The 3 Duck's Trading System

[drum]

Nice work Drum.

I’m a visual person, so here are the results in cumulative pips on a chart below. 550 pips from 1 pair in 6 months is not too shabby. Let’s try to improve these results though.

1. You will notice that you get runs of loss making days with over 2 losing trades - eg 10/02/2015

Set your algorithm to only accept 1 loss making trade per day. Shoot the dice, if it doesn’t work out, then wait for the next day to trade. This will take care of some of the severe drawdowns.

Good point, I’ll give this a go

2. I notice that you have loss making trades of >30 pips, even though your stop loss is fixed at 30 pips. Why?

I was also worried about these and assumed I messed up, infact some of my data is 5sec data (the more recent stuff is tick data) and the price jumps by over 14pips against me at one point, making a loss of 43pips, I decided to leave it in, as it’s sort of a worse case scenario, I’d like to think the stoploss would protect me, but if it doesn’t atleast I’ve included it in my plans.

3. Also attached is a histogram with the distribution of returns. I assumed that a loss of 30 pips = 1% loss.

I planned it as 2% but in fairness I think I’ve messed up and it was actually 4%, so expect a drop in profitability when I find out what I got wrong

If my calculations are correct, almost half of your trades end up loss making. You are making profits because the Reward:Risk is more than 1.

To improve on this, I personally use trailing stops. Therefore, by bringing my stop loss to breakeven once I have a R:R of 1:1 (ie once I am in 30 pips profit), I shift my histogram of returns to the right. Most of my trades end up in the buckets -0.5% to 1.0% (treading water) but since the skew of the histogram is to the right, the outliers, ie the ones that take off and give 50-60-100, make up a good return.

[B]Take care of the downside, and the upside takes care of itself.[/B]

In your program, try using trailing stops to see if it improves point no.3.

I’m do actually use a 30 trailing stop, if you notice there are some profits of like 10 pips etc. these are when a trailing stop has triggered it.

As you’ve picked up on, I think the next thing is reducing the number of losing trades, you’ve suggested a good way to look at, and I think better\quicker reacting trend detection could both do this, I’ll try them independently and see what we come up with. Infact I can probably do your method as a quick test on a spreadsheet from the existing data…

[drum]

Same graph as fxsnowball, but cancelling day after first loss.

[WayneG]

[QUOTE=“fxsnowball;704736”]Contrasting a trade that works off the gate with one that’s not really moving below. > Not really much traction on the AUDUSD short, so I cancelled my trade entry order. Not interested in participating in this pair today. > On the other hand, GBPUSD broke the lows of the session and is consolidating. Here’s to some continued momentum lower … <img src=“301 Moved Permanently”/> <img src=“301 Moved Permanently”/>[/QUOTE]
I too entered this trade.
My personal rule is if there is a whole candle in profit (1hr), then I move to BE.
I was therefore stopped out for 0.

[rindoan]

@drum

Same graph as fxsnowball, but cancelling day after first loss.

Can you try to run a back test with the following modifications:
Stop loss 50 pips, no profit target.
Trades can be entered at any point from 2:30 AM GMT and for the next 24 hours.
When you reach 2:30 AM GMT the next day you close out your trade no matter the profit loss and a new position can then be entered or set as pending.

[rindoan]

Just to emphasize the reason you should not trade around NFP, EURCAD had a 150 pip gap (it doesn’t show as a gap on the chart below but it was a gap for all intend and purposes as there was 0 liquidity)!

(1min chart)

[drum]

Can you try to run a back test with the following modifications:
Stop loss 50 pips, no profit target.
Trades can be entered at any point from 2:30 AM GMT and for the next 24 hours.
When you reach 2:30 AM GMT the next day you close out your trade no matter the profit loss and a new position can then be entered or set as pending.

I can tell you from previous tests (on different strategy) that timing out orders, rather than closing for price echnical\fundamental reasons, is like opening orders based on time, it’s like flipping a coin. It never works. Once you have decided to open an order, be patient and stick to your plan.

I will be tuning stop loss and take profit in the future, for the time being I’m working on reducing the losing trades, based on detecting the trend. But when I start tuning the stop loss and profit stop, I’ll be sure to make sure I cover those options.

[rindoan]

I can tell you from previous tests (on different strategy) that timing out orders, rather than closing for price echnical\fundamental reasons, is like opening orders based on time, it’s like flipping a coin. It never works. Once you have decided to open an order, be patient and stick to your plan.

Well its one of the strategies that is working for me

Was just curious how it would look if you traded EURUSD with it exclusively.

[drum]

Well its one of the strategies that is working for me

Was just curious how it would look if you traded EURUSD with it exclusively.

The only thing I can think of is that at 2:30GMT the EURUSD is probably fairly stagnant, and so you’re getting out of a position that has a 50/50 chance of setting off either way when London opens. However if you are close to a stop loss you are saving further losses, and if you are in profit, you banking some pips. But hey if it works for you, stick with it. As you probably guessed I prefer a logical route, just which the markets would aswell :lol:

[bobcon]

I think what Rindoan is suggesting (forgive me if I’m wrong) is along the lines of - if something is trending well and makes a move , more pips may be captured if you leave it alone and give it a day it so to run. It is always tempting to cut such trades shirt but they tend to turn into huge winners. If you look over the trends, many big moves often consolidate in the afternoon before another leg up, often through later Asian session.

I think your 50/50 statement is flawed as well as by choosing a trending vehicle you would be aligning yourself with a higher probability trade.

[rindoan]

The only thing I can think of is that at 2:30GMT the EURUSD is probably fairly stagnant, and so you’re getting out of a position that has a 50/50 chance of setting off either way when London opens. However if you are close to a stop loss you are saving further losses, and if you are in profit, you banking some pips. But hey if it works for you, stick with it. As you probably guessed I prefer a logical route, just which the markets would aswell :lol:

I think you are missing the whole point of why we trade the 3 duck system.

This is a trend following system and the reason we have the 3 ducks line up is so we can enter a trade in line with the trend.

Our edge is in going with the trend and what we are trying to do is take out chunks of the daily move of a pair.

If you look away from the 3 ducks lining up and just take random trades you are correct it would just be throwing some dice but that is why we are trading the 3 ducks and not something else.

I am not trying to execute my trades at 2:30 AM GMT I am merely setting my targets at this point in time as I have found that usually you will have gotten the asia fake out top or bottom by then so setting your pending entried in line with the trend above or below that gives you a better chance of getting executed when the liquidity picks up at EU open (when I am sleeping).

[drum]

I’ve not missed the point that we are trend following, I think we just have different approaches taking what we can from the trend etc. Both you and bobcon have raised some interesting points which I hadn’t thought of which could differentiate this from my previous time related tests. I shall add it to the list of things to back test (the ever growing list as I have ideas aswell But for the time being the order is trend detection, stops then 2:30 time. It will probably take me several days to get each to a point that I’m happy with, but hopefully I’ll get there at some point.

[rindoan]

Drum:
Just for your guidance I am genuinely intrigued by your testing but I just want to make sure the numbers being thrown around are not based on an incorrect foundation.

Going over the trades you posted 2 pages back I was looking at the big draw down you experienced in late Jan and have some questions.

First of all what timezone are the time stamps listed as?
If its meant to be either GMT or EST then I am not able to make any sense of why the trades were executed when they were.

Can you post the exact breakdown of the rules you have applied to the testing?

[drum]

Drum:
Just for your guidance I am genuinely intrigued by your testing but I just want to make sure the numbers being thrown around are not based on an incorrect foundation.

By all means go over and question my findings, I would much prefer you found a flaw, than my wallet finding the flaw when I go live eventually

Going over the trades you posted 2 pages back I was looking at the big draw down you experienced in late Jan and have some questions.

First of all what timezone are the time stamps listed as?
If its meant to be either GMT or EST then I am not able to make any sense of why the trades were executed when they were.

GMT

Can you post the exact breakdown of the rules you have applied to the testing?

Okay I have fxsnowball 200day rule in place.
open trades between 06:00 and 16:00 GMT
I then I have the standard 3 ducks, which the price must be below\above all three
Then for trend detection I make sure all the 3 ducks SMAs are in the right order. (I think this is too slow to react, so I’m working on this at the moment)
Then I need 5 pips between the last high\low in the last 3 bars on the 1 hr chart.

If the trades are made later than you to would expect them, then I suspect that the trend detection is delayed too much (which is already my suspicion)

[rindoan]

Times in my below screenshots are based on EST (NY close charts).

I am not sure why the trades were triggered when they were but does not seem to make much sense to me basis your listed rules.

Can you explain the logic?

2015-01-23 14:30:10,SELL,1.12117,2015-01-23 14:44:25,1.12443,-0.00326,-32.6

2015-01-26 11:27:15,SELL,1.12287,2015-01-26 13:19:10,1.12625,-0.00338,-33.8

[bobcon]

The thing is you really are over complicating it. Use the 4h to identify a trend, enter when price breaks recent high/low on 1h/5 min. That’s it. You don’t need all smas in order to identify a trend - it’s obviously going to be slow to react. It’s better to enter after a pullback when the lower smas will be pulled out of sequence anyway. You don’t need the 200 sma - it’s extra baggage. Keep it simple.

[drum]

I agree, both are wrong I can see they triggered when the 5min SMA was crossed, however neither should of triggered because there are candles with lower minimums in the left 3 bars. I shall investigate and return. Thanks for the spotting that.

[rindoan]

I agree, both are wrong I can see they triggered when the 5min SMA was crossed, however neither should of triggered because there are candles with lower minimums in the left 3 bars. I shall investigate and return. Thanks for the spotting that.

That was just 2 out of 2 when I started looking at the numbers so I assume if I went through the remaining 78 they would be off as well.

Let us know when you correct it and run the test again.

[drum]

The thing is you really are over complicating it. Use the 4h to identify a trend, enter when price breaks recent high/low on 1h/5 min. That’s it. You don’t need all smas in order to identify a trend - it’s obviously going to be slow to react. It’s better to enter after a pullback when the lower smas will be pulled out of sequence anyway. You don’t need the 200 sma - it’s extra baggage. Keep it simple.

I actually agree the 200sma is probably not required, but my point was to start from a known position which was fxsnowballs results, and as such I started with it in.

[drum]

I was referencing an array without the index, so it always looked at the first item. Oops.

Hopefully people will prefer these results, not least because it is now more profitable

2014-12-23 12:15:15,SELL,1.22144,2014-12-24 08:31:20,1.21962,,0.00182,18.2,,18.2
2015-01-02 07:03:10,SELL,1.20382,2015-01-02 08:04:15,1.20686,,-0.00304,-30.4,,-12.2
2015-01-02 13:22:15,SELL,1.20292,2015-01-04 22:01:30,1.19245,,0.01047,104.7,,92.5
2015-01-05 10:24:35,SELL,1.19348,2015-01-05 13:15:10,1.19185,,0.00163,16.3,,108.8
2015-01-06 11:00:00,SELL,1.18981,2015-01-06 15:09:55,1.19283,,-0.00302,-30.2,,78.6
2015-01-07 10:55:30,SELL,1.1845,2015-01-07 17:45:25,1.18356,,0.00094,9.4,,88
2015-01-08 08:58:45,SELL,1.17941,2015-01-08 13:58:50,1.17857,,0.00084,8.4,,96.4
2015-01-09 07:00:00,SELL,1.17932,2015-01-09 13:25:40,1.18237,,-0.00305,-30.5,,65.9
2015-01-09 13:30:00,SELL,1.17775,2015-01-09 13:30:10,1.18078,,-0.00303,-30.3,,35.6
2015-01-13 12:49:45,SELL,1.17809,2015-01-14 08:18:30,1.18113,,-0.00304,-30.4,,5.2
2015-01-14 09:28:15,SELL,1.17676,2015-01-14 10:14:30,1.17593,,0.00083,8.3,,13.5
2015-01-15 08:49:25,SELL,1.17542,2015-01-15 09:34:20,1.16463,,0.01079,107.9,,121.4
2015-01-15 14:15:35,SELL,1.16598,2015-01-15 15:16:35,1.16418,,0.0018,18,,139.4
2015-01-16 08:56:05,SELL,1.1616,2015-01-16 13:30:00,1.16144,,0.00016,1.6,,141
2015-01-16 14:08:00,SELL,1.1568,2015-01-16 15:46:30,1.14675,,0.01005,100.5,,241.5
2015-01-21 07:58:35,SELL,1.15554,2015-01-21 09:32:15,1.15857,,-0.00303,-30.3,,211.2
2015-01-22 15:26:15,SELL,1.14437,2015-01-22 21:03:45,1.13429,,0.01008,100.8,,312
2015-01-23 08:45:40,SELL,1.13085,2015-01-23 09:03:30,1.12898,,0.00187,18.7,,330.7
2015-02-06 14:50:05,SELL,1.13396,2015-02-09 01:57:50,1.13291,,0.00105,10.5,,341.2
2015-02-09 07:00:00,SELL,1.1323,2015-02-09 08:03:00,1.13536,,-0.00306,-30.6,,310.6
2015-02-09 11:18:30,SELL,1.13091,2015-02-09 14:04:45,1.13044,,0.00047,4.7,,315.3
2015-02-10 07:29:05,SELL,1.13218,2015-02-10 12:08:50,1.13084,,0.00134,13.4,,328.7
2015-02-11 07:25:25,SELL,1.13079,2015-02-11 21:48:15,1.13391,,-0.00312,-31.2,,297.5
2015-02-17 08:20:25,SELL,1.13375,2015-02-17 09:08:45,1.13717,,-0.00342,-34.2,,263.3
2015-02-18 11:35:10,SELL,1.13668,2015-02-18 19:00:00,1.13651,,0.00017,1.7,,265
2015-02-20 07:03:20,SELL,1.13497,2015-02-20 09:54:00,1.13354,,0.00143,14.3,,279.3
2015-02-20 12:07:55,SELL,1.12971,2015-02-20 12:10:45,1.13275,,-0.00304,-30.4,,248.9
2015-02-20 13:15:55,SELL,1.12871,2015-02-20 15:22:30,1.13175,,-0.00304,-30.4,,218.5
2015-02-23 08:18:10,SELL,1.13407,2015-02-23 14:07:20,1.13263,,0.00144,14.4,,232.9
2015-02-24 08:15:45,SELL,1.13145,2015-02-24 15:15:45,1.13465,,-0.0032,-32,,200.9
2015-02-26 13:45:05,SELL,1.12924,2015-02-26 17:40:20,1.11908,,0.01016,101.6,,302.5
2015-02-27 14:17:40,SELL,1.12109,2015-02-27 15:08:20,1.12076,,0.00033,3.3,,305.8
2015-03-02 07:46:35,SELL,1.11681,2015-03-02 09:11:55,1.11994,,-0.00313,-31.3,,274.5
2015-03-02 15:30:10,SELL,1.11926,2015-03-03 14:37:35,1.11864,,0.00062,6.2,,280.7
2015-03-04 08:33:20,SELL,1.11482,2015-03-05 06:08:55,1.10446,,0.01036,103.6,,384.3
2015-03-05 13:55:30,SELL,1.10299,2015-03-05 18:18:15,1.10206,,0.00093,9.3,,393.6
2015-03-06 07:00:00,SELL,1.10144,2015-03-06 12:42:35,1.09616,,0.00528,52.8,,446.4
2015-03-06 13:31:10,SELL,1.0911,2015-03-06 13:57:20,1.09062,,0.00048,4.8,,451.2
2015-03-09 11:57:45,SELL,1.08577,2015-03-10 07:33:35,1.08166,,0.00411,41.1,,492.3
2015-03-10 08:21:10,SELL,1.07831,2015-03-10 09:10:30,1.07665,,0.00166,16.6,,508.9
2015-03-10 15:37:05,SELL,1.07181,2015-03-10 23:27:55,1.07051,,0.0013,13,,521.9
2015-03-11 08:03:45,SELL,1.0659,2015-03-11 11:41:15,1.05911,,0.00679,67.9,,589.8
2015-03-11 15:04:00,SELL,1.05624,2015-03-11 15:29:25,1.05935,,-0.00311,-31.1,,558.7
2015-03-12 14:02:45,SELL,1.05958,2015-03-12 14:29:40,1.06264,,-0.00306,-30.6,,528.1
2015-03-13 07:00:00,SELL,1.05786,2015-03-13 07:52:55,1.06096,,-0.0031,-31,,497.1
2015-03-13 11:55:10,SELL,1.05737,2015-03-13 14:32:50,1.0536,,0.00377,37.7,,534.8
2015-03-30 13:01:00,SELL,1.08154,2015-03-30 13:25:35,1.08473,,-0.00319,-31.9,,502.9
2015-03-31 07:15:15,SELL,1.07672,2015-03-31 10:55:05,1.07464,,0.00208,20.8,,523.7
2015-03-31 14:06:35,SELL,1.07235,2015-03-31 14:42:30,1.07548,,-0.00313,-31.3,,492.4
2015-04-01 07:00:00,SELL,1.07605,2015-04-01 10:14:40,1.07505,,0.001,10,,502.4
2015-04-01 14:02:25,SELL,1.07353,2015-04-01 14:15:50,1.07655,,-0.00302,-30.2,,472.2
2015-04-07 08:23:30,SELL,1.08754,2015-04-07 11:18:40,1.08729,,0.00025,2.5,,474.7
2015-04-08 11:38:05,SELL,1.08433,2015-04-08 12:32:50,1.08778,,-0.00345,-34.5,,440.2
2015-04-08 14:07:00,SELL,1.08344,2015-04-08 15:36:35,1.08174,,0.0017,17,,457.2
2015-04-09 07:25:00,SELL,1.07407,2015-04-09 11:06:05,1.07717,,-0.0031,-31,,426.2
2015-04-09 13:40:05,SELL,1.07292,2015-04-09 23:58:45,1.06688,,0.00604,60.4,,486.6
2015-04-13 07:52:35,SELL,1.05718,2015-04-13 12:12:45,1.05522,,0.00196,19.6,,506.2
2015-04-21 07:00:00,SELL,1.06799,2015-04-21 11:47:05,1.071,,-0.00301,-30.1,,476.1
2015-04-23 07:00:00,SELL,1.06821,2015-04-23 08:19:20,1.0713,,-0.00309,-30.9,,445.2
2015-05-27 09:43:17,SELL,1.08937,2015-05-27 13:49:40,1.08503,,0.00434,43.4,,488.6
2015-06-01 08:38:09,SELL,1.08986,2015-06-01 11:40:03,1.09287,,-0.00301,-30.1,,458.5
2015-06-01 14:28:55,SELL,1.09034,2015-06-01 17:37:47,1.09336,,-0.00302,-30.2,,428.3

[rindoan]

I was referencing an array without the index, so it always looked at the first item. Oops.

Hopefully people will prefer these results, not least because it is now more profitable

Why do you only have sell orders in there?

There were plenty of buy opportunities in April and May.