Hello traders,
the first of five weeks (30 trading days) of my new strategy is over and I am sharing my results with
the community; some of you will remember my “Seven Majors System” thread, so will recognise similar
features to this system. The last system was on demo and was marginally profitable, but I only gave it
two months of testing; this system will be tested for one month, initially, but the aim is to keep it up
for a few months unchanged, unless losses necessitate a radical rethink.
How does the system work? It is a basic ‘straddling’ system, so it is built on two entry orders (one buy
and one sell) for each chosen pair, and the stops/limits are based on each pair’s ATR (Average True Range).
For the first week of testing, I used the following pairs, based on the fact that they all totalled 100 points
or more in daily ATR:
GBP/USD; AUD/JPY; CAD/CHF; EUR/NZD.
More importantly, on the currency correlation charts, none of these pairs at the start of the past
trading week (10th Feb. - 14th Feb. 2014) showed a strong correlation on a daily or even weekly
basis.
To sum it up, the criteria for choosing these pairs were:
- eight Major currencies traded in four pairs with weak correlation, meaning no doubling up on losses;
- ATR of 100 or more pips (on Daily time frame), as a sign of sufficient probable volatility;
- two orders per pair meant eight orders in total, which is not too large a number to be handled manually
at the start of each trading day (just before my actual day job).
The aim, which was reached, was to enter all orders before 9am and, unless automatically closed, close
them manually (or remove them, if untriggered) by 5pm, GMT.
The Risk-Reward ratio was 1:2, meaning that the distance between the entry point and the stop was half that between the entry point and the limit; each stop was set as a Trailing (Dynamic) stop; the lot size for each and every order was always 4k. The latter was decided on a target of 150 pips to be gained within the trial period, thus around 30 pips per week; the amount chosen means a leverage of 8-to-1 per trade, based on the account balance; as there are floating positions (pre-dating the current system trial), the leverage calculated on the equity is closer to 10-to-1 per trade.
The system was trialled in the first week with a parallel version being served up on a demo account using the same pairs and same ATR-based targets (and same lot sizes) BUT setting the entry orders once at the beginning of the week and basing the ATR on a weekly time frame, letting them run for the entire week until
Friday at 5pm GMT.
In the real account, the system used the previous day’s (10pmGMT /5pm EST) close as the value around which the orders would be calculated; however, due to weekend price jumps, the Monday orders would be set not on the preceding Friday close but on the Sunday evening open value; in the demo account, on the other hand, the values on Monday morning would be set on the close values of the previous weekly candle.
Here are the results for the first week:
REAL account (Daily ATR targets):
Total P/L: +40.8 pips / +11.18 GBP;
DEMO account (Weekly ATR targets):
Total P/L: -79.4 pips / -27.75 USD.
The REAL account saw 13 out of the total 40 orders being triggered (that is 32% of the total),
whereas the DEMO account saw 6 out of the 8 orders being triggered (that is 75% of the total);
however, the REAL account set-up was profitable, while the DEMO one was not.
For the week ahead, I will make the following changes, and for the given reasons:
-
the pairs chosen will be different, in that the previous ones are all showing stronger correlations
now on a Daily chart; the new pairs are all showing weak correlation (on both Daily and Weekly
charts), and they are:EUR/JPY, AUD/CAD, GBP/USD, NZD/CHF;
-
the least volatile pairs, AUD/CAD and NZD/CHF, which score less than 100 pips on the daily ATR,
will be traded using weekly chart ATR values, and triggered orders will be left to run through the
entire week; if stopped sooner, they will be re-entered the following day; this may also allow any
positive rollover to be accrued after each day’s close, depending on certain factors. By trading these
two pairs on weekly ATR values, we may be able to more successfully hit the 100+ pips range; -
the times of trade for the daily orders will now be 8am to 5pm, to coincide more precisely with the
London open and close times; trades will be entered between 7.55am and 8am and closed at 5pm
exactly (or removed, if untriggered); -
the DEMO account will be used to replicate the trades of the REAL account, but they will use
Trailing Dynamic stops, whereas the REAL account will now use unchanging stops, to allow more
room for pairs to breathe; results will be compared at the end of the week, to see which type of
stop allowed for better preservation of capital as well as better profit margins; -
entry price will no longer be based on the previous day’s close, but on the price at the time of
the entry order being set: this is to avoid missing on moves where price has moved considerably
since the previous day’s close.
Happy trading.
