{"id":10526,"date":"2015-10-20T21:00:16","date_gmt":"2015-10-21T04:00:16","guid":{"rendered":"http:\/\/www.tradingheroes.com\/?p=10526"},"modified":"2025-08-12T15:56:10","modified_gmt":"2025-08-12T22:56:10","slug":"backtesting-results-eurusd-weekly-outside-bars","status":"publish","type":"post","link":"https:\/\/www.tradingheroes.com\/backtesting-results-eurusd-weekly-outside-bars\/","title":{"rendered":"Backtesting Results: $EURUSD Weekly Outside Bars"},"content":{"rendered":"

In a previous post, I took a look at the weekly chart of the EURUSD and identified all of the Outside Bars<\/a>, from 2001 to 2015.<\/p>\n

I just have to make a quick correction to that post…I called the chart\u00a0formation\u00a0Engulfing Bars, when they are really Outside Bars<\/em>.<\/p>\n

\"Outside<\/p>\n

Outside Bars only take into account the high and low of the candles, while the body of an Engulfing Bar must engulf<\/em>\u00a0the body of the previous candle AND have a higher high and a lower low. Also remember that Backtesting data is valuable, but it does have limitations<\/a>.<\/p>\n

Now that we have that out of the way, let's get to my Backtesting.<\/p>\n

First, we need a method to test…<\/p>\n

The Trading System<\/h2>\n

In my previous post<\/a>, I only looked at Outside Bars that were in breakout and continuation (trending) situations. Based on a purely visual review, my hypothesis was that only trading this pattern in these situations would make it profitable.<\/p>\n

I put in an order to buy or sell on a break of the Outside Bar<\/a> in the direction of the trade. The stop loss<\/a> was above\/below the Outside bar. Once the trade was up 100 pips, I moved the trade to +5 pips.<\/p>\n

Then I moved the stop up when a support\/resistance level formed. I risked 2% on each\u00a0trade. Here is an example trade on the chart.<\/p>\n

\"Trade<\/p>\n

Then I would let the trade get stopped out. That should work, right?<\/p>\n

Let's see…<\/p>\n

Results of Backtesting<\/h2>\n

The first test yielded a 356% return over the entire testing period of 170 months.<\/strong> This means it would have averaged 2.09% per month, over that period. Pretty great right?<\/p>\n

But hold on…<\/em><\/p>\n

As a result of working on the previous blog post, I got to know the EURUSD weekly chart really well. Was I\u00a0doing well because I already knew what the charts looked like?<\/p>\n

I decided to wait a few days, before doing another test.\u00a0The second test yielded 142% over the same time period<\/strong>.<\/p>\n

…yes, I was influenced by my previous work on the charts. But the results were promising.<\/p>\n

So I tried the trading strategy on other currency pairs<\/a>. The results were not as good.<\/p>\n

They ranged from +20% to being overall net losses.\u00a0\u00a0<\/strong><\/p>\n

The Debrief<\/h2>\n

Does that mean that Outside Bars are useless? No, not at all.<\/p>\n

They can be powerful trading signals.<\/strong> But they need to be used in the right context. In this case, the EURUSD trends well, so a strategy that moves the stop up with each new level, looks like a good strategy.<\/p>\n

But other pairs are much choppier, so using this method would not work well on those pairs.<\/p>\n

Another thing to consider is that I may be trying to go for too much on each trade. What if I stuck to a 1R or 2R profit target?<\/p>\n

That is a test for next time…<\/p>\n

Bonus Backtesting Results<\/h2>\n

As I mentioned above, I also tested this method on other pairs. I filmed one of my sessions to help me see what I miss when I backtest. Here is my test on the GBPJPY.<\/p>\n