PipBoxer V3 Strategy

PipBoxer is a breakout system with a twist. The strategy consists of five major steps to enter the trades correctly, manage them in the best way possible and exit them safely. Here are those strategies:

1. Recognizing the box size.
2. Filtering out the false breakouts.
3. Taking risk management into account.
4. Entering and exiting trades.
5. Adopting money management techniques.

Table of Contents:

1. Recognizing the Box Size
2. Filtering Out the False Breakouts
3. Taking Risk Management into Account
4. Entering and Exiting Trades
5. Adopting Money Management Techniques
6. Other Capabilities

The following figure gives you a better idea of how PipBoxer V3 works:

figure 1

Recognizing the Box Size

PipBoxer is a time sensitive system. It starts analyzing the market at a specific time of the day. The analysis time depends on the currency pair. At the time of analysis the system recognizes the highest high and the lowest low for a specified number of bars. The number of bars varies for different currency pairs. You usually need to wait a few hours or even a few days to see the first trade takes place.

The difference between the highest high and the lowest low is called the “box height”. This variable is very important. PipBoxer uses the “box height” to calculate TP (take profit) and SL (stop loss) values.

The “box height” also affects the calculation of trading stripes. Trading stripes (green stripes in figure 1) are price ranges that PipBoxer initiates a trade within them.

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Filtering Out the False Breakouts

PipBoxer uses a set of CCI (Commodity Channel Index) based calculations to filter out false breakouts. It calculates the weighted average of CCI for a few bars right before and including the analysis bar. In other words the calculations take place before entering the market. This helps the system to make its decisions almost regardless of the reaction of the market to the news. We found out that this combination works the best. Breakout depends on the news but the CCI calculations behave almost independent of the market action. One other benefit is that you can have a trading signal in place long before entering a trade. The “PipBoxer Signal Generator” is a set of expert advisor that generate trading signals with the help of PipBoxer strategy for those who do not use MetaTrader or prefer to trade manually.

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Taking Risk Management into Account

According to Investopedia.com Risk Management is “the process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or in action) given their investment objectives and risk tolerance.”

In other words a complete trading system is one that gives you the opportunity to mitigate your risk while you have the chance to gain profit. PipBoxer is such a system. It offers several features to increase your chance to make more money and lose less.

Value At Risk (VAR)

Every PipBoxer V3 EA gives you the opportunity to trade the correct lot size according to “Value-At-Risk”. VAR (or value-at-risk) is simply the maximum percentage of your account balance that you are willing to lose in a single trade. It is very important to take VAR into account. It could help to reduce your risk and even increase the profitability of your system.

The precision of the VAR calculations highly depends on the ratio of the minimum lot size that your broker allows you to trade to your account balance. If your account balance is low or the minimum lot size is high the actual risk could be higher than what you expect.

Never a Margin Call

PipBoxer V3 follows the “Never a Margin Call” policy. It calculates the risk of losing money per trade and also the amount of money you need to invest to enter the trade. It then compares the total money that you might lose or engage with the trade to the minimum balance that you need to avoid the margin call. If there is a chance of receiving a margin call from your broker it doesn’t enter the trade, so you never receive a margin call. The system receives your broker’s margin call policy from the MetaTrader terminal and then makes calculations accordingly.

Currency Pair Diversification

The other risk management tool is “currency pair diversification”. PipBoxer is capable to trade up to 12 currency pairs. Trading more than 1 currency pair could help you to distribute the risk among different EAs rather than relying on one EA alone. Our live reports and also back-test reports show that the result could vary among different pairs.

My suggestion is to distribute VAR between 3 or more currency pairs and let them trade at the same time. You may choose the ones that you feel more comfortable with, or your broker offers tighter spreads on.

Other Risk Management Tools

There are five variables in place that can help you mitigate your risk.

• user_lot_size: This variable enables you to take the order size under your control. If you assign 0 or a negative value to “Value_At_Risk” then PipBoxer uses the value of “user_lot_size” as the size of each trade. For example if “Value_At_Risk” is 0 and “user_lot_size” is 0.1 then the size of each order would be 0.1 lots. If you want to use “user_lot_size” instead of the automated lot calculator, make sure to assign 0 to “Value_At_Risk” and also enter a value for “user_lot_size” that is acceptable by your broker.

• account_risk_control: If you set this variable to true – the default value – the EA does not allow you to assign a value greater than 10 to VAR. If you by mistake enter a large value for VAR the system reduces it to 10%.

• no_risk_balance: This value is the part of your account balance that you don’t want to be risked on a trade. For example if your account balance is $25,000.00 and you set $10,000.00 to this variable, the system calculates the lot size based on the remainder of the balance that is $15,000.00 (or 25,000-10,000). So if your VAR is 10% the worst case scenario would be to lose $1,500.00 per trade not $2,500.00.

• enter_high_risk: Suppose your broker doesn’t allow you to trade less than 0.1 of a standard lot. If the calculated lot size for a trade is less than 0.1 lots and “enter_high_risk” is “true” the system will trade the minimum lot size (i.e. 0.1 lots). However, if the trade hits the SL it may lose more than the value you have set to VAR. To eliminate the risk of losing more than what you can afford assign “false” to “enter_high_risk”. When “enter_high_risk” is “false” the system will only enter a trade if the calculated lot size is equal or more than the minimum lot size. The default value is “true” to avoid missing any trades. This feature is especially very important if your account balance is low.

• _above_max_lots_ok: This variable is set to “true” by default. When this variable is true if the calculated lot number is more than maximum number of lots allowed by your broker the system trades the maximum number of lots. If the variable is “false” and calculated number of lots exceeds the maximum lot number the system does not initiate the trade.

• bypass_margin_call: This variable controls the margin call feature. It is “false” by default. If you set it to “true” then it won’t a trade if the odds of getting margin call is high. Some brokers do not support this feature.

Trade/Risk Management Tools

There are some variables/tools that could be considered risk management tools but we have placed them under Trading Tools. These variables give the trader some level of freedom to control the behavior of PipBoxer they way he/she wants. We have preset the values of these variables to what we believe are the best but you have the chance to change them at your own discretion.

• _short_trades: It “false” the system won’t enter short trades. The default value is “true”.

• _long_trades: It “false” the system won’t enter long trades. The default value is “true”. If you set both “_short_trades” and “_long_trades” to false it is obvious that PipBoxer does not enter new trades at all.

• _max_takeprofit: Defines the maximum take profit in pips targeted by each trade. For example if you set this variable to 300 the maximum profit that you can make per trade does not exceed 300 pips. We have optimized this value for every currency pair but have given you the capability to override our calculated value. Please note that this variable defines the maximum TP value. The actual TP value could be smaller than this.

• _max_stoploss: Defines the maximum stop loss in pips targeted by each trade. For example if you set this variable to 300 the maximum loss that may occur per trade does not exceed 300 pips. This feature is especially useful for those who use fixed lots to trade. It helps them to control their maximum loss. Please note that this variable defines the maximum SL value. The actual SL value could be smaller than this.

• _quick_be: Moves the stop loss 1 pip above the open price when the market reaches this value. For example if you set this value to 50, if the market moves 50 pips in your favor the stop loss moves 1 pip above your open price and your trade is locked in profit. We have optimized this value for each EA but you may override it at your own discretion. On top of “_quick_be” PipBoxer uses an internal “Move to Break-even” feature which could move SL to break-even point at another level of price movement.

• _max_open_trades: Defines the maximum number of open trades. The system enters a new trade only if the number of open trades – no matter how they are initiated – is less than this number. The variable is set to 100 by default. So if there are 10 or more trades open – whether manual or automatic – PipBoxer V3 does not enter a new trade. I should insist that this trade considers all pending and open trades which are placed manually, by PipBoxer, or by another Expert Advisor or Script.

• _max_trades_this_pair: This is a new variable for PipBoxer V3. This variable controls the maximum trades that could be opened by PipBoxer on a specific currency pair. For example if you have attached PipBoxer to a USDCHF chart and this variable is 4, then PipBoxer would open a maximum of 4 trades on USDCHF. This variable only takes PipBoxer trades on a specific pair into account. It does not consider trades opened manually or by other automatic methods.

• _trades_allowed: This variable is obsolete. We have replaced it by two variables “_short_trades” and “_long_trades”.

• trades_slippage: Slippage shows the systems flexibility at the time of entering a new trade. For example if the current Ask price is 1.9000 and the “trades_slippage” is 2 when the system request to initiate a trade the broker has the flexibility to open the trade up to 2 pips away from the requested price. The default value is set to 2. If your broker re-quotes you a lot you can increase this value. However, you may increase your chance of losing a trade.

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Entering and Exiting Trades

A complete auto-trader is the one that can enter and exit trades automatically. PipBoxer V3 is no exception. It automatically enters a trade when it recognizes an opportunity and exits a trade by setting proper Take Profit and Stop Loss levels. The entry and exit happens according to the strategy and settings of the EAs.

The Use of Trading Stripes

One of the features that we like a lot about PipBoxer V3 is the definition of trading stripes. With this concept in hand the system does not enter a trade if the price does not fall into the stripe. This means that you are secured against sudden uncontrolled breakouts. The value of this approach is demonstrated when you are trading live. For example if, because of a news release the price suddenly jumps to 30 pips above the box a trade does not take place. This is a fantastic shield against an unpredictable forex market.

Multiple Trades on the Same Pair

If PipBoxer V3 recognizes a chance to enter the market even if another trade from the same pair is open it enters the trade. Sometimes two trades in the opposite direction are open and build a hedge until one of the trades gets closed. When you see two or more trades open from the same pair do not panic. PipBoxer knows its job and manages all those trades individually and at the same time. Sometimes both trades that are open in an opposite direction make money.

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Adopting Money Management Techniques

Money management (MM) techniques are those that you use to get the best profit from each trade. With the help of these techniques you can maintain the win rate (i.e. the ratio of winning trades to losing trades) while you increase your pay rate (i.e. the average gain per winning trade to the average loss per losing trade). The following variables define the MM techniques. Note that some people consider the calculation of the number of lots an MM technique. I prefer to call it a risk management technique.

• _move_to_break_even: With this variable set to “true” if the price moves in your favor (e.g. 30% of profit target) the system moves the Stop Loss to the purchase price of the currency or a value near to it. This reduces the chances to lose a trade or at least mitigates the loss size. For example if PipBoxer V3.0 buys USDCHF at 1.2400 and the TP (Take Profit) is set to 1.2500 (i.e. 100 pips) while SL (Stop Loss) is set to 1.2320 (i.e. -70 pips) you might lose up to 70 pips if the market moves in the opposite direction of the trade. That’s why if the price moves to 1.2430 PipBoxer moves the SL to 1.2387 (i.e. -13 pips). Now if the market moves against you the maximum loss will be 13 pips rather than 70 pips. The exact deviation from the BE (Break-Even) point depends on the back-test results and it might be positive or negative.

• _trailing_stop_available: If the price moves in your trade’s favor to certain level (e.g. 60% of the profit target) the stop loss will jump to BE plus 1 pip and then every pip the price moves toward TP the SL also moves one pip above BE. If the price moves in the opposite direction, the SL does not move and remains where it was. Therefore, if the direction of the market reverses you still make some money. For example in the previous example if the price moves to 1.2461 the SL moves to BE + 1 pip (i.e. 1.2401). If the price moves to 1.2467 the SL moves to BE + 7 pips (i.e. 1.2407). Now if the price moves in the opposite direction the SL stays where it is and if the price drops over 60 pips it hits the SL but instead of losing money you gain 7 pips. I have optimized the behavior of TS (trailing stop) for every pair to make sure you make the most out of it.

• _move_to_mid_TP: Suppose the price advances 90% in your favor and suddenly reverses. In this case the trailing stop will save a few pips for you but that probably is not even enough to pay for the rollover swap interest. To address this problem in such cases the system moves the SL to somewhere around 50% of the TP. In the previous example if the price moves to 1.2485 the SL moves to 1.2455 so if the price drops you make 55 pips. If the “mid TP” was not in place you would have only made 25 pips with the help of TS. I have optimized the “mid TP” system to make as much money as possible in a market that keeps changing directions.

• _compromise_TP: If the price moves in the opposite direction and there is a big chance that you’ll lose this trade the PipBoxer V3.0 moves the TP to somewhere near BE so if the price moves in your favor the system closes the trade with minimal loss or even a little bit of profit. This feature is one of my favorites because many of the trades that were supposed to end up in loss will make money just as a result of a short move of price in your favor. This feature is similar to “_move_to_break_even” but when the price moves against your trades.

• _neg_TS_available: This variable enables a trailing profit in the opposite direction. It means that when the price moves in a negative direction it moves the TP to BE first and then follows the price in the negative direction. This feature in some cases minimizes the loss. However, throughout the back-testing I found out that I need to disable it for almost every pair.

• _move_to_mid_SL: With the help of this variable if the price approaches the original stop loss the system moves the TP midway to SL. This means that if by chance the price slightly moves in your favor the trade may get closed with half the loss instead of full loss. I have disabled this feature for most pairs but it can be used as a potential tool to reduce the loss.

Managing Multiple Trades

PipBoxer V3 comes with a new feature that enables the money manager not only to manage individual trades but to manage multiple trades opened on the same currency pair. The previous variables that I explained consider trades as isolated entities. With “multiple trades money manager” PipBoxer is able to consider more than one open trade at the same time.

For example if PipBoxer has opened 3 trades on GBPJPY then this feature manages them all at the same time. The parameters that control this feature are as follows. You as the user can change the values if you want to.

• _manage_multi_trades: The variable could be “true” or “false” to enable or disable multi trade manager respectively.

• profit_cap: The minimum ratio of the open profit on multiple trades to the account balance in order to close the trades. This ratio is stated in percentage. For example 8 means, 8%. As an example if this value is 8 and your account balance is $1000.00 the multi trades manager closes all GBPJPY trades if the open profit by all these trades reaches $80.00. Note that multi trades manager built into PipBoxer EAs consider all trades opened on one pair only. It also considers both swap and profit/loss combined.

• loss_cap: The minimum ratio of the open loss on multiple trades to the account balance in order to close the trades. This ratio is stated in percentage. For example 5 means, 5%.

• cap_dollar_flex: It considers a dollar value to enhance the behavior of multi trades manager. For example if your account balance is $5000.00 and your "profit_cap" is 5 then multi trades manager closes trades if the open profit is equal or more than $250.00 (or rather 5% of the account balance). Now if the value of "cap_dollar_flex" is 10, then multi trades manager closes the trades when the open profit is $240.00 or more (i.e. 250-10). In other words "cap_dollar_flex" narrows the range to capture the moment. "cap_dollar_flex" works the same way if you are facing a negative float (or rather open loss).

We believe that with all these MM tools in place you are guarded against negative market movements to a great extent.

With a combination of market analysis techniques, entry and exit tools, risk management techniques, and money management tools PipBoxer V3 is beyond a simple EA. It is a powerful trading package.

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Other Capabilities

PipBoxer is capable to create hedge trades. Click here to see an example and more explanation about this feature.

Click here to purchase PipBoxer V3.

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About PipBoxer Forex Solutions

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