Hello Traders:
We are ready, here it goes!
VERSION 10.0.1
This is a major update for both Master Scalper and Breakout Hunter.
It addresses better entries and better exit strategies for both the Master Scalper and the Breakout Hunter.
While the idea behind this update was to minimize Drawdown, the use of several new filters and new exit strategies have allowed us to sustain considerably smaller Drawdown in all tests, while maintaining a high level of profitability.
Whatâs new:
Improvement to entries:
- ADX/MA filter for Master Scalper: A new combination of 2 filters is being used to screen for improved entry criteria. In the scalper, the ADX filter determines the maximum volatility level that will be allowed for trading in both directions. If the ADX level is exceeded, then the entries will only be allowed in the direction of the trend as determined by the MA filter. This is a medium term trend filter, the most appropriate for our purposes, since rallies during scalping hours are usually continuations of the prior trading session, and not along the longer term trends. Accordingly, if the ADX volatility filter forces trading in only one direction, should the trend continue ahead or at the beginning of the Asian session, we should be trading along with the trend only.
-ADX/MA for Breakout Hunter: The ADX/MA filter combination works different in this trending strategy. We use the ADX to determine the minimum level of volatility acceptable to enter any trade, hoping to avoid whipsaw, or dull channel behavior that is not conductive to true breakouts. If the ADX allows trading, this will take place only in the direction of the short term trend, trying to catch any rallies that have enough momentum, even if they are contrary to the longer term trend.
- VIX filter: This is the big one: I believe that we are the first commercial EA to implement this approach to inter-market intelligence.
The VIX filter is constantly connected via the internet to the recent performances of Stock and Commodities markets worldwide. When the volatility seen in those markets is excessive, it modifies or cancels our EAsâ trading strategy for the session. The probabilities of scalping success are smaller when the markets in Asia are likely to respond to the volatility in the New York and European markets with strong opening rallies. Even as early as the New Zealand session the price of oil could follow the volatility seen in NY, and inject excessive volatility into the scalping session of those currency pairs typically affected by that commodity (EurCad in particular). If the Gold and Metals markets in NY are too volatile, the Australian opening will not be suitable for scalping, and we are better off skipping the session altogether. Stock markets worldwide follow each other in rallies and selloffs, so if NY was too volatile, we anticipate from statistical studies a rough beginning to the Australian and Japanese markets, which will not allow our positions to close normally. Better off skipping the sessionâŚ
This is an improvement that manages to bring in the âfundamentalsâ part of the markets into the picture. When coupled with the âtechnicalâ side of our trading strategies, we have a more balanced approach to automated trading. No more blind trading with behavior preset months in advance according to just the events calendar, but actual up to the minute information on the price action and volatility of the influential markets, of the actual trading session. This knowledge will allow our robots to make more informed, more intelligent decisions, as to whether the probabilities of success for the dayâs trading are in our favor.
Improvements to exits:
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The increased volatility of the Asian session in the last year has been addressed by a number of techniques that attempt to get open trades closed as soon as it is reasonably possible, with self adjusting levels of TP and SL along the trading session, so that we have the best chance to scalp for profit, or eventually the best chance to close the positions with the smallest possible loss, in order to avoid the exposure to the London market open. Techniques used are the following:
- Trailing stops: We have incorporated Trailing Stops that start working typically at the end of the scalping session. They are meant to capture very small profits or even accept small losses to get trades closed and avoid unnecessary exposure to the volatile new sessions.
In the case of the Breakout Hunter, we have a Trailing Stop reduce the size of the SL to about half, while conserving any profits that may have been already accomplished by the time the Japanese session is under way, with the idea of closing most positions by the time London opens.
- New Breakeven techniques: We are now using a strong Breakeven strategy to force the closing of trades which have been open too long, once the odds are no longer in our favor.
- Revised âAfter Hours settingsâ trying to close those lingering trades after they have remained open too long and are approaching the London opening time. We will accept some controlled losses with this settings, to avoid exposure to larger drawdown.
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All other parameters, from Volatility filter settings, to Take Profit levels and Stop Loss values have been tweaked to account for these new improvements. Our objective has been to minimize drawdown considerably, while trying to conserve profitability. Both objectives were met in all the tests we run on all market conditions encountered during the last 3 years.
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Lot sizes have been reduced on the Money Manager, particularly on UsdJpy, which has been lagging in performance since the interventions started after the Tsunami. Other pairs have somewhat reduced lot sizes as well. The improved profitability and controlled drawdown allows us to anticipate similar profits with much less drawdown risk. On these new settings, accounts with up to 300:1 will perform mostly identically, since the leverage required to trade all pairs will not be excessive given the smaller lot sizes in our default parameters.
- Friday scalping session has been cancelled from our default setting, given the fact that for over a year it has brought little profit, and plenty of headaches. Enjoy your weekends!
The Breakout Hunter continues trading on Fridays, and stops entering new orders at 15:00 gmt. As usual, open orders will continue being administered normally and may remain open over the weekend, since all tests indicate that this is the optimum setting.
- The trading schedule has been adapter to the new DST schedule of the markets worldwide.
- All No Trade dates are updated, for all pairs.
Thanks to all who contributed with suggestions, ideas, and to our own team for a lot of hard work! Kudos.
