In a similar style to Mark’s Thinking Stuff Forex trading software where the user is given a NON-programming approach to automating their strategy this web site similarly provides the ability for the user to test a myriad of trading strategies and to then trade those strategies LIVE via your FXCM account.

What made this web site even more compelling was the fact that all this (so far) is offered FREELY!!

Basically here’s how it works:
1. First you start at the SIGNAL end by compiling your entry and exit signals on selected time frames (you’re unfortunately only limited to the signals offered). If you’ve created some exit signals be sure to create a “Contextual Exit” otherwise your exit signals will not be used when you formulate your system.
2. When you’re happy that you’ve got your signals listed, jump over to SYSTEMS and select which currency pair you’d like to test your singals on, which direction (either Long or Short), what the order type should be once your entry signals are satisfied, and at what times you would want your system to run on (i.e. ALL, or just during the London session, or NY session… etc). Lastly, select your exit strategy.
3. Then move over to TESTS and create a new test. Select the strategy you want to test and the date range of your backtest and hit start.
4. Wait a few minutes and you’ll soon have your results sent to your email address.

Easy, huh?

Okay, so what are the downsides of this service?

Well, I think one issue that some people might have is that your systems are public. I suppose this is a negative and a positive, because on the one hand you can look at other people’s systems and tweak them to suit your own trading personality, yet on the other hand YOUR edge may begin to lose its profitability if others start using it.

Another problem is that you’re only limited to 100 signals, systems and tests per account. This may not sound like much, but considering that you can only test one currency in one direction at a time 8 tests can be chewed up quite easily on one system if the user tests both LONG and SHORT on each of the four majors.

Lastly, I’d prefer if I could access the test results better – maybe an export to CSV file or something of that nature. Ideally I’d like to see something whereby we have a table that has at least the following: ENTRY DATE & TIME, ENTRY PRICE, INITIAL STOP LOSS (IF ANY), EXIT DATE & TIME, EXIT PRICE, MAE, MFE, P/L (IN PIPS).

Anyway, HiveTrader is definitely worth a look and I would encourage you to go over and have a little play.

(If you like you can include my username currsec in the referrer ID when you register your account – I don’t make anything by you doing so.)

Tags: Auto Execution, FXEngines, Forex Systems, Forex Tester, HiveTrader

One such forex course that came across my desk not too long ago stated in their copy that users COULD make US$300 per day trading their method, with only 20-30 minutes day of work.

What shocked me though, as I read through the copy, was that the claim was backed on mere hearsay.

That’s right there was no substantive evidence confirming that a user could make US$300/day – just someone’s opinion!

Yet this course sold for US$2,000 and many bought into the hype.

When I asked how such claims were derived (i.e. from hypothetical backtesting, or from actual trading – whether it be from the person selling the course or from a customer) no such response was given (which didn’t surprise me).

In this internet age things such as this will become more prominent.

Forex trading is a skill. There’s nothing wrong with purchasing ebooks or courses if you believe purchasing the course will enhance your forex trading skills, but try to remain objective whenever you come across such emotive sales copy that has been written by a trained copywriter who is expert in exaggerating claims and enhacing the course without stretching the truth too much.

You may even want to employ tactics that I use before I purchase a product (I’m going to assume that the product being pucrhased here is an informational product, you wouldn’t likely be able to use these tactics if purchasing a signal service, or something more tangible such as forex data):

First thing I do is look for claims in the sales copy of what this product will give me and I try to reverse engineer from the sales copy! What I try to look for are bullet points as these usually contain small snippets of information about what the product will provide. What I do with each bullet point is to try and figure out for myself what each bullet point’s answer is – it will be test of your own knowledge and also your creativity. As an example a sales copy might say:

• Know which direction a currency is likely to trend in the short-term AND medium-term in TEN SECONDS.

Now if you had to think of what this could be what answers would you come up with? Stop, think about it for a minute. Try it for a few seconds and see what you’d come up with.

If I had to have a guess on copy that said something like that I’d probably guess that the course would be either peddling some sort of trending technical indicator (such as moving averages, trend lines… etc) and employing them on different time frames to gauge short and medium-term trend, or perhaps looking at carry trades by assessing which pair has the higher interest rate (for medium-term direction), or perhaps looking at announcements to see whether an economic report will be favorable or not to a currencies short-term direction.

Sometimes brainstorming like this has produced new ideas… all thanks to a product I never bought!

If I come across a bullet point that I cannot answer I write it down and come back to it when I’ve gone through the copy. When I’m done I then go back to all the bullets and determine whether the bullet point will indeed enhance my forex trading. For those bullet points that I believe MAY enhance my forex trading skills I look at the price of the product and make one last final determination on whether the price fits the value (that I deem) for me to increase my forex skills.

Sometimes I’ll even search on the internet to see if I can try and find the answer to it before buying the product, because you never know if the seller may have pinched it from somewhere else!

So, one of your main priorities when purchasing any forex product should be: will it enhance my forex trading skills. If it doesn’t don’t be afraid to say no and move on – spending money on forex material is an EXPENSE and will affect your overall profit and loss at the end of the financial year.

Signal vendors come and go, methods have their season, but if you have purchased products that have enhanced your forex trading skills then you’ve got something that will last you a lifetime.

Tags: Forex Systems, Forex Trading, Forex Trading Courses

As an example, if we were testing a simple moving average crossover system on closing prices we would test which moving average periods would be the best to use – these moving average periods are what I term as variables.

Unfortunately most new forex traders test every number known to mankind and proceed to test all of these numbers over their entire historical data. Once the computer has churned out a database of results the trader looks at which variables produce the best Net Profit and then trades those “best” variables.

And the money just comes rolling in by the bucket loads, doesn’t it?

Hardly.

I wonder what the trader would’ve been using had they ran their optimization last month? Or maybe 3 months ago? Would the variables have been the same?

What then does the importance of NOW have over one month ago? Or three months ago?

The only real difference between now and back in the past is more historical data to test over, but what of the future? What if one week from today the best variable(s) to use are different? How often should one change their system’s variables? Every time? Even during a trade?

As you can see optimizing can be very detrimental to your forex system – just when you thought you were safe in finding the best variable a whole bunch of new ones enter!

So what do we do?

One solution is to conduct a walk-forward optimization (WFO).

A what?

In its simplest form WFO allows users to test their system by allowing the computer to automatically test the variables used and, according to the system’s results over the testing period, use the best variable(s) for a predetermined period before re-testing again.

As an example, if we have a WFO on our moving average crossover system, we would test a whole different bunch of numbers for the moving averages over a period of say 3 years (if we’re using end-of-day data) and we instruct the computer to use the best variables that returned the highest Net Profit over the sample period to use over the out-of-sample period being the next 3 months. In 3 month’s time we then repeat the process again: test the system over the last 3 years, locate the best variable(s) that produced the highest Net Profit, use those variables to trade over the next 3 months.

Okay so now the money should start rolling in, right?

Well, the great thing about WFO is that it tests your system’s foundation – as too many people place far too much emphasis on finding the right “magic” number rather than putting in that effort on the method used.

But WFO does have its problems and if you ever do use WFO on a system you’ll more than likely find your systems results rather dismal.

There are several reasons for this with the most obvious being that the system needs 1 in-sample period where no trades will be conducted. Depending upon how large your in-sample testing period is as compared to your overall historical sample you could find that 20-30% could be lost. As an example, if you have a large in-sample testing period, of say three years, and the entire historical sample of your data is 4 years in length then 75% of your data will not be traded, therefore your results will be reduced by 75% than an otherwise simple optimization over the ENTIRE period would make!

Another not-so-obvious reason is that WFO’s (such as those created in Wealth-Lab Developer) only allow one constraint. This means that if we tell the WFO to use the best variables for our trading period those that produce the highest Net Profit (or whatever constraint we use) during the testing period if there just so happens to be a variable that produces one trade yet luckily enough ends up producing the highest Net Profit the WFO will use those variable(s) for the trading period.

“But who cares?” you might say, “it produced the highest net profit.”

Well would you really want to trade a system that had ONLY 1 trade??

Of course not!

So why should your WFO tests be any different?

And this is where WFO testing falls down – it’s lack of additional constraints.

Unless you can tailor a WFO to contain constraints that you personally use when selecting whether a system is feasible or not I’d be very wary of using it.

Tags: Forex Systems, Forex Trading

Several things that I enjoyed about this book were its structure, its brevity, and the willingness by Jeff to help his clients.

Jeff doesn’t fill the ebook with forex fluff (you know, the stuff that can easily be found freely on the internet and as you’re reading it you’re wondering why you paid $50 for something you didn’t already know!) – it isn’t found in this ebook, Jeff gets straight to his method and explains it.

Another good thing I liked about Jeff’s product was that he illustrated his system by using video. While I would have preferred a LIVE recording of a trade using his method, his historic video captures were ample enough to ground out any problems the user had in understanding his method.

Unfortunately that’s all that can be said about the things *I* enjoyed about the book.

As to the method… well… it isn’t as sound as I had hoped.

After placing Jeff’s method into Wealth-Lab and testing it on popular currencies such as the EUR/USD and the GBP/USD (which he recommends), and on the 1 hour time frame (which he recommended although he did say that his method worked on any time frame) his method just wasn’t profitable.

Of course, this testing is based on dataHQ’s FXCM data, which could have differing data to Jeff’s.

One last thing that I’d like to note is that Jeff may indeed use this method AND make money – it just doesn’t show historically. The reason I say that he can still make money is that he may apply other filters that he may not be aware of. I know when I taught a friend about flag formations he’d point to all the formations that technically were flags (according to my definition), but upon my seeing these formations I *knew* they weren’t – and the only way I could describe it to my friend was that they just didn’t *feel* right.

And this is why if you’re new to the market I highly encourage you to look at as many charts as you can. Familiarise yourself with what happens before a big move and after a big move. By doing this you are subconsciously locking away a library more powerful than a Cray computer, so that when you start trading the right-hand side of the chart you’ll “see” what is likely to occur next.

Anyway, I thank Jeff for allowing him to see his unique MACD trading method, however, I feel as though users may not be happy with their results.

If anyone has purchased Jeff’s product add your experience below.

Tags: Fast Forex Profits, Forex Systems, Forex Trading Systems

Here is the resulting code without the sample space constraints: CLICK HERE

And for the last time let’s run a watchlist scan as well as Simulation to see how the numbers have panned out.

Watchlist Rankings = 254 trades
6% risk per trade…
Starting Capital = $10,000
Ending Capital = $77,136.58
# Trades = 241 (13 neglected or 5.1%)
Strike Rate = 43.15%
Avg Win = $2,499.55
Avg Loss = -$1,407.42
Avg W/L Ratio = 1.78
Drawdown = -53.75%
Recovery Factor = 0.98

Unfortunately, as discussed in our previous post, this system has an increase in drawdown, but now the drawdown is WAY outside what we’d be comfortable with.

So, it’s back to the tweaking board.

And that’s pretty much it.

I will not have the time to go into detail with reversal based systems, but with these types of systems you are mainly look for price extremes and then looking to take advantage of price moving back to normal.

Here are some entry conditions that you may want to test:

• Bollinger bands on price burst
• High volatility
• Bollinger bands on range bound indicators
• Bollinger bands on non-range bound indicators
• Reversal indicators – stochastics, RSI, Williams %R
• Reversal price patterns – engulfing patterns, piercing patterns, dojis

Those should be enough to wet your appetite in your design of reversal based systems.

Well I hope this FREE series has helped you understand the process of system designing from an area that really isn’t discussed in much detail anywhere else. I hope that with the knowledge you have gained that it has helped you design your systems better and quicker and more robust than what you previously were accustomed at doing. Even if this series has helped you to see another side to your system that you weren’t previously aware of then I would have achieved my result.

In ending, I have tested many forex systems and many fall short of my goals and targets for the system I personally prefer to trade, and this is the very reason why I trade discretionary, however this does not mean that I do not stop testing new methods and techniques searching for a profitable mechanical system because in the end the best way to trade is automatically (without thinking). In fact it would even be better if the entire process is done automatically… the only thing needed done on my behalf is withdrawing the profits!!

So, dear friends, I wish you all the best in your testing of new ideas and hope that one day you will find that system that complements you perfectly.

Ryan Sheehy
Currency Secrets.com

Tags: Forex Systems, Top Currency Secrets

So what is money management?

Money management answers the question: “How much?“. This not only applies to the quantity of contracts you wish to trade, but also at the ending stats.

First we will begin by looking at how much we are willing to trade.

Okay, as I mentioned before it’s easy to make a system look better or worse than it actually is by modifying your position sizing. The reason why we use a fixed quantity in our initial tests is that we do not want to weight any trade with more contracts than another. If we apply a percentage based position size (whether it be a percentage of capital or a percentage of risk capital) we will be skewing the results in favor to how the system performs at the end of the sample.

So, to ensure that we objectively see how our system is faring in the initial phase of our testing we use equal position sizing.

The important thing now, once we have found our system, is to test our system according to the actual position sizing rules we wish to use with our system: in the case of the systems I implement I prefer to use Maximum Risk Pct.

This style of position sizing ensures that I never lose any more than whatever percentage I am willing to lose. If I am designing an intraday forex system I am generally not willing to risk any more than 1% of capital per trade, if I am designing and end of day forex system I don’t mind expanding this risk to 5% of capital per trade (end of day systems will generally have wider stops, therefore you may want to consider risking more just to make the position worth it).

First thing we need to do is change our code so that it now can accept risk percentage type position sizes, here’s the new code: CLICK HERE

So let’s see what Simulation results we get:
2% Maximum Risk Pct produces…
Starting Capital = $10,000
Ending Capital = $11,547
# Trades = 5 (68 neglected or 93.2%)
Strike Rate = 80%
Avg Profit = $1,549.10
Avg Loss = -$2.10
Avg P/L Ratio = 737.67
Drawdown = -4.35%
Recovery Factor = 3.21

Why should we ignore this data straight away?

Two reasons:

1. It ignores more than 90% of trades; and
2. It has less than 50 trades

Obviously we don’t have enough capital to enter into the trades, therefore we have two options available to us:

1. We can increase our risk percentage; or
2. We can increase our capital

Depending upon what you have you can either test both of the above changes or only one of them. I will assume that you can only increase you risk percentage, here are the next set of results when we do this…

3% Maximum Risk Pct…
Starting Capital = $10,000
Ending Capital = $16,020.70
# Trades = 27 (46 neglected or 63%)
Strike Rate = 48.15%
Avg Profit = $648.50
Avg Loss = -$172.13
Avg P/L Ratio = 3.77
Drawdown = -14.76%
Recovery Factor = 2.93

Still not good enough. Onward.

5% Maximum Risk Pct…
Starting Capital = $10,000
Ending Capital = $28,896.19
# Trades = 65 (8 neglected or 10.96%)
Strike Rate = 44.62%
Avg Profit = $1,096.40
Avg Loss = -$358.32
Avg P/L Ratio = 3.06
Drawdown = -28.07%
Recovery Factor = 2.61

Much better, but now we are still neglecting 10% of trades.

What if we just went one more percent?

6% Maximum Risk Pct…
Starting Capital = $10,000
Ending Capital = $34,583
# Trades = 70 (3 neglected or 4.3%)
Strike Rate = 47.14%
Avg Profit = $1,329.65
Avg Loss = -$521.49
Avg P/L Ratio = 2.55
Drawdown = -33.48%
Recovery Factor = 2.41

Done.

Now that we’ve satisfied our quantity of trades do we satisfy our own risk tolerance (this is the second how much to our money management)?

First thing I do is check the drawdown figure: -33.48%

This is a tad too high for me… I prefer systems that have drawdowns no greater than 25%… at the most 30%.

But if it were acceptable the next set of how much statistics I would look at would be the profit made.

Is the profit that was made enough to meet whatever need I am looking for in the forex market? If I’m looking to have this as a retirement fund can I retire with these returns? If I’m looking for *any* form of additional income is this sufficient?

Only you can answer these questions.

So is it a case of back to the drawing board?

No, not at all.

All we would need do is go back to our tweaking and add/modify our entry/exit conditions until we end up finding the right match.

This may have seemed like a lengthy process, but once you start doing more of the process you will begin to see what can be modified to improve results (etc).

With our next post we will wrap up the process as well provide some tips for those who wish to trade reversal type systems.

Tags: Forex Systems, Top Currency Secrets

It was the reason why I tried to have you seek out what sort of trader you are.

Knowing this can go a long way in helping you create your system.

Okay, so where do we begin?

There are many different things you can add to your existing entry rules, here is a very broad scope of what types of entry conditions can be added:

• Volatility
• Sentiment
• Trend
• Time
• Volume (obviously not included in the forex market)

Let’s quickly explore in a little bit more depth each of the following areas:

Volatility

Out of all of the different types of entry gates you could possibly add I ALWAYS try and add a volatility gate – again, this is just my preference and is nothing that is set in stone… in my experience I have found ways to improve some of the systems I have created in the past by adding a volatility rule.

Indicators that are available to help your guage and measure volatility include: Standard Deviation, ATR (Average True Range), and HHV-LLV (highest high value minus lowest low value over a set period).

Sentiment

A sentiment indicator is what is also commonly known as a leading indicator and generally this indicator shows areas where price may be overbought or oversold and likely to reverse.

There are quite a few indicators that fall into this category so I’ll refrain from detailing as many as I know, however some of the more popular indicators include:

• RSI (Relative Strength Index) – range bound between 100 and 0 where readings above 70 indicate overbought (and thereby likely for a drop) and below 30 oversold (up move likely)
• Stochastics (D & K) – range bound between 100 and 0 and generally readings above 80 are considered overbought and below 20 oversold
• Williams R – range bound between 100 and 0 where readings below 10 are OVERBOUGHT and above 90 OVERSOLD (note the difference)
• MACD (Moving Average Convergence Divergence) – this indicator is NOT range bound but the histogram of this indicator generally shows turning points
• Momentum (or Rate-Of-Change) – same as MACD with NOT being range bound… combining this indicator with Bollinger Bands can help identify potential overbought and oversold conditions
• CCI (Commodity Channel Index) – NOT range bound, indicator value above +100 indicates price is overbought, below -100 price is oversold

I could continue with other lesser known indicators, but these are enough to give you an idea of what type of sentiment indicators are available.

Trend

These indicators help identify the current trend… the most popular indicators in this family generally use the moving average or some derivative of a moving average.

Time

Using time allows you to delay entry/exit, or possibly include it as a condition whereby you may find a certain day of the month more profitable to trade than another, or certain month(s), or certain year(s)!

Volume

Popular indicators that use volume include OBV (on balance volume) & Accumulation/Distribution… I’ll refrain from discussing these as our forex data does not contain volume and we obviously cannot test something that we do not have!

Alright, now that you have a basic understanding of what classes of indicators are available you can begin adding them one by one into your system and going back through the entire tweaking process.

I must admit, going back through the tweaking process seems like a lot, but when you begin doing this time and time again you’ll begin to instantly zoom through the whole process without batting an eyelid.

So which entry gate do we add?

Well, as discussed above, I love the volatility indicators so I’ll begin by using this indicator first. Considering that we are trading a breakout style system I would use a volatility gate by finding low volatility zones as a breakout from congestion is one of my favored trading strategies. Here’s how I’d begin coding it… CLICK HERE

What results do we get?
Watchlist Rankings = 76 trades
$500 position size…
Starting Capital = $10,000
Ending Capital = $48,582.96
# Trades = 73 (3 neglected or ~4%)
Strike Rate = 45.21%
Avg Profit = $2,382.82
Avg Loss = -$1,001.25
Avg P/L Ratio = 2.38
Drawdown = -61.43%
Recovery Factor = 1.96

Here were our results from the original AtStop system…
Starting Capital = $10,000
Ending Capital = $37,275.36
Number of Trades = 113 (2 neglected)
Strike Rate = 46.02%
Avg Profit = $1,217.12
Avg Loss = -$590.14
Avg P/L Ratio = 2.06
Drawdown = -64.50%
Recovery Factor = 2.36

Do we have any major changes?

Well, several things I like about the new system is the increase in profits (due to increase in position size) with less quantity of trades. An improved Avg P/L ratio, a better drawdown (even though it isn’t to be too highly entered into consideration) and a lower recovery factor (not good).

Will I choose this system over the other?

Yes… I DO prefer less work for more pay, but the changes aren’t anything fantastic.

Okay, what can we add next?

Let’s move to sentiment indicators…

Out of all of the sentiment indicators the ones I dislike the MOST are the ones that are range bound. In the forex market there can be prolonged periods where an overbought or oversold condition stays in effect for a sustained period, by using indicators that are NOT range bound and using boundaries that change with the volatility of the indicator (by incorporating Bollinger Bands ONTO the sentiment indicator) you can more effectively manage your overbought and oversold conditions.

My favored sentiment indicator is the Momentum indicator – it isn’t range bound.

Therefore my new code would now look a little like this: CLICK HERE

Here are the results:
Watchlist Rankings = 52 trades (oooo… getting close to my limit of a MINIMUM of 50 trades for the sample)
$1,200 position sizes…
Starting Capital = $10,000
Ending Capital = $106,908.36 (969.08% net profit!!)
# Trades = 50 (2 neglected or 3.8%)
Strike Rate = 52.00%
Avg Profit = $5,886.78
Avg Loss = -$2,339.50
Avg P/L Ratio = 2.52
Drawdown = -65.22%
Recovery Factor = 2.38

Nice!

But did you notice with this system that we’ve suddenly had a BREAKOUT of results? What I’d quickly test now is the NEW conditions that were placed and delete the previous additions.

Here are the results:
Watchlist Rankings = 73 trades
$1,100 position sizes…
Starting Capital = $10,000
Ending Capital = $93,012.53 (830.13%!)
# Trades = 71 (2 neglected or 2.8%)
Avg Profit = $4,809.86
Avg Loss = -$2,370.35
Avg P/L Ratio = 2.03
Drawdown = -63.46%
Recovery Factor = 2.20

I think this was MUCH better than our previous addition, in fact I LIKE IT and will discard the previous volatility additions.

Onwards.

What if we now added a trend indicator? I personally don’t prefer adding moving averages into my system – especially in breakout type systems such as mine considering that the entry order already incorporates trend into its order price.

I also don’t use any TIME type indicators in my system, but this shouldn’t prevent you from testing it.

So what’s the new system?

Here’s the code: CLICK HERE

And what does it mean in English?

Okay, here goes…

• Plot Momentum(Close, 30) indicator on chart
• Plot Bollinger Bands on the Momentum(Close, 30) indicator with time period 30 and standard deviation 1
• When the Momentum(Close, 30) is lower than the UPPER Bollinger Band place a BuyAtStop order at the Highest High of the last 30 daysplus one pip
• If the Momentum(Close, 30) is higher than the LOWER Bollinger Band place a ShortAtStop order at the Lowest Low of the last 30 days minus one pip
• For successful BUY entry orders place a stop at the lowest low of the last 30 days and trail (i.e. only move the stop loss when the lowest low of the last 30 days is GREATER than the current stop price)
• For successful SELL entry orders place a stop at the highest high of the last 30 days and trail (i.e. only move the stop loss when the highest high of the last 30 days is LESS than the current stop price)

Next we’ll explore the Money Management aspect of system development and see how our system stands up.

Tags: Forex Systems, Top Currency Secrets

It is SO easy during the tweaking process to get caught up and whisked away in testing a bazillion exit techniques all at once.

I’m probably not going to be saving you much in the way of time with the technique I’m about to share with you, but I’ll assure you that if you do it you’ll advance far more than normal traders & computer geeks!

What is it?

Throughout all my tweaking years the best additions I have made to my systems are the ones where I have physically traded, or physically scanned through all the previous trades and SEEN what would improve results.

Yes this does take time, yes it would be easier to set up some super script that can formulate every conceivable exit known to man and have your computer process it, but the most important computer is the one that resides in between your two ears (and this should give you a hint as to why I became a discretionary trader!).

So… put away the coding screen, run a simulation of your current system and now go and look through the charts and visualize as many trades as you can over the next 30 minutes (yes, give yourself a time limit because all the best ideas don’t do anything unless you test them).

While you are viewing these trades I want you take note of what happens during the trade. Take note especially of trades that go wrong straight away, as well as trades that do extremely well. How could you have traded better? Was there some telltale sign?

By writing down some general ideas that you have about the system you will begin to formulate better exit strategies.

Conditions I want you to be wary of when you are scanning your exits include:

• Your trailing stop
• Volatility (ATR, Bollinger Bands)
• Other popular indicators (RSI, Momentum, MACD, Stochastics)
• Initial stop loss

So… let’s have a look at some of the things I spotted with this system:

• First thing I noticed was how rare it was for systems to reverse sharply back, I think the system can handle a tighter initial stop loss;
• During large volatile swings I didn’t feel as though the system was consistent enough to add an exit of this calibre in (i.e. some trades would have done well with a high volatility exit whereas others would have done worse with it! So… I’ll leave it alone);
• The trailing stop seemed to be at a reasonable distance and was able to keep you in the position of the main trend. No real change or addition came to mind.

Alright, so how does this translate into code?

Well, the only real change I can see so far for this system is to place a better initial stop loss. Here’s one way you could code it: CLICK HERE

What does it produce?
Watchlist Rankings: 116 trades
$300 position size…
Starting Capital = $10,000
Ending Capital = $37,728.96
# Trades = 114 (2 neglected)
Strike Rate = 45.61%
Avg Profit = $1,217.12
Avg Loss = -$573.57
Avg P/L Ratio = 2.12
Drawdown = -63.87%
Recovery Factor = 2.28

Here were our results from the original AtStop system…
Starting Capital = $10,000
Ending Capital = $37,275.36
Number of Trades = 113 (2 neglected)
Strike Rate = 46.02%
Avg Profit = $1,217.12
Avg Loss = -$590.14
Avg P/L Ratio = 2.06
Drawdown = -64.50%
Recovery Factor = 2.36

Do we have any startling difference? No.

We have improved some numbers (slightly), but not enough to effect a change… and this is important: whenever you ADD stuff you want to make sure that the results have at least a better result in comparison to your previous system’s results. If you are looking for an exact measure then you really want to improve ANY of the following stats by at least 20%:

• Decrease in quantity of trades (if I can do less and still make the same amount that’s great!)
• Increase in profits
• Reduction in drawdown
• Increase in Avg P/L ratio

Why isn’t any good change a step in the right direction?

If you begin adding too many conditions into your system you begin to optimize it too much. It will restrict future options and will make your system too optimized for the sample space you are testing. And one other important thing I should mention: you should have about 50 trades in your testing sample. Some people say 20, others 30, but for back testing purposes I aim high and always try to get at least 50 trades into my simulation.

Too few and you are basing your decision on insufficient data (small sample size).

I personally don’t do too much testing on “Other Popular Indicators”. I’ll leave this option open for those who have fancy indicators to include into this portion, but throughout my life I’ve found that most indicators are useless. Again, this is only through my eyes, others may have differing views.

Next we’ll look at ways in which we can begin adding or modifying our entry rules – out of all the changes this one has the greatest effect on the bottom line (and it’s the reason why so many start at this area FIRST and then work their way down).

Tags: Forex Systems, Top Currency Secrets

As we only have a trailing stop in place there are several methods of modifying it, these include:

• High/low values over the past X amount of days (currently being used… possibly change X to a different variable)
• A multiple of the Average True Range minus/plus the high/low of the day
• Previous peaks/troughs

First things first lets change our trailing stop to another variable, labelled Y, which we will make equal 10.

Therefore, our code now looks like this: CLICK HERE

What results did we get?

WatchList Rankings = 200 trades
$800 position sizing results…
Starting Capital = $10,000
Ending Capital = $52,464.61
Number of Trades = 196 (4 neglected or 2%)
Strike Rate = 41.84%
Avg Profit = $2,007.69
Avg Loss = -$1,071.63
Avg P/L Ratio = 1.87
Drawdown = -86.26%
Recovery Factor = 1.48

Here were our results from the original AtStop system…
Starting Capital = $10,000
Ending Capital = $37,275.36
Number of Trades = 113 (2 neglected)
Strike Rate = 46.02%
Avg Profit = $1,217.12
Avg Loss = -$590.14
Avg P/L Ratio = 2.06
Drawdown = -64.50%
Recovery Factor = 2.36

It’s important to keep an eye on the ratios more than the net profit. By comparing the two we see that the ratios for our original system are better.

Let’s look at using a trailing volatility stop… change trailing stops to:

• SellAtTrailingStop(Bar+1, PriceHigh(Bar)-(3 * ATR(Bar, X)), LastPosition, ”);
• CoverAtTrailingStop(Bar+1, PriceLow(Bar)+(3 * ATR(Bar, X)), LastPosition, ”);

(You could further change the trailing stops above to use PriceLow (for Sell)/PriceHigh (for Cover), PriceClose, or even Highest(Bar, #High/#Low/#Close, X)/Lowest(Bar, #High/#Low/#Close, X))

Watchlist Rankings: 181 trades
$500 position size…
Starting Capital = $10,000
Ending Capital = $32,575.44
# Trades = 177 (4 neglected or 2.2%)
Strike Rate = 40.11%
Avg Profit = $1,429.94
Avg Loss = -$744.81
Avg P/L Ratio = 1.92
Drawdown = -96.60%
Recovery Factor = 1.07

Again, no good…

Let’s now move to a more technical stop by using previous peaks and troughs as our trailing stop. Here we have changed the exits to:

• SellAtTrailingStop(Bar+1, Trough(Bar, #Low, ATR(Bar, X)), LastPosition, ”);
• CoverAtTrailingStop(Bar+1, Peak(Bar, #High, ATR(Bar, X)), LastPosition, ”);

Here are our results:
Watchlist Rankings: 255 trades
$500 position size…
Starting Capital = $10,000
Ending Capital = $29,641.41
# Trades = 251 (4 neglected 1.6%)
Strike Rate = 40.64%
Avg Profit = $987.17
Avg Loss = -$543.96
Avg P/L Ratio = 1.81
Drawdown = -93.91%
Recovery Factor = 1.15

Again, no good.

So, even after doing a couple of tweaks we have found that our current system has withstood the last two series of tweaks.

Next we’ll begin to ADD stuff!

Tags: Forex Systems, Top Currency Secrets

• Be wary of any good result; and
• Know your testing environment’s limitations

You need to be wary of any good results that you come across in your testing. It’s hard NOT to become emotionally attached when you discover what seems the holy grail, but if you don’t re-check your testing code you might be up for some pain if you hurriedly decide to trade your system live.

As with live trading, don’t get emotionally attached to ANY system or it’s results.

The second point goes hand in hand with the first: understand the limitations of your back-testing software.

Most back-testing systems have some sort of flaw, and most will not tell you – you’ll need to discover them for yourself.

Whenever I find a system that is too good to be true the first thing I check is the code. If the code looks fine I will then go to the charts. Here is what our last system showed on the chart for an ordinary exit (click on image to enlarge):

As you can see from the chart the dotted lines represent where our trailing stop lays, on the day when the trailing stop is hit the system reverses the position to go the other way from that day’s OPENING price!! If you can see the left most orders you will notice that the system exited a BUY order by hitting it’s trailing stop order at 0.8947 it then proceeded to go short at 0.8990. How could the system have possibly known from the OPEN of that day that it would also see it exit from it BUY order??

Fact is it can’t.

Even though the code is okay, WLD is not.

The flaw for this system is the way in which WLD processes entry orders on the same day as our exit – this is ok for system’s such as the one which used the AtStop orders, but not okay for any other type of order such as the AtMarket and AtLimit orders.

So, instead of chucking a tantrum we need to understand that we simply cannot process the entry order on the same day as the exit, therefore we will need to re-design the system so that it no longer is flawed, here is the resulting code: CLICK HERE

Here are the results:
Watchlist Rankings = 115 trades
$300 position size…
Starting Capital = $10,000
Ending Capital = $35,684.83
# Trades = 115
Strike Rate = 44.35%
Avg Profit = $1,239.73
Avg Loss = -$586.58
Avg P/L Ratio = 2.11
Drawdown = -70.58%
Recovery Factor = 2.28

So how does this compare to our AtStop system?

Here were our results from the AtStop system…
Starting Capital = $10,000
Ending Capital = $37,275.36
Number of Trades = 113 (2 neglected)
Strike Rate = 46.02%
Avg Profit = $1,217.12
Avg Loss = -$590.14
Avg P/L Ratio = 2.06
Drawdown = -64.50%
Recovery Factor = 2.36

They are nearly the same, but the AtStop system does fare a little better.

Okay, reverting back to our previous AtStop system let’s continue the tweaking journey by now looking at the variables.

In this case we only have one variable being used, namely X = 30.

Let’s test to see what results are thrown up when we change the X to 10 and then to 50…

X := 10 results…

Watchlist Rankings = 355 trades (eek!)
$400 position size results…
Starting Capital = $10,000
Ending Capital = $23,190.69
Number of Trades = 346 (9 trades neglected or 2.5%)
Strike Rate = 37.86%
Avg Profit = $991.06
Avg Loss = -$542.50
Avg P/L Ratio = 1.83
Drawdown = -93.14%
Recovery Factor = 0.54

Conclusion = not good, revert back to X = 30.

Try X := 50…

Watchlist Rankings = 76
$300 position size results…
Starting Capital = $10,000
Ending Capital = $15,502.87
Number of Trades = 72 (4 neglected or 5.3%)
Strike Rate = 37.50%
Avg Profit = $1,637.11
Avg Loss = -$859.98
Avg P/L Ratio = 1.90
Drawdown = -79.72%
Recovery Factor = 0.44

Still no good… revert back to X = 30.

Testing variables is a simple thing to undertake, however many will try and over-optimize their system in attempt to find the perfect variable that will fit over their entire sample space. This is an incorrect approach. No one variable will work EVERY time.

If you find yourself testing EVERY single number from 5-500 then you really are over-optimizing.

Just do broad brush strokes, we are only testing a limited sample space of our data set so don’t panic that we haven’t got the best variable.

Next we’ll look at the simple art of modifying exits.

Tags: Forex Systems, Top Currency Secrets

The system’s results posted were only if you were willing to trade $250 position sizes with that system.

I personally do not prefer trading ANY system with just a fixed dollar amount – I always prefer trading with position sizes based on the amount I am willing to risk and where my initial stop loss lays (otherwise known as the “Maximum Risk %” feature in WLD’s $imulator).

Therefore, before I begin I want to make sure you have something very clear in your head: when we tweak we use EQUAL position sizes, when we are in the final stages of our testing phase we will look to change our position sizing model.

What we are doing when we tweak is to find the most profitable system with the highest “Avg P/L Ratio” and highest “Recovery Factor”.

Understood?

Good.

Now, let’s move onto todays BIG post…

I love tweaking. Tweaking allows me to become creative, it allows me to try a plethora of things.

However, sometimes I can get a little too carried away with this aspect and this is why it’s important to keep a record of what you are doing… and yes I know it’s annoying, but it’s far less painful than the other alternatives – such as NOT doing it and chasing your tail around for weeks on end.

Time *is* precious.

Tweaking involves changing the current structure of your system and finding ways to IMPROVE your current results.

Now there are several ways you can tweak your system, here they are in a broad sense:

• Adding/Editing Gates (at present we only have ONE entry and exit gate (the crossover/crossunder gate)
• Modifying Variables (again we only have ONE variable, being X = 30)
• Modifying Orders (we are only using “At Market” orders at present)

These three areas are where you can begin to target your tweaking process.

BUT, there is an order that I undertake which can enhance your tweaking experience. When tweaking make sure that you tweak things in this order:

1. Orders
2. Variables
3. Modifying Exit Conditions/Gates
4. Adding Exit Conditions/Gates
5. Modifying OR Adding Entry Conditions/Gates (this should be last as you’ll probably need to go back through the entire tweaking processes again)

NB: notice how this is the EXACT opposite of how NEW forex traders start out with system testing… everyone starts at ENTRY gates and moves UP. Interesting.

Lastly, when you begin tweaking DO ONE tweak at a time… yes I know it’s slow, but you don’t want to miss out on what would have been the best result because you changed 3 or more items in your system do you? Of course for things like variables don’t test EVERY number, be consistent and just use round numbers (or Fibonacci numbers if that’s the way you’re wired).

Remember: sure and steady wins the race.

Alright, at present our system waits for a cross over the highest high or lowest low over X amount of days and then enters at market.

Let’s begin our tweak by starting at the first on our list: ORDERS.

There are three types of orders:

• At Market;
• At Limit; and
• Stop

So, now that we’ve used “At Market” orders, let’s change our entry/exit process to limits.

This now brings a new can of worms into the mix as limit orders need a price. Here we will test a limit price of the signal day’s entry and the signal day’s low/high:

Here is the code: CLICK HERE

Here are the results:

Watchlist Rankings: 94 trades
$250 position size…
Starting Capital = $10,000
Ending Capital = $22,822.41
# Trades = 94
Strike Rate = 45.74%
Avg Profit = $832.45
Avg Loss = -$450.45
Avg P/L Ratio = 1.85
Drawdown = -57.07% (don’t forget ignore this number unless you are trading this system with the $250 per trade position size… which I wouldn’t be)
Recovery Factor = 1.41

Mmmm… it’s okay… can we do better?

Let’s change the limit entry order price to the Low (for BuyAtLimit orders) and High (for ShortAtLimit orders) of the signal day, here are the results:

Watchlist Rankings = 34
$250 position sizes
Starting Capital = $3,482.80
… don’t need to record the rest, we know it’s a loser.

Now we’ll test the stop order process. We can do one of two things with this system considering that it uses previous high and low prices as an entry gate. Firstly though, we will change the current system so that on the crossover/crossunder we will enter a stop entry at the day’s high (for buy orders) or low (for short orders).

So, where we once had BuyAtLimit(Bar+1, PriceLow(Bar), ”) it will now change to BuyAtStop(Bar+1, PriceHigh(Bar), ”), and for ShortAtLimit(Bar+1, PriceHigh(Bar), ”) we will change it to ShortAtStop(Bar+1, PriceLow(Bar), ”).

Here are our results:

Watchlist Rankings = 90 trades
$250 position size
Starting Capital = $10,000
Ending Capital = $13,174.40
# Trades = 89 (1 neglected)
Strike Rate = 43.82%
Avg Profit = $731.27
Avg Loss = -$506.90
Avg P/L Ratio = 1.44
Drawdown = -72.07%
Recovery Factor = 0.33

Conclusion: Not good.

As you can see there’s nothing real inspiring, however, if we take the ideals of this system and convert it into a stop entry order system what results do we get.

First, here’s the code of our new system… CLICK HERE

Results…

Watchlist Rankings = 115 trades
$500 position size…
Starting Capital = $10,000
Ending Capital = $60,542.95 (505.43% over 5 years!)
Number of Trades = 101 (14 or 12.1% are neglected)
Strike Rate = 48.51%
Avg Profit = $2,135.09
Avg Loss = -$1,039.93
Avg P/L Ratio = 2.05
Drawdown = -76.76%
Recovery Factor = 2.62

What’s wrong with the above results?

That’s right… the quantity of trades neglects too many… just thought I’d see if you were still awake.

The good thing about Wealth-Lab is that it makes it easy to change the position size… just edit the figure to whatever you want and then click the APPLY button (there’s no need to re-run the simulation)… and voila your new results are displayed.

Here are the results for other position sizes:
$400 produces trades of 107 (8 neglected)
$300 produces trades of 113 (2 neglected)

So the winner is $300, what are our results:

Starting Capital = $10,000
Ending Capital = $37,275.36
Number of Trades = 113
Strike Rate = 46.02%
Avg Profit = $1,217.12
Avg Loss = -$590.14
Avg P/L Ratio = 2.06
Drawdown = -64.50%
Recovery Factor = 2.36

So, by looking at these results would you say that we’re moving in the right direction? We’ve increased profits, we’ve improved strike rate (slightly), we’ve improved our Avg P/L ratio, we’ve worsened and we’ve improved our recovery factor… conclusion = we’re heading in the right direction.

Let’s continue to tweak…

Let’s do something a little odd, why not change all AtStop orders to AtLimit orders??

What results do we get??

Watchlist Rankings: 118 trades
$400 position sizes
Starting Capital = $10,000
Ending Capital = $74,378.02
# Trades = 114 (4 neglected or 3.4%)
Strike Rate = 52.63%
Avg Profit = $1,674.54
Avg Loss = -$668.41
Avg P/L Ratio = 2.51
Drawdown = -58.79%
Recovery Factor = 4.82

WOW! Big jump.

We’re onto something… and we’ve only really tweaked one aspect – the ordering process!

This is now the time where I leave you all in suspense until next time.

As they say: Stay tuned.

Tags: Forex Systems, Top Currency Secrets

Okay, time to get our hands dirty.

Where do we start?

First we need to select a sample from our testing data so that we don’t over-optimize our system’s results when we begin tweaking.

There are several ways of doing this:

• You can select a handful of currencies from your currency portfolio; or
• You can select a time period for all currencies

I prefer selecting a time period, but when I am testing systems for stocks I generally prefer testing on an alphabetical list (i.e. all A-C’s).

Our sample for currencies will be from July-18-1999 to July-18-2003 (5 years) – my entire data sample ranges from 2-Jan-1991 to today (14.5 years), therefore my testing sample will equate to roughly 30% of my entire data range (a good percentage, anything more I would be wary of).

The currencies I will be testing on will be the following:

• AUDUSD
• EURUSD
• GBPUSD
• USDCHF
• USDCAD
• USDJPY

So, now that we have our date range and currencies set let’s start…

Today we will explore breakout systems.

A breakout system can incorporate any (or all) of the following characteristics:

• Price
• Volume (obviously cannot in forex as we are not privvy to this with our data)
• Volatility
• Momentum-type indicators

So, let’s start exploring by creating an extremely simple system.

Here’s our starting code: CLICK HERE

What does this system do… in plain English?

Okay, this system buys (or shorts) at market when we have a close that crosses above (or below) the highest high (or lowest low) of the last 30 days. It is always in the market.

So, what should we do next?

Most people would now scoot on over to Wealth-Lab’s $imulator enter in their starting capital and have the computer zip out a hypothetical performance. If the performance looks good people will continue to play with it, if not they will throw it out.

This is wrong.

You need to start with Wealth-Lab’s WATCHLIST RANKINGS. You then need to make sure that you have the following settings:

• All data selected (your system’s will still only trade between the selected sample dates)
• RAW PROFIT ONLY : Position Size (Stocks) : Fixed Dollar = $500 (or whatever number you want… make it around 5% of your capital)
• Then make sure your script is selected as well as your forex watchlist
• Click on “Begin Rankings”

Now, why did we do this?

It will become obvious a little later on, but for now I want you to write down one number from the results:

TRADES

What number is it in the case of this system above? 94

Alright, now that we’ve done this we can now scoot on over to Wealth-Lab’s $imulator and see how our hypothetical portfolio of $10,000 would have gone during this period. So, we enter 10,000 into our “Starting Capital” section and “Fixed/Dollar Margin” of $500 (ensure that the PERIOD tab has “All Data” selected, Lead Bars of 1, and a ticked box for the one labelled “Include Price Series that do not have complete historical data”; for the SCALE tab enusure that “Daily (Intraday)” is selected; for the OPTIONS tab NOTHING should be ticked).

With our hypothetical test we end up with the following results:
Starting Capital = $10,000
Ending Capital = $35,471.07 (254.71% over 5 years)
Number of Trades = 77
Strike Rate = 48.05%
Avg Profit = $1,941.73
Avg Loss = -$1,159.32
Avg P/L Ratio = 1.67
Drawdown = -81.91%
Recovery Factor = 1.11

Can you see why we did the WATCHLIST RANKINGS first??

Well of course it’s easy to see because I told you to record only ONE number – the quantity of TRADES taken!

The quantity of trades taken in our Simulation was different. This means that out of our Simulation 17 trades were neglected (obviously we didn’t have enough capital), or 18% of total trades weren’t taken! What if these neglected 17 were the best trades of the entire system?? What do we do?

There are several options open to us:

• We can add more entry gates (more filters) to our system
• We can lower our position size

If we lower our position size to $300 let’s see what happens:
Starting Capital = $10,000
Ending Capital = $21,241.04 (112.41% return over 5 years)
Trades = 82
Strike Rate = 45.12%
Avg Profit = $1,165.04
Avg Loss = -$708.12
Avg P/L Ratio = 1.64
Drawdown = -88.27%
Recovery Factor = 0.81

Things are getting worse! But we still don’t have all trades entered – we now have 12 neglected or 12.7%. I still think this number is too high and I personally prefer to only neglect NO MORE than about 5% of all trades… there’s no hard and fast rule, some prefer to neglect no more than 10%.

Alright, what if we used $250 as our position size?

Starting Capital = $10,000
Ending Capital = $21,967.83
Number of Trades = 94
Strike Rate = 45.74%
Avg Profit = $822.16
Avg Loss = -$458.53
Avg P/L Ratio = 1.79
Drawdown = -58.67%
Recovery Factor = 1.30

So, to trade ALL of this system’s trades with a starting capital of $10,000 we will need to trade $250 position sizes.

Is this system profitable? Yes.
Are you comfortable with the Drawdown? For me – No.

Then we need to go back to the drawing board and see how we can improve this system, or, what I like to call tweaking.

… that will be our next episode.

PS – why do we trade fixed dollar position sizes instead of “Max % Risk” or “Percent of Equity”? Simply because any percentage based system biases the results depending upon how well the last trades in the sample perform. We want to keep all positions EQUAL and therefore reduce the biasing of our results during our testing phase. This does not mean that I neglect “Max Risk %” based systems – I only neglect them in the initial testing phases of system design – you should too.

Tags: Forex Systems, Top Currency Secrets

In the trading profession there are many types of traders that each have their own specific edge. I have found that those who are the most successful have a system that complements THEM and their personality.

Therefore, for you to become a success you also will need to design a system that can complement your personality.

So, what type of personality are you? Then, what type of trading style will be more suited to your personality?

In my experience there are generally 2 types of trading styles: breakout & reversal.

Depending upon the sort of person that you are you will likely gravitate toward one end of the spectrum than to the other.

By answering the following questions we will be able to ascertain what type of trader you likely are:

1. Do you prefer large wins, over smaller more consistent wins? YES = 1 NO = -1
2. Do you prefer spending time in front of the screen? YES = -1 NO = 1
3. Would you be irate if you exited a profitable position that ended up making more money? YES = 1 NO = -1
4. Do you prefer a smaller consistent income in comparison to a larger inconsistent income? YES = -1 NO = 1

Add up your answers and with your tally see where you lay on the breakout-reversal spectrum:
Breakout = 4
Mid = 0
Reversal = -4

If you scored a perfect 4 then you are more of a breakout-type trader and should therefore cater your system development to that type, conversely if your scored a perfect -4 then you should concentrate your system development to that of a reversal-type.

The characteristics of a breakout trader are as follows:

• Avg Win to Avg Loss ratio is about 5:1 (big wins)
• Less active
• Returns are generally not capped
• Returns are less consistent
• Lower winning strike rate (30-40%)
• Generally someone who enjoys working less, prefers hitting the big home runs and unconcerned about the consistency of income

Compare this to the characteristics of a reversal style trader…

• Avg Win to Avg Loss ratio is about 2:1 (lots of little wins)
• More active
• Returns are generally capped
• Returns are more consistent
• Higher winning strike rate (60-70%, maybe even as high as 90% for scalpers!)
• Generally someone who enjoys working, prefers being right and receiving a consistent income

Now these are what the two ends of the spectrum present, you need not be entirely in ONE camp… you might take what you feel is the best from each camp and then sit in the middle.

But what style do you prefer?

Do you have the time to be in front of the computer? Do you want to spend that time in front of a computer? If YES then you will want an active system, breakout systems in general aren’t really ACTIVE systems whereas their counterparts the reversals are… therefore you may have a tendency to become a reversal type trader.

Do you prefer being right more often than not? If a string of losses will dent your ego or provide you with great difficulties in following your system you may want to look at a reversal type system as these systems generally have a higher strike rate than their breakout counterparts.

Do you enjoy big wins? Reversal traders are only willing to snap up small profits along the way, breakout traders prefer large gains.

Do you need consistent income? A reversal trader generally has a more levelled equity curve than a breakout trader therefore you may decide to give up large drawdowns with shallow ones made from reversal type systems.

By looking inside yourself first we can begin to see what type of system you will gravitate towards.

Many traders who seek to find some fulfilment in the markets often leave sorely because the system they decide to follow does not agree with their own personality. How do you know what type of trader you are if you never ask yourself?? At least by having something guide as to what you now think you are right now we can work from this and see what happens.

Alright, so how does knowing what type of a trader I am relate to how I should start coding?

Well, everything… it now begins to nut out HOW you will begin your expedition, how you will start to nut out what needs to be done, how you will trade!

Next we will start exploring the needed components of each type of style to determine what the systems will need to contain.

Tags: Forex Systems, Top Currency Secrets

It’s an annoying aspect to testing, but believe me: you want to get this set up correctly FIRST TIME.

Here are some things you will need to know on the forex broker level:

• Leverage of your forex broker (margin per contract)
• Trading times (?)
• Minimum account size/minimum trade size

Here are the things you will need to know about the currencies which are traded inside your forex broker:

• Pip values
• Contract sizes
• Spreads
• Commissions per contract / per trade
• Carry charges (interest paid/received)

Once you have collated all this information then you will need to insert it into your testing environment.

Here is a text file on what I use for the above scenarios in Wealth-Lab’s Futures Symbols Manager. With this text file I have used USD as my account denomination (i.e. all pip values are in USD) and I have used mini contract sizes at 100:1 leverage.

Probably one of the toughest forex brokers to set up the Futures Symbol Manager in WLD is Oanda. Log in to your demo or live account and do the following:

Click on the first currency and conduct a market order.
Enter a purchase of 10,000 units and note down the pip value found at the bottom of the order window.
CLICK CANCEL WHEN DONE.
Do this for each currency you wish to trade.

In Wealth-Lab’s FSM enter the following:
Currency Symbol
Point Value (multiply 10,000 by the pip value; BUT for JPY crosses multiply 100 by the pip value)
Margin (for 50:1 leverage divide the point value by 50; BUT for JPY crosses divide the Point Value by 0.5 (leverage/100))
Tick (all of the majors are 0.0001; BUT for JPY crosses use 0.01)
Decimal (most are 4 any; BUT for JPY crosses use 2)

So, as a quick example, for an AUD account if we were looking to find out what to enter into Wealth-Lab’s FSM for the GBPJPY we would conduct a market order trade in Oanda, we not down the pip value for 10,000 units being AU$1.19. For the USDCAD we conduct a market order trade for 10,000 units and we note down the pip value as AU$1.10.

We scoot over to our beloved Wealth-Lab and enter the following data into our FSM for the two currencies:
GBPJPY
119
238
0.01
2
–
USDCAD
11000
220
0.0001
4

If we were doing 20:1 leverage with Oanda all we need change is the Margin value, making the above currencies values in WLD FSM the following:
GBPJPY
119
595
0.01
2
–
USDCAD
11000
550
0.0001
4

Now, I will admit, the results you will receive from entering in these figures will not accurately reflect what you would have received in the past. This is due the fact that the pricing of the forex market is DYNAMIC – the values above will be different in 3 to 6 months. The importance is that we have SOMETHING down.

Alright, it is important to be as harsh on your results as possible (without going overboard).

It will be FAR cheaper for you to be stringent here than once you’re underway. Don’t fall in love with any system… fall in love with the ACTUAL result of what the system GIVES you in your account.

Now I personally don’t use Wealth-Lab’s global slippage settings (hit your F12 key and click on “Trading Costs/Control”) I prefer entering the slippage settings on the SCRIPT level.

Our slippage setting will incorporate the spread of the currency as well as our general slippage charge.

As an example if our forex broker has a spread on the EURUSD of 3 pips our slippage will be an ABSOLUTE minimum of 1.5 pips (slippage in WLD is incurred on both entry and exit). If we then want to apportion 5 pips round turn to we will add 2.5 pips to our 1.5 spread charge… totalling 4 pips slippage per trade (8 pips round turn).

In Wealth-Lab you can specify different levels of slippage for each currency. The script would look something like this:

if GetSymbol = 'EURUSD' then
 SetSlippage(true, 4, false)
else
 SetSlippage(true, 5, false);

This code would be placed at the top of the main “for” loop.

Anyway, next we will finally start by exploring what type of system you will begin to code… we may even get our hands dirty!!

Until next time.

Tags: Forex Systems, Top Currency Secrets

1. How do I get the series?
Simply register your name and email into the right hand section of the Currency Secrets home page OR fill in your details here:

2. Is the series free?
Yes the series is 100% free with no up sell of anything whatsoever (I do detail the products I use, but do not make any money from doing so).

3. The password does not work?
I check and re-check every password that is issued and I can safely say that all the passwords do work. If you are having troubles highlight the password in your email and then paste the password into the correct password box.

4. Why are you testing on indicative data?
At present I will be testing on end of day indicative data – this probably only has a 5-10 pip error band as compared to normal bid/ask/mid-priced end of day data. We have many users who utilize other forex data providers so no doubt we will see the difference. If the difference IS significant I will change to a mid priced end of day data series. Don’t forget I am using DAILY indicative data I do not condone the use of INTRADAY indicative data on smaller time scales (the 5-10 error band is just too large). You can read more about it here.

5. Are you going to include the spread, commissions and slippage into your testing?
Yes. All other costs will be used as slippage.

6. Are you going to be posting live buy and sell signals of your system?
This is an education for how *you* can design a system. This whole process is about making you smarter by teaching you how *you* can design your own system.

7. Which forex broker do you use?
Oanda

8. What leverage will you be using?
I will be using the common 100:1 leverage for mini accounts.

9. Where can I find free indicative data?
I don’t recommend it but you can try reading our free forex data review for sources – possibly start with Dukascopy.

10. I don’t know how to code in Wealth-Lab?
Then do not participate in the series. Keep your eyes closed.

11. Can I automatically trade through Wealth-Lab?
I think you can, but I am unfamiliar with how Fidelity have things structured with Wealth-Lab and FX at the moment. Possibly ask on the Wealth-Lab forum.

12. How much money do I need?
If you are talking about this series you don’t need any at all. If you are talking about the forex system that you will design then this will depend upon the settings of your system.

13. How do I unsubscribe?
Each email contains a link at the bottom with the words “To unsubscribe or change subscriber options visit:” beside it. Just click on that link and hit unsubscribe on the ensuing screen that pops up.

14. How much time will I need to devote to your system?
Again, this is not so much about MY system it is educating you on the process of creating YOUR system, therefore it will purely depend on how busy you want to be.

15. I don’t have Wealth-Lab, what should I do?
You can either sign up for their free trial when all this is done, or you can program it into your testing enviroment’s software, or… you can do nothing.

16. What currencies will you be testing on?
This will be discussed.

17. I don’t understand what drawdown means?
Drawdown is the maximum measurement of each peak to trough dip in your equity curve. As an example, if your account sits at $100,000 and races up to $110,000 but then dips back down to $105,000 before going back up to $111,000 then you’ve had a drop of $5,000 or 4.5% in equity ($5,000 / $110,000). If you account drops from $111,000 to $101,000 before scaling back above its previous peak of $111,000 to rest at $115,000 you’ve now had a drop of $10,000 or 9% in equity ($10,000 / $111,000). If these were the only two drops in your account then the system would report that your Maximum Drawdown is the 9% (the highest of the two numbers).

18. What time frame are you going to be back-testing and will you be testing on multiple time frames?
Daily data only and no.

19. Do I have to read code to understand this series?
No, but it is a good prerequisite.

20. What are you selling?
Absolutely nothing.

21. Are you crazy?
Yes, and by doing this exercise it has only emphasized this. LOL

Tags: Forex Systems

Oooo look MACD… Oooo Stoch RSI… Oooo Williams R…

And then they begin pasting all these indicators onto the chart and seeing which one looks the best.

How do I know this?

Well… believe it or not this was how I started trading! I was captivated by all the glitz and glamour of these fancy indicators, and made sure that whichever testing environment I bought it had the largest quantity of indicators available… no doubt some of you are (or have been) in this situation too.

Take a step back.

Begin at the right end of system design by firstly doing a self-examination of where you’re at right NOW.

Here’s what you will need to check:

• Your capital
• Your risk tolerance
• Your system development skills
• Your statistical analysis skills

Don’t underestimate the importance of this… if you don’t know where you are CURRENLY AT you will not know the best way(s) on HOW to get to where you want to go. I underestimated this and lost probably at least 6-12 months of my life by just haphazardly testing systems with no idea on why I was doing it and what I was doing! The only benefit I really got from the experience was programming better!

Now if you don’t have any system or statistical skills you will need to TRY to equip yourself with this knowledge. Someone once told me that if I wanted to become a successful trader I needed to learn some basic programming skills… I’m glad I took that person’s advice. If you have the time you should invest in learning how to code in your testing environment. Don’t get mad, just do it… if I can learn how do it so can you… and the great thing about Wealth-Lab Developer is the support.

Moving on.

Next, you need to know what YOU WANT.

This answers an important question that most new traders fail to ask: Where am I? How will you know where you are if you don’t know where you’re AT and/or where you’re going TO? You could already be at your destination and never know it!

Moving on.

Lastly, you need to keep track of what you’re CURRENTLY DOING.

Sometimes you will add a tweak to your system that will enhance the performance of your results, other times it will worsen it. If you don’t keep track of your system changes then you’ll either miss results that were the best during those testing times, or, you’ll continue to test the same system over and over again.

So, today work out where you’re AT. This is easy. Start by answering the following questions:

• How much capital do you have?
• How many losses in a row can you tolerate?
• How much of your capital are you prepared to lose before you call it quits?
• What is your maximum drawdown tolerance? (drawdown is the maximum peak to trough percentage)

Work out what you want. This is tough. Start by answering the following questions…

• What annual return on capital would you like?
• Why?

It is important to provide a reason for why you want this return. Will it provide for the lifestyle you want? Will it get you out of your job? Will it just allow you to live comfortably?

Provide a reason… because when things get tough you can focus on your reason and not lose heart.

As yet we haven’t coded a thing.

It’s important to make sure you understand THIS section and that you *do* it. You’ll only be spinning your wheels in the dirt if you don’t.

I did.

Next we’ll look at setting Wealth-Lab up correctly.

Tags: Forex Systems, Top Currency Secrets

Before we start we need to make sure we have some formalities out of the way.

First and foremost I am not a licence individual and as such cannot give any advice. Everything contained within this web site is only for educational purposes. If you have a problem with this then consult with a qualified legal financial advisor. Any returns that are stated are likely to be historical and therefore please be aware that historical returns are not indicative of future performance.

Okay, sorry about that, just needed to get it off my chest before we begin.

Everyone okay with that?

Good.

Now, before we get down and dirty with code, ideas, and all other messy stuff let’s just make sure we start on the same footing.

As you know forex data is a different kettle of fish in comparison to other forms of data.

All of the sources I’ve tested over the years all have varying historical data prices. Some vendors are better than others.

The historical data that I will be using will be DAILY INDICATIVE data provided by DataHQ. I have found their data quite reliable and much better in comparison to free end of day historical data vendors.

Ok, secondly I use Wealth-Lab Developer as my backtesting software environment. If you use another platform then you will need to translate any Wealth-Lab code into your testing environment’s language. If you’re smart you could wait until this series is over and apply for a free 30-day evaluation of Wealth-Lab’s software (I think you can so likewise with DataHQ’s data too)!

So, we have the disclaimers out of the way, the historical data that will be used and the testing enviroment.

Alright, nothing profound just yet. Settings of what is used in Wealth-Lab will be discussed as we progress through the series.

I hope I haven’t missed out any other blaringly obvious introductory material… oh well.

Stay tuned for the next instalment where I will show how most new forex traders (and I’ll even go as far as say MOST forex traders!) get it wrong when they begin designing their system.

Tags: Forex Systems, Top Currency Secrets

Over those weeks you should have been equipped with the ability to see flag formations as well think of the best ways to exploit these formations when they do occur.

Similarly other patterns such as triangles and Fibonacci zones were also identified.

Now we are going to change tack and begin exploring the world of mechanical trading.

Just because I may not prefer mechanical forex trading does not mean that I have no clue on how to design such a system and/or follow one.

So, to satisfy my subscribers and Currency Secrets readers who have been searching around the net for a profitable mechanical forex system I will be outlining the thought processes as well as developments of how I go about designing a mechanical system.

I will not be selling this information, BUT will be password protecting these pages and therefore make such information available ONLY to those who subscribe.

If you wish to become a Currency Secrets subscriber just fill in your name and email address in the form on the right.

Registration IS FREE.

We will not PIMP your email address (i.e. we will not pass your details on to anyone else).

And should you wish to unsubscribe at any time you can easily do so by clicking on the unsubscribe link found at the bottom of any email we send.

We hope that many subscribers learn much from the experience.

Ryan Sheehy
Currency Secrets.com

Tags: Currency Secrets Announcements, Forex Systems

You can read this short publication here.

Tags: Forex Systems, Forex Trading Systems

To learn more about this development start by reading this post then when you’re done move onto this post where I’ve asked some questions and offered some suggestions about the product.

Mark, the developer, is interested in any comments and questions you might have about the product so feel free to offer any suggestions you might have for his product by commenting on his blog.

The product does look very promising and I’ll be looking forward to seeing what other suggestions Currency Secrets.com readers offer.

So have a read and see what you think.

Tags: Forex Systems, Forex Trading