75% hit rate: 1+3 indicator makes greedy!

Last Updated: 27. Dezember 2023By

Preaching money management and drinking greed. I surprised myself a bit there. For you I made a video as a Christmas present, in which I show you my backtest of the 1+3 indicator in detail. There you will find out how I test the trading system thoroughly.

And lo and behold: At the end of the video I want to explain to you that with a 1,000 Euro account a risk of a hefty 6 percent per signal is more than enough. While I’m playing around with the numbers in the Excel table, the 10 percent appeals to me much more. No wonder. From 1,000 euros with 6 percent risk, we would have made 2,500 euros after a quarter.

With 10 percent risk, we would have been at 4,500 euros after a quarter! This is the result from the beginning of October to just before Christmas. There were 12 trades in the 15-minute chart in the DAX and the win rate was 75 percent. Of course, that’s not representative yet. 12 trades are not enough for that. But a good start all the same.

(Source: Tradingview.com)

As you can see, I have set 5 percent risk per position here. When we start a long trade, we open 2 positions with different targets. Therefore, we come to 10 percent risk per signal.

Our biggest loss was 19 percent through 2 lost trades in a row. That can happen. It’s also good that the backtest wasn’t even better. If we had 2 more losses, we would still be plenty in the positive.

That is due to the strong ROI or CRV. We can even out 2 loss trades with one winning trade! The ROI % column stands for the Return of Investment, i.e. how much profit we have made on the respective trade. That in the event of a win the figures often differ here is in the nature of the thing: We have a spread when trading the DAX, i.e. the purchase price and the sale price are different. On average often 1 point.

When we then have a trade with 4 point stoploss, 1 point spread is already much. Depending on how much room we give the stoploss and how exactly we enter the take profit points, there are fluctuations here. That’s why a successful trade can sometimes yield 219 percent return and sometimes 245 percent.

2x long and 3x short What sounds a bit like a knitting pattern is actually a lucrative change that I discovered in the backtest. We use the pullback after a signal as an entry. For a long trade we take the 61.8 retracement, for a short trade we now take the 78.6. I noticed that the prices often enough run back to the 78.6 retracement after a short signal. There was my stoploss before. Now we start the trade there.

As a result, I now always open 3 short trades with fixed targets. Therefore, there is one more column in the table for the short. I adjust the risk accordingly. For the short, 2 percent is then risked per position, for example, if we invest 6 percent per signal in total.

But as already mentioned above, I have moved away from the 6 percent a little and now aim more towards the 10 percent. Of course, that’s a hot iron and 3 losses in a row would shrink the account by almost 30 percent. After a good start like in the example above, however, we could pay out the 1,000 euros deposited again and only trade with the remaining profit. That’s psychologically probably easier.

Outlook for the next few days I am currently testing a system how we can also conquer the currency pair EUR/USD with the indicator. The DAX should not be the only colleague we work with here. If the forex area also works, we can look forward to considerably more signals.

Probably at the end with a lower hit rate, but in return more profit per quarter. And then we would have to go down with the risk again because we will then almost certainly have several trades open at the same time. At the beginning of this article I linked the video to the backtest, if you have become curious.