Basic Bracket Strategy

[FrankTheTank]

While most bracket strategies are placed before a news event, this one is placed after allowing you to get better fills.


This basic strategy seems to work well on the major news releases. I am embarressased to admit that I actually paid money to learn this a few years ago on eBay

Entry Rules
Enter the market 6 pips above and/or below the close of the first bar on the 1-minute EUR/USD chart. For example, the report bar is 8:30 EST on NFP so you would enter on the 8:31 bar.

Exit Rules
Here is the protetive stops used
On NFP days use a 30 pip stop
This makes sense (and back tests well) given the volatility and profitability of each trade.

Here are the Profit Targets used
On NFP days, once 15 pips of profit is seen, move a trailing stop, trailing the open profit by 70% until either stopped out, or 12:00 noon EST


If you can get an entry on all three reports, you should be able to make 50-100 pips per month.

[FrankTheTank]

Hmmmm

The more I think about it, the more practical this strategy is. I never really gave it a fair try since I got caught up in trading the first spike only, however, this method should be able to catch most of the continuations and reversals.

I would modify it to set a smaller stop loss of maybe 10 pips and a small profit target for the reversal of 20 pips or half of whatever the initial spike was (whatever is smaller).

Here are the back test results from 2002 to 2005 (assumes you are starting with $100,000, only trading three reports: NFP, TIC, and IT):

[FrankTheTank]

If my math is correct, this is an average of 69 pips per month with a max drawdown of 83 pips.


Not bad for only trading 3 reports. Imagine if we added some UK and CAD reports I think we could get an average 100+ pips per month.

[FrankTheTank]

Also, lets assume that you are trading with an account size of $2000 and your broker allows up to 100:1 leverage.

I think this would mean during those 2 years and 8 months:

-largest drawdown would be $830
-Profit for the entire period would be $20,200
-Return on account would be 1,010%
-Compound Annual Growth Rage (CAGR) would be 143%


I think this is right?

[News Pipper]

Got a few questions:

Originally Posted by FrankTheTank

Entry Rules
Enter the market 6 pips above and/or below the close of the report bar.

What chart time frame are you talking about, 1 min, 5 min, 15 min?

Originally Posted by FrankTheTank

On IT days, once 15 pips of profit is seen, move a trailing stop, trailing the open profit by 50% until either stopped out, or 12:00 noon EST

Sorry, what's an IT day?


News Pipper

[FrankTheTank]

Sorry, I will update the first post to make it more clear.

This is trading the EURUSD 1-minute charts. It is only for three reports:

1. NFP (Non Farm Payroll)
2. TIC (Treasury International Capital) http://www.ustreas.gov/tic/
3. IT (International Trade Report) Im not sure if this is still a valid news release

[News Pipper]

Another question about the Basic Bracket Strategy:

Originally Posted by FrankTheTank

On NFP days, once 15 pips of profit is seen, move a trailing stop, trailing the open profit by 70% until either stopped out, or 12:00 noon EST

Does the 70% Trailing Stop Loss mean you are locking in 70% of the profit, or 30%?

Also, I was wondering if you have tried this method out yet. I thought today's ISM might have been a good opportunity. Although, if you were concentrating on trading the spike, it may have all happened too quickly for you to switch strategies in time. I just started trading with KFS last Thursday and have noticed how much more hectic it is trying to do KFS and SNW at he same time. I know it would take an awfull lot of pre-release mental preparation and post-release concentration for me to use multiple stategies on the news.

On the other hand, the ISM report was not really expected to cause a big move in GBP/USD, even on Jimmy Young's conservative triggers. As you have said, the strategy test results were based on 'NFP, TIC, and IT". Perhaps this strategy is better left to be used only on what Jimmy Young would call "Key Tradable News" or what Tom Yeoman's would call a "Class A Indicator" - reports that have the potential to cause a minimum 50 pip move.

I think I'll give it a try on Wednesday's UK Industrial Production report if I happen to take an early exit on the SNW spike trade. I really think it is time to start using methods other that the SNW spike option - for me at least, the Oanda spreads are killing it.


News Pipper

[FrankTheTank]

I think that this is a good strategy for any initial spike move that is great then 30 pips. I will also test it out on a demo to see what happens.

[News Pipper]

Hellooo!

Originally Posted by News Pipper

Another question about the Basic Bracket Strategy:

Does the 70% Trailing Stop Loss mean you are locking in 70% of the profit, or 30%?

[FrankTheTank]

Oops.

Yes. The 70% Stop Loss means you lock in 70% of your profit. I think advanced programs like tradestation give you this option but using Metatrader I have to calculate it very fast in my head as the market moves.