I Backtested One of the Best Forex Traders' Strategies

0:00 So here we have a resistance area which I switch all the way to the left hand side. We see that there's clean range here to the left hand side. So number one I'm going to mark this area right over here and I'm going to focus on what price is doing right at this point. So if we measure this range from the candle high this range is about 270 pip range. Now the question is will I be able to take a buy within this range here? Yes or no? Let's take a look on the 15-minut time frame. We're only going to focus on the candles. Now look, if you have a candle that's closing bullish right over here, there are two things you got to focus on. Look, one, we have a rejection right over here and we have consolidation area. This is where traders, they want to take a buy, but you have all these issues here to the left hand side. So what I want to do is I want to wait to see if a candle can

0:46 break and close above 4704 because if we do then if you look to the left hand side you have all this clean range where price can move up you know at the same time if I'm looking for sells I'm only going to be comfortable in taking a sell below let's say 4665 and then I know that below this area I have a 140 pip range for price to push That's it. So, trading is not about getting a confirmation and taking a buy because you think you're going to win a trade. Trading is about looking to see if you have enough clean range to the left side or not for price to work out. Okay? So, keep this in mind. Mark up your charts, study them. Good luck. All right. This is Raja Banks. He's uh very

1:32 well known in the space. And this concept is actually quite simple and very effective because you're not trading in the noise. you're waiting to trade when you hit a very clear space or range is what he calls it or you know a lot of people call them gaps. Uh it really just depends on what you want to name it but it's all the same general idea. And so we actually built an indicator that identifies these gaps and when you break out of these key resistance levels into those gaps for a good trade opportunity. So, let's go into that indicator, break it down, and what I want to do in this video specifically is back test this strategy to see how profitable it can be. So, let's get into it. So, the indicator that we built is called the gap fill

2:17 breakout indicator. And essentially, it marks very key gaps and waits for clean structure to show some type of consolidation and then a break of that consolidation in the direction of where the gap was, targeting a gap fill or just a touch of that gap. And here on the Lux Aago library, you can search up gap fill breakouts. You can get the indicator. I'll also include it in the description. But from here, we can actually bring it into Luxalgo Quant and we can back test it. Now, all I do is click uh bring it to quant here. And while that's loading in, as you can see, it's already in the code viewer. Let me show you a quick example of it on Trading View here. As you can see, we have a signal outside of a gap that formed a very clear consolidated period. and taking out lows, which is nice. We

3:03 know there was liquidity there. And then it ends up breaking out of that high back into the gap. From here is where you would end up taking, let's say, a long going for a full gap fill. I would usually probably do a one:1 risk. I would determine my stop actually on uh the take-profit level instead of the other way around. And then from here, I would play it out. And you'll see that it actually runs back through that gap very nicely. And so this identifies it very well and easy. But how does it work in the long run? And that's what we're about to do with Lux Aago Quant is we have a back testing feature now where we can fully back test this indicator um through Lux Aago Quant and we can go about adjusting the actual strategy to potentially fit a really nice equity

3:49 curve. So, um, essentially what we're going to want to look for and have a part of that back test is an indicator that, let me load it on my chart here real quick. If it doesn't load right away, just go to the code view and click run. It should load up that indicator right away. I'm going to go to the five minute for now. And then the gold chart. [clears throat] He trades pretty much gold and other pairs like the Euro USD, very uh very high volume currency pairs is what this strategy seems to work best with. Um and so let's kind of go back here and um see where you know a potential setup would be. So for an example, it would be something like this. There's a gap left over here. It creates some type of consolidation. We want to enter a trade when that

4:36 consolidation breaks. So when these signals occur and then take profit would be at the top or full gap fill and we can apply that in the settings. Do we want the top of the gap or do we want a gap fill to be our takeprofit? And that's what we'll build out within the back test. So let's get to back testing. All right. So we have the indicator in here. I clicked run. We saw it on our chart. Now what I did was I actually gave it an example of what I want the take-profit and stop loss to look like and um where um I want it to actually take profit. So the stop loss is going to be based on the take-profit. So in the prompt I said I want to convert this indicator into a strategy. When a signal occurs to take profit sorry when a signal occurs take profit should be at the gap high or low depending on the signal. For a bearish signal top of a

5:22 bullish gap for a bullish signal top of the bearish gap and then put the stop loss will be one one of the takerit like we said already. So as an example if it's 4.25 to five points uh for a takeprofit then the stop will be as well and then the indicator is in the editor. So I made sure to clarify that the indicator is in the editor. It should look regardless but if we want to do this starting with one prompt it's always good to clarify certain things. U I'm actually going to say here and allow me to adjust the uh risk-to-reward. So RR in these settings as well. So I'm going to go ahead and let that run. Here's kind of what the screenshot looked like. pretty much the signal and then take profit would be down at where that gap formed. So, we're going to let it uh build that out. All right, so we

6:09 got a decent back test so far. As you can see here, we have a 61% win rate. I'll expand that. We have a 61% win rate, $22 max draw down, 74 net profit. So, not bad on the first edition. I'm going to make sure it's working here. We do have a signal taking profit at the top of that gap. Signal taking profit at the top of the gap. Now, these are pretty close. Notice here there's a signal and an exit almost within the same candle. So that is something I do want to add. Let me see if there's a risk-to-reward. There is. You can add a uh 2:1 or whatever it would be there. Um so what we want to do is have a certain amount of gap that needs to be from entry. That way we don't have trades forming on top of each other. So that's what I'm going to explain to Quant here. I'm going to say um make let's have a

6:57 filter we can adjust in the settings for the amount amount of take profit needed to take a trade. uh because I am noticing that when an entry occurs sometimes it takes profit right away because a signal because a signal forms uh inside inside a gap. So let's have a filter for So let's have a filter to leave enough space for good

7:42 trades and not just scalps. All right. So I just wanted to explain that we don't want trades that happen so quickly here. We want enough space um in between the entry and the exit. So we don't want to have any signals that occur inside of gaps, which is good. Um and so we can adjust that accordingly. So let's see what that offered there. Minimum takeprofit distance it said uh require at least two price points of potential profit 4.25. So let me just up that to like a five here and see what that does. Okay, perfect. So that eliminated all these up close here. So if I do a two, let's go back and see. It kept that one, which is fine. And got rid of these. Perfect. That's exactly what we wanted.

8:28 Let me go back to the five though. We're starting to see a nice little equity curve switch here. 75% win rate just went up there. Now, I know a lot of people will see this and be like, "Oh, well that's only from July 1st, July 23rd. It's very short back test. Like, how are we supposed to know if this is going to work or not?" Essentially, right now in Lux Algo Quant, the back tests work for a certain period um of time on the lower time frames. You can bring this strategy script right here over to Trading View, which is what we're going to do in a second, and back test further to fully optimize the strategy. There will be more data that you can back test very soon on Lux Algo Quant, but for now, this is a good starting point on us understanding what is the best settings before we bring it into Trading View. So, what we're going

9:14 to do next, actually bring this strategy script over to Trading View. We can further back test it there on the lower time frames. Very soon you'll be able to back test just as far if not more on the lower time frames in Lux Aago quant. From here though, you're going to go create new strategy in the Pine editor. Make sure you delete everything in there before pasting and then we're going to add it to our chart. We'll see where we are at. If for some reason trades don't load, it's usually the initial capital. You just have to up that. Um so like in this case right now, I do want to change our properties to 100 like we had in the initial back test on um Luxo Quant. The other thing is this goes by default settings when you load it in. So we had the minimum takeprofit distance of five when we were testing it. As you can see here, it actually has a 57% win rate on that 5minute chart. So

10:02 nothing too bad at the moment. Was going back to see kind of some of these trades. Remember we had the filter of the u minimum takeprofit distance. We didn't want to have it enter inside a gap as you see here. Obviously, if we were to have that at a one there, you'd see it would enter in that U when that gap was entered there. So, if I go to a five here, we can start to see and maybe look through a few uh different riskrewards to see if we can get a little bit better equity curve to see what's optimal for this particular strategy. It is quite an interesting strategy, I will say. Um, we can adjust obviously the multiplier on the uh ATR for the FGS to get more um fre or sorry larger FGS or gaps to trade to if we

10:48 wanted to. That didn't really do much. Let me do it to a 1.5. This is just the filter on how big the gap needs to be. It seems like one is the uh prime spot for that. And let me go to a two riskreward. I don't really like to go past that. Maybe a three at max. So, three is not terrible, but it does seem like the um one or the 1.5 is our most optimal. The next thing I would try is the uh minimum takeprofit distance is bringing that back a little bit to see if we get any change in uh the draw down or anything, which we don't really. And then five seems like it's the prime spot. So, from here, I'll try different time frames. I don't really like using the one minute time frame. I rather use like the um higher time frames because they are definitely more consistent. It

11:35 seems like the one hour here is actually showing us some promise. Uh so I do want to see here on this if we were to get a smaller let's say take-profit distance if we were to maybe get a better equity curve here. It does seem a little bit more scattered just because um actually let's do minimum. See what it does. Yeah, it seems a little bit more scattered on the take-profit and stop-loss because these gaps are bigger sometimes or smaller just it's not extremely consistent, right? So, on like the profit distance. So, that's going to give you a more scattered curve like you're seeing here, but inevitably still showing nice profitability. The next thing I would do besides looking at more time frames is looking at different

12:21 assets as well and seeing if you maybe see a a negative equity curve. Um, and that can all always uh show you that maybe you flip the signals, you get a better um setup. Let me go to the one uh contract on ES here and we'll see. But notice most of these curves are all over the place because the gap distances are are much different. We could with Luxo Quant go in here and I could ask something like I want, you know, only to trade gaps that have 20 points of profit or something like that. That is very possible to do to have maybe a more consistent curve. Um, but for now, we're just going to be testing this straight up going for that potential um tap of

13:08 the um gap for take profit. So, riskreward here where, you know, we were just messing with these before. We put that at a one, a two, and then a 1.5. Nothing too crazy here on the 15 minute for ES. That's a little better there. Do the five minute for ES. Five minutes showing some more promise. I do like to look at up to the one minute. I don't like going past that, of course, but if I can be five minute or or more, that's ideal for me in my opinion. Yeah, looks like the okay, the uh 30 minute starting to show probably the most promise and consistent equity curve down here. There's nothing too amazing on this strategy. Um, you would, like I said, we would probably have to adjust um the take-profit parameters here. And that's actually not bad. Let me do a three on

13:55 this and see if that changes our draw down at all. It does not. Five. Let me do like a 10. Maybe we go for bigger trades. 10. 11. Yeah, it seems like five is going to be your best bet in this scenario. Um, pivot length. Let's do a higher pivot length. We haven't messed with that just yet. That's actually a great negative curve. Wow. Let's do 11. So, we had a 10 on the pivot length. So, essentially what that means is there has to be more bars between pivot points for a trade to be uh for right a trade to be taken place. So, for example, here let me go to like this part right here. Remember, this is a 1 hour by the way. So there has to be a more significant higher low

14:40 for it to break on that structure like here. This is a better pivot than any of these um for it to break that into the gap which makes sense. You can see though this is a very nice negative curve. So, what I can do, what we talked about before is once we see a curve that's good in either direction, we actually go back to quant and say, um, can you create a setting that flips the entry, uh, flips the entry sides? So if I see a nice negative negative that's terrible way to spell negative negative curve I can I can flip the entry conditions by one button. So you can

15:25 just do something like that. Always have it added to the settings. That way when you're going to look at what may be the best settings when you're looking on Trading View or, you know, wherever you're looking at or on Quant, you can just check it on or off and then you can see it really quickly without having to just continuously go back and forth. So you'll see now in the settings panel there is a reverse entry detection. And what that should do here is flip that curve. As you can see here, that was a positive curve. If I go back here, it'll flip it to or yeah, it was a negative flip back to a positive. So, from here, I'm going to copy that code back over to Trading View because I really want to see these settings here. Um, and it should save them, but for the sake of this, we got 10525. Okay, just in case we lose those settings, it should save them. But let's see here.

16:13 All right. And then we have it. Perfect. We do. Okay. So, if I were to reverse those, you can see it is showing a decent upwards curve, but it's not ideal. It's still not as good as what we saw. Um, so I would want to go back and see the difference here. And you can see that this negative curve is very nice if we were to reverse those entries. This one isn't as good as what we saw um on that negative side. Um, so I would want to try uh once again a few other riskrewards with the negative side. And wow. Okay, so we're starting to show a little bit more promise on consistency here. Let's go to a five. Okay, it does seem like the higher structural points that you do, the better the overall curve is for this particular strategy.

17:00 So, going to like a 15 pivot link, which means it's looking for very significant pivots to trade um before it takes entry. We're starting to see a way better equity curve from that. And that's just by thinking about different ways we could go about the strategy. So, I'm going to even up this to like a 20 so we get some potential swing detection. We're getting this. Wow, we're starting to dial this in. 25. Okay, 20 seems to be pretty prime there. So, 20 on the 30 minute here for ES is actually super super solid. Uh, as you can see here, 60% win rate. If I go to the MEES mees here, we can see that we're looking from January is January 1st. January 1st to today, we're looking at a $700 draw

17:48 down, $2,400 net profit, which isn't um terrible, right? It's not terrible for a particular strategy. Obviously, that's a pretty long period of time. Uh we would probably want it to perform a little bit better, but this is the 30-inut chart. So, obviously, if you were to have, you know, just trading one account, this isn't that bad. Um, this is trading obviously at a million dollar capital. If it were trading at 10,000, which I don't know if it'll let us trade a micro. Yeah. I don't know why it does that on Trading View. Go 100,000. Will let you do it. There you go. 100,000. You're looking at 2%. Obviously, you'd be 20% if you're trading a 10K account with only a 7% draw down, which is quite honestly very nice. 20% in about 6 months is really nice. Um so so far this is the best equity curve we've gotten

18:34 going the reverse entry with a higher pivot right higher structural points um and a minute minimum takeprofit distance of five if I were to bring that down. I'm curious if anything changes not really 15 five. So risk-to-reward is that going to help us out at all? risk-to-reward there up lower the draw down a bit which is nice. Um so yeah going about the settings you can see the profitable trades actually died down there as well. So yeah it looks like the was it the one we did one was probably the best there with a 54% win rate. Looking at the more optimized things, we saw here 20 pivot length, inverted entry, right? Uh number of gaps uh was still default at five, riskreward of a two, minimum takeprofit distance of a

19:20 five. And we're looking at a much much better uh equity curve here with a 24K net profit and a 4.8K draw down um since January 1st. So, not a bad equity curve showing nice consistency. What we can do now is we can go um this should be yeah this more recently we can go the last 365 days see how it's done over the past year because this strategy in this particular 30 minute on the ES doesn't take a ton of trades the other thing we can do is we can go to the NQ and take a look at the ENQ see if it maybe had performed better on the NQ with the inverted uh trades on the 30 minute here actually this is actually performing much better on the uh 365 days. Look at that. Um, very consistent. Uh, 2.29

20:08 profit factor, which is good. I was going to bring that out of replay mode. I don't know why that was there. U, but this is on the 15minute. It's shown very nice. Let's see the five minute. Five minute. Not so much on the negative curve, but let's move it back to a positive uh or the the proper entry with it flipped to taking longs and shorts when it originally said still not as good even though it was a negative curve there. So, we're looking at the 15-minute on uh NQ right now has done great in the past 365 days. Let's just look at these other time frames really quick on the ENQ and then we'll then we'll be done. Overall, it seems like the 15-minut. I just like higher time frames. Um 15minute here is showing the most most promise. So, overall, we're

20:53 seeing that higher time frames like the 15-minute or the 30 minute is the the best on ES or NQ. In the video, he does use XAU. We actually did not test this with XAU on uh flipping the conditions. Let's bring this back up. Go to 30 minute. 30 minute's not really showing much. Five minute. The structure uh difference on here just isn't as good. It doesn't like those higher structures. Yeah, it's just hard to get a consistent curve with how much different the takerit is and stop-loss is per trade with this particular strategy because you're trading back into that gap. Okay. Yeah. So, going back on gold here, definitely seeing a lot of chop all around the board. And that's mostly because the take-profit and everything isn't very

21:38 consistent. Um, you know, you usually get big takeprofits and then little and then big losses, little little losses. It's all back and forth. Gold doesn't seem to be the best with this particular strategy. When it comes to automation, though, it's like user discretion. When you're when you're trading, you have your own view at how you might trade this strategy. in my opinion is going to work a hundred times better for this particular strategy because it's based on these breakouts. It's based on where these gaps are positioned. It's more so you really just looking for a um opportunity when you see that strength back to that gap versus it just automatically trading whenever the the structure shifts back into a gap. So, it's definitely in my opinion going to be easier to just trade it as its own as

22:25 its own system and not having it automated. We saw that it does work quite okay on NQ on those higher time frames with higher structure. In my opinion though, it's like and like here there there's several things we can do. There's several things we could do with the strategy and say, "Hey, don't take a gap. Don't take a trade like this, right? For an automation strategy because this gap's too far away." We could say there needs to be a minimum, right? And that's things we can add to quant to just make the strategy better. And this is why I'm going to give you the exact link to this quant chat to where you can add those things in if you want to further back test this. But straight up, if there's a gap there and you get a breakout of that structure and you, you know, want to just trade back to that gap, it's on a robotic front, it's really not the best automated

23:11 system. Um, you would really have to fine-tune what you're looking for per trade. So hopefully this video is very informative. If you do want the uh link to this chat here, I'm going to link it below in the description as well as the indicator. I'm going to give you guys this indicator. If you go to the Lux Algo website and you go to library and then just type in gap here or gap fill, you'll actually see it right here. Gap fill breakouts. It has the indicator by itself to where you could just use it on your chart right now. I will also link that below, but feel free to also go through all of our indicators in our library. There's a lot of really cool concepts from all the popular traders out there and their strategies. But this is really just here to um help you

23:57 understand how to trade them. And also if you click any of these buttons or if you open them, you can click use in quant and you can back test them yourself. You can add your own parameters to them, your own stop-loss, take profit, whatever you think to fully optimize a potential automated system to trade for you, which is pretty cool. So, if you did like this video, please leave a comment and a like and sub to the YouTube channel because we're going to be coming out with more content like this. We have a lot of updates coming to Quant and Luxalgo dashboard in general. So stay tuned for that and we'll see you in the next