Tuesday, November 30, 2010

Meta-Trader - Watukushay #3 Review

Welcome back Meta-Traders.

This is the 3rd in our series of reviews of the systems found on Asirikuy. In this review, we tackle Watukushay #3, also known as Kutichiy.

Kutichiy is a word in Quechua (the language used by the Inca and related tribes in South America) which means “answer.” The name comes from the fact that the author considers the system to be the answer to an ongoing search for a weekly breakout system that adapts to the market – versus systems based on fixed breakout, Take Profit and Stop Loss values.

Like all Daniel’s systems, the logic is relatively simple and easy to explain. The system waits a certain number of hours after the Sunday open then enters a buy stop above the market and a sell stop below the market. The distance between the market and the stop orders is set as a multiple of the “box size”. The box size is determined by the range (High-Low) of the preceding X number of bars. Since the system bases the box size on the actual range of the pair, the box size will vary by week. Take profit and stop-loss values are set at a multiple of the box size.

Position sizes are set based on the risk setting (which defaults to 1) and are adjusted for the box size such that the system will make or lose roughly the same amount for each trade as a percentage of account size.

Once stop orders are entered, the system will cancel the orders if they are not filled as of the close of trading that week. Open positions are left open until they hit either the Take Profit, or the Stop Loss which can occur anywhere from days to weeks after the orders are placed. As a result, the system can have multiple orders open at the same time in the same or opposite directions. This means that the system (when trading as designed) is not NFA-compliant since NFA prohibits ‘hedging’ or being long and short the same pair at the same time. The system does have an NFA compliant setting which allows it to be traded under NFA rules, but that affects performance as discussed below.

What about performance?

When trading with NFA=False (Hedging allowed), the system returned approximately 13.5% a year over a 10-year period with an average drawdown of about -12.0%. Performance could be improved by increasing the Risk level, but that would also increase drawdown proportionally.

When trading with NFA=True, the system returned about 7.5% per year, but the maximum drawdown for the period was -19% which was the same as the maximum drawdown for the NFA=False system.

On the basis of performance, Kutichiy does not compare favorably to both Watukushay No 2 and God’s Gift ATR which both earn close to 20% per year with average drawdown close to -10%. Both those systems are traded with a higher risk level, but manage to return about $2 for every $1 of risk.

I should mention that Kutichiy is designed to work on many different pairs and contains a setting to fade breakouts as well as buying them. Daniel mentioned that one of his users designed a robots portfolio where one trades Kutichiy on USD/JPY. I tested a few pairs aside from EUR/USD and got mixed results.

All that said, Kutichiy is an interesting addition to the Asirikuy arsenal of trading systems. The most important additions I believe are the following:

  • Breakout-based systems should trigger at certain fixed hours of the day and the breakouts should be based on the price action itself. The systems can either buy or sell the breakouts, and Kutichuy has an option for either approach.
  • Once open, trade closing should be based on conditions which are not the mirror images of entry conditions both on time and price. SL and TP values are dynamic in the sense that they change from week to week and trades don't necesarily need to be closed every week.

At this point, my robot’s portfolio for 2011 is nearly formed and some of them have already started live trading. I'm not reporting on them just yet since I would like to build up some trading history first.

Check back later for details on that and have a great week!

Thursday, November 25, 2010

Meta-Trader - Happy Thanksgiving!

Happy Thanksgiving to all my readers!

Its been a great year in Forex and particularly the equity markets and we have much to be thankful for.

With a day off from work, we have time to kick back, spend some time with the family, and of course work on developing long-term profitable expert advisors!

I've been hard at work on a system i'm calling Forex Regression that is based on logic from Fish Forex commercial EA. Here's a few key stats to whet your appetite:

  • System has profitable trades nearly 80% of the time!
  • Ten-year back-test shows an average annual return of 15.6% with max drawdown of 19.8%
  • System is up 19% for the year with only 10% drawdown!

Still, i'm not satisfied with the system in its current form and i'm looking for opportunities for improvement. Once i'm satisfied it it, i'll make it available at no charge to members of the million dollar trading room, and on my Yahoo group.

Check back for a review of Watukushay #3 (aka Kutichy) and enjoy the holiday!

Friday, November 19, 2010

Meta-Trader - Boot stomped

Welcome back Meta-Traders.

I took a bit of a beating in the forex market this week. But i've had a pretty good year so far in both equities and Forex and drawdown is part of the game. So let's do the numbers.

Megadroid Live took a big it. Recall from last week's post that was back above 30% for the year and just short of a new equity high. The lack of a high put the 'Droid in "Recovery" mode which means it trades double lot size. Well it did so and took a 70-pip loss times 2 or about 14% of the account in one shot. This set the account back and took back about half of this years profits. Even so, it remains up 17% for the year and we'll see what happens next.

Megadroid Demo took no trades this week and remains up over 50% for the year. Note that MD Demo is running a different version of the 'Droid and on a different broker than my live account which may account for some of the differences.

The beating continued with Atinalla #1 which lost -182 pips after getting drawn in on a short EUR/USD position early in the week which reversed as EUR/USD moved higher later in the week. This was also my first week trading Atinalla #1 in my new live FXDD account. That account lost $54 or about 2.7% on the week.

Atinalla #2 took a long GBP/USD and short USD/JPY early in the week and are still with those trades. Those trades went positive as the USD weakened later in the week against the majors.

Finally, God's Gift Duo Live started with week with a -95 pip loss and slowly zig-zagged its way back to end down about -35 pips.

In the other half of my new FXDD live account, I traded the Megadroid, ScalperX combination. This account also lost about -2% on the week. Comparing this account to Forex.com, i'm finding that the spreads are actually worse than Forex.com. FXDD advertises a fixed, 2-pip spread in EUR/USD, but apparently that is only good during active hours and it becomes 4 pips after hours. The spread on EUR/CHF is even worse and I saw it as high as 7 pips.

Overall lessons learned for the week are as follows:

- EUR/CHF and EUR/USD have a strong positive correlation, and trading the scalpers as a pair doesn't help to diversify the account

- EUR/CHF is not an ideal pair to use with a scalper since the spreads are much wider than EUR/USD

- Trading 40% of my accounts with scalpers is probably not smart as they are likely to all draw down together.

Overall, my journey to profitability in Forex in going to be much lumpier than I expected. Stay tuned for the Watukushay #3 review and have a great weekend.

Sunday, November 14, 2010

Meta-Trader - Join our Trading Room

Welcome back Meta-Traders.

Well I promised you an interesting opportunity and here it is.

For over a year now, I have been associated with a group called the Million Dollar Trading Room. Our mission is to become better traders and share our research and knowledge of Forex trading and technologies.

We meet usually for the Asian open from 7-9 PM EST and a new Goto Meeting ID and phone number are provided via e-mail. We meet Sunday - Thursday and sometimes for Non-Farm Payroll news release.

We share templates, trading ideas, EA Test results and whatever else is available. Anyone can be the presenter and can take over and share their screen and present their results. Due to some member turnover, we have some spots available. There is no charge, but we do collect a small fee to pay the Live Meeting subscription fees.

If you are interested, please contact me private message on Twitter at http://twitter.com/tcxmon. I will reply with an e-mail to which you should send your resume, CV, or short bio describing your education, experience and trading history and what you can provide to the room. If we accept your request, you can join on a trial basis to see if it works for you and the group.

Also, if you are a Forex industry celebrity, and you would like to present to the members on a guest basis, we can arrange to do that and record it for future playback.

So drop a line if you are interested and let's see where it takes us.

Friday, November 12, 2010

Meta-Trader - Bouncing Back

Welcome back Meta-Traders.

It was a week of bouncing back and a nice follow-up to my post 2 weeks back A week of drawdown.

Megadroid Demo topped 50% for the first time this year

Megadroid Live came roaring back from recent drawdown picking up over 6% for the week and is now up 30.1% for the year and just a buck or so off off an all-time equity high. This system has been very easy to trade spending most of the time at equity high with drawdowns short lived. Just before the start of 2011, I will top this account up to $2000 will be 20% of my live robot's portfolio for 2011. More on that in a later post.

Atinalla #1 picked up 67 pips on the week and is up 12% on the year since opening it back at the end of July.

Atinalla #3 picked up a solid 387 pips on the week and is recovering nicely from some startup related issues. This account is still struggling to get back to even.

God's Gift Duo Live had a bummer of a week and dropped -237 pips and has now had 5 straight losing trades. I took a look up on Asirikuy and the results look more or less consistent with other instances.

On the development side, my new FXDD account funding of $4000 came in last week. I started trading it live with the Megadroid/Scalper X combo at 5% risk. It quickly got into trouble and lost about $70 on Monday on a few EUR/CHF trades. But I stuck with it and it made back its losses on the week and closed up $14. I cloned that account with an e-mail to FXDD and sent $2000 from that deposit off to the newly cloned account.

One bummer item was that I was expecting at least a 5% deposit bonus on this cash. I was dissapointed that I didn't get it and I later found out that the bonus promoted on the Trader's Choice FX Webinar was only good for one week. Further follow-up with FXDD showed that the bonus was not active for last week, but a 5% bonus was active this week, and possibly even a larger bonus starting this Sunday.

This was at lost opportunity of at least $200 and possibly even more. So the plan is to see what FXDD offers next week, then possibly clone another account and send another 4K over there just to collect the deposit. At that point, I have the option of closing the other accounts and getting my original deposit back. It may not be worth the effort, but we'll see.

Finally, i've lost interest in the Q-Diamond EA's for now. I need to start another demo up this coming week and see if we can get some interest going on that front.

I've started work on my review of Watukushay #3 (aka Kutichiy) and will have that for you soon.

Also check back tomorrow for an interesting opportunity which is totally different than anything you have seen so far on this blog.

Have a great weekend.

Sunday, November 7, 2010

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.

Friday, November 5, 2010

Meta-Trader - In Fed we Trust

Welcome back forex fans.

It was a huge week of news developments affecting the markets.

The US mid-term elections came on Tuesday and the Republicans took back the House of Representatives as expected. Score one for big business there.

The big news dropped on Wednesday when the US Fed delivered on weeks of speculation that they would create billions in reserves (with a mere book entry of course) to buy government issued debt. This was a major dollar negative and sent USD tanking versus all the majors.

The last shoe dropped on Friday with Non-Farm Payroll when the US Labor Dept reported that the private sector added 159K jobs in October versus expectations of just under 100K jobs added. They also provided upward revisions on prior month's numbers. This put the USD back on the advance and took back all of the dollars losses after the Fed report.

So what does all this mean for our money? Equites ripped higher inflating my stock portfolio about 2.8% for the week. How did our forex robots perform in this news-driven week?

Megadroid Demo and Megadroid Live picked were basically flat and picked up a pip or 2.

Turning in a nice performance was God's Gift Live which closed out a long EUR/USD trade opened just before last week's close for a 1.48% gain in a few days's time. This was a 148-pip gain and impressive given only 1% of the account was at risk. Later it the week, it went long GBP/USD and this trade closed out at about an 80-pip loss which reduced its gains to about 0.68% for the week. Gains were bigger than losses which is a good thing.

Next up was Atinalla No which took a pasting on the week and lost about -4.7%. I opened another demo account against FXDD trading this system, and it lost -7.8% on the week which was rough. But long term profitable systems have periods of drawdown, so this is well with expectations.

Next up was Atinalla No 3. We re-started this account after some parameter adjustments and it lost about -3% early in the week but closed with an 18-pip winner and went out long GBP/USD with a few pips open profit.

On the development side, funding of my new FXDD live account is nearly complete. I setup a new demo called FXDD Demo Twin Scalpers which trade Megadroid and ScalperX at an 0.05 risk level. This is a conservative setting considering we typically trade Megadroid with an 0.10 risk setting. In any case, it picked up about $18 on a $2000 account which is sufficiently close to my 1% per week mantra.

My review of WA FE is nearly complete and to follow. Have a great weekend.