【Automated trading】 Reproduce trades with high reproducibility through automated trading! ~Trading only 3 hours a day won’t earn fast results~
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Empathy 99.9%!
What is the FX manga everyone is talking about now??
↓
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This is FX Ryusei!
Hello, this is FX Ryusei!
There are many important elements in trading.
・Trading methods
・Mentality
・Money management
These are, in trading,
the three sacred treasures
to be considered very important.
However, I’d like to point out one more factor
that is on the same level of importance.
That is,
“Reproducibility”
.
In terms of results,
automatic trading has
“supreme reproducibility”
and I believe it possesses this.
What does that mean?
I’d like to explain in detail!
▼Low reproducibility of part-time trading▼
Common FX information product catchphrases include
“Earn quickly in 3 hours after coming home!”
and such phrases are often seen.
Indeed, that is an attractive catchphrase,
but honestly, it’s dubious.
Saying that shows an underestimation of trading.
The reason is,
in trades that occur a few hours after returning home,
“execution of trading logic”
is the point,
and reproducibility is too low.
In trading,
a period in which losses must be takenis inevitable
— one must endure it,
but a period where profits can be taken must be fully leveraged
.
From the essence of trading,
many part-time traders are
in a state where the number of trading opportunities is too small.
In other words,
even with a profitable trading logic,
the logic’s potential cannot be realized
.
▼If you do 5-minute time-frame part-time trading…▼
For example, you work from a company and then spend
scalp trading (very short-term trading)
for 3 hours after returning home.
If the logic is based on 5-minute bars,
you must identify opportunities within only 36 five-minute bars.
There are 288 five-minute bars in a day.
A part-time trader who can only view 36 of 288 bars will, during times when not watching the chart,
miss numerous chances to profit
time and time again.
Of course, there are times when you can avoid losses during the non-trading hours, but
as a result, with a 3-hour-per-day trading schedule,
the logic’s advantage cannot be maintained, I think.
▼What happened when I tested with My Logic EA▼
The above
“The hypothesis that a 3-hour-per-day trading cannot draw out the logic’s potential”
is
not enough by itself to prove anything.
“What is the basis for such a claim?”
“Show me the evidence!”
With that in mind (laughs),
I decided to test with an EA.
The EA used for this test is my My Logic EA,
“BigBangProfitSignalEA”
.
It’s a 5-minute-bar strategy.
An EA is convenient because it allows you to limit the time period for testing.
“Operate only during London time”
and
“Exclude Japan time”
,
limit the timeand have it trade.
In contrast, my EA is a fearless one that trades 24 hours a day, anywhere, anytime, and will enter whenever there’s a chance,
without any time controls at all.
This is why the trading volume is high.
That’s why there’s profit that can accumulate from a huge amount of trades.
Now below is the 24-hour trading equity curve.
The test period runs from early 2005 to August 11, 2017.
Number of trades: 22,445.
Profit: $41,261.
As expected for 24-hour trading,
the number of trades is enormous.
So what happens if we run this EA only from 21:00 to 24:00 Japan time for 3 hours?
What would the result be?
By the way, this EA automatically shifts between daylight saving and standard time according to Japan time, which is convenient ^^
In short, this backtest asks:
“Using a universally advantageous fixed logic, can the logic’s potential be drawn out with just the 3 hours after returning home?”
This is the test.
I’m actually running a backtest while writing the article (laughs).
What will the result be?
Most people can guess (＾＾；)
Well, I’ll go fetch coffee during the backtest.
▼Backtest completed♪▼
Thanks for the coffee＾＾
Now it seems the backtest is done.
From 21:00 to 24:00 Japan time, trading with my logic results were as follows.
Yes, not good at all.
It’s clearly negative.
It’s a near-break-even negative,
not a big loss, but
I can’t say this is a winning logic.
Because with a 3-hour-per-day trading window,
the potential of the logic cannot be realized
.
Don’t underestimate trading.
As expected, the result came, but
even with this trading model,
locally,there are periods of superb performance.
▼Don’t confuse coincidental wins with a true edge▼
“How far can the strategy’s edge be reproduced during 3 hours from 21:00 to 24:00?”
The answer is
“Not at all reproducible.”
That was the answer.
Even so,
the stance of “earn quickly in the 3 hours after coming home”
do you think you can sustain it long-term?
I think it’s tough, though...
However, in this
“part-time 3-hour trading model”
there are also periods of superb performance.
In the figure above, the red-ringed period is
During backtesting,
the curve going steep upward was observed,
and once it exceeded $13,600,
“could it be”
I thought.
I was worried that profits would continue to rise aggressively,
in a sense, I was concerned (laughs).
But in the end,
the superb spell did not last, and it sank back down
to the ground.
Even with a strategy that cannot win long-term,
there are times when you can accidentally win like this.
That superb period actually lasts for
two years and three months.
Most people, if they win during two years,
think, “I have mastered FX.”
Isn’t that what you think?
That is not how the market works.
Trading is unforgiving.
Even if you have a superb two-year streak,
that isonly a two-year tendency.
After that period, as shown in the equity curve,
you will fall sharply into losses…
This is something many under-tested discretionary traders may face.
No one wants to admit that, after 2 years of wins,
their hard-won know-how could be negated.
But unfortunately, for traders with extreme under-testing,
it is inevitable that they must accept this reality.
Scary...
scary...
▼High reproducibility of automated trading▼
The discussion has become lengthy, but
you now understand that high reproducibility in trading is essential, right?
Even with a highly advantageous method,
if you can only trade for a few hours,
you cannot draw out the method’s potential.
In that regard, with automated trading,
you can
- be working
- be asleep
- be playing
the machine stays glued to the market,
and when a trading opportunity comes, it executes with perfect precision
.
Such high reproducibility is unlikely in manual trading.
Manual trading,
tends to be swayed by the trader’s circumstances.
When a great opportunity arises,
if urgent matters come up, you must stop trading and
address them.
Even if you can force an entry on a smartphone while you’re out,
it’s true you can do it, but
“a life ruled by trading”
is not a good thing.
I’ve had that phase too (＾＾；)
Oh, I don’t want to go back to a market where I can’t stop thinking about it ( ;∀;)
By the way, there are manual trading methods that are relatively reproducible without spending much time in front of charts.
Those use
longer timeframes like daily or 4-hour bars
for trading
.
Using only daily charts, you can perform trading with
“check the chart once a day”
to execute trades.
With 4-hour bars,
“check the chart every 4 hours”
is OK.
Of course, sleep time must be considered, so you can’t handle one bar, which is acceptable, and you would develop ways to address this.
However, as the timeframes become longer, you can also face prolonged losing streaks.
The length of streaks can become quite long.
Prolonged convergence of probabilities can be problematic.
With all this in mind, I ultimately settled on
a method that handles a reasonable number of trades with a profitable automated trading software.
As discussed extensively,
automated trading offers supreme reproducibility.
But the problem is
“you must choose a profitable automated trading software (EA)”
.
Some backtests look good,
but the system may not actually win in real trading.
That is also true.
In these matters,
you need the discerning eye to identify excellent EAs
.
Building an excellent EA portfolio is also very effective.
Understanding probability theory is also necessary.
For more on these, below are related articles in the “Automated Trading” category.
“Trade frequency is an important metric for automated trading!”
https://ryusei-fx.biz/ea-trade-frequency-is-important
“How to become a winning automated trader”
https://ryusei-fx.biz/system-trader-winner
“Assemble excellent automated trading software and walk the path of FX winners! -EA portfolio effects-
https://ryusei-fx.biz/ea-portfolio-winner
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Empathy 99.9% of the
FX manga that is now trending…?
↓
http://tr.adgocoo.com/cl/296efzcc
