Strategy test next week!

[dan...@danielalexander.info]

 

Hi everyone,

 

Here is the set file and excel sheet I used to generate very large gains over relatively short periods of time with very low average drawdown.

 

Some of you said that you'd like to participate in a test of this system next week.

 

To run this, you will need a broker offering very tight spreads and low commission, such as FxOpen or FxPig who both offer spreads of around 0.5 and commissions around $5 (I think reaching around $9 on other pairs such as GBP/JPY). Open a $5000 demo (or live!) and load MBC with the set file attached. For feeds with minimum 0.1 lot, you will need a $50,000 demo (no need to change the base balance or lot multipliers, you should automatically get a 0.1 lot start using this set file).

 

My suggestion is that when you open up your charts, you go around the pairs looking for price action that looks reasonably consolidated. This system can do ok in trends provided those trends are jerky enough, but it's probably better to avoid them if possible. Avoid red news items. Load MBC checking that your DD at max balance is about 3% of your account (I not then just reload MBC), and then set open sell and buy baskets to true. Watch the price and trading for one hour only, and then set the basket opening back to false checking that all baskets close.

 

After that, record:

a) Date and Time of Start and Stop (in GMT please!)

b) Pair traded

c) Kind of market encountered (trending, range, etc)

d) % made on equity

 

Do this one hour a day, Monday to Friday if you can, recording your results....then share them with us next weekend giving us your weekly % gain.

 

I have found USD/CAD to be pretty good, but would like some experiment on EUR/GBP (remember you get more per pip on this pair, so DD levels will be higher).

 

Now, you will see that this file has 8 levels, and is hedged at level 9, instead of opening the 2.56 lot size at this level. The reason for this is to risk no more than 3.5% at any given time, and give you the option of de-hedging and continuing the lot progression later if you wish. Feel free to reinstate level 9, but notice that your DD will increase to 7, 14, 28% etc on subsequent levels.

 

Remember that this strategy relies on you stopping trading soon enough before the market produces moves which fails to make the, admittedly small, retraces necessary at each level. With more data we could be more sure but it seems to me that such moves happen on average maybe 1, possibly 2 times a day on USD/CAD, mostly during the London/NY overlap. A high quality back test would tell us statistically the best time to trade per pair, and that could be very valuable. I would not really recommend the overnight, as moves can be extremely small, and price can easily move away at London open, which reduces gains without necessarily reducing risk, but you might want to experiment, especially if you are in Australian time zones. It should be nice to watch price stay close to buy TP and sell TP levels at all times, and this might give you other ideas for other systems you would like to try.

 

Any questions, feel free!

Best regards

Daniel

 

[EOGORFX]

Hi Daniel

Thank you for the set file, Excel file and useful comments.

I am trying a few short term BTs with the max hedging off.

It’s interesting to see the visual BT mode on with M1 TF and full zoom in –  it trade like road runner – Rick’s fab dialog is running also and showing all the relevant data.

 

It sure is an novel way to trade – so much better than waiting forever for an entry condition for a manual trade.

I will run it on the 1M TF as the hedges and trails are off apart from the Max hedge.

 

I believe it can work if we watch the economic calendar and the live price action  with some momentum / volume indicator and be prepared to quit quickly and take some hits before the hedge becomes very wide..

 

Stop start (like the old reliable RS232 Asynchronous data communications system) is the best way to use any Marty as it keeps the lower levels near the price action.

 

I will do my best to get a few forward test demo hours this week on EU pair. We have to give full credit to Rick for opening up all these possibilities with this system.

 

Maybe you can get a chance to verify if the Excel sheet is correct  and will work for  my account which is a mini GBP where the lot = 10,000 and a trade size of 1 is £1/pip. The min trade size is 0.1 i.e.  £0.1/ pip  (trading 1,000)

Therefore I put 1 in the $/pip/lot cell and set the lots to 0.1, 0.2, 0.4, 0.8, 1.6, 3.2, 6.4, 12.8 the requires account size is showing $6,449.10

I believe this should give me the same account size required as for the 10/pip/lot of the standard account with lots set to 0.01 ….. 1.28 but it shows required account size  =724

Also the profit at level 8 = 25 for the mini and is showing 12.75 for the standard

Perhaps I am not using it correctly?

 

Thanks again.

Ed

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[protokop]

I have been running the setfile today during the Aussie/Asian session on a demo account with standard lot sizing.

I made approx $10/hr in total when used on 5 pairs. (EURUSD, GBPUSD, EURGBP, USDJPY and AUDUSD). That is $10/hr across all 5 pairs not each pair.

I just left it running on a demo account to see what would/could happen.

How do you handle the hedges when they open? 

The hedge lot size is the same as the basket lot size so the basket will always close with about -$200 ish. 

How/when do you close them?

[dan...@danielalexander.info]

HI Ed

 

I wouldn't bother changing $/pip/lot to 1, just keep it at 10 and set the lot sizes to 0.01, 0.02 etc. You are trading micro lots and I don't know why some brokers set lot size 1 to be equal to a 10,000 contract. 

 

But the excel will calculate the same way if you do change $/pip/lot to 1 and then use lot sizes of 0.1, 0.2 etc.

 

The thing to be careful of is commissions -this is what distorts your results. I am sure you are not paying $5 per 10,000 traded, so if you do change $/pip/lot to 1, you'll also need to divide this by around 10 (ie set it to around 0.5), or set it to zero if you are paying spread only.

 

Remember that your result will be in dollars, not pounds.

 

In order to get the correct DD values, you can either modify the risk multiplier to equal the inverse of the GBP/USD rate (0.63 etc), or quote your GBP account balance in USD.

 

Daniel

[dan...@danielalexander.info]

 

Thanks for your test!

 

I think $10/hr might still be achievable on one pair alone, but price does have to ranging up and down at a relatively high rate. Movements in the Asian session are probably too slow.

 

Keep us posted on how your demo does through London/NY.

 

The way you deal with hedges is:

1) if you have made enough that the loss on the hedge+basket is significantly lower than gains so far, then close the hedge+basket (this is the best scenario)

2) If 1) does not apply then you can find a short term resistance or support line, remove either the hedge or the basket and trade the remainder into profit, setting an appropriate SL

3) Reinstate the level 9 (2.56 lot in this case), close the hedge manually (as there is a bug in the close all hedges parameter) and allow MBC to continue the progression into higher DD levels

4) Disable MBC and trade off individual levels in the basket manually, so that you are not trading the entire basket or the entire hedge all at once (which can be stressful)

 

Hope that helps!

Best regards

Daniel 

 

[EOGORFX]

Daniel

I got buy side and a sell side basket hedges today on EURUSD.

It was a complete pain to get out of them but I managed with a small loss. And several hours of screen time.

I switched off the EA and every time I saw a half decent gain in the hedge or the basket levels . I cashed them in and used the profit to close an equal money portion of the other side of the hedge.

 

The trouble really starts when the hedge and the basket go into loss. I also opened some trades manually and used the profit to pay off the hedge – but it is stressful to do as you could end up with a bigger mess.

The key, as I see it, is to keep the lots equal after each pair of lot reduction transactions.

 

I can only use the EURUSD as I have a spread of 0.8 on that pair and no commission

Worked good on Monday with no hedge. On Tue I got one hedge and just took the loss as I couldn’t babysit. Over the 3 days I am in about 1% loss

 

Overall I think I could trade it if I could be a bit more sure of when the market is ranging or at least choppy enough to get the retraces.

 

Might work better if the level was back to 5 or 6 as the hedge would be easier to deal with but of course many more of them would pop up. Maybe increase the EP to 4?

 

At present the total trend is 21 +3 =24 before the max hedge kicks in. retrace =4.71  DD = ~99

If EP = 4 the total trend at level 6 would be 20 + 4 = 24 for the max hedge and retrace = 5.76  (~ 1 pip worse with my spread) DD ~ 23

Can now afford to increase the max hedge pips from to 6 then DD = 48 when the hedge kicks in.

Profits will fall however.

Perhaps it is just about the same probability either way of hitting the hedge as the span is so small.  No easy lunches in this game.

 

‘Travelling for rest of this week so no trading.

 

Good luck and thank you again for this great idea. (Maybe many heads will “find the best way with this EA”

 

Ed

[dan...@danielalexander.info]

HI Ed,

That's very good sport of you to test out this file, thanks.

Well done for manoeuvring around those hedges. I think one thing that would help is that if a hedge develops on one side, you close the other side to ensure that you only have one side affected.

Having said that, the problem remains that for the risk taken, it is not quite generating enough profit.

The reason I liked it at first is that the retraces are always tight at every level, because another file I did use on a live $50K account, mostly on USD CAD during quiet markets, (avoiding most of Lon/NY), had tight retraces followed by less tight retraces, and it was the less tight retrace at higher levels that bothered me.

This file is attached.

It's very aggressive and so requires frequent switch on and switch off. I made 7% in 3 weeks and then hit a 5% hedge so I was up 2% but just at that point Mark shared his file and I realised that his was superior to mine.

I only attach my old one for "ideas" as it seems Mark wants to incorporate a bit of this, which sounds great, and look forward to that.

Thanks again!