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Developing Forex strategy - your thoughts?

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Artamon

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G'day all,

I'm currently playing around with an FX strategy. Without optimising it to the nth degree, it's currently at a stage where the annual return is 55% with a max sys DD of 18%. It's an AUDUSD hourly system, but my current hourly data only goes back to mid-2003. (I'd like someone who has at least 10yrs data to backtest this for me at a later stage)

I've included the Amibroker report and settings below. If you have a moment can you look at it and tell me what you think of the figures in the report. Some figures you'll see are way way out and not possibly correct (net risk adj return %, avg profit %, avg loss %) but this is because of the settings needed for the report to correctly reflect the 100:1 leverage I'm using for this test.

Any thoughts and comments would be greatly appreciated.

Andrew.
 

Attachments

  • forex-strategy.zip
    3.5 KB · Views: 120
Re: Developing Forex strategy - your thoughts

55% is a poor return for such high leverage

positive carry alone with leverage of 20:1 would yield 50% p.a (and now is a great time to do it after a fall from 80c)

does your strategy involve utilising the EURUSD lead? what about the gold/usd lead?

any T.A system on forex using anything other than trendlines, support, resistance or Fibonacci JUST WONT WORK.

Central banks control currencies. They dont use RSI or stochastic. Those LAGGING indicators were designed for stocks, where investor psychology is being measured. There are NO investors in forex.
 
Re: Developing Forex strategy - your thoughts

Graham,

kaveman said:
just need the formula
Click to expand...
Yeah I purposely left the code out coz I wanted comment on the resultant figures, not so much the code that got me there. But, i'll post it later today.

money tree said:
55% is a poor return for such high leverage
positive carry alone with leverage of 20:1 would yield 50% p.a (and now is a great time to do it after a fall from 80c)
does your strategy involve utilising the EURUSD lead? what about the gold/usd lead?
any T.A system on forex using anything other than trendlines, support, resistance or Fibonacci JUST WONT WORK.
Central banks control currencies. They dont use RSI or stochastic. Those LAGGING indicators were designed for stocks, where investor psychology is being measured. There are NO investors in forex.
Click to expand...

Money Tree,

My strategy does not involve any other currencies. I'm not using any indicators except for a simple MA from which I generate my entry signals to buy if it is an uptrend and sell if it is in a downtrend (amongst other things). But, I do understand that taking the lead from eur or gold can provide guidance in direction, and I do plan on looking into that at a later stage.

It's nowhere near complete or final. I'm yet to code in the scenario for shorting. Incidentally, the results above are based on a 1 lot purchase. Buying 2 lots in my example took the annual return to 90+% and the drawdown into the mid-20's.

What I'm trying to do in this exercise is get a decently profitable strategy based on 1 lot purchases. In my limited experience, if you can get a decent % profit from 1 lot with a 5k bank with a DD that won't have you sweating whenever you enter a position, then with good exits you should be able to trade the trends (both up and down). The 1 hour timeframe is something I picked as workbable for me.

I appreciate the comments are a more experienced head.

Andrew.
 
Re: Developing Forex strategy - your thoughts

Artarmon,

A good return without pyramiding and without a too bad a drawdown. Can you plot the equity curve? I noticed that it is a long only system so far and you want to be sure that you haven't just captured the long term trend. If the equity curve still goes up when the AUD is going down that is a good sign.

This is a problem in forex because shares markets tend to go up as the economies grow but forex can trend for extended periods in either direction.

I had a lot of trouble with this with my system (GBPUSD) and didn't trust it until I could trade both directions equally profitably with the same system. 168 is a reasonable number of trades. I'd optimize each year to see how much your parameters move.

MIT
 
Re: Developing Forex strategy - your thoughts

Hi MIT,

mit said:
This is a problem in forex because shares markets tend to go up as the economies grow but forex can trend for extended periods in either direction.
I had a lot of trouble with this with my system (GBPUSD) and didn't trust it until I could trade both directions equally profitably with the same system. 168 is a reasonable number of trades. I'd optimize each year to see how much your parameters move.
MIT
Click to expand...

Shorting is what I'm having trouble with at the moment :banghead: I'm still hacking away, but nothing I've coded for the short side has worked out. If I can nut this out, theoretically, I can always be in a trade no matter the direction, which is my end goal.

Andrew.
 
Re: Developing Forex strategy - your thoughts

Artamon said:
Shorting is what I'm having trouble with at the moment :banghead: I'm still hacking away, but nothing I've coded for the short side has worked out. If I can nut this out, theoretically, I can always be in a trade no matter the direction, which is my end goal.

Andrew.
Click to expand...

Ditto to that. I'm scanning for ideas on a short side system for stocks so i'll keep you posted. I don't even know what Forex is fully though :eek: so i'm unsure how much that will help.
 
Re: Developing Forex strategy - your thoughts

I've never found a mechanical shorting strategy for stocks. It annoyed me in Guppy's books when he says to short you simply turn the charts upside down. Shares definitely move down in a different way to how they move up.
I have an idea though to do with something I have noticed with ex-dividend stocks.

Forex is different though and is more symmetrical. The problem is when your system gets caught in a general trend. I have a FOREX system now but it took me a long time to find one that was robust enough to trade. I agree with Money Tree most people who make money on FOREX do it using some version of S/R and Fibs which is hard to backtest automatically and I don't have the patience or time at the moment to forward test on a demo account.

keep at it

MIT
 
Re: Developing Forex strategy - your thoughts

G'day all,

Here's the hourly fx long system. It's only basic at the moment. Haven't made a lot of progress with the short side, but it'll come. Those that have hourly fx data, can you also backtest this code and post your results please. I tested using 5k capital and a SL of 35. Play around with the parameters.

Thanks,
Andrew.
 

Attachments

  • forex 1hr strategy.zip
    761 bytes · Views: 132
Re: Developing Forex strategy - your thoughts

G'day all,

Has anyone (with hourly historical data) backtested this? I'm curious to see how it performs.

Thanks,
Andrew.
 
Re: Developing Forex strategy - your thoughts

I managed to replicate your results. Here's the equity curve.

MIT
 

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  • untitled.JPG
    untitled.JPG
    76.2 KB · Views: 247
Re: Developing Forex strategy - your thoughts

One thing, to make your coding easier Amibroker has a defined variable TickSize. You can set this up in settings or on a per symbol basis. Also my graph is based on a 4 pip spread.

MIT
 
Re: Developing Forex strategy - your thoughts

am I the only one concerned that the results are:

1. based on only longs
2. during a test period where the market went up and up

??
 
Re: Developing Forex strategy - your thoughts

mit said:
I managed to replicate your results. Here's the equity curve.
MIT
Click to expand...

Thanks MIT. The hard part is still on the table though - taking short trades.

Andrew.
 
Re: Developing Forex strategy - your thoughts

MT

I agree. However, one good point is that the equity curve does not slavishly follow the AUD price action so there is something there.
Another problem is that you have to watch the market around the clock for your buys and sells. I have heard of people who do this. Start Monday morning and trade until they have made their weekly quota. Pretty tough, you would want to get a good return on your money.

MIT
 
Re: Developing Forex strategy - your thoughts

money tree said:
am I the only one concerned that the results are:
1. based on only longs
2. during a test period where the market went up and up
??
Click to expand...

Not at all, money tree. These are concerns of mine as well. But, I have stated in previous posts that I am looking at taking short trades as well - just have to come up with a suitable strategy.

As for test period, it's all i have available at the moment. Looking to rectify that though.

As results stand now, what are your thoughts?

Andrew.
 
Re: Developing Forex strategy - your thoughts

Im a little confused why there would need to be a different strategy for shorting.

I mean, with any forex pair you are always short one currency and long another. Those who trade forex would know that USDCHF is nearly inversely identical to EURUSD. Therefore, any strategy that works for long EURUSD must also work for short USDCHF.

As I said, the results are not adequate. A buy and hold strategy (positive carry) would yield the same results with less risk, and almost zero management.

For all the labour required you are not getting any extra return.
 
Re: Developing Forex strategy - your thoughts

G'day all,

I made a bit of progress tonight. I want to be able to go long AND short within the same currency pair (alternately). On it's own, taking short trades gave an annual return of 38% and a max sys DD of 28%. Nothing too flash, I agree. However, when I combined both sets of code into the one strategy, backtesting (my limited data) gives an annual return of 82% with a max sys DD of 24%.

Andrew.
 
Re: Developing Forex strategy - your thoughts

I backtested over last five years on non-indicitive data. Allowed 3 pip spread. With optimization (SL 0.0017 - PS 0.0050 I managed 656.96 pips for that period. Max Sys drawdown was -5.44% from 341 trades with 29.91% winners. Allowing a trailing SL of 0.0025 dropped profit to less then 300 pips.
 

Attachments

  • Oz 1 hr.zip
    3.9 KB · Views: 68
Forex trading,been there and lost, you're playing with the big boys here, best advice i can give is get out of it, after being sucessful with stocks i guess it's a natural progression, but i kept being stopped out, you need deep pockets for forex not luck. porkpie :(
 
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