the 25% observed in back-testing.

Cons:

It took entirely too long to reach BE after the Stop & Reversal Short trade got triggered in the Harmonic failure. XA, AB and BC, took a little more than 1 hour to establish themselves. However, the break-even took slightly more than 2 hours. On a trade where the Harmonic ratios are established with synchronicity, back-testing has shown that either point "D" or BE is struck within a similar time-frame. That did not happen on this trade - so I don't like the timing of the sequence.

However, I think I have a good idea why BE took such a long time, but I'll have to check my historical back-test data to confirm my suspicions. The Falcon died a slow death and had another early launch before its fixed entry time. It launched 18 minutes to early and only rose 15.4 pips before suffering a broken right wing on descent to the Stop & Reversal level. The Falcon did turn into an AB=CD pattern, but in the absolute wrong direction. So, I'll take some time later to see if I may have missed anything with this particular Falcon set-up.

Overall, I'll take BE on 3 out of 10 trades any day of the week. I'll try to post more CD Intercept to D set-ups as I have time and as the come forth.

For the Newbies:

Preservation of capital is extremely important. It is not enough to simply have a good entry strategy. The way you go about preserving your capital is just as important as the way you go about taking profits. Every entry needs a backdoor. In other words, when you walk into a room, make sure you know where the exits are located. That's how you get to BE and preserve your capital. My philosophy has always been to use Stop & Reversal to BE strategies on all naked trades (when I'm not using a multi-pair strategy). This reduces the risk profile greatly and it protects your equity curve from severe downward spikes. It also provides a level of comfort with each trade you make.

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