In previous articles (we strongly recommend that you read) we have decided on the entry point. It turned out to be logical and promising. Let’s briefly recall what the buy entry point looks like: The Yellow line (averaged ATR) turns up. The trend indicator shows an uptrend.
But this is not enough to create a truly profitable trading system. It is the exit from the position that determines the amount of the final profit and the variance applied to our account. As part of this material, we will try different exit points and determine the most appropriate one.
To evaluate the results, we will use the following symbols: XAUUSD (Gold). For convenience, let’s choose the hourly (H1) timeframe and the testing range from 2011 to 2025. This range captures different market situations, including falls and stagnation of gold prices.
First, let’s try the easiest way out. We will close the position after a certain number of hours. We’ll ignore everything else.
Parameters:
Symbol: Gold (XAUUSD)
Direction: BUY
Timeframe: H1
FourAverage parameters: PeriodFA = 95, Average_1 = 159, Average_2 = 188 , Average_3 = 79, Average_4 = 48
ATR Parameters: ATR 55 MA 165
Entry Rules: The yellow line (average ATR) turns up. FourAverage > 0
Exit Rules: after 220 bars
The result is not bad, to be honest, it was expected much worse. As a result, even such a simple system is capable of not sagging much during periods of stagnation.
Just in case, we will check the work on new data that was not involved in the selection of parameters. The market showed strong growth during this period, so the expert coped well, as expected.
Let’s try to use a proven and reliable way out. Let’s take a range (hereinafter referred to as the Range for stops) for a certain number (180 hours) of bars and use part of it to determine the size of the stop loss and takeprofit. This exit method is usually characterized by high transaction accuracy.
Using the parameters:
Symbol: Gold (XAUUSD)
Direction: BUY
Timeframe: H1
FourAverage parameters: PeriodFA = 36, Average_1 = 181, Average_2 = 149 , Average_3 = 165 , Average_4 = 76
ATR Parameters: ATR 95 MA 110
Entry Rules: The yellow line (average ATR) turns up. FourAverage > 0
Exit Rules: Stop Loss = Range for stops * 1.85. Take Profit = Range for stops * 0.30
As a result, we got a trading system that wins 95% of the time. With a good recovery factor and a huge profit factor. The disadvantage can be considered a small number of transactions and a small ratio of stop loss to takeprofit. Nevertheless, this is a rather special case. And using this set of indicators, you can create other successful options for exiting a position.
In the next article, we will continue to modify the system. Let’s try to apply a trailing stop and adaptive exit with offset.