Thursday, December 30, 2010

Meta-Trader - Watukushay #6 Review

Welcome back Meta-Traders.

This is 6th in our series of reviews of the systems found on Asirikuy. In this review, we tackle Watukushay #6, also known as Quimichi.

Quimichi is a word in Nahuatl - the language of the Aztecs in Mexico - which means mouse. I think the name applies since the system earns un-impressive returns on individual pairs, yet gains its power by replicating its affects across multiple pairs. To analogize to nature, you might be able to trap an individual mouse, but as a group, they are hard to defeat due to their persistence and their sheer numbers.

Quimichi is a trend-following system that runs against the daily charts. The system was designed in part to improve on the performance of Ayotyl – which is Daniel’s implementation of the Turtle Trading system made popular by Richard Dennis and William Eckert back in the early 1980’s.

Quimichi runs on the daily charts on pairs EUR/USD, GBP/USD, USD/CHF, USD/JPY, AUD/USD and NDZ/USD. The parameters and rules are exactly the same for each pair which says something for the robustness of the logic. Like all Daniel’s system, the logic is simple and can be explained in a few bullet points:
  • Take a long position once the pair makes a close above the highest close for the past X days

  • Take a short position once the pair makes a close below the lowest close for the past X days

  • Stop out values are Y times the Average True Range

  • Take profits occur when the market goes Z consecutive days without closing at a new trend high or low. This may shake the system out of a long-persistent trend early, but the entry logic will re-enter on a subsequent breakout to a new X-day high or low.
This logic is an improvement over the Turtle system because it uses the daily close instead of the high and low price so it’s less likely to get drawn in by an intraday price spike. Also, the system takes profits more quickly than turtle system which would require a close below an N day low or high before exiting.

What about performance?

Given the large number of pairs, I relied on the back-tests posted on Asirikuy rather than running my own. The attached table shows that the average of the AMR (Average Mean Return) across the 6 pairs return just under 3% while the average of the Maximum Drawdown comes to just over 8%. That is not a favorable result and shows that (at least on an individual pairs basis) the system earns about $3 for each $8 in drawdown.

When combined into a portfolio, the 6 pairs perform a lot better and show a combined AMR of 18% with a Maximum Equity Drawdown of 19.4%. Again, the system earns less than in return than it suffers in drawdown. This result does not compare favorably to other systems on Asirikuy such as God’s Gift, Watukushay #2 and Teyacanani which return closer to $2 for every $1 in drawdown.

While the system may not compare favorably based on profit to drawdown, it compares favorably on other dimensions. Its simplicity gives it increased robustness which means increased likelihood that it will continue to work in the future. A few other points:
  • System trades on nearly every major currency pair and is therefore less vulnerable to any major change in the Forex market such as restructuring of the European Monetary Union.
  • System trades infrequently and with very large stops and take-profits and is therefore less likely to be affected by broker dependencies and execution related issues. The contrasts particular with my own EA FX-Regression which (according to simulations) earns $2 for every $1 in drawdown but is subject to execution issues and broker dependencies.
  • System uses the same parameters on every pair offsetting the potential effects of curve fitting on individual pairs.
Overall, Watukushay #6 is a fine addition to the Asirikuy arsenal of trading systems. However I’m going to take a pass on this system because there are stronger systems on Asirikuy competing for my investing dollar.

Tuesday, December 28, 2010

Meta-Trader - FX-Regression Portfolio analysis

Welcome back Meta-Traders.

This chart shows shows the combined 10-year portfolio simulation for FX-Regression on EUR/USD, USD/CAD and USD/CHF. The chart was created with the Profit and Drawdown Analysis tool from Asirikuy.

Here are the key stats:

Arithmetic mean return (AMR%)
49.96 (average yearly return)

Maximum drawdown %: 32.85 which is pretty high.

Maximum Drawdown period, 676 days without a new equity high. That's a long time to stick with a system without making a new equity high

Pain Index is 6.6 on a scale of zero to 10.

Win to loss ratio 3.83 (Number of wins / number of losses)

Profit factor - 1.14 Gross profit / gross loss

Total number of trades 5187

Maximum consecutive winning trades 39

Maximum consecutive losing trades 6

Maximum consecutive winning months 7

Maximum consecutive losing months 4

Maximum consecutive winning years 8

Maximum consecutive losing years 1

I need to do some more work with this tool to know how this portfolio compares to the other portfolios that have been designed as part of the Atinalla portfolios. I'm particulary interested in comparing it to Atinalla #1 and #3. Check back later for that.

Saturday, December 25, 2010

Meta-Trader - FX-Regression

Welcome back Meta-Traders.

Here's wishing you a happy winter solstice and warm greetings of the season.

Not much happened in my live or demo accounts this past week, so instead i'm going to talk about my own EA called FX-Regression.

Since starting my automated trading with Meta-Trader about a year ago, i've coded quite a few expert advisors. But all of them have ended up on the scrap heap and none have been worth of risking any real funds. Now, I finally feel like i'm onto something and i'm ready to share my findings.

The logic of the system is incredibly simple and goes something like this:

- Wait until a particular hour of the day which is at the end of regular active market hours. Trading days are Monday through Thursday, no trading Sunday or Friday.

- Place a sell limit a certain number of pips above the market a buy limit a certain number of pips below the market. The number of pips in each direction is fixed and is the same amount in either direction.

- Once one of the orders is filled, cancel the opposite one.

- If neither order is triggered within an 8-hour period, cancel both orders and start again the next day

- Take profit is when the price returns to its original value when the orders were placed.

- Stop loss pips is just under 3X the take profit value meaning the system can loose 1 out of 4 times and still be profitable.

This screen shot shows some of the typical action. In the first case, the 8 hours expires and the orders go unfilled. In the second case, the trade triggers in the first 2 hours then stays open for 15 hours before hitting the take profit. In the third case, orders are placed, one is filled and the take profit occurs within the hour.

One thing I like about this system is that it benefits from sloppy, ranging, directionless market action which is what the market does most of the time. How can I say the market does this most of the time? Based on back-testing:

- When trading EUR/USD - the system is profitable 76.8% of the time

- When trading USD/CHF - the system is profitable 77.2% of the time

- When trading USD/CAD - the system is profitable 84.95% of the time!

What about performance?

Over a 10-year backtest, on EUR/USD the system averaged over 14% per year with 2 loosing years and an average drawdown of about 14%. Risk per trade was roughly 5% of the account. The system performed even better on USD/CAD and USD/CHF, see backtest results below. A few other points:

- The system does have long periods of drawdown and is by no means a holy grail. But it does provide a statistical edge that can be exploited.

- The system takes losses when the pair gets into a strong trend and therefore is a good compliment to trend-following systems.

- Performance can be improved by avoiding trading when a strong trend is in place. I implemented one such trick in the presets file for EUR/USD to get the performance shown above.

- Tests were performed using Alpari data and fixed spreads based on recommended values from Asirikuy.

I suspect that the system will perform best when trading all 3 of the above pairs in a single account in a portfolio fashion. Before I can assess the performance of the system as a portfolio, I need to learn how to to and use the Profit and Drawdown Analysis tool by Gabor as found on Asirikuy. That will allow me to more fully understand the drawdown behavior of the portfolio and determine adequate risk levels before I start trading it live.

I have uploaded the FX-Regression EA and presets files for the 3 pairs above to my Yahoo group at

Wednesday, December 22, 2010

Meta-Trader - Atipaq Review

Welcome back Meta-Traders.

This is 5th in our series of reviews of the systems found on Asirikuy. In this review, we tackle Watukushay #5, also known as Atipaq.

Atipaq is a word in Nahuatl - the language of the Aztecs in Mexico - which means Powerful. It’s powerful because the system can be run on multiple currency pairs in a portfolio fashion.

Here’s the logic:

  • Once per day at a fixed time, calculate a box which is measured by the range of the prior N hours price action.

  • Examine the range of the box. Discard boxes that are either too small or too large with respect to the ATR.

  • If the box size passes the above criteria, put a buy stop above the market at the top of the box, and a sell stop below the market at the bottom of the box. If the orders are not hit within Z-hours, orders are cancelled and the process repeats the next day.

  • Take profit is Q-multiple of the box typically 3 or higher so that TP is 3 times the box size so when the system wins, it will make up for 3 losses.

  • Stop loss is the bottom of the box for buy orders, top of the box for sell orders.
Basically, the system is looking for to enter new orders early into the active market session based on a breakout of the range created by the prior session’s price action. The range has to be relatively narrow, so we are waiting for a price to consolidate prior to the breakout. The startup time, and the other variables are different for each pair, and Daniel has tested and optimized to find the best startup time for each pair. The pairs I tested (and I suspect are the best) are USD/CHF, GBP/USD and USD/JPY.

USD/JPY is a bit of an exception, since the recommended settings put a sell order above the market, and a buy order below. In this case, the system is being used to fade breakouts and buy selloffs. I like this option because it benefits from sideways action, which the market does much of the time.

The correctness of the breakout hour is very important. Daniel warns that incorrect settings can cause the system to lose money, and I have witnessed this first-hand. Getting the breakout hour setting correct is a real mess with multiple brokers and daylight savings time, etc, etc.

Fortunately, Daniel provides a tool which feeds the correct time to the EA’s from a log file created from an Alpari Demo account. The only annoying thing about this is that demo accounts on Alpari expire once a month, so this will require once a month demo renewal. Not a big deal in the larger scheme of things, but worth mentioning.

One interesting thing about this system is that once positions are open, they can be open for many days or even weeks. Meanwhile the daily order setting continues, so it’s possible that multiple positions can be opened at once. There is an NFACompliant setting that will prevent the system from going long and short the same pair at the same time.

What about performance?

Over a 10-year period, USD/CHF turned $216,000 which is about an 8% annual return. Not spectacular, but that is trading 0.5% risk (one half of 1%) and drawdown is low at -3.6% drawdown. As shown on the left, results for GBP/USD and USD/JPY as pretty solid as well. Where this system really shines is trading it on a portfolio approach, where multiple pairs are traded in a single account in a portfolio fashion. Daniel makes a very compelling case that this system really shines when traded as a portfolio.

I will be trading Atipaq as part of the Atinalla #3 portfolio starting in early 2010.

I have uploaded the 10-year back-tests for the 3 pairs mentioned above to my yahoo group at

minus the parameter settings.

Monday, December 20, 2010

Meta-Trader – Teyacanani Review

Welcome back Meta-Traders.

This is the 4th in our series of reviews of the systems found on Asirikuy. In this review, we tackle Watukushay #4, also known as Teyacanani.

Teyacanani is a word in Nahuatl - the language of the Aztecs in Mexico - which means “leader.” The name comes from the fact that the author considers this to be the best of all the systems on Asirikuy. And based on the back test and live test results, he appears to be correct!

The development of this system traces back to Watukushay #2. Recall that Watukushay #2 is based on a 3 bar candlestick pattern called “Three white soldiers” or “Three black crows” its bearish equivalent. The author was looking for something simpler that would trigger more quickly than the 3 bar pattern as sometimes a significant price move has already developed by the completion of the 3 bar pattern. What he came up with is the height of simplicity and is based on a 1-bar price pattern.

Unlike my other review of systems on Asirikuy, I cannot reveal the specific details of the logic. The author considers them to be proprietary but they are covered in a video which you get as part of your membership to Asirikuy. You also get the source code for the system which you can use to unravel the logic.

What about performance?

In a 10-year back test, the system turned 100K into $226,600. That comes to a 7.72% annual return which is less than spectacular. But wait, that’s only with 1% risk. Up the risk factor to 3 and 100K turns into over $1,017,179! Now that’s more like it and done with only a maximum of 17% drawdown!

A look at the back-test for 10 years on EUR/USD shows 10 straight winning years with an average drawdown of -3.70% with an average annual gain of over 10%. That means the system returns about $3 for every $1 in drawdown. This compares favorably to Watukushay #2 and God’s Gift ATR which both return about $2 for each $1 in drawdown.

Daniel also runs Teycanani on other currency pairs USD/CHF, GBP/USD, AUD/USD and NZD/USD. Backtesting shows that the system did not perform nearly as well on those pairs as they did on EUR/USD.

In terms of live results, Teycanani is performing very well (in the 25-31% range) year to date on the EUR/USD. Live results from the other pairs are all negative except for USD/CHF which is slightly in the positive.

I have uploaded a 10-year back test results (minus the parameters section) to my Yahoo group at

I will be running Teyacanani against EUR/USD in at least 2 portfolio accounts live starting in 2011.

Check back later for an updated on work on my own EA called Fx-Regression.

Saturday, December 18, 2010

Meta-Trader - Droid Takes a Dive

Welcome back Meta-Traders.

Well after almost a year of live trading, Megadroid Live gave back all of its year-to-date profits (about 24%) in one short evening. Its depressing to see an entire year's worth of earnings evaporate so quickly But I knew it could happen and giving back profits is part of the process. Meanwhile the demo account continues to chug along and got out of this particular trade with a 1-pip profit!

One point worth making is that much of the action in Forex is just stop-running. I watched a video last week about how the market makers go through a daily cycle of letting stops accumulate above and below the market. Then they swing the prices around to take out the stops. And once a set of orders accumulate at a certain level (away from the market) its exponentially more likely that the market will go there. Take a look at this chart of my Megadroid trade. The market kept on going up and up until my stop was taken out and magically, that was the top of the move!

Enough whining about this setback, how did our other robot's make out?

It was a pretty good week for the portfolio systems at Asirikuy. Atinalla #3 had a week picking up about 4% and is now up about 6.5% since starting the demo back in mid-November

Atinalla #1 live finally came into profit after being down as much 3% since starting live trading on November 12th. The star trade for the week came from Teyancanani which picked up nearly $100 on a single trade. Watukyshay FE chimed in with a few winners as well, but gave those profits back with a larger loss later in the week. The system went out out short on EUR/USD on 2 of the 3 systems, which did not trigger in my live account due a platform crash. I'm not too concerned since trend trades taken on Friday's can easily get thrown back early next week.

God's Gift Duo continues to cycle lower in lackluster trading and is now down -1.67% since starting trading live back on October 19, 2010.

So here's what I learned from this week's experience:

- A high winning percentage doesn't mean anything of the risk/reward ratio is skewed
- Martingales result in nice smooth equity curves, but when they crash, they crash hard!
- Diversification is key!

I'm going to make a few adjustments to my robot's portfolio as a result of this experience and report back on that. Also, i'm done with my regular job for the remainder of 2010 so look for more frequent posts in the next 2 weeks.

Enjoy your Saturday.

Saturday, December 11, 2010

Meta-Trader - Flakes are flying

Welcome back Meta-Traders.

We had our first snowflakes last evening and winter is upon us in the Northeast USA. But the mood is bright and the holiday season is officially upon us. But its been a great 2010 and we have much to be thankful for. So what about the robots?

It was a week for the scalpers. While Megadroid Demo was idle this week, Megadroid Live came ripping back and picked up about 3.6% for the week. FXDD Live Twin Scalpers had a good week recovering from a -4.34% drawdown to close the week +0.19 since its start of live trading back on November 4th.

The Asirikuy systems didn't fare as well. After a brilliant last week, my Atinalla #1 live instances went long EUR/USD late in the cycle just to get whacked as EUR/USD sold off early this week. The other Atinalla #1 instances on Asirikuy took some trades later in the week which were not triggered on either my demo or live instances. It was just as well since they were mostly losing trades.

Atinalla #3 was idle this week while one of the instances on Asirikuy has an open trade with about a 2% profit. God's Gift Duo Live had a series of losing trades this week, sending it into the negative, but only by a small margin. These trades were replicated in other Asirikuy accounts more or less.

In terms of robot's development, I started trading Forex Regression in a demo account this week. I'm not pleased with the results and I think I have some technical problems to work out before I share the results.

I have the last 2 weeks of the year off from my regular job and i'm looking forward to getting some good coding and research done during that time.

Check back later for a review of Teyacannai, aka Watukushay #4. Have a great Saturday.

Friday, December 3, 2010

Meta-Trader - Wow, what a week..

Welcome back Meta-Traders.

After a few rocky weeks, we finally made some good money in the land of the robots this past week.

First up, is Megadroid Demo which hasn't had a single loosing trade since the demo was restarted back on 9/1/2010. This account continues to defy gravity, and is now up an amazing 56.9% for the year.

Demo Droid's sister account Megadroid Live recovered somewhat from some recent drawdown and picked up +3.7% for the week. At this point, its up +19.5% for the year but is still in "recovery" mode. This means the lot size is doubled trading roughly 20% of the account equity per trade, and is therefore subject to further steep drawdown until it takes out the old equity high just above +30%.

A bright spot of the week was Atinalla #3. After starting this demo account back on October 10, 2010, this account has been in drawdown from the start and at one point was down about 6%. This week it finally came back into the black and is now up +1.15%, +2.4% if you consider open trades.

Another bright spot was Atinalla #1 Live which I started trading live back on November 16th. This account went into drawdown immediately and was down as much as 3%. It took some good profits early this week, then got chopped up in a few trades as the week went on. It went into Friday's Non-Farm Payroll report long EUR/USD and that one trade put it in the black. Even though the account shows down -2.8%, its up about +2.3% if you consider open trades.

God's Gift Duo Live had a similar experience and had 5 trades this week, 3 losers and 2 winners, but still came out on top up +68 pips for the week.

Finally, FXDD Twin Scalpers went straight into in drawdown from when I started trading it back on 11/9/2010. This system would be up if I dropped Scalper X (EUR/CHF) and just traded the Megadroid EUR/USD. We'll see how it finishes the year before deciding how to go forward.

I'm finally getting a taste of trading the Asirikuy systems live. Its an altogether different experience than trading the scalpers. The table on the left summarizes it nicely. I think there's something to be said for both styles.

The fact that the market ranges much of the time benefits the scalpers. But we do see some pretty good trendiness also. Take a look at EUR/USD which at one point was down about 2.3% for the week, then turned around and rocketed higher making back those losses and then some.

Trading the trend-followers is much more of an exercise in faith because you have to believe they will come back, and that's where the research comes in. I recall a story about legendary trend follower John Henry who started trading a system which was still in hole after 13 months of live trading. But he stuck with it and it came back and showed many years of profitability after that.

With only a few weeks left in 2011 things are coming together nicely. Things get really slow around the holidays, so in a few weeks we're going to wish we had as much action as we saw this past week.

Check back later for my next review in the Watukushay review series where we will cover Watukushay #4 (aka Teyacanani) which is arguably the best system up on Asirikuy

Also, more to come on my own EA called FX-Regression.

Enjoy your weekend.