Another Simple Long Signal for the EUR/USD

Here's a signal I came up with for predicting buy/long trades of the Euro-US Dollar pair. I've backtested it on almost 3 1/2 years of daily market data going back to September, 2002. In that time it generated 288 buy signals, making it a fairly selective indicator, at least by my standards. Remember, the fewer trades, the more you save on the spread.

The signal goes like this:

If the highest price on the previous trading day was more than 50 pips greater than the closing price, AND the highest price was NOT more than 130 pips above the closing price, then a long signal is generated for the next 24 hours, commencing at midnight Greenwich Mean Time. This is 4:00 PM in California, where I live.

Here's what it looks like in an Excel-style formula; obviously you'd need to tweak this to match the cells on your own spreadsheet:

=IF(AND(HIGH-CLOSE>0.005,HIGH-CLOSE<0.013),1,0)

In the testing period, this signal proved to be 59.72% accurate, and brought in 3865 pips before the 3-pip spread was taken into account. With spread costs, the total was 3202 pips. I reached this figure by counting all trades (288) then subtracting trades that occurred on successive days, since these would be rolled into the previous day's trade, saving on spread costs. I ended up with 221 trades x 3 pips, or 663 pips, which I then subtracted from 3865 for the final total of 3202 pips. So you're still left with a respectable pile of pips at the end of the day. (No, I didn't to figure out interest...I'll leave that to you.)

Here's a chart of its performance (before spread) over the ~ 3.5 year test period. One the left, vertical axis you see pips expressed as fractions of a dollar, where 1 pip = .0001, so .35 = 3500 pips.



You could also try combining this with other signals (such as the ones I described in this post) to see if you can boost its performance. Of course, I can't guarantee it'll continue to work in the future -- but it certainly was pretty reliable in the past. Good luck if you try it!