Derek Moneyberg that I have been following since 2014 says: Money is a Team Sport.
Elon Musk says 'Robots will replace humans in everything. And when I say everything, I mean E-V-E-R-Y-T-H-I-N-G.
So I would like to share my system with you and if you feel excited by its mechanics then let’s embark on a fun journey to optimize it and make money together.
I have always been reluctant to share my system but the Prisoner’s Dilemma proves that in the long term it is always the best to cooperate as the Expected Value is immensely more positive.
I always get the long-term direction right but I never seem to be able to properly place stop losses and take profits or effectively manage my position mid-way like partially Take Profit, Move SL, trail stop etc and also be emotionless.
Hence, I’m implementing a robot that can be optimized to do the aforementioned in order to extract as much money as possible from the forex markets. AND it comes with detailed backtesting performance!!
So first things first; I try to identify long-mid-short term strong currencies and trade them against long-mid-short term weak currencies. I go about doing that in a few ways as means of Multi-Confirmation and Top-Down analysis!
And to stack more odds to my benefit, I start off using the COT report to copy what the professionals do and create the first currency strength meter for my system.
I go to tradingster.com where the COT report is neatly organized. I first go to Non-Commercials Strength = Longs/Shorts.
For example, this is AUD for this week 18,835/98,664=0.19090042974
The AUD has got a strength of 0.19. Apparently, if the number is less than 1 it translates that the professional traders involved in the Non-Commercial category, short the AUD more than they long it.
Anyway, we repeat the same process for all 8 main currencies for this week and we have the following currency strength readings for COT Non-Commercial:
I have a google sheet file where I copy in these values from tradingster and these numbers are calculated automatically to make the process of calculating these strength readings less tedious
Now, sorting these currencies in descending order we have:
That’s all done for the 1st currency strength meter which is based on the COT Non-Commercials. Moving on to the 2nd CSM…
And this time we throw, the Commercials in the mix. Reminding yall that Commercials are Hedgers so they bet against the direction of the trend. Therefore we need to do Short/Longs to get the CS readings…with a small twist… we will use the following formula: (NC Longs+C Shorts)/(C Longs + NC Shorts)=COT Mix CSM.
Again, the super easy-to-build google sheet formula can calculate all these readings with a simple copy-paste in the spreadsheet. And so we have another column of currency strength from strongest to weakest in descending order.
Not much difference at all as you can see for today between the 2 metrics. We continue with the pure pro money makers…the Asset Managers section of the COT as the 3rd CRM confirmation/filter, whatever you wanna call it…
Same process as the Non-Commercials. Asset Manager Strenth=Longs/Shorts. For example, today’s GBP for Asset Managers is 36,175/79,449=0.45532354088
Interesting to see that the currencies don’t fluctuate massively. Some criss-cross across the columns which is something I take as consolidation and non-tradable. Finished with the COT…
The infamous contrarian sentiment as our 4th CSM filter…the banks love feeding their positions off retailers stop losses which are found on the opposite (contrarian) side of their sentiment.
I use myfxbook’s community sentiment Forex Sentiment | Myfxbook. I look at a pair and consider the MINORITY sentiment as the long-term direction where the pair is going towards.
A 2:1 ratio of traders trading the EURUSD speculate that it is going to drop. But it is the minority that tends to be correct. The EURUSD will go up, but we will need to confirm across all 28 pairs.
The EUR is strong, the USD is weak. EUR gets a +1 for long and USD gets a -1 for being weak/short. That’s because when we buy a pair we long the base currency and short the quote currency. When we sell a pair we short the base currency and long the quote currency.
We repeat the process across all 28 pairs.
In the end, we will end up with something like the following:
1USD6 4CAD3 5EUR2 6GBP1 3CHF4 2JPY5 7AUD0 0NZD7
Number on the left indicates how many times the currency has been a +1, while the number on the right indicates how many times the currency has been a -1
Finished this 4th step but I’d like to mention that it would be way more accurate had I took in account the number of positions opened for each pair. For example, the EURUSD hover menu in pic above shows Positions as Shorts: 40109 and Longs: 19484. Therefore EUR gets 40109 Shorts and 19484 Longs while the USD is reversed, meaning 19484 Shorts and 40109 Longs. Then we repeat this process across all 28 main pairs, then sum up all Long positions for each currency, then sum up all short positions for each currency, then do the division Sum Longs/Sum Shorts for each currency and sort them differently now…in ASCENDING order because we are interested in MINORITY sentiment. However, this is too tedious for me, so waiting to get someone to accept my project proposal in order to code this one up for us from Freelancer or Fiverr.
Number 5 is Dennis’ CSM in his years long-lasting thread, Trading the Trend with Strong Weak Analysis
The current look of our table so far with 5 Currency Strength readings
Another 2 confirmation columns we can add are the Intra Day and Long Term Targets on cTrader provided by Trading Central partner.
Their Long Term Targets agree with the above Top-Down analysis the overwhelming majority of the time.
So, for steps 6 and 7, I will be going about using their targets to create another currency strength reading by assigning +1 and -1 values to each currency according to the direction of these targets. Similar to what we do with contrarian sentiment except for this time we don’t do anything opposite.
Any time frame below the daily shows the intraday target for that pair and any time frame from Daily and above shows the long-term target.
This is it. 7 steps and the final table looks like this:
Now we need to extract tradable pairs. We need to find which currencies are stronger (placed above the other on the spreadsheet row) than other currencies across all 7 columns. This is a 7 step confirmation process. And so we have B for Buy and S for Sell:
5 pairs are likely to go towards the indicated direction. We have followed a process in order to stack as many odds to our side and increase the Expected Value. Now, where do I place TP, SL and what equity% risk?
1 out of these 5 extracted pairs are put in bold letters. The reason is that my Optimised robots have got open positions towards the same direction as these extracted pairs in bold.
I bought these robots from cTrader’s biggest partner regarding developing tools for cTrader called ClickAlgo. 10 robots each for 1 pair on the H1 timeframe:
When these robots have an open trade towards the direction of the extracted pair, then I activate another optimized robot on the m1. This m1 robot has been optimized during the period while the most recent trade of the H1 robot was active.
For example, the last time the GBPCHF robot had an open trade was on the 13th of January. Therefore I only optimize the EURJPY robot on the m1, only on the 13th of January. It makes sense to use the most recent open trade active period to optimize on, since the market moves in cycles, and the more recent the better!!
So I activate the GBPCHF m1 optimized robot and my SL, TP and risk are all to be managed by the optimized robot. Let the trades begin!!
I also have access to telegram groups that mirror signals from 300+ signal providers on Telegram. The vast majority are scammers but the very few good ones can give us leading signal confirmations. I will probably be adding them into the system later on. Else I will find signals from traditional sources like darwinex, Naga, myfxbook, ZuluTrade etc which come with signals performance detailed reports.
Also looking to rent a supercomputer to sharpen optimize my robots.
Meow that’s it for now, thanks for taking the time to read this post, pls tell me what you think and rest assured that I will change this first post accordingly and even the system as there is aaaaalways room for improvement…
We will help each other uncover their blind spots (psychological scotoma) and ill be very happy and eager to explain any question you might have if you are interested to become somewhat involved in whatever degree you wish with this system . Money is a team sport and hopefully, we are about to embark on something unique
It is 5:37am here so chat you all later :))