I'm coming to you today from lovely Skytop, PA in the heart of the Pennsylvania Poconos.
Here's a quick update on this week's action. My favorite robot - Forex Megadroid - did nothing nearly the entire week and finally sprung into action on Thursday evening at about 5PM EST. It pulled in 16 pips in 2 trades which was just over 1% of the account. This is consistent with my new "1 percent a week" mantra, and i'm perfectly happy with that.
The "God's Gift" robots from Daniel Fernandez swung between narrow gains and losses for the week and are both down marginally for the year. According to Daniel, this is perfectly normal behavior and the robots can have flat to downish performance for months on end, then suddenly make 70% of the account in equity in a single winning trade. This is a characteristic of trend following systems - they loose on the majority of trades, but make it all back on a single big winner. This makes the God's Gift robots much harder to trade psychologically.
We humans need regular encouragement, and that's why the 'Droid is much easier to trade, since it has about a 95% win rate. But with a handful of trades a week at best, it takes patience.
The other robot i'm following is a free evaluation from Forex PipZen that anyone can download and trial for free at http://forexpipzen.com/. This robot so far has 2 winners, although they relatively small. I've been running about 2 weeks now, and its up just under 1%. At $149 per year, I don't like it as much as the 'Droid. Many thanks to my good buddy Redford for the tip on this one.
So let's dip a bit deeper into the Megadroid to get some insight into how it works.
First of all, it trades only the EUR/USD pair on a one-hour timeframe. Once you get it loaded up in the right timeframe, the manual says that you can change the timeframe on the chart with no harm done. It very often gets in and out of trades in under an hour's time, so its pretty clear the analysis its doing has minimal relationship to the chart timeframe.
One of the most interesting things about the 'Droid is that it trades only Monday through Thursday in a 2 hour window - from about 5PM to about 7PM EST. Taking a look at the graphic below (courtesy of http://www.forexmarkethours.com/), this corresponds to the least busy time of the Forex trading day. At this point, New York, London and Toyko are in off-hours mode and the only active market is Sydney.
That's interesting since the web site where I got the graphic advises the exact opposite! The page advises to avoid trading unless the market is active, and all the big boys are at the trading desk.
Megadroid take the opposite tact and only trades when the big boys are away.
I'm not sure what to make of this other than the fact that this the time slice of the day where markets are least subject to manipulation. It seems a bit counter-intuitive - you would think that the markets are more likely to be manipulated at lower volume times. But according to the logic of the 'Droid, its the other way around. When all the daylight traders are away from the desk, that's when markets are most likely to follow their natural up and down rhythms.
One reassuring thing about the 'Droid is that I can go to sleep Sunday evening and not wake up to a loss Monday morning (as so often happened with Zulu). Also, I can go into Friday and not have to worry about being blown up by the Non-Farm Payroll report which comes out at 8:30 AM EST and is the 800-pound gorilla of news releases in the forex market.
I suppose there are some other good reasons for trading in the 5-7PM EST timeframe (lack of news releases affecting EUR/USD?) but I suppose the point has been made.
I've a few more interesting observations about the 'Driod, but i'll save those for next time. Good luck and good trading,