creating a trading system, some thoughts on

hayseed

Master Trader
Jul 27, 2010
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258
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usa
quite often it's almost impossible to fully understand someone's meaning on forums.... the language barrier makes the finer details obscure.....

this is an attempt to outline my thoughts on creating a trading system.....

there is no doubt in my mind, your thoughts will differ and your thoughts will be better..... (please see point of view post later).....

//------ thoughts on the goal

for me, realistic market returns are the goal..... anything else is dessert....

the average return on the s&p 500 is roughly 6% a year..... if you reinvest dividends it's about 10..... so a 1000$ account might be expected to be 1100 a year later....

the average saving's account interest rate here in the states is currently way less than 1%..... and i mean way less than 1%.... so a 1000$ account might be expected to be 1010 a year later....

so, roughly speakin, my realistic goals would be the greater of the 2..... to make 100 on an account of 1000 in a year...... any dessert would be a pleasant surprise......

perhaps this explains my post on reasons for being satisfied.....h
 
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hayseed

Master Trader
Jul 27, 2010
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for me, trend trading the 240 and 1440 time frames seem to work the best...... even with all their well founded weakness's, it still seems to work the best..... the difficulty is in a timely manner of determining the trend if any...... we can all look back 12 months at the daily tsr(89) and see the trend...... but at any given day along that route it would have been a calculated best guess.....

there is no doubt in my mind, your thoughts will differ and your thoughts will be better..... (please see point of view post later).....

//------thoughts on the how

there are books worth of neat catch phrases that only appear neat..... one of which is that all indicators lag..... yes, that might be true ...... and it might be the reason jurik research spent so much time to speed things up...... and the reason nikolay kositsin spent so much time converting all jurik's formulas into the commonly known mq4 jurik indicators...... this interview with nikolay is one of my favorites.....

lag does not bother me...... it might help..... in any event, for trend following systems, moving averages will be the how..... and my only requirements would be that the indicator is stable and that the load is low.... other than that, the type does not really matter..... this would also includes things like the qqe and rvi..... basically any indicator that smooths values over time..... the periods would be simple like 10 perhaps.....

keepin in mind my meager goal above, 100 on 1000 in 1 year, the drill down method will be used...... by that i mean, first observe the daily trend, then the 240, followed by possibly the 60 and 30...... when they agree, or slightly before, trades will be placed with small lot sizes with the proper targets.... it does not take many trades to make 100$.... even with small lot sizes..... the risk is in over trading.....

this can be done all from the 60 minute chart.... such as, the (60 minute 5 period moving average) is roughly equivalent to the (10 period moving average on the 30 minute chart)..... the (60 minute 40 period moving average) is roughly equivalent to the (4 hour 10 period moving average)..... and the (60 minute 240 period moving average is likable to the daily 10)..... and if need be, the (80 period 60 minute average) is the 8 hour 10 ma..... and so on.....

1..... 10.... 100..... 1000..... so we have our rough idea..... in 1 year..... using 10 periods..... to make 100 $..... on a 1000$ account.....

now we must choose the indicators..... all of which will lag to varying degrees..... h
 

hayseed

Master Trader
Jul 27, 2010
1,013
258
149
usa
choosing the indicators can be the most time consuming.... there is never a final product..... it's reasonable for things to evolve over time..... it's quite often best to convert them to separate window histogram style.....

//---- thoughts on targets

there is no doubt in my mind, your thoughts will differ and your thoughts will be better..... (please see point of view post later).....

once rough rules are in place, remember this is trend following, an indicator needs to be written to count the number of signals per year..... along with the average length of time per signal.... with possibly the maximum and minimum price excursion during each signal...... for my small goal not many trades are needed so above average filtering is not harmful...... this will be the basis for profit/loss targets.....

the indicator should place vertical color coded lines at every signal.... this way you can clearly see each..... look hard into any losing trade for possible additional rule to avoid.... for me, it is better to filter out a losing trade if possible even if it filters out a winning trade..... look harder still into every wining trade for possible ways to extend it.....

indicators like peytons test ma will allow you to slide vertical lines to the buy/sell points and will calculate your expected profit/loss....

1..... 10..... 100..... 1000.... this is all that is required to beat the s&p 500.....h
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eurjpy-h1-oanda-division1-count.png

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eurjpy-h1-oanda-division1-peytons-test-ma.png
 

hayseed

Master Trader
Jul 27, 2010
1,013
258
149
usa
in the 2006 metaquotes contest, hendrick introduced us to some wonderful ideas with his ea "Phoenix"..... one of which was unique preferred settings on a per pair basis..... the idea was not meant to over fit ea's to each pair but rather allow each pair and time frame to express itself..... a 10 pip eurchf target on the 15 minute chart might be ok, but try 10 pips on the gbpnzd daily......

even though few trades will be needed per year, the ea should trade across every pair...... the basic trade rules should not vary per pair except in rare occasions..... each pair, thanks hendrick, should be allowed to express itself in terms of lot size, targets and trade frequency..... there will always be a few workhorse pairs carrying the load and always be a few lazy pairs that seldom trade..... this ok..... this is expected.....

forcing the same lot size, profit and loss targets on every pair and time frame usually should be avoided.....

1..... 10..... 100...... 1000..... let as many pairs help as can, only when they are good and ready..... coerce none......h
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euraud-h4-oanda-division1.png


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eurnzd-h4-oanda-division1.png
 

hayseed

Master Trader
Jul 27, 2010
1,013
258
149
usa
in july 2004, metaquotes released the beta version of metatrader 4..... they have been improving it with each passing day.....

there is no harm in attempting the same with a trading system..... as time goes by, odds are something will be noticed that was missed before.... or perhaps a new manner of code might be found.... anything that can make the ea's code lighter and tighter is usually helpful....
//----

a few months ago metaquotes merged several different forums into the mql5..... it appears much was lost, or at least to me, in that transfer....
the interviews from the earlier metaquotes contests are a good example.... wish i would have saved them all.....

during the 2012 competition, alexey masterov was asked about his trend following contest entry,
Your trading robot made $25 000 during the last week of the competition occupying the third place. But the history shows that it already had similar deals with big TakeProfit. Why did it appear so late in our TOP-10?

to which he replied,

The robot did not have enough funds to trade large volumes at the time. Therefore, the profit was small enough.

//----

turning a small initial balance into a large one takes time..... turning a large initial balance into a small one does not.....

let the indicator place vertical lines at it's best guess entry point..... the rest is up us..... when the conditions plotted on the chart it's quite easy to see if we are trading against them....h

 

hayseed

Master Trader
Jul 27, 2010
1,013
258
149
usa
small goals are somewhat easier to make.... so success is somewhat easier.... it's success that keeps us motivated.....

no one can broad jump 10 miles...... quite a few can run it...... almost everyone can walk it.....

1.....10.....100......1000...... anything more is just desert.......
//------

we have the 3 rug rats again for the whole summer..... spent the first week at the grand canyon..... opened peyton's summer account as usual, 6/2/17....... she can out trade me......

trading forex is risky beyond belief...... rules are needed along with the strength to adhere to them......h
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Ary Barroso

Active Trader
Jul 9, 2017
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Well, it’s the most challenging part in this sector; it takes such a long time! I guess, traders need to make minimum 500 trades to judge their trading system. But, most of the time, traders like to judge their trading system too early.