Wednesday, July 29, 2009

A new Likely Long Term Profitable Trading System : My modified Trend Finder Daily System

Well everyone, I have been working hard this past month to get some new expert advisors to test for my newsletter subscribers, you saw the first results in my last post about GBP/JPY daily breakout system and now you'll see another interesting result using the trend finder daily trading system. This system was suggested to me by a newsletter subscriber too (thank you very much for all those wonderful suggestions !)

The first think I noticed when I started to research this system was that it started on forex factory as yet another Awesome oscillator, stochastics, SMA based system. It is really common to find systems based on this particular combination of indicators as they are known to give some very good trend following signals. The reason why this happens is because the combination of indicators is mathematically sound. If you know where the Awesome oscillator, stochastics and SMA come from (how they are calculated and what they mathematically mean about price) you will notice that it makes sense to use these three types of indicators together. Such systems include but are not limited to such systems as the Ozfx and trend finder daily.

Ok, I have to admit that I wasn't this excited about the system since I have programmed myself the Ozfx and similar systems without any long term profitable results. The system does get some beautiful trend following trades but then it gets absolutely killed by changing market conditions which the indicators themselves cannot filter out. Well, the solution normally people use to tackle these problems is simply to add more indicator filters (which is not a good thing to do if you just add random things and hope some will work) but a much better solution was found for this system in my case.

First, we need to know what is definetely wrong with the Trend finder daily, what is exactly being neglected ? Again and again, EA creators on forums show their classical way of thinking on forums, the system entry rules are explained in a crystal clear way but the money management and order placing just seems to be a randomly thrown number. The author suggests 100 pip stops and 50 and 100 pip take profits. Really ? Why did he come up with this number and why is he using it for all currency pairs ? Well the answer is just that most people on forums underestimate the importance of these values.

Again, my first try on the simple adaptation of SL and TP values as well as the lot size against the ATR indicator which is a measure of market volatility. This somehow improved the system but did not actually make it profitable in backtesting from 1999 (the original system crashed like no other with wipe out results and breakeven in the best cases I could get). The new system was still losing but there was some hope. The answer was pretty simple, let your profits run ! Having a fixed TP was making the biggest trades end prematurely so I decided to add an ATR adjusted TL to the mix and there you go, a profitable trading system since 1999. Again, my point sees to be proven as most system that make some sense and try to follow daily trend can be made profitable by the addition of ATR adjusted values and often some type of volatility filtering mechanism. You can check the results below (backtesting from 1999 to 2009 with 90% modeling quality).
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Of course, this system is being tested and is available to anyone who purchases my ebook or to any newsletter subscriber,. This system will be demo traded for at least 1 year before starting a live test. If you would like to learn more about automated trading system profitability and how the correct strategies and thinking can bring you profit in the automated trading forex market please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed this article !

7 comments:

Joanne said...

Hi Daniel,

I am confused. I have your latest e book, but cannot seem to find anything called the "Trend Finder Daily ATR". Am I missing something or am I looking in the wrong place?

Thanks
Scott

Daniel said...

Hi Scott,

Send me an email and I'll send you the EA directly if your having a problem finding it. Thanks again for your purchase !

Best Regards,

Daniel

Scott said...

Thank You

Winter said...

Hi Daniel,

My backtest using Alpari does not yield the same result as your. Are you using the default setting ?

Winter

Daniel said...

Hello winter,

No, settings are NOT default you should use the settings that are on the backtest reports. The settings are also available on the FTP if you are a newsletter subscriber. Thanks for the comment,

Best Regards,

Daniel

Winter said...

Hi Daniel,

Any problem with your FTP site ? Don't seems to be able to log in.

Winter

Daniel said...

Hello Winter,

I have just checked and its working perfectly, the passwords gets changed every now and then and their sent with the newsletters, if you want to check your password just send me an email and I'll be glad to send you the new password if your an active subscriber.

Best Regards,

Daniel

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