Yet another newbie system!

[sr2]

Originally posted by Skorpion
Thanks for sharing. Appreciate people who openly share their systems. Good luck with it.

Thanks Skorpion

[sr2]

Originally posted by tim_nn
This looks rather interesting, sr2.

Well done with it so far and thank you for posting it.

Could I ask a couple of questions (three, actually)?

1. What made you use WMA's rather than EMA's for this system?

2. What proportion of the time, overall, is it "in the market", i.e. with an open position?

3. Do you think it might be viable to relate your figure of 100 (for the maximum difference between the two WMA's at the point of the crossover of the PAR and the long MA, I mean) to the ATR of each pair, rather than taking it as a flat 100 for all currency pairs?

(I agree entirely with TLB's comments above, also).

Hi tim_nn

Thanks for your reply. I will try to answer your questions as best I can. I am still a newbie

1) I found that the WMA moved closely with the market which I suppose makes sense as it is weighted. Also the profits were higher. Some may call that curve fitting and I would probably agree but if over time WMA generates more profits than SMA or EMA then surely that is the better approach.
2) Not sure how to answer this. The image above shows the time the trade was taken and exited so you can get a rough idea of how long the I am in the market. Most of the trades would probably be overnight. I think the average time for a trade is probably about 30 hours with some weeks not generating any trades.
3) Not thought about that. Will have to take a look see. Basically what I am trying to do at present is create a very simple set of rules for entry and exit of trades, which can be set and left to play out. I did at one stage try different SL and TP for different currencies but then decided to try and create a universal set of rules. Over time I may find this is not the best approach and so may try other values. Also I am only looking at 8 currency pairs at present but obviously there are more which may actually be more profitable.

Hope that answers your questions. And yes I agree with TLB also.

I know it is so easy to fall into the curve fitting mode whereby you create a simple set of rules, back test using whatever and then modify to improve your back test results. I suppose luckily for me this was not how I started. I watched the charts and thought that crossover was a good way of jumping into the market. But obviouisly due to whipsaws and spreads the trades were often losses. I then noticed that often when the price had crossed over and gone past a certain point it tended to continue in that direction. I used this premis to back test manually. I did not change the rules deliberately as that would be curve fitting.

I hope that sort of explains how this system came about.

Also a quick point about drawdowns. My SL are set at 100. Which means roughly $1000 per trade. The maximum number of trades I have had going at any one time so far is 3, so basically you are looking at drawdowns approaching $3000 on average at present. This will no doubt change if I add more currencies.

SR2

[tim_nn]

Thanks for your reply, sr2.

Originally posted by sr2 if over time WMA generates more profits than SMA or EMA then surely that is the better approach.

That's for sure. Was not trying to "imply" anything with that or my other questions. I noticed recently that "BunnyGirl" had switched from WMA's to EMA's for her MA crossover system, which I believe she has traded quite successfully for quite a long time; hence my question.

Originally posted by sr2 I think the average time for a trade is probably about 30 hours with some weeks not generating any trades.

I see; thanks. My experiences with such systems lead me to suspect that the higher the proportion of time that such a system is "in the market", the less reliable the results will be overall. I'm all the more interested now that your answer's confirmed what I imagined about this system comprising something closer to "occasional trades".

Originally posted by sr2 Not thought about that. Will have to take a look see.

Understood. Hopefully you're not going to be too influenced anyway by any "casual comments" on an internet forum from people you don't know. But (there had to be a "but", didn't there? ) my guess is that in the long run it's both better and easier to relate variables like the maximum permitted distance between the MA's to the ATR than it is to use a universal figure. The volatility of various pairs is such that trying to "fix" it universally will result in unnecessary compromise somewhere which will reduce profitability; and it's not _really_ any more any complicated or difficult to say "double the 4-hourly ATR(10)" than it is to say "100 pips". It might make a surprisingly big difference to the overall results, I suspect.

SL and TP, IMHO, are a different kettle of fish altogether, and not something I'd want to lay down myself without looking at areas of probable support and resistance; but of course that's inevitably "discretionary" rather than "mechanical".

Originally posted by sr2 know it is so easy to fall into the curve fitting mode whereby you create a simple set of rules, back test using whatever and then modify to improve your back test results. I suppose luckily for me this was not how I started. I watched the charts and thought that crossover was a good way of jumping into the market. But obviouisly due to whipsaws and spreads the trades were often losses.

Sounds like you've come at this from a different point of view from most "newbies". My money's on you.

Originally posted by sr2 I then noticed that often when the price had crossed over and gone past a certain point it tended to continue in that direction.

I feel pretty certain that that's a completely and almost universally valid observation and principle (as well as one that JetHeat and BunnyGirl and people trading their systems would certainly agree with).

Originally posted by sr2 I hope that sort of explains how this system came about.

It does indeed. And thank you for posting it, and for your further explanations. I wish you very well with it and look forward very much to hearing about your progress with it.

Originally posted by sr2 Also a quick point about drawdowns. My SL are set at 100. Which means roughly $1000 per trade. The maximum number of trades I have had going at any one time so far is 3, so basically you are looking at drawdowns approaching $3000 on average at present. This will no doubt change if I add more currencies.

The 8 currencies you're looking at are probably plenty to be going on with, no? The spreads will also be higher on others, I think, though that may not be very material?

[It sounds from the above as if you're looking at "standard lots", which surprises me slightly since you're UK-based, like me. You should perhaps look at trading these by spread-betting instead, especially if it becomes profitable, which it looks like! No point in paying a lot of tax unnecessarily or dealing with not-so-well-regulated brokers. But that's another matter altogether ...]

[tim_nn]

And one more question (sorry!) ...

Interesting that so far the EUR/GBP pair should have such strikingly worse results than the others. Do you think there's anything in that, or is it just because of the small sample-size?

[sr2]

Originally posted by tim_nn
And one more question (sorry!) ...

Interesting that so far the EUR/GBP pair should have such strikingly worse results than the others. Do you think there's anything in that, or is it just because of the small sample-size?

Hello again tim_nn

thank you so much for your comments. I really appreciate it. I love the fact that I can post something on a forum and within days get feedback and new ideas.

Your point about Spread betting is great and I have already thought about potentially going down that route.

I think re EUR/GBP its a combination of both of your points. I found in some of the pairs there is a struggle to get the profits without suffering drawdowns of up to 61 pips (which has been the worse so far if memory serves.) Like I said I did think about having different criteria for different pairs but then I thought how difficult it is to watch all the currencies so decided on a fixed criteria of 100, for now. It could be that I drop EUR/GBP for now and try one of the other pairs coming up with a list of 8 or so profitable ones.

In all honesty what I will do for now if just use the system as is following the old philosophy of "if it is broken don't try to fix it" The true test will be how the system fairs over the next few months.

I hope the system continues to be successful and that others can possibly use it. I think MT resets demo accounts every month(???) in which case I will open a new $10000 for Feb. I will post the results, good or bad

Do you think it may be worth while demoing on Refco or GFT as one of these is likely to be my real brokers? Also probably bets to use a mini account if and when I go live?

Thanks again
SR2

[sr2]

Thought I would share with you how I came about creating this system initially.

Basically I attended a seminar on stocks and shares. At this seminar one of the handouts mentioned MA's and crossover and how if these were followed could be very profitable. This stayed in my head for a few years but I did not do anything with it until finally deciding to jump into forex.

Anyway the point I wanted to make was that sometimes good ideas come from the most unlikely sources which in this case was a chap by the name of Mr Darren Winters!!! For those of you in the UK who have heard of him or been to one of his seminars you will understand what I am trying to say.

Hope that does not scare anyone away

[tim_nn]

Originally posted by sr2 I love the fact that I can post something on a forum and within days get feedback and new ideas.

I know what you mean; but take care that your main problem doesn't become spending too much time answering fatuous questions and heckling from people like me who spend too many hours a day sitting in front of a PC and chat here when they should be working/trading!

Originally posted by sr2 Your point about Spread betting is great and I have already thought about potentially going down that route.

It's worth it when tax becomes relevant. Many people in internet forums are strongly opinionated about (and opposed to) spread-betting and usually rather ill-informed and out-of-date, but IMHO the more successful traders here are gradually realising that it's both better regulated and more profitable than anything else. Enough of that, anyway.

Originally posted by sr2 It could be that I drop EUR/GBP for now and try one of the other pairs coming up with a list of 8 or so profitable ones.

Find "products" that fit your system rather than curve-fitting your system to fit them? There are advantages and disadvantages both ways.

Originally posted by sr2 I think MT resets demo accounts every month(???) in which case I will open a new $10000 for Feb. I will post the results, good or bad

I don't even know what MT is, sorry. Someone else will answer, though; this "MT" has many followers and users here, I gather.

Certainly looking forward to seeing some forward-going results, and wishing you well with them.

Originally posted by sr2 Do you think it may be worth while demoing on Refco or GFT as one of these is likely to be my real brokers? Also probably bets to use a mini account if and when I go live?

I'd say yes. Always better to do demo-trading on as close as you can get to the real platform you'll be using for real money trading. (This is actually quite an important point which many people ignore, IMHO).

(Slightly curious about why you're mentioning Refco and GFT rather than FXCM or CMC, but again, that's another matter and perhaps not very important anyway.)

Originally posted by sr2 Basically I attended a seminar on stocks and shares. At this seminar one of the handouts mentioned MA's and crossover and how if these were followed could be very profitable. This stayed in my head for a few years but I did not do anything with it until finally deciding to jump into forex. Anyway the point I wanted to make was that sometimes good ideas come from the most unlikely sources which in this case was a chap by the name of Mr Darren Winters!!! For those of you in the UK who have heard of him or been to one of his seminars you will understand what I am trying to say.

I know exactly what you mean.

I've also been to a Darren Winters free 3-hour "performance" about 4 years ago (from which I did learn a few things, actually, and was surprised how much stuff it contained, and that only quite a small proportion of it was spent promoting the longer, paid-for courses).

My sense of MA crossovers now is that they don't ever work long-term on their own but need an awful lot of filtering (for example in the BunnyGirl or JetHeat ways). This is certainly the first time I've seen exactly your method, though, and I'm intrigued. Will be watching eagerly.

[tim_nn]

And while we're (not?) on the subject ... I'll explain my interest in your system ...

A couple of years ago I came up with a system of 3, 13 and 39-period EMA's on 4-hour and/or 3-hour currency charts. Entry signals were 13/39 crossovers, filtered by various combinations of DMI/ADX (definitely the most promising) MACD (less useful) and RSI (ditto) using various different settings and criteria. Exits were mostly re-crossovers of the shorter 3-EMA. Initial stop-losses related to ATR and then trailed.

This system was "in the market" quite a bit more than yours (which was perhaps its problem, or one of them).

To cut a long story short, although initial back-testing and following it up looked extremely encouraging, I couldn't find a way to make it work consistently or reliably enough to trade it with real money, eventually stopped trying to tweak it and have since then acquired a greater interest in trading without indicators (as you might gather from my other posts around here). But a system like yours brings back mostly happy memories. So I'm very interested.