Uneven Strategies Working with Different Profitabilities in Portfolio Building Part One ~ forex trading kaskus

9:24 PM in advisors, an, building, different, expert, Forex, in, money, one, part, portfolio, profitabilities, review, strategies, train, unbiased, uneven, with, working

One of the first questions I asked myself when I begun the development of portfolios within Asirikuy was : What if the profitabiliy of the trading systems used is very different ? What will happen if one system is much more profitable than the other one in the long term ? I started to wonder if the most unprofitable system would just drain out the profitability of the best one or if things would improve with time as the systems traded together. Today I will be writing the first part of a two part post which will talk about my finding around portfolio trading of uneven systems and the effect of doing these types of pair-ups in the overall draw down and profitability of a given portfolio.

In order to pair two uneven systems I needed to find two likely long term profitable systems that traded with similar frequency but which had significant differences in profitability that would become larger in the long term. The most suitable system I found was Watukushay No.2 which trades on both the EUR/USD and the GBP/USD. Although both instances are bound to be long term profitable, the EUR/USD instance achieves higher profitabilities in simulation due to the higher presence of the inefficiency exploited by Watukushay No.2 on this currency pair. By pairing up both systems I would be able to see the overall effect in long term portfolio trading allowing me to see if one system would be able to drain the other one or if - despite their differences in profitability - they would achieve a joint effort towards more profitable territory.

To make things even more interesting I decided to increase the Risk used on these tests to 5 also extending the backtests to include 2010 months up until May first. The results - shown below - let us see the big difference in profitability between the EUR/USD and GBP/USD instances of Watukushay No.2 as compounding effects become more pronounced. The contribution of the less profitable GBP/USD instance becomes less significant as time goes by and the EUR/USD instance starts to take a very important place within the portfolio. In the year 2009-2010, most of the position sizes taken are the responsability of the EUR/USD instance while the GBP/USD instance contributes about 5-10% of the trading volume. It is extremely interesting here to note that -in the long term - a portfolio setup eliminates unprofitable strategies by itself, since less account percentage is allocated as the instances fail to accurately perform, effectively protecting the account from the less perfoming strategies.
--
However what happens during the whole ten year period ? What happens with the overall losing period length, maximum draw down, etc ? For the Risk 5 tests, the maximum draw down period length and the maximum draw down values for the EUR/USD instance were 658 days and 26.96% while for the GBP/USD instance they were 1026 and 59.41%. However, the portfolio achieves a wonderful effect and achieves - within the ten year period - to reduce the maximum draw down period to 433 days and the maximum draw down to 30.66% just a little bit higher than the EUR/USD instance and much lower than the GBP/USD instance.
-
-
It is also very interesing to evaluate the yearly profits of the portfolio (shown above) which allow us to see how the EUR/USD instance takes over as times goes by. Of particular importance is the year 2002 in which Watukushay No.2 achieves its highest profit on the EUR/USD (note that high risks exaggerate these effects), leaving behind the GBP/USD instance in terms of equity gains. As time evolves even further we note how the EUR/USD instance keeps growing the account and the contribution of the GBP/USD instance becomes very small. In the end, the profitability of the GBP/USD instance achieves a minor increase in average yearly profitability for the account, from 41 to 42% showing that the addition of this instance, eventhough much less profitable did add up to draw down period reduction and increases in profitability in the long term.

Of course, there are still several questions unanswered which will be addressed on the next part, released tomorrow. For example, what happens if we decide to start to trade a portfolio like this just before the worst draw down period of the worst performing system ? Will this expose us to higher risk ? Is the long term risk indicative of the highest possible draw down even when different starting periods are taken into account ? Tomorrow I will try to answer these questions as I continue to research the depths of the world of portfolio trading and combinations of Asirikuy systems.

From todays post we can definitely conclude that the best idea is to combine trading systems with similar profit targets, however if one of the systems does start to fail it is very probable that its trading contribution will be slowly eliminated by the account growth caused by the other systems. This is very powerful in the sense that the portfolio self-manages the profitability of trading strategies and automatically rewards systems that perform better and punishes systems that perform worse.

If you would like to learn more about automated trading system development and how you too can learn to develop your own long term profitable systems please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading kaskus

Read more

Five Common Mistakes in System Optimization ~ forex trading jobs in new york

2:16 PM in 1, an, common, experiment, fe, five, Forex, in, instrument, intra, mistakes, no, optimization, part, system, watukushay

I believe that one of the most important aspects of system design and use is system optimization. This step in system design is vital since it allows us to adjust a given trading system so that it can more efficiently exploit the market inefficiency it is based on. When done correctly, the optimization of a trading system gives you a more profitable version of your logic with better profit and risk targets in long term performance and a very robust strategy which is not likely to fail even if market conditions change significantly. When done incorrectly, optimization leads to curve-fitted systems which are "fit" to test profitably in the past but fail to profit in the same way in the future. What is the difference between correct and incorrect optimization ? On todays post I will talk to you about this very important aspect of system design and what mistakes system designers and traders usually make that make their optimizations invalid and the resulting trading system useless.

In the end, there is a good way and a bad way to optimize a strategy and definitely all systems can be adequately optimized if certain precautions are taken into account so that the most important "curve-fitting pitfalls" are avoided. I will now describe the five most common and dangerous mistakes made when optimizing and I will attempt to give some solutions to these very usual and sadly lethal blows to long term profitability.

1. Optimization period length. I think that the most common mistake when doing optimization is -without a doubt- the length of the testing period used to optimize. Strictly speaking, optimizations are not bound to be meaningful fit they are done within periods of less than 5 years given that smaller periods of time are not statistically relevant according to long term changes in market volatility. So if you want to optimize your system and avoid curve fitting, use a period of at least five years. Using a smaller period will most likely "fit" your strategy to very specific market conditions and will make it unable to perform correctly as the market changes.

2. Reliability of the simulations. It is very important to note that in order for optimizations to be valid, simulations need to be valid. Optimizing a scalper or a similar strategy which cannot be simulated accurately does not make any sense since the trading results - and thus the optimization results - are not going to represent live testing to any accurate extent. Designing systems that explicitely control one minute bar opening and that use adequate profit and risk targets - large enough to avoid interpolation errors - is critical for adequate optimization.

3. Ignoring the results surroundings. One of the most important aspects of system optimization is to take into account the results "around" the most profitable result you found. For example, if the optimal value for an indicator period for your strategy is 20 when doing a 5 year optimization what happens when the indicator value is changes to 19 or 21, what about 18 or 22 ? It is very important to consider the surrounding since they give you an idea of the possible changes of profitability you will get if the market changes enough so that your "optimal" settings are no longer that good. If your system is very profitable with 20 and then loses 70% of its profitability with 19, then the strategy is not robust enough and it IS bound to fail in the future as market conditions may drift - even if only slightly - from your set results.

4. Fine grid optimizations. Another common problem with optimizations is the use of very fine grids when optimizting. In general, the coarser the optimization the less risk there is to curve fit a strategy since the fitting is done in a "lose way" and results that may over estimate profits and underestimate future draw downs are also avoided to a good extent. In general you should not optimize to any grid lower than 2% and better 5% so if you are doing an optimization of a strategys SL from 20 to 200 do not use steps smaller than 4 to accomplish this.
--
5. Reoptimizing after Optimizing. When you optimize a parameter for given strategy, then optimize another one and then reoptimize the first one to the new profitable results you are most likely doing a sort of "fine grid" optimization in the sense that you are "fine tuning" the first variable to the seconds "best results". This is similar to doing a fully correlated optimization (although less computationally intensive) but it has similar dangers in the sense that increased correlation and probably further curve fitting is introduced. My advice here is to only optimize variables from a first set of parameters in order and avoid reoptimization of a variable after it has been optimized once.

As you see, these common mistakes in optimization are made by most people who want to improve their automated trading systems and all of them are bound to generate very good results using optimizations that are possibly going to be an over estimation of profit and underestimation of draw down in the long term. In a future post I will give you a diagram for optimizations explaining a little bit how I optimize my systems and what "general procedures" I follow so that my systems end up being robust, profitable and with a high like hood of maintaining their risk and draw down characteristics in the long term.

If you would like to learn more about my journey in automated trading and how you too can start to design and program your own likely long term profitable strategies please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading jobs in new york

Read more

Forex trading without idicators part 2 ~ forex trading signals

7:16 AM in 2, 4, Forex, gold, idicators, part, realese, strategies, trading, video, without

Forex trading without indicators with the basic model.
In the previous section, we know how to set up trading method. Part 2, we will analyze the entry point, SL point, TP point.
Watch video at here:

Popular models:

forex trading signals

Read more

HLO2 with Automatic Robot Trading System ~ forex trading strategies

7:47 PM in 2, automatic, Forex, hlo2, idicators, part, robot, system, trading, with, without

A new trading system launched. That is HLO2 with Automatic Robot Trading System:

You will have the opportunity to buy at low prices and sell at the highest price. The intelligence multi time frame candle strategy , overbought/oversold that was confirmed by trend market direction and it works together with trade area channel Indicator.

See how it works here.

Who can trade with the system?

Newbie: I already saved as a chart profile including template and setting. So what have to do is only to place files in the right folder and load the profile. Done. More questions,read a manual or you can contact us.

Professional Trader: There are several options provided on the indicators and EA. You can explore your own experiences with new setting and see the results. Trailing Stop, Lot size, Money management, nPips Open, nPips Close, Take profit, Stop Loss and more.

HL02 EURAUD automatic robot trading system:

Let your money work for you with " HL02 with Automatic Robot Trading System "


forex trading strategies

Read more

Intelligent Trading Answering Every What if ~ forex trading journal spreadsheet

2:25 PM in 2, an, answering, every, experiment, fe, Forex, if, instrument, intelligent, intra, no, part, trading, watukushay, what

I believe that the worst characteristic a person can have as a trader is unfounded optimism. When I started trading I possesed this very undesirable character trait and it took me a long time to get rid of this pest that would keep profits away from my account. It is very easy for traders -especially new ones - to get lured into believing simulations or past live testing results and jump into systems with high risks believing that a certain scenario will not happen. I cannot tell you how big a mistake it is to ignore every possibility and to act on faith and hope. Time after time I have seen traders do this and get burned in the process with their hopes in one hand and their empty accounts on the other. On todays post I want to talk to you about the great importance of the "What ifs" of trading and why it is important for you to answer every possible "what if" question you can ask until you are satisfied with every answer.

One of the most vital things when you want to succeed at something in life is definitely preparation and trading is simply not the exception to this rule. Often people will venture into trading manual or automated trading systems with little preparation and without a good plan for every possible outcome that can arise. The truth is that most people who attempt to succeed at trading with expert advisors dont even have a clue of what they do if certain scenarios arise and in the worst cases they consider some scenarios "extremely unlikely" or "impossible to happen".

I remember clearly how a person told me a few years ago that it was "almost impossible" that his Martingale system would get 7 consecutive loses since such a market situation was simply extremely rare and such a case would never appear. I told him that everytime a trade is entered the possibility to lose exists but he continued to tell me that it wouldnt and that I was simply "not understanding" the nature of his system. The years passed and his system did trade profitably for a while and after a year or so of trading it took 8 consecutive loses and wiped his account clean. It was not the fact that the consecutive loses happened what killed my friends account, it was the obvious lack of preparation for such a scenario.

This happens all the time. People trade systems believing that a certain "what if" question does not deserve an answer because it is simply "extremely unlikely" when the truth is that the mere possibility of it happening should make a trader have a plan against it. If you are trading a system believing that A or B or C wont happen then you are setting up yourself for disaster. Every unanswered "what if" question is a void in your system, a void that will one day be filled, catching you completely unprepared for the consequences.

I always answer any possible question about a trading system - especially losing situations - so that I can avoid having a situation where I am simply caught with no answer. What if system A has 6 consecutive loses ? I will suffer an X draw down and the system will be Y% away from a worst-case scenario. What if a draw down level of X% is reached ? I will stop trading the system since it is below the worst-case scenario which is double the max draw down infered from reliable simulation results, etc. One of the things I have found helps me keep up with my systems and maintain my success as a trader is to ALWAYS have a plan. The most important part of doing this is to answer EVERY "What if" question you can think about. What if you have 5 onsecutive loses ? What if you have a 2 year draw down ? What if... What if ?

As you see, one of the most important parts of success in trading is nothing more than preparation. Knowing the answer to every possible question about your system and having a plan for every possible trading outcome is vital for you to achieve success. There cannot be a lethal "What if" question. If there is any of these questions that ends in "I would lose my account" then there is something inherently wrong with your trading strategy, as a safety every system must be able to give signals of "being too risky and not worth trading" before reaching a wipeout status. For example, a system with a worst-case scenario of 30% will be stopped at this equity level, preserving the other 70%, while a system that wipes the account at 5 consecutive loses simply has no such "time" to warn its user about a problem before it is already to late. Hope for the best. Prepare for the worst.

Are you answering all your "What if" questions ? Having an answer to all of them and having a plan for every draw down and profit outcome is vital for success, that is my humble advice. If you would like to learn more about automated trading and how you too can learn to design systems based on sound trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading journal spreadsheet

Read more

Watukushay FE An Intra Instrument Experiment Part No 1 ~ forex trading journal excel

2:46 PM in 1, 5, an, experiment, fe, Forex, instrument, intra, metatrader, no, part, porting, series, the, trying, watukushay

One of the best things about the new metatrader 5 platform - as I mentioned on a previous post - is the extreme quickness in which backtesting and optimizations can be done. It is remarkable how I can now do a 200 run optimization in less than an hour while previously it took more than 5 or 6 hours and even 24-48 for certain trading systems. After porting Watukushay FE and enjoying this very fast simulations capability I decided that it was time to try a multi-instrument approach for this freely available trading system. Certainly I had donde some experiments before on the USD/CHF and the GBP/USD but I had never been able to try as many combinations and settings as I wanted to due to the inherent slowness of MQL4 based backtesting. On today and tomorrows post I want to show you some of the results of my studies on several currency pairs for Watukushay FE and how these results show us a very wide and unique perspective about the Watukushay FE trading system. For those of you who do not know anything about Watukushay FE it is a freely available trading system I coded available at http://watukushayfe.blogspot.com.

It is important to note here that I coded Watukushay FE based solely on my observations of the RSI and trend behavior on the EUR/USD and I had never thought about making this expert trade on other instruments when I first designed and implemented its logic. It is a fallacy that a "good system" should work on "all" currency pairs as it tackles a "vital aspect of market psychology" since different pairs have different trading makeups and volumes which make their particular price action very different. Pairs that people may regard as similar such as the EUR/USD and the USD/CHF are in fact tremendously different with many systems that work on the EUR/USD failing to work on the USD/CHF and vice versa. Some of the reasons why this happens include bank intervention, liquidity, volume, trade deficit difference, etc.

However it is always interesting to look at the performance of systems on other currency pairs since it brings a hint about the differences between instruments, showing us why a system may work on one and not on another. Understanding and knowing the true nature of these differences allows us to develop systems that are "adapted" to each different currency pairs trading nature. An analysis of these differences also allows us to change the design of a system- particularly its exit logic- to better exploit inefficiencies found in a particular instrument.

The first think I did with Watukushay FE was to run the "standard" settings derived from very coarse optimizations on the EUR/USD on the GBP/USD, USD/CHF, AUD/USD and USD/CAD (10 year backtests on Metatrader 5). The results are indeed good -as shown in the graphs below- in the sense that the system is profitable in the long term on all of these currency pairs, however it is important to say here that profitability is much lower than on the EUR/USD with most of these pairs reaching only a compounded yearly profit to maximum draw down ratio of 1:3 to 1:5. This shows us that the system tackles a market inefficiency that is present to a certain extent on all these currency pairs but unfavorable conditions are much more frequent than on the EUR/USD.
--
It is evident when comparing the different equity curves that the smoothest of them is the EUR/USD which - of course - achieves the best results. We see that Watukushay FE has smooth periods of profit on most of these instruments but unprofitable periods are simply very destructive for the other pairs while they are only mild for the EUR/USD. Even tough the equity curves seem to show us that all instruments could be traded profitably the potential reward for instruments other than the EUR/USD is simply not enough to compensate for the risk taken. The deeper draw down periods also make Watukushay FE on other currency pairs far more difficult to trade also limiting risk escalation to a great extent.

However it is clear that some very interesting questions arise. Is it possible to do coarse optimizations on other pairs to find more EUR/USD-like results ? It is possible to implement small modification to the logic that improve the trading technique significantly ? Are there any other instruments worth trading for Watukushay FE besides the EUR/USD ? I will tray to address some of these questions on tomorrows post. If you would like to learn more about Watukushay FE and all the Watukushay Project experts please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading journal excel

Read more

Liquidity in Forex Part No 1 What it Means and Why it is Important ~ forex trading game app

3:54 PM in 1, and, characteristics, evaluating, forex, important, in, is, it, liquidity, means, no, part, quality, systems, trading, what, why

The term "liquidity" is used a lot in trading and finances since it is a vital aspect of market behavior. However, people often use this term very liberally in forex trading often without understanding its exact meaning and the implications of high or low values of this particular property. On this article I want to explain to you what the term "liquidity" is, what it exactly means, its implications within a given instrument and why it is such an important characteristic of the market.

Imagine that we had 20 people standing on a circle with 19 of them holding empty glasses and one of them holding a glass full of water. Now we want to see how much time it will take for the person with the glass to pour it onto the next one and so on until the water reaches him/her again. What we find is that it takes a long time for the water to be exchanged along the full circle because only 2 players are able to participate (the one holding and the one receiving) while all the others have to stay on the sidelines, waiting for their glass of water. Now imagine that we give half of them a glass of water, the process is much faster since the number of active participants has now increased to include everyone, all the people are actually exchanging water all the time.
-
-

Liquidity on the market is nothing else than the "water" in the above example, it is the amount of volume exchanged of a given instrument over a given amount of time. When there is high liquidity there is a lot of volume being exchanged and when there is low liquidity there is little volume being exchanged. When we have a lot of volume people can get in and out of the market easily (since there is always a buyer for every seller and vice versa) while when there is low liquidity the market gets "stuck" as people have to fight to get in or out of their positions. When there is low liquidity you also get harsher price movements since a person holding a position may be forced to drastically change the offering price to match what the other end - which is very scarce - wants. So while under high liquidity exchanges are easy and swift, under low liquidity prices move more erratically since the offered and accepted prices tend to have larger gaps between them. The consequences for the little trader are unpredictability and spread widening while for the large players the consequences are mainly not being able to get in or out of positions due to the lack of available exchange capacity.

Liquidity in the forex market is extremely difficult to read and study since the market has no central exchange but it is handled over a wide variety of banks worldwide in an over-the-counter manner. The volume of a given contract that has been exchanged during a certain period of time therefore becomes hard to read since it depends on the particular provider you are talking about. Even though the market is praised as being extremely liquid and huge, the fact is that this is only be true if you can access to all - or a lot - of liquidity providers (banks). If you limit yourself to just a few you will see that the liquidity you have access to is nowhere near the trillions of dollars people talk about.

When we are going to trade the foreign exchange market, knowing the liquidity levels of the instruments we want to trade is important since currency pairs with higher liquidity tend to be "easier to trade" since they show more inefficiencies characteristic of crowd behavior while instruments with low liquidity tend to show a more random walk much more characteristic of individual investor behavior. Therefore, instruments that are very liquid tend to be easier to exploit using mechanical trading systems while those that dont tend to be much harder to trade. However, as the time frames get bigger liquidity starts to become a less important factor and crowd-based inefficiencies still arise. This is the main reason why you should look for strategies based on larger time frames and longer period indicators when attempting to design systems for illiquid instruments.

On tomorrows post I will discuss the inner aspects of liquidity in the forex market a little bit more, I will discuss some of the currently available literature about the subject in economics and the liquidity characteristics of different currency pairs. If you however would like to learn more about automated trading and how you too can start designing and programming your own systems based on realistic and sound strategies please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading game app

Read more

Liquidity in Forex Part No 2 Analyzing the Liquidity of Different Pairs ~ forex trading good or bad

5:10 AM in 2, 5, analyzing, and, aussie, different, encouraging, forex, in, kiwi, liquidity, more, no, of, pairs, part, results, the, watukushay

On yesterdays article - which was part No.1 of this post - we talked about the definition of liquidity and the implications of high and low liquidity levels on the forex market. Today we are going to give an in-depth look to liquidity in the forex market, particularly I will talk about recent literature in economics dealing with the evaluation of liquidity on several different currency pairs and what we can conclude and use from this analysis. After reading this article you will have an idea about which are the most liquid and illiquid currency pairs, something which should give you a good idea of what pairs you would want to focus on for the development of mechanical trading strategies.

First of all, it is important to understand that liquidity in forex in simply a pain to research. In order to investigate the liquidity levels of any given market instrument we need to have all transaction information including, type, volume and time. This means that we need access to the "books", the registry where all the transaction information of a given broker is kept. Since there is no central exchange in forex, we cannot get the real liquidity values but if we choose a broker that uses a large array of liquidity providers and we take a look at all their transaction we might be able to draw some general conclusions regarding overall pair liquidity values (at least relative to each other).

The Swiss National bank published a paper a few months ago dealing with the evaluation of liquidity on the FX market (you can access it here). Besides discussing previous literature findings regarding forex liquidity the authors investigated the liquidity levels of several different currency pairs using data from 2007 to 2008. The authors used a daily reversal measurement (explained within the paper) of liquidity in order to get a comparable to number to use between the different currency pairs.
-
-
The studys first findings show us that the EUR/USD and USD/JPY were the most traded instruments during the testing periods while the AUD/USD and USD/CAD had the lowest trading volume. The authors also emphasize on the fact that even though the GBP/USD is an important pair it is very illiquid when compared to the EUR/USD, confirming the findings of previous studies and pointing to the reason why the development of GBP/USD based systems is far more difficult than for the EUR/USD since the lower liquidity makes inefficiencies harder to exploit in a mechanical fashion.

Another interesting conclusion is the high liquidity of the USD/CHF and EUR/CHF during this period which the authors attribute to the safe-heaven status of the frank and the economic crisis during 2007-2008. The study also shows us that liquidity is not constant but changes considerably over time with most currency pairs starting to lose liquidity around August 2007 (carry trade unwinding) rebounding slightly and then resuming the downtrend at the end of this year. This analysis shows that stressful periods in the market are characterized by important drops in liquidity having a very strong relationship with risk sentiment.

Perhaps the most important contribution of this article is the development of ways to measure liquidity and the finding of correlations of FX pairs liquidity with other financial instruments or markets where liquidity is more easily measured. This in turn would allow investors to watch for drops of liquidity, something that could be especially important to those investors looking to shield themselves from crisis periods (investors involved in carry trades for example).

Of course, for us the most important findings are the relative levels of liquidity of the different pairs and their relative relationship. From the above mentioned study we can see that definitely system development should be focused on the EUR/USD and USD/JPY while longer term strategies aimed at "harder" to trade instruments should be used on pairs like the GBP/USD and the USD/CAD.

If you would like to learn more about system development and how you too can develop systems for these currency pairs with sound trading strategies please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading good or bad

Read more

Some Trading Advice Trade What you See ~ forex trading kuwait

7:57 AM in advice, building, different, Forex, in, part, portfolio, profitabilities, see, some, strategies, trade, trading, two, uneven, what, with, working, you

It is incredible to see how many traders out there start calling different future price levels and saying that a certain currency pair will fall or rise in the long term and how another will not, etc. One of the first things that new forex traders are tempted to do is to issue forecasts of future price movements of currencies and act accordingly. On todays post I want to write about this practice and how the forecasting of currency pairs should be avoided if you wish to become successful in currency trading. Particularly I want to pinpoint the dangers and flaws of fundamental forecasting and how trading based entirely on price action - with the application of some sound trading principles - is in my mind the best way to achieve success either in manual trading or in the design of automated trading systems.

First of all, it is good to know what I refer to as forecasting. When a person says "The EUR/USD will be 1.60 in 2 years", that is what I call forecasting, an attempt to predict the future based on some evidence that holds no predictive power over such a wide range of possible outcomes. Predicting economic cycles, wide movements, bottoms, tops and similar unpredictable market outcomes are some of the fundamental reasons why new traders fail.

It is easy to understand why so many people fall victim to forecasting. We like to be right and forecasting a given price level that in the long term becomes true is very satisfying. For example, if you said in December 2009 that the EUR/USD would reach 1.3 next year, you would have made a very accurate forecast of what would have happened in the future. However there was no substantial evidence to guide you towards this conclusion and hitting the nail on the head with your prediction might have been a simple lucky guess. Of course, I can say that next year the EUR/USD will reach 1 or 1.5 and probably I would be right about one those forecasts due to the yearly volatility of this forex currency pair.

However what we have to understand here is that we cannot come up with conclusions outside of what is being showed by a certain currency pairs price action. I saw many people talking about the EUR/USD reaching a bottom around 1.32-33 when in fact there was no evidence to believe this to be true. Of course, in the end the people who make money are the people who play the market by two extremely simple principles. Take into account support and resistance levels and follow the trend.

Why would you be willing to go against a trend that is so crystal clear on the charts ? There is a reason why trends develop and taking trades against long term trends is suicidal most of the time. Reversals are quite rare and they take long periods of time to develop and for this reason they are not a good strategy to trade, it is much better to wait until a reversal happens and a new trend develops than attempting to enter the "beginning" of a new trend by guessing a reversal is in place. When you watch support and resistance levels not only are you able to accurately gauge the probabilities of price movements but you are also able to get into very good spots for long term trend following.

What you need to understand here as a trader is that you should read the information the market tells you and make an educated guess regarding price movement based on the simple assumption that trends will most of the time continue and support and resistance levels will shape price action. It is a matter of interpreting what the market is telling you and forming a high probability outcome based on these two simple market principles.

So in the future you should not try to forecast the price level of a currency in a few years or attempt to "call" the bottom or top of the current trend. You should focus on following price action relative to support and resistance levels and following trends, entering them on favorable positions based on your first analysis. Trading what you see on the charts instead of what you hear on the news or what you think will happen in the future is vital in order for you to achieve long term success in forex trading. Of course, the above technique is what has worked for me but other ways of analyzing price action and coming up with good probability reading may obviously be possible. Just remember : do not attempt to forecast, just follow your charts.

If you would like to learn how you can develop your own long term profitable strategies using forex automated trading please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading kuwait

Read more

Watukushay FE An Intra Instrument Experiment Part No 2 ~ forex trading jobs miami

10:21 AM in 2, again, an, case, experiment, fe, Forex, gallantfx, hacked, instrument, intra, is, money, no, part, safe, the, think, watukushay, your

On yesterdays post we talked about Watukushay FE and the first essays to test the intra-instrument compatibility of this trading system. We arrived at some good results which showed that Watukushay FE did achieve long term profitability on all of these instruments while the yearly compounded profit to maximum draw down ratio was always much lower than for the EUR/USD. Since I left yesterdays post with some questions regarding the optimization and modification of Watukushay FE to improve results on these currency pairs today I will dedicate this post to the answering of these questions. I will talk to you about the optimizations I have done on the Watukushay FE system on different currency pairs, what their results have been and what they tell us about the inefficiency exploited by Watukushay FE and its potential to be used on several different instruments, effectively diversifying the usage of this trading strategy.

Many of you may be thinking that the results shared yesterday point to the fact that just a few coarse optimizations would lead us to a gigantic improvement in performance which would leave us with a multi-currency Watukushay FE system, something which is very reasonable to assume given the fact that systems usually improve significantly with only moderate optimization. However what reality shows us is somewhat different. The Watukushay FE trading system fails to improve significantly on almost all trading instruments despite coarse or even finer optimization which attempt to fine-tune the systems variables to each currency pair.

For example, the GBP/USD and USD/CHF achieve compunded yearly profit to maximum draw down ratios of about 1:5 and the usage of even fine grid optimizations is not able to bring this down to a 1:3 level. When we examine the trading characteristics of this system on these pairs we see that the overall market inefficiency exploited by the EA disappears for significant periods of time in which the instruments consolidate or experience wide ranges that are not at all favorable for Watukushay FE. It becomes obvious that the system is simply not able to cut loses short on these currency pairs with its present logic. However a few ideas have come to my mind to "adapt" Watukushay FE to the trading mechanics of these pairs and improve its trading characteristics, something which I will probably leave for a future post.

Perhaps the most important achievement of Watukushay FE comes when you analyze its results on the AUD/USD and USD/CAD instruments. With only very coarse optimizations on these currency pairs we are able to obtain marked improvements that show us that -for example- in the case of the AUD/USD only a modification of the RSI period grants a significant improvement of the compounded yearly profit to maximum draw down ratio from 1:5 to almost 2:1 in a ten year run. This shows that the modification of only one variable is enough to fit a system to another currency pair when the overall inefficiency has a similar presence than in the initial instrument it was designed for. Below you can see the backtesting results for the AUD/USD before an after an RSI period change, leaving all other variables -including SL and TP - intact.
-
-
The USD/CAD also improves its results incredibly only after small RSI period changes but results are improved much more significantly after the TP and SL are optimized in a coarse manner changing the risk to reward ratio of the SL and TP to almost 1:2, this in turn changes the compounded average yearly return to maximum draw down ratio to a little bit more than 1:1 from a previous value - before optimization- of nearly 1:4. The images below show you how the overall results for this currency pair also change as a function of this very limited optimization which is most likely not going to introduce any curve fitting into the system due to its coarse nature and the overall adaptive character of the trading system.
--
After doing this analysis of Watukushay FE it is also worth noting that the optimization of this EA are heavily populated by profitable results showing you that future deviations from optimal values are not going to drastically change the risk and profit characteristics of this trading system. We have also learned that when the inefficiency is present to a good extent only minor optimizations are needed to greatly increase performance while very fine and extensive runs -when the inefficiency is absent a significant amount of time- bring us only marginal improvement to pre-optimization results.

From the above results it seems that Watukushay FE will be exploring Canada and Australia soon enough :o) Probably during the next few weeks I will release EA modifications and set files on the experts website so that people can start doing their own evaluations and tests on these currency pairs. A couple of live accounts to test these new pairs will also be added. Right now I am also exploring logic modifications to trade on the GBP/USD and USD/CHF, results I will be sharing with you once they are ready. It seems that Watukushay FE likes more instruments than what I originally thought :o)

If you would like to learn more about Watukushay FE and how you too can build your own long term profitable system based on sound trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading jobs miami

Read more

Uneven Strategies Working with Different Profitabilities in Portfolio Building Part Two ~ forex trading keywords

10:50 PM in advisors, an, building, different, expert, forex, in, part, portfolio, pro, profitabilities, review, robot, strategies, two, unbiased, uneven, with, working

Yesterday I started to discuss the effect of running a portfolio with systems that have very uneven performance. I used the GBP/USD and EUR/USD instances to exemplify this case and show you exactly what the effect of running systems with very different profitabilities is along a very wide range of years. However once post was not enough to discuss all the effects of running such uneven strategies and several questions still remained. On todays post I will finish my discussion on this matter, answering the remaining matters as clearly as I can. I will attempt to discuss the effect of different starting times in running a portfolio and how this affects the global profitability and risk/draw down targets of a portfolio built upon the join venture of uneven strategies.

On part one of this post I was able to show you how running a portfolio of two long term profitable systems has an overall profitable effect regardless of the global differences in profitability. I showed you how the GBP/USD and EUR/USD instances contributed somewhat equal profit/draw down percentage in the beginning of the account and how the contributing power of the GBP/USD instance grew smaller as trading progressed. Of course, this means that the portfolio starting time may prove decisive as different startup periods may lend themselves to different contributions of the separate systems. Some very important questions start to come out as a consequence of this matter. Will the account face higher risk targets if the account is started right before the worst draw down of the worst performing strategy ? Will long term draw down targets be an underestimation of the potential draw down ?

In order to answer these questions I looked at an account started right before a very significant draw down period of the GBP/USD instance which started in mid 2009. I ran a test from January 2009 until May 2010 and compared the results obtained for the 10 year portfolio for these same months. The first thing we can take into account is the draw down figures of both tests. The maximum draw down in 2009 of the 10 year test was near 9% while the maximum draw down for the test from 2009 to 2010 is 28%. It is however worth noting that this 28% is inline with the maximum historical draw down of the 10 year portfolio which is 30%. Looking at the equity curves of both systems displaying percentage gains and looking at monthly performance gives us a better idea of what is going on.
--
As you can see, the 10 year portfolio has already diminished the participation of the GBP/USD instance significantly while the 1 year and a half test still has both experts contributing roughly the same since they havent had a chance to compound profits significantly. The result is that the strong draw down period on the GBP/USD eliminates a lot of the profit of the EUR/USD instance but the profit made by the later is enough to hedge the loses made by the GBP/USD account and put the overall portfolio in a profitable point.

I have to say that a careful analysis of similar periods - in which an account is started right before the worst draw down case of the worst performing instance - reveals that this is exactly when the maximum draw down portfolio levels are reached. In this case, a level of about 28% was reached which is close to the expected maximum historical draw down of the ten year portfolio (starting in 2000) at 30%. Running different initial periods were the account is started right before a GBP/USD instance unfavorable period shows us that draw down between 20-30% show almost all the time. However, the EUR/USD instance is always able to hedge this draw down and get the account to the other side.

As we saw on part number one of this article, the overall larger compounding effect of the EUR/USD instance ends up eliminating most contributions of the GBP/USD instance as it fails to perform up to the same level. Interestingly, this shows that the startup point does not increase risk but the 10 year maximum draw down appears to be the draw down combinatorial "upper-limit" that determines the draw down attained when experts are started within an unfavorable period. The 10 year estimation therefore becomes a valid estimate of future draw down limits and doubling it provides and accurate worst-case scenario.

In the case of systems with very different performance levels, the use of a continuous portfolio in which the most profitable systems take lead seems to be a good solution. However it is still easy to wonder if there is any other better way. Is there a better way when systems have similar profit levels ? Is there a way of examining portfolios in which we can be absolutely sure that the importance of the startup point is not critical ? How can we trade a portfolio in such a way that a very clear draw down limit is attained ? Answering all these questions and studying portfolios in depth has led me to the development of a series of portfolio guidelines and investment rules that I will talk about on tomorrows post and that will be discussed in depth this Sunday on an Asirikuy video... Stay tuned for the release of the Atinalla project.

If you would like to learn more about my journey in automated trading and how you too can develop a portfolio of likely long term profitable systems based on sound trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

forex trading keywords

Read more