Saturday, January 16, 2010

Trading the Full Turtle System... The Ayotl Trading System

For the past year I have been very interested in the development of a trading system that matches all the exact specification of the original turtle trading system developed by Richard Denis in the 80s. I have separately programmed and evaluated both turtle trading systems (no.1 and no.2) in a reliable fashion leading to a publication on the 2010 January issue of currency trader magazine of my research done on the Turtle trading system No.2 and its performance on 7 different currency pairs during the past 10 years of trading. Near last year's end I published a post which stated that I was working on an implementation of the turtle trading system that would allow completely automated trading of both strategies including all correlation and portfolio management rules which formed part of the original turtle system.

As far as I know, there is no precise implementation of the separate trading systems available for mt4 besides my own and there is currently no implementatin of all the portfolio managment and correlation strategies which are supposed to further enhance the profitability of this trading system. Today's post aims to show you what I have been up to for the past few weeks regarding this trading system and what I have achieved... The Ayotl trading system.

As always, there is an etimological reason for the name. Since I want my developments to be able to be distinguished from other people's attempts to develop a turtle trading system expert advisor I decided to give mine the name Ayotl, which simply means turtle shell in Nahuatl, the original language used by the Aztecs in Mexico. A common word which also has its roots in Nahuatl is tomato, which comes from the word tomatl from the same language.

What is the Ayotl trading system exaclty ? It is not only a single expert advisor but a conjunction of three different expert advisors which are used together in order to trade the turtle trading system in a portfolio environment. There is an EA that trades system no.1, another EA that trades system no.2 and another EA which is called the "turtle controller" which simply controls what the other experts are doing and authorizes or denies permission to open new trades. The controller EA takes into account the number of total open trades per currency, total long open trades, total short open trades, total trades opened on heavily correlated instruments, total number of trades opened on uncorrelated instruments, etc. The controller has a myriad of functions and manages all the experts so that they work in unisone, just like an original turtle trader would have done.

Ayotl is the first true automated representation of the whole turtle trading system. The person who wants to use it picks up the instruments and simply decides whether to use system No.1 or No.2 on each one, loads the experts on each different chart, loads the controller on a separate chart (instrument does not matter) and defines the magic numbers used for each one of the separate instances. Then the system is initialized and the controller starts to handle requests and answers to each one of the interfaces. While it does that the EA checks if each request fulfills the necessary criteria to allow for the opening of new trades. The only shortcoming of this approach is that the Ayotl system cannot be backtested due to the fact that it uses several different currency pairs and the interactions between trades taken on different pairs but the separate systems can be tested individually on backtesting achieving the results shown on the Currency Trader Magazine article I mentioned at the beginning.

Without a doubt trading either system no.1 or no.2 yields profitable results in the long term . Manually looking at the probable modifications caused by the portfolio strategy only points out to a diminishment in risk because of the diversification and restrictions caused by correlations, total number of trades, etc. For the past two weeks I have tested the strategy on the 5 minute time frame (only to have fast breakouts and exits to test the programming, clearly the final system will be traded ONLY on daily charts like the original turtle trading system) and have found it to behave just exactly as it is supposed to. After a little bit more testing and the writing of a manual for the system it will be released for use to both ebook customers and newsletter subscribers. Watch my twiter feed on the bottom of the left handed sidebar (or subscribe to the feed) to get the news when the release is coming out.

If you would like to learn more about long term profitable trading systems and how you too can program design and use your own trading systems to achieve reliable profits in the 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 the article !

1 comment:

Kristopher said...

Yes, i agree trading is like a turtle system. It's very hard to keep up the profitable trading systems for long run. Your ayotl futures trading system is good.

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