{"id":10805,"date":"2016-02-02T08:18:14","date_gmt":"2016-02-02T16:18:14","guid":{"rendered":"http:\/\/www.tradingheroes.com\/?p=10805"},"modified":"2024-04-02T00:33:27","modified_gmt":"2024-04-02T07:33:27","slug":"simple-pin-bar-system-results","status":"publish","type":"post","link":"https:\/\/www.tradingheroes.com\/simple-pin-bar-system-results\/","title":{"rendered":"Backtesting Results: Simple Pin Bar System on AUDJPY"},"content":{"rendered":"

Before we get start digging into this simple pin bar system, be sure that you understand the limitations of backtesting.<\/p>\n

Past performance does not guarantee future results and all testing is theoretical.<\/p>\n

…but it does give\u00a0you a higher probability of being right, when real money is on the line.<\/em><\/p>\n

That being said, I wanted to share some results of my latest test.<\/p>\n

As I always say, don't take what I'm saying for granted, test it for yourself<\/a>. This is also not the final version, so this is a work in progress.<\/p>\n

You may remember that I tested a simple system<\/a> before. But that was a very rudimentary test. This test will go deeper.<\/p>\n

This method is easy enough to test on almost any manual backtesting software<\/a>, or even scrolling backwards (then forwards) on MT4.<\/p>\n

Alright, here we go…<\/p>\n

The Entry to the Simple Pin Bar System<\/h2>\n

I'm looking for a Pin Bar<\/a> that has a tail of 61% and a 14-period RSI<\/a> in the corresponding overbought or oversold territory (default 70\/30 settings), at the close of the candle<\/strong>.<\/p>\n

I'm also looking for a countertrend\u00a0move\u00a0before the Pin Bar (examples below). The Pin Bar also has to be the highest\/lowest point in the move. The idea is to find an area where price has been stretched in one direction and will hopefully snap back.<\/p>\n

Finally, I'm entering the trade on the close of the Pin Bar and setting a 1R take profit. That may be a little hard to picture (I know it is for me), so let's see a couple of\u00a0examples.<\/p>\n

Long Example<\/h3>\n

For a long, you look for a Pin Bar (marked by my Forex Tester 2 indicator<\/a>) and the trend, in the bearish direction. There is also an oversold condition on the RSI.<\/p>\n

\"Oversold<\/p>\n

Short Example<\/h3>\n

A short trade is just the opposite, of course. Here is an example:<\/p>\n

\"Overbought<\/p>\n

The Stop Loss<\/h2>\n

Stop is set 15 pips above\/below the Pin Bar. This might be too tight of a stop<\/a>, but let's give it a try.<\/p>\n

For this test, I'm risking 2% of the account on each trade.<\/p>\n

The Take Profit<\/h2>\n

I'm looking for a 1R profit target on this round of testing. So\u00a0if I'm risking 30 pips, I'm targeting 30 pips. For simplicity, I'm not taking the spread into account.<\/p>\n

There is probably a better TP, but I'm starting simple.<\/p>\n

The Results<\/h2>\n

Alright, now let's get down to the results. I did 8 rounds of testing<\/a> on the AUDJPY daily chart, from January 2001 to present. Here are the results:<\/p>\n

\"Simple<\/p>\n

Not bad. But 20% over 14 years?<\/p>\n

That probably isn't going to be profitable enough, especially when risking 2% per trade. This means that I have to come up with a way to get more out of each trade.<\/p>\n

But the good news is that a 74% average winners is a great place to start. However, there is another\u00a0thing to consider.<\/p>\n

In testing, there were only about 20 trades per test. This is an example from one test.<\/p>\n

\"Trades<\/p>\n

So 20 trades over 14 years, probably isn't a big enough sample size to get a really good idea of if this is a viable system or not.<\/p>\n

You might also notice that there is some difference\u00a0between the tests.<\/p>\n

This is why we test. <\/em><\/p>\n

Just like with real trading, you will miss some trades. You might be sleeping, on vacation or just not completely focused. Multiple tests helps us simulate these conditions.<\/p>\n

This also shows how concrete your\u00a0trading rules<\/a> are. If there is a large variance in the results, this shows that your rules might not be easy to follow in real trading.<\/p>\n

Possible Improvements to the Simple Pin Bar System<\/h2>\n

Given these results, I could\u00a0test four\u00a0things next:<\/p>\n

    \n
  1. Setting two profit targets, one at 1R and one at the next S\/R level<\/li>\n
  2. Test on more pairs and on the H4 timeframe<\/li>\n
  3. Looking for a minimum 2R on the first profit target<\/li>\n
  4. Only look for fake pin bars<\/a><\/li>\n<\/ol>\n

    Conclusion<\/h2>\n

    I really like Pin Bars and I'm going to show you the entire testing process for this system. My goal is to figure out a system that works for me and I will track the method all the way from testing to tracking live trading results.<\/p>\n

    I haven't seen anyone do this before, so I hope that this will be a first and will ultimately help you understand the guts of a trading system.<\/p>\n

    Remember that no technical pattern exists in a vacuum. You always have to watch news and previous price action. But basic testing like this establishes a baseline of probability.<\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    This is the first post in a series that will develop a simple pin bar system. I’m starting with the AUDJPY currency pair.<\/p>\n","protected":false},"author":2022,"featured_media":10844,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[201579],"tags":[849,201651],"class_list":["post-10805","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trading-strategies","tag-forex-backtesting-results","tag-forex-trading-strategies","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"\nSimple Pin Bar System (V1) on AUDJPY: Backtesting Results<\/title>\n<meta name=\"description\" content=\"This is the first post in a series that will develop a simple pin bar system. 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