Welcome back Meta-Traders.I was going through some Forex marketing material and saw this graphic and just had to use it for a blog post.
Why is it we all spend so much time looking for the Holy Grail in Forex. Is it a lost cause? Does it even exist?
I suppose it depends on your definition of the Grail. For me The Holy Grail is a system that makes 30% to 60% per year on average with no more than 25% to 30% drawdown - or loss of equity from peak to trough. Is that possible? Absolutely!
In my quest, I've come across a new system that I will call "System Q". This EA seems to fit the bill with these key characteristics:
- Regular, Active Daily trading of EUR/USD on M5 timeframe
- Reasonable Take Profit and Stop loss values about 20 pips on average
- Trades during active hours, not just during Asian Scalper times when spreads are widenened
- No Martingales - trades fixed lot sizes which grow or shrink with account size
- Excellent Year to Date back-test results (+121% with -15% Max DD)
- Excellent 7-Year back-test results (Avg +181% with Avg -21% Max DD). Robot would not test prior to 2003.
Also, i've run a 2-week forward demo test with results here System Q1. The vendor also sells an GBP/USD M5 system that has a lower returns and higher risk, so I took a pass on that. They also just recently started selling a AUD/USD system which I have yet to evaluate.
So I will be following this system going forward with an eye toward going live shortly. Also, I will reveal the names of the system to anyone who joins my Yahoo group. Just send a private message at http://twitter.com/tcxmon.
Next, my good buddy Daniel Fernandez has made some excellent strides recently over at Asirikuy. I've started tracking the Atinalla #1 portfolio which deserves a post in itself which I hope to get to later this weekend. Also, DF is in the process of unveiling Watukushay #5 which looks to be the most promising of all his systems.
Granted, DF's system provide an entire level of back/live testing consistency, full revealing of logic, source code disclosure (etc, etc) which make comparison of his systems an Apples and Oranges exercise versus commercial EA's such as System Q.
Finally, live trading this past week was such a non-event, its hardly worth discussing. The Megadroids and Scalper X's barely traded, and appear to be almost completely invalidated by spread-widening. Scalper X lost 2.5% on Monday, then recovered about 0.6% of that loss to end up down about 1.9% on the week.
Overall, i'm still in decent shape on my live and demo accounts. I'm kind of haunted by the fact that both accounts seem to have been capped at 20%. Since I know the brokers trade against me, I wonder if they will allow any of my accounts to make more than 20% on the year.
Can they widen the spreads with System X even during regular market hours? Will the brokers widen the spreads for me specifically and not the rest of the their customers? I don't doubt they are capable of that and who knows what else.
Check back later in the weekend for a post on Atinalla #1 and enjoy your weekend.
Hello Chris,
ReplyDeleteThank you very much for your update and kind words about my work and systems :o). Certainly I have put a lot of work into Watukushay No.5 to make it a great contribution to Asirikuy .
I also wanted to give you a strong word of warning here. I have seen hundreds of systems with the description you have posted and none of them have ever lived up to their expectations. The system's simulations seem to greatly exploit one minute interpolation errors so be VERY careful. Remember that simulations in such a low time frame are NOT reliable since data feed differences and interpolation errors on indicator values in this time frame can mean that results in the LONG term in reality could be total opposite to the backtests.
I know I have mentioned it several times Chris but you should pay close attention to the reliability of simulations. There is no system that brings a 180% yearly profit with a 20% maximum draw down, the market does not allow such mechanical exploitation. Also remember that many sellers have been found to include code within their systems to bias the backtests (eliminating trading over certain losing periods in hindsight).
It seems like this is another round of my endless battle with backtesting illusions and their effect on new traders in automated trading. An obsession with scalpers and their unreliable simulations that always ends the same way (Sigh). Well, I always hope it ends well but from all my years of experience I haven't seen it happen the first time !
Oh well, I think I have made my points enough in your blog so I won't be making emphasis on simulation reliability any longer :o) However bear in mind that I take the time to write this long comments because I care about your success in automated trading.
Thank you very for for your update Chris :o) I will be looking forward to your post on Atinalla No.1
Best Regards,
Daniel Fernandez
PS : Thank you very much for the "good buddy" remark :o)
Thanks for the update Chris. And Daniel, its always nice to hear your voice of caution and concern, you do make it easy to call you "good buddy", and in the future (next year) I may just join your group as this year I am putting myself on my own and I am trying to be more than the "ferret", I think it was in your post, and come out with a positive gain this year. It has been a great year for learning and understanding, and more and more I see Daniel's points of view on trading quite clearly.
ReplyDeleteNext year is a year in which I plan to take my hopefully new found patience, and knowledge and set up a portfolio of EA's. Right now my list sits at about 2 EA's, one of them the Gods Gift 7c (not sure which pair maybe both), and my Tiger Tail. The more I hear about the actions brokers take against scalpers the more I am hesitant to add a scalper to the portfolio.
As Daniel has explained directly and indirectly through his posts I am starting to really see the reality of EA's not being the kind of thing to pull +100% with little draw down %. There may be one or two out there, but they would be well kept secrets in my thoughts. (Could you imagine making 100% a year!) I am guessing a realistic EA that is good can pull at least 20% a year to 70% a year. I started my EA adventure thinking it might be possible to pull 130% with Tiger Tail, only to find that it may be more realistic around 20% to 60%. Even my new project EA mover3, If I look at each year individually you will find it only pulls 12% up to 70% in a year. At any rate I don't want to discourage your new find Chris. Give it a go, and see what it does and what you find, I am always interested to know the results. (If you ever did find an EA that pulled over 100% a year and 5 or so years went by with this happening in my live account, I might just fly out to New York and give you a pat on the back :))
Chris and Daniel, not to sound too cheesy, I am happy to call both of you my trading "good buddies" :)
Thanks for your posts and comments.
JT
Hi guys - Thanks for all the great comments.
ReplyDeleteDaniel - I really do understand your points and I appreciate your concern about my success in Forex Trading. I guess i'm just like a kid in the sense that I have to find things out for myself. Otherwise, how do I really know what what's really possible in Forex Trading?
Like it was said in 'Reminisciences of a Stock Operator', "You never know until you bet."
As usual, i'll keep the dollar amounts small until the system is a proven winner.
JT - As you know my goal is 30% to 60% per year and I firmly beleive that's possible. I was going through the systems in Asirikuy the other and some of them clearly are capable of producing returns in that range.
Let us know how your doing with Tiger Tail or the Mover3. Post an mt4live statement or something - give us a hint!
Take care guys and talk later,
Chris
Thanks for such a nice update about forex.I have update my knowledge.
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