lucky, i appreciate your concerns and taking time to post. geez, i certainly hope no one is jumping in with real money. you can hardly read a paragraph on this site without being warned about researching and demoing before you go live. but, i guess it happens.
there is a notice on post 1 advising traders to be sure they see post 52. that post is about periods of time when this approach simply doesn’t work. markets change. when they do, they may cripple methods that have previously had great track records or bring back into play methods that had quit working. in my personal trading experience, i have never found anything that consistently worked all the time. i find that i have to be nimble and willing to change. some of my best help in making those changes is the equity curve. it is just a way of looking at whether a system has quit working and for how long. i have a trader friend who says he doesn’t need an equity curve, he just watches his account balance.
daybreak showed positive results for the most recent six and a half year test period. prior to that, there were periods where you would want to trade it with terrorist money, i.e., it lost. i don’t know for sure what pair(s) you were testing or over what time period. i can only conclude that if the trading results did not pay expenses, you had to be testing in a losing period. i did note what seems to be a problem with the math for your rough estimate. three pips costs per transaction seems fair enough. i pay three for g/j and between one and two for the others. but, there is slippage, mistakes, and surprises to cover. so, that part seems okay.
i do think i see an error in that you are supposing four pairs would trade an average of 250 times per year each for a total of 1,000 trades. if that were true and the average cost per trade was three pips, you would have 3,000 pips in transaction costs per year, not 15,000. maybe you meant for the entire test period and that would be about right.
actually, i am showing about +48,000 gross pips for the total four-pair portfolio over the test period. you are correct that this does not include transaction costs. to get these results over a 78 month period, each pair traded about 1,250 times, except for the usd/jpy which traded about 800 times. let’s be generous to the transaction costs and say 5,000 trades X 3 pips per trade = -15,000. not as pretty as the original +48,000, but will leave us with net +33,000. the lowest performer was eur/usd with around +8,500 gross and found it necessary to trade about 1,250 times to get that. by our estimates, transaction costs would have been roughly -3,750, leaving +4,750. this nets about +60 pips a month and won’t do much to help pay the bills unless you’re trading $100 a pip. if you were able to trade all four pairs, you might have made just over +400 a month.
i have and will continue to warn readers that this system has limitations both in the research methodology and the performance aspects. it was tested with a spreadsheet and daily bars. the limitations of that approach have been discussed from the beginning and throughout the thread. it is a “set it and forget it” trading method and that implies certain performance limitations. for example, suppose you set it at 7:00 pm, check it before you go to bed, check it again in the morning, and go to work or school. when you get home that evening, you learn that there was a major rate announcement sure to bear on the currency markets. you find that prices blew right through your stops and you suffered a serious loss. might you have done more about that had you been able to keep up with the news, watch your trades, and close out as that event approached? of course. but, that’s what we call a full time trader, not someone who has responsibilities at work, school, etc.
now, i hope i didn’t miss something very obvious! heh. best wishes for your trading and good luck with your finals.
thought of one more thing and will add it as an edit here. you mentioned a profit of some 1,500 pips with tranactions costs of 3,000. per our estimates, that implies 1,000 trades and an average profit per trade of 1 1/2 pips. bottom line, whatever approach is doing that is just not adequate.