Using Duckworth’s Numerical Price Prediction (NPP) system to trade binary options

[expiated]

This has been an invaluable experience. Adapting the Numerical Price Prediction system to binary options has guided me to the very core of the strategy’s power, reducing and refining its methodology down to the most critical aspects of the approach—those evidencing the greatest amount of validity and reliability as prognosticators of future price action, and leaving with a setup whose simplicity, elegance and power is just what the doctor ordered.

The ultimate refinement of my Numerical Price Prediction (NPP) system setup

But that means this journal has served its purpose, so going forward I suppose I will be doing little more than adding an occasional comment, insight or revelation every now and then.

Results obtain with the above chart configuration

 

[expiated]

The Numerical Price Prediction system did not produce very good results in the binary option arena today. In analyzing the situation, I believe I uncovered a strategy that will result in most trades expiring in-the-money.

If the same technique were applied to my normal trading, I would still be making more trades than I was with my oldest system, but each trade would be much more substantial, reaping 10 to 30 pips worth of profit per trade or even more—and it’s a very simple approach—involving little more than the general overall day-to-day trend and a single average price range.

 

[expiated]

I believe I uncovered a strategy that will result in most trades expiring in-the-money.

Since this idea looks to be viable, I’m going to go ahead and call it the Numerical Price Prediction Binary Option Trade Strategy.

What I need to establish now (to optimize strike price and expiry selection) is: (1) how long, on average, does it take the exchange rates to hit my targets and remain there; (2) what parameters will avoid my being stopped out of positions once entered; and (3) will there be any need to modify my current approach to selecting take-profit targets?

I executed my first two trades using this new methodology about 15 minutes ago by shorting GBPJPY and USDJPY, and the latter pair hit my take-profit target within the first 10 minutes…

It has retraced 50% of the distance it traveled to get there, so now I want to see how long it will take for the rate to drop back down to that level for good. (GBPJPY still has a ways to go.)

 

[expiated]

What I need to establish now (to optimize strike price and expiry selection) is: (1) how long, on average, does it take the exchange rates to hit my targets and remain there; (2) what parameters will avoid my being stopped out of positions once entered; and (3) will there be any need to modify my current approach to selecting take-profit targets?

The first two trades made using the new strategy (GBPJPY and USDJPY) were stopped out and had to be reentered, so the criteria for entering positions had to be changed, with the 35-period simple moving average becoming the arbiter granting permission to go ahead and “pull the trigger.”

NZDUSD: I missed the correct entry level, so I was stopped out about 40 minutes later and had to reenter the position. Two hours would have been enough time to hit the modified target. The rate has continued to bounce back and forth since then, but never to such a degree after that as to find itself near the original strike price.

GBPUSD would have hit the halfway point to the original target after a couple of hours and the modified target after about five hours. It reversed direction after about seven hours to stop me out of the trade without ever hitting the original take-profit target, so this definitely needs to be shortened to at least the modified level, if not cut in half.

GBPJPY: the original take-profit level was hit after six hours, but “price” is reversing direction now during hours seven and eight.

AUDJPY: Significant separation was achieved two hours later and five hours later, but that was immediately followed by a significant turn back toward the original strike price.

AUDUSD has made relatively steady progress away from the original strike price, but all in all, if SMA (35) had been used in deciding when to enter all of these trades in conjunction with the modified take-profit target, 100% of them would have been successful...and all of them would have closed in-the-money if expiry had been set at approximately two hours from the time of entry.

In any event, it does not appear to make a lot of sense at all to set the time of expiry beyond four hours from the time a position is entered.

 

[expiated]

Adapting the Numerical Price Prediction system to binary options has guided me to the very core of the strategy’s power, reducing and refining its methodology down to the most critical aspects of the approach—those evidencing the greatest amount of validity and reliability as prognosticators of future price action, and leaving me with a setup whose simplicity, elegance and power is just what the doctor ordered.

But that means this journal has served its purpose, so going forward I suppose I will be doing little more than adding an occasional comment, insight or revelation every now and then.

The modifications made as a result of yesterday’s uncharacteristically poor performance has essentially resulted in my “drilling down” to the most critical aspects of my system’s most critical aspects. I can see how the outcome is likely to mean that in the future I will be shooting exclusively for 10 to 20 pips worth of profit per trade with a near 100% success rate, God willing.

I recently had someone inform me that the core suppositions on which I base my approach conflict with the findings of just about every independent, objective, systematic, statistically significant research-trial that has ever been published on the use of moving averages in the trading of financial instruments, and that I will not have a position to defend until the results from 13,000 trades (or perhaps even just 1,300 trades) show the same thing.

Of course, if I didn’t already have a position, I wouldn’t be using its principles to conduct my day-to-day trading right now. Still, I’m looking forward to generating just such results over the next year or so and beyond, nonetheless.

But at this point, this journal has once again served its purpose, so going forward, I’m again likely to be doing little more than adding an occasional comment, insight or revelation every now and then.

 

[expiated]

In the past, whenever I felt I had enough information to fall into a routine, trading became kind of boring. But for some reason, this time around it strikes me as kind of fun. Perhaps it has something to do with feeling like I am now literally “reading the story” of the charts, or maybe it's because the most recent modifications are allowing me to trade more frequently.

In any event, it’s interesting to me that I haven’t really changed the foundation of my winning approach since the summer of 2016, yet it’s taken me almost two years since then to have finally settled (possibly) on a chart setup that I feel inclined to set in concrete—at least when it comes to five-minute charts, which is what I used to execute the first eight trades recorded below.

It is a setup that enabled me to, for the first time ever, realize an average profit trade that significantly bettered my average loss trade. It is also my first setup that appears to have the potential to lead to 20- and 30- pip trades on a regular basis.

But for some reason, after the first eight trades, all I did was essentially tread water. I’m not sure why, but I think it was because I stopped “trading” per se at that point, and was instead “conducting research” to reconcile the disparities between my most recent one-minute setup and my new powerful five-minute setup.

If I managed to do that successfully (which should probably become evident rather quickly next week) I am likely (I think) to feel inclined to fully embrace my current charts and leave them be.

If I’m gleaning more pips per trade than I ever intended, am trading with as much frequency as I like, and am able to make total sense out of what is going on in the market via the graphics plotted on my screen—tools constituting the crème de la crème of what was already my most exclusive set of indicators—there should be no need to modify anything further.

I should be able to leave off where I stopped after the first eight trades Thursday night, and keep climbing higher and higher from there, especially since I consider a 67% success rate to be way too low for me personally.

 

[expiated]

There are some markets that are obviously bullish this morning, such as EURJPY and EURUSD. Nonetheless, there were no ideal Numerical Price Prediction (NPP) setups at the time I awoke today, and the currencies “feel” kind of sluggish to me at the moment, and since I’d rather do other things then sit around monitoring/managing my trades as they slowly reach my take-profit targets (or not) or waiting for entry structures to develop, I’m going to be satisfied with moderate results from CADJPY, GBPJPY, and GBPUSD this morning and call it a day.

(Rather than look down on things that appear to be insignificant in our eyes, I will remember that God works in great ways through “small beginnings.” Zachariah 4:10)

After two years of refinement my (NPP) chart setup is finally set in stone…

 

[expiated]

Only making quick trades this morning...

 

[expiated]

I see the potential for some big moves here. But the question for me is, can I use NPP to hop out each time the rate pulls back, but then hop back in again as soon as the rate begins to surge ahead once more?

 

[expiated]

Can I use NPP to hop out each time the rate pulls back, but then hop back in again as soon as the rate begins to surge ahead once more?

In the process of trying to answer the above question, I believe I have established “rules” for myself that, if followed religiously, will virtually guarantee nearly all of my trades end in success—at least if I set relatively modest take-profit targets of perhaps ten to twenty pips per trade.

The rules equate to two trade setups, as described below…

SMA (A) conveys the overall direction of the exchange rates on a day-to-day basis. SMA (B) essentially does the same thing, but with fewer fluctuations.

SMA (C) does a pretty decent job of tracking the exchange rate from hour-to-hour.

Consequently, when these three indicators are headed in one direction, and the shorter-term moving averages—the ones used to track rates from minute-to-minute—are headed in the opposite direction, the shorter-term moving averages are out of sync with where the rates ultimately want to go, making it advisable to enter positions in the same direction as the overall trend as soon as the lower-term moving averages signal that a rate is ready to resume a trajectory aligned with the predominant sentiment.

This is especially true if the reversal occurs “behind” the X.XX% deviation band of the simple moving average envelope corresponding to SMA (C) that is opposite (or away from) the direction in which the exchange rate is headed overall. (Of course, in the examples below, a trader would be entering long positions.)

It also makes sense to enter positions when the shorter-term minute-to-minute trend reverses direction to rejoin the “less flexible” dominant trend whenever rates enter regions where it is obvious that they have separated themselves from the “more flexible” general overall longer-term trend (line) by an unusually wide distance. Such regions are represented by the bands belonging to SMA Envelope (A) starting at Y.YY% deviation.

I anticipate that these two trade setups will be my “bread and butter” heading into the future.