Meta-Trader - Watukushay FE review

Welcome back Forex Fans.

This is the second in a series of reviews of the systems found up on Asirikuy. This week we tackle Watukushay FE.

Watukushay means 'to care for' in the in Quechua, the language used by the Inca and related tribes in South America. FE means "For Everyone" because it has the distinction of being the only one of Daniel's system's which is free to the public. You can download it at http://watukushayfe.blogspot.com/.

This EA was made free on the Internet on December 25, 2009 as a gift to the trading world. Daniel could have named it Forex Mega Cash Machine, and hyped it on a web site with a lot of pop-ups. But instead gve it away to the world for nothing. That shows you what type of guy Daniel is. His lack of greed is pretty refreshing, especially in the world of Forex, which has its share of hype and agressive marketing to put it kindly.

The system uses the 1 hour timeframe and a 20 period RSI. The RSI indicator was first published by Wells Wilder in his 1978 book, New Concepts in Technical Trading Systems. The indicator measures the ratio of up to down movement over a time period smoothed with an Exponential Moving Average. The value is an oscillator and is between 0 and 100.

The traditional interpretion of RSI is as the price reaches high values, the instrument is overbought and should be sold. Watukushay FE uses the opposite logic and when the RSI exceeds 72, the system will go long once the RSI comes crosses back below the 72 line. When the RSI is less than 28, the system will go short once the RSI crosses back above the 28 line. The idea is that when RSI moves to an extreme, it signals the start of a strong trend. The system will exit trades upon a second cross over and re-entry to the below 32 or above 68 zones.

What about performance?

In a 10-year back test with 3% risk, the system grew 100K to $258K which comes to about 9.1% return per year with an average drawdown of about 11%. This is clearly not one of Daniel’s more profitable systems versus say God’s Gift ATR or WA #2 return closer to $2 for every $1 in drawdown. For that reason, I probably wouldn’t trade it stand-alone, but I would definitely consider trading it in a robot portfolio and expect to be doing that starting in 2011.

I uploaded the 10-year back test to my Yahoo group at http://finance.groups.yahoo.com/group/fx-mon/.

Next up in the series Watukushay #3 also know as Kutichiy, so check back later for that one and have a great week.