Saturday, May 29, 2010

Meta-Trader - Forex night sweats

Welcome back Meta-Traders and Forex fans.

It was a week with some drawdown for the robots I'm following - which isn't surprising after the run of winners we have had recently.

On the global macro side, the equity markets hit what seemed to be a short-term bottom on Tuesday and worked their way higher from there. EUR/USD also held its bottom (made the prior week) in the 1.2150 area. Of course we won't know until later whether this is a real bottom - but then again we don't care because we are system traders and we can make money in any market, right?

A quick housekeeping note - the demo accounts i'm following all expired this week. So I opened up new demo accounts and set the initial deposit equal to the balance on the prior demo at the time of expiration. So the % gains will be based on the starting $1000 account size but unfortunately our trading history has been lost for all except my live Megadroid account.

Anyway back to the systems. Megadroid Demo continued to trade like clockwork and picked up 31 pips or about 3% on the week. Megadroid demo is now up a solid 29.4% for the year easily exceeding my 1% per week target.

Megadroid Live got into a bit of trouble on Tuesday. Both MD Live and MD demo bought 0.10 EUR/USD at 1.2348. On the demo side, the trade closed with its 10-pip take profit in a little over 1 hour's time. In the live account, the trade must have missed the TP by just 2 or 3 pips (based on a wider spread in live account) and instead went into drawdown. By the time I went to bed, the position was in 70 pips drawdown and I had no choice but to go to bed and let it ride.

This is a similar situation I've been in the the past few drawdowns with Megadroid. The trade goes 1 of 3 ways.

  • The robot takes a 10-pip take profit within an hour or 2.

  • The trade goes into drawdown and the robot will close out the trade for any profit whatsoever for about the next 14 hours.

  • After 14 hours if the trade still hasn't shown a profit, it will be closed out for whatever loss is on the table at that time.

There is a 4th option and that is that the robot will take the 200 pips stop loss in under 14 hours. Fortunately, I haven't seen that outcome yet.

Anyway, I woke up the next morning and found that most of the 70 pip drawdown had been recovered and I was a mere 10-pips away from exiting this trade with a small profit. So I went to work and later found out that the trade turned back against me and was closed with a -51 pip loss or about 5% of the account. Fortunately the trade size was 0.10 - recall that i'm now managing the 'Recovery Mode' feature myself because this feature in the robot seems to be broken.

So I came home at the end of the day and set the account risk back up to 0.10 so it was now trading double the intended lot size or 0.20. This worked like a champ and the robot took 27 pips out of the market it 3 quick trades, two of which lasted under 10 minutes! So in one day's trading I made back the entire loss which shows the power and accuracy of the Megadroid robot. Also, I set my risk value back down to to 0.05 having recovered this week's drawdown.

In other action, God's Gift GBP/USD took a small, 6-pip profit on Friday and remains up an impressive 18.1% on the year. God's Gift EUR/USD took a 70-pip drawdown but remains up 11.6% for the year

Finally, Megadroid Pro is sucking wind down 27% in just 2 weeks time. Even more suckish is Forex Maximizer which is down a stunning 45.7% is the same 2 weeks. I'll be going after Click Bank for a refund of my $97. Should be interesting to see if they give me any trouble with the refund. Hard to beleive Megadroid and Megadroid pro could be from the same developers.

On a final note, my regular job has kept me busy and both ends of the work day, so I haven't had much chance to do any new robot development. I have some great ideas however regarding multi-timeframe systems so check back later and enjoy your weekend.

Saturday, May 22, 2010

MegaDroid - Watch for sudden acceleration

Welcome back Meta-Traders and Forex fans.

It was another wild week in Forex with EUR/USD finally appearing to find a bottom in the 1.2150 area.

Daily ranges remain close to a one year high at over 200 pips based on Average True Range on the daily chart with 14-day lookback. This period of high volatility provided excellent trading conditions for the robots i'm following.

God's Gift EUR/USD was the winner on the week picking up 74 pips and is now up an impressive 16.9% for the year.

God's Gift GBP/USD didn't trade this week but remains up 18.1% for the year. For God's Gift GBP/USD, this performance is just about half of the 10-year average return of about 32%, so its right on track for where it should be on a year-to-date basis.

For 10-year back test results for these robot, click here God's Gift backtests. If you want a copy of these robots, buy Daniel's Fernandez e-book here which is a bargain at $18.95 USD.

Megadroid Demo continued to trade like clockwork and leads the pack up 26% for the year.

Megadroid Live had an interesting week and traded every day in its trading window (Mon-Thu) which was a first in the 6 months i've been following it. Also recall that Megadroid has been in "recovery mode", trading twice its normal lot size until it recovered from the loss I took back on 4/22/2010.

Strangely, Megadroid continued to trade in "Recovery Mode" this past week even though it already recovered the loss. As a result, it picked up 5% in trades on Monday and Tuesday. I was feeling good but a bit nervous, so I opened a ticket with Megadroid support asking for an explanation. They asked for some screenshots which I sent back, but didn't hear back from them.

On Wednesday, Megadroid entered an S2 signal and bought 0.20 EUR/USD at 1.2404. This trade was up briefly, then went sharply against me. At one point, it was down about 80 pips (and at double the lot size) this was down about $160 and wiped out my entire gain for the year! This was a shocking and scary development, but I hung in there and went to bed. When I woke up Thursday, I was relieved to find in closed the trade at a small profit. This was similar to the S2 trade that I closed manually back on 4/22/2010, but I learned my lesson and stuck with it this time.

I followed up with Megadroid support and got no reply. So I took matters into my own hands and lowered the risk setting to 0.05 which reduced my lot size to the desired 0.10 which worked as designed when the robot picked up 10 pips ($10 USD) on Thursday. So due to unintended "sudden acceleration" (Toyota) Megadroid picked up 5.6% on the week.

By way of follow-up, I did some research and the Megadroid S2 signal has a 50-pip take profit and a 200-pip stop loss. That means on any given day I should be prepared for a 40-pip loss (which is the stop on the S1 signal) plus a 200-pip loss on the S2 signal for a total of a 240-pip loss. If these signals occur when the account is in "recovery mode" this would constitute a 480-pip loss which would represent about 48% of the account. This number turns out to be surprisingly close to the maximum 10-year drawdown shown from the back-test results found here.

Lesson learned? Be prepared for drawdown. Every trading systems has some drawdown. Understand the historical drawdowns of the robots you are trading and don't be surprised when it happens! Also I learned the Megadroid support can be pretty lame when faced with an interesting but very real dilemma.

Speaking of drawdown, the 2 new robots i'm following Forex Maximizer and Megadroid Pro quickly went into the tank and lost 12% and 25% respectively. This is not at all surprising based on back-test results.

Anyway, this type of performance is why demo accounts were created and gives us a good look at robot performance before we risk our hard-earned real money. Demo accounts are just one of the many reasons why forex trading with Meta-Trader rules!

Take care and check back later for more cool stuff.

Tuesday, May 18, 2010

Megadroid Pro - Back-test results

Welcome back Meta-Traders.

As promised, here are the 10-year back test results for Megadroid Pro. I got Megadroid Pro as a bonus with the purchase of Forex Maximizer. MD Pro trades the original EUR/USD as well as EUR/GBP, EUR/CHF and USD/CHF on an H1 timeframe.

The tests use all the robot default settings, the most important of which is risk, which is set to 0.1. This is the risk value I use for my live account with Megadroid and I believe is safe for solid growth with minimal chance of blowing up the account.

Looking at the drawdowns, its not difficult to see that a risk setting of 0.20 would nearly blow out the account in some years. Anybody trading this robot with risk of 0.3 is asking for trouble.

As you can see on the left, EUR/USD had 9 straight winning years with profit to drawdown in the 7 to 1 range. That's a pretty awesome result and I don't know of many robots with that type of performance.

The only fly in the ointment is the 2010 year to date performance which is down almost 25%. This result alone shows that this robot is not the same thing as the original Megadroid since its up year to date in my other accounts.

EUR/GBP did not test as well with 2 losing years of the past 9. Drawdowns were higher than profits in a lot of those years as well. Results from 2003 and 2004 were spectacular, its almost like the accelerator got stuck on the money printing machine. I doubt these results are possible in the current environment and its possible that the very presence of the robots in this market would reduce its profitability.

EUR/GBP results were equally wierd with 2 of 9 loosing years and high drawdowns to profits in the past few years. Again, things went haywire is 2003 and 2004 which are obviously skewing the 10-year average profit to the upside.

USD/CHF were the best of any of the pairs with an almost 63 to 1 profit to drawdown ratio.

In summary, this is a great looking robot with lousy year to date results. What's behind the performance or lack thereof?

I think the answer is EAKAIN.

It was widely rumored that EAKAIN was a rip off of Megadroid Pro and expanded to a few additional pairs. EAKAIN had a spectacular performance in 2009 and early 2010, but has been in a steady down-trend since then. Also, the EAKAIN code itself was widely leaked by a blogger, from the publishers own web site and therefore a large number of traders got their hands on it for much less than the $579 asking price. As a result, it became quickly overused and failed en mass.

Does that mean that the system is bad forever? Will traders loose their patience and go back to other robots and will this one and perhaps EAKAIN become profitable again? Is it possible that the year-to-date lousy performance of Megadroid Pro is an abberation and should be bought instead of dismissed?

As always, we'll find out over time and observation. So as of today, i'm following MD-Pro in a demo account and will be following it going forward.

Have a great day.

Saturday, May 15, 2010

Meta-Trader - Forex Maximizer Back Test results

Welcome back Meta-Traders.

Let's take a look at back-test results for Forex Maximizer. I found out about this robot from an e-mail I got this past week from the guys over at Forex Megadroid. I took a further look because:

1) I want to start following more systems on this blog

2) I trust the guys over at Megadroid to pick good robots

3) It offered a free bonus of Megadroid Pro - a reworked version of Megadroid that trades on 4 different currency pairs.

I sprung for the $97 figuring that the Megadroid Pro must be worth the price alone and they said in the e-mail that they would soon be charging $600 for the Megadroid Pro. Of course I had to hurry since it was a limited time offer - you know the drill.

Also, I bought the robot through Click-Bank with the understanding that I have a 60-day conditional money back guarantee. Not sure yet what are the conditions but I may find out soon!

Anyway, Forex Maximizer runs on the GBP/USD pair only on a H1 time setting.

As you can see above, the 2010 and 2009 results were spectacular with profits more than 4 times drawdown. But prior to that, it was a looser. So much so in fact that over a 10-year period, the average profit was 1/4 of the average drawdown! So this is clearly not a long-term profitable system, at least from the perspective of the back test.

What about parameters? Do the inputs need to periodically re-optimized? I took a look at the robot inputs and all I could find was:

Lot Size, Magic Number, TradeCommentLong, TradeCommentShort, Start Hour and End Hour.

No lookbacks, Moving Average lengths or anything like that.

So to summarize, this robot appears to be highly optimized to show profitable back-testing for 2009 and 2010. It may make money for a time going forward with a live account. But am I willing to risk my real money on this system? Not a chance.

What about the Megadroid Pro? How did that back test?

Come back later for back-test results on that robot.

Meta-Trader - Weekly 'bots update - 5/15/2010

Welcome back Meta-Traders and forex fans.

Here's a weekly update on Forex robots i'm following.

In terms of the week's gainers, God's Gift EUR/USD was the winner picking up 58 pips putting it up about 9.6% on the year.

Megadroid Demo had a solid week picking up 25 pips on a pair of trades. The second order picked up 15 pips which was an unusual amount considering it usually takes a 10-pip profit. I checked around and couldn't find any reports in MT4 showing the "Magic Number" for the orders historically. I was thinking perhaps it was a Megadroid S2 symbol versus an S1 signal. I found the detailed report showed the 'Comments' for orders, but no Magic Numbers. If anyone knows how to extract Magic numbers for past orders, please leave me a comment.

Megadroid Live also had a decent week and is now back to a new equity high. I'm slightly concerned that its still trading 0.20 lots because, since its back to an equity high, it should drop out of 'Recovery Mode" and return to its regular 0.08 lots. We'll see what happens this coming week.

God's Gift GBP/USD was idle this week but remains up an impressive 18.1% for the year.

Check back later for 10-year back test results for Forex Maximizer - a new robot announced this week as well as 10-year back test results for Megadroid Pro - which wsa offered as a bonus with a purchase of Forex Maximizer.

Saturday, May 8, 2010

Meta-Trader - A wild week in Forex

Welcome back Forex fans and Meta-Traders.

This past 5 days had to be one of wildest weeks in recent memory for the Forex and financial markets in general. EUR/USD tumbled 580 pips to a one year low on higher daily ranges than we've seen in over a year. US Equity Markets tumbled and nearly wiped out year to date gains.

So how did our forex robots make out?

God's Gift GBP/USD had a spectacular week, picking up 150 pips on single short GBP/USD trade. It would have made more except it has a 150 pip take-profit. In any case, this robot gained 11% on the week and is up about 18% year to date.

Megadroid Demo had a solid week and picked up its customary 10-pip take profit like clockwork on Tuesday, Wednesday and Thursday. Conditions were were good for Megadroid although the take profits seem kind of small in this type of market. Megadroid demo leads the pack up 20.1% for the year and is holding true to my 1% a week mantra.

Megadroid Live continued to recover from recent drawdown and picked up 10 pips which was doubled in terms of return because it remains in "Recovery Mode" trading 0.18 lots instead of the usual 0.09 lots.

God's Gift EUR/USD picked up a half percent on the week and is up about 3.7% on the year.

To conclude, the Forex robots, which are trading less than 1% of my real money are out-performing the equity markets which are trading the bulk of my funds. To put things in perspective, though, i've been trading equities for over 25 years, and i've only just found out about Meta-Trader in the last 6 months!

So for now my plan is to continue to learn and observe and get a whole year of Meta-Trader under my belt before I start to commit any more serious funds.

Check back later for some cool developments in the land of the Meta-Traders.

Tuesday, May 4, 2010

Meta-Trader - Candle Weight indicator

Welcome back Meta-Traders.

This morning I was just staring at this daily chart of EUR/USD trying to figure out what it was telling me - aside from the fact that its going down of course!

Then it occured to me the candles themselves have a weight. Big dark candles are heavy and big white candles are light. Put another way, black candles have a negative value, and white candles have a postive value. The bigger the candle, the bigger the value.

Then it occured to me that if you just add up these values over the past say 14 bars, you come up with the candle weight indicator. The result represents the total amount of movement over the past 14 bars as measured by the sum of the difference between the Close and the Open for the lookback period.

Note this value is closely related to the total range of the pair for that period - except it does not include candle highs and lows and also does not include the gaps.

There are a few things that I like about this as a trading indicator:

- Its always negative when the market is going down, and postive when its going up (at least for the selected timeframe and lookback)

- It has no fixed range - on the contrary, its range depends on range of the underlying pair over the lookback period.

- It switches from postive to negative and back again smoothly by taking the vote of all the candles equally.

A few minutes later, I had the Candleweight indicator - which is now uploaded to my Yahoo group under the name CandleWeight.mq4.

This indicator is really the height of simplicity so it appeals to me at a fundamental level, particularly because its completely price based and prices never lie - not for an extended period of time anyway.

A few minutes after that, I threw some logic into an EA (called the CandleWeightEA of course) that goes long once the CandleWeight value crosses up through some constant value, and goes short when the indicator crosses down through some opposite condition.

Then I ran a quick optimization on the Hourly charts from January 2009 and I found some broad areas of profitability. Before I get too excited, I realize this system will probably perform like a lot of other trend followers, never miss the big move, but suffer some hefty drawdown while the market sloshes around sideways.

Anyway, stay tuned for the Candle Weight EA and results of back testing and optimization.

Sunday, May 2, 2010

Meta-Trader - Engulfing Candles indicator

Welcome back Meta-Traders.

Indicators are an amazing thing in Meta-Trader.

Whatever conditions you dream up can be turned into an indicator that either calculates a value and paints a line or draws an arrow, or display some other type of object.

Drag the indicator from the navigator view onto a chart, and the indicator will be calculated on the chart. The indicator on the left draws a red arrow above the bar on a "bearish engulfing" candle, and a blue arrow below the bar on a "bullish engulfing" candle pattern.

Recall that bullish engulfing condition occurs when the real body of the candle exceeds or "engulfs" the prior candle.

Indicators are very easy to code. Start with somebody elses indicator file. Or you can use this indicator which has been uploaded to my Yahoo group under the name EngulfingPattern.mq4.

If you want access to my Yahoo group, drop me your e-mail via a private message via Twitter at Back to the coding.

First you declare an array of doubles for each indicator to be calculated. In our case, we need 2 arrays:

//---- buffers
double LowerLine[];
double UpperLine[];

Each array position simply holds the indicator's value for that bar. In the case of drawing arrows, the array position contains the approximate price value where the arrow should be drawn.

Next, in the Init() function, calls these functions to associate the array with the on-screen indicator. It also sets the style of the indicator (Line or Arrow):

//---- indicators
SetIndexStyle(0, DRAW_ARROW, EMPTY);
SetIndexArrow(0, 233);
SetIndexBuffer(0, LowerLine);

SetIndexStyle(1, DRAW_ARROW, EMPTY);
SetIndexArrow(1, 234);
SetIndexBuffer(1, UpperLine);

Then inside the start function, use this code:

/* Calculate range for arrow drawing */
for(nCount=i; nCount <= i+9; nCount++) {
dAverageRange = dAverageRange + MathAbs(High[nCount]-Low[nCount]);
dAverageRange = dAverageRange/10;

/* Check for bearish engulfing */
if (Close[i] < Open[i] && Open[i] > MathMax(Open[i+1],Close[i+1]) && Close[i] < MathMin(Open[i+1],Close[i+1])) {

UpperLine[i] = High[i] + dAverageRange*0.3;

/* Check for bullish engulfing */
if (Close[i] > Open[i] && Open[i] < MathMin(Open[i+1],Close[i+1]) && Close[i] > MathMax(Open[i+1],Close[i+1])) {
LowerLine[i] = Low[i] - dAverageRange*0.3;

The code on the top simply calculates the 10-bar average of the range for the sole purpose of calculating how far the arrow should go above or below the price bar. The code below checks for the 3 conditions required for a bullish engulfing pattern:

Higher Close
Real Body top is above prior real body top
Real Body bottom is below prior real body bottom

I also coded my favorite EARangeBands indicator, but i'll save that for another post.

So if anybody out there is interested in have me code an indicator, just leave me a comment and i'll take a crack at it. So let me know some indicator ideas and if they have some promise, we can code them into an EA and see how it backtests.