Trading System Development

[Samuel Jackson]

Hi Petko,

I’ve just done a bunch of work putting together a system for trading live. Its not quite there yet but I’d love your input and if you agree with my approach and direction.

Basically what I have done is generate a pool of EA’s on the H1 timeframe with a reactor end date early last year for 6 currency pairs (About 200-300 EAs for each).

Then I have done the following:

Step 1 – Run validator (/recalculated) to filter out only strategies with profit factor > 1.1 and R/D > 0.5 for both 1 month and 2 weeks pre trading data.

Step 2 – Selected the top 5 simply according to max net profit for the EAs to trade for the next month by adding them to the portfolio.

Step 3 – Recalculated the portfolio for the mock trading month and recorded results in a spreadsheet

I have then done this in a monthly walk forward fashion as shown in the table below (Each row shows the months mock trading results from the portfolio):

For the in-sample dates I essentially collected data for 6 pairs and with a few different filter types (I.e 3 months and 1 month, same dates but with R/D > 1 etc)

Then after reviewing the results I settled on the combination of the filter criteria and combining the three pairs above. I then used the OOS months to just run the chosen pair combinations and filters and recorded the results. CERTAINLY a lot of work behind that table which is a very brief summary.

Regarding the reactor settings, everything in line with your courses a few slight deviations with the most impactful being more bars (I used 10 years or data) and a lower trade count since I was a bit stricter with monte carlo.

Anyway, a few questions:

1. You will notice my pairs are slightly unbalanced with 2 EUR and JPY and 1 GBP and 1 USD. This just showed to combine best over this date range with this particular pool of robots along with the filter criteria I set. I currently tend to accept non perfectly balance pairings as long as they are not overly unbalanced? I did have EURUSD but EURGBP just seemed to have better performing robots so I decided to use it instead, would you agree that is sensible?

2. This seems a decent enough start to a system to run for a month but definitely needs padding out as its not making enough trades and in fact makes zero trades one month of the OOS.

3. To move forward and pad it out further I was thinking of repeating the exercise but with M30 and M15 timeframes to add another few pairs and diversity to the portfolio. Rerunning the reactor with different settings on the H1 timeframe for the pairs that didn’t give me particularly good results. Projecting forward I can see that this MAY end up with something looking like the following:

5 EA’s for the month of EURGBP, EURJPY and USDJPY on H1

5 EA’s for  the month on EURUSD and GBPJPY on M30

5 EA’s for the month on GPBUSD on M15

I used to try really hard to aim for perfectly balanced pairs with same number of EAs on same timeframe but I am finding that sometimes I just get better performing strategies on different time frames and I’m currently just feeling like the above would be nicely diversified (different  time frames, reactor settings) if that’s how it comes out, any thoughts?

Also if you are wondering how I calculated the portfolio combined drawdown on three different pairs, I just summed the max drawdowns of each and multiplied it by 0.6 as a very rough estimate.

Also in the table above Walk Forward 9 was last month, I intend to create another table with the in-sample up until the most recent date and then use that to trade on a demo account and see how the results come out in the next week or so, will happily post the results.

I know these are EA studio results on open prices so there is some scope with spread and inner bar but I have also spot tested many of the portfolio EA’s both with open prices and control points in MT4 with a spread of 20 and have been happy enough with the comparison. Demo\live trading is the true test of course.

[Petko Aleksandrov]

Hey Samuel,

Great topic here! Glad you are sharing your system with the others!

1. I think it is alright to keep it a bit unbalanced. The only issue you might encounter is during the red hod news. For example, if you have a bigger exposure to USD and you keep the EAs trading during the NFP. You might see bigger profits or losses. However, that is not every day. Changes in Interest Rates might also turbulence the portfolio…

2. Well, you can not do a lot about it… I wouldn’t worry about not having trades…better not have trades than have losing trades 🙂

3. Yes, adding M15 and M30 makes sense

I know keeping it all balanced is nearly impossible. And recently, I have tried not to focus on that but on the markets that make the most profits.

Again if I give the crypto market as an example, I used to trade many coins and keep a  balanced portfolio. However, in the last two years, I increased BTC in my portfolio because it brought me significant profits over time, it is stable (compared to the other altcoins), and it is good enough for me to trade it.

So if you find that EURUSD on H1 brings you the most profits, then why not have more strategies with it, right?

Keep up the excellent work!

 

[Samuel Jackson]

Exactly Petko :-),

If its clear that I am getting more and better EA’s for certain pairs and timeframes and it makes sense to play to that!

Glad to hear you feel similar about not being too pedantic about keeping things perfectly balanced in this way.

Likewise if a certain asset always seems to be performing poorly generally in backtests compared to others then its seems okay to leave it out of the portfolio rather than include it just the sake of maintaining the pair balance, provided there is not too much exposure to a single asset and also enough diversity in assets.

At the end of the day the goal is to include a wide range of uncorrelated strategies over several assets in order to increase my chances of a smoother equity curve with more controlled account drawdowns.

[Petko Aleksandrov]

Yep, some users trade just EURUSD on M15 but with different strategies. That is still a portfolio.

While analyzing the collections in the Pool today, I saw that some of the assets like AUDCHF or AUDNZD are not worth generating and studying strategies. There could be some good EAs…but why would you trade them when there are the majors, right?

Imagine Porche and Bently were at the same prices as Mazda and Toyota. What would one prefer to drive? 🙂

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