I’ve not seen many threads on automated trading and after having some good back testing results with my cBot, I thought I’d document and log the process I’ve gone through and what I will go through further on. I have no idea if this strategy will truly work long term in reality but I’ll keep this thread updated from time to time win or lose.
Part 1 - Strategy
I’m not giving away my entire strategy, but it’s based on Heiken Ashi candles and is trying to pivot trade on lower time frames. This strategy adds to winning positions and also uses cost averaging to recover losing positions.
Primarily and maybe entirely this will be EURUSD. When there is big news, NFP etc trading will be disabled. Backtesting shows that the big news events can create big moves that don’t retrace and cause big drawdowns when cost averaging. However I have additional features that allow me to only buy or sell an instrument, so if NFP surprises to the upside I can just let it take buy positions until I see the market stabilise.
Trading times are only during London and New York. Right now I’m stopping the bot manually outside of these hours, but eventually the intention is to “set and forget” it except when big news events are incoming. I can automate the disabling of trading on these events, but I still want to be able to use discretion as to whether I switch on buy or sell only at these times, so it’s on the backburner for now.
The strategy may well evolve over time, but as a starting point I’m happy with where it is.
My backtesting shows that this strategy works on every time frame I tested. I have a preference for short term trades and they are more profitable but have more drawdown. 1 minute charts open too many positions for the small amount of capital I’m willing to risk on this, so I’m using 5 minute charts. Anything longer than that is too slow for me to supervise it live testing and would have to run through the night to work properly.
The position sizes are the smallest possible for my account at 0.1. This is spreadbetting, not CFD so don’t get carried away with what this means, it’s just different to what most of you are used to. If the account grows, I will increase lot sizes accordingly. I want to be able to hold a minimum of 60 open positions, so it will be a while before I can double that position size.
Here’s an image of the trades it’s taken throughout the day on Monday 4th December. If it’s not obvious, the arrow shows the direction and the line colour is whether it was profitable.