Automated Trading

I spent over 1.5 years coding and backtesting 100s of strategies.

I did not find a universal winner.

Sure, some systems were good for a time, some were really good, most were really bad. Even among the winners, many had win ratios no better than random, and they were only profitable because they won more pips than they lost (i.e. R:R > 1). Of those strategies that performed really good – on closer inspection it was usually because the backtest just happened to catch a really good trend – almost by chance – and stuck with it. This is no guarantee of future performance – it is what some people refer to as ‘curve fitting’.

But in my view, coding a universal strategy that can work 24/5 under all market conditions, is not a worthwhile or achievable goal.

A better approach is to create a handful of strategies, which you can apply manually depending on market conditions. For example:
1) buy pull-backs on up-trend
2) sell rallies on down-trend
3) sell tops and buy bottoms of range
4) overnight scalper
5) news event scalper

These specialist strategies will be much simpler than a universal 24/5 strategy. Simpler means easier to code, easier to test, and ultimately more robust.

You’d simply activate the appropriate strategy based on your assessment of the day’s market conditions. For example, suppose today was an established up-trend day, and I thought next major resistance would be 200 pips away, I would activate my “buy pull-back on up-trend” strategy. I’ve made the decision, the strategy is simply freeing me from staring at the chart all day. This approach is far more realistic in my view.

A 24/5 universal strategy is only useful if you intend to leave your trading platform running totally unsupervised and go on holiday for a week. You would have to be really confident of your strategy to do that!

As I mentioned at the start, I used to code and test a lot of strategies. I only ever had the guts to run one of them on a live account – this was the “buy pull-backs on up-trend” (and its twin “sell rallies on down-trend”). I coded for Strategy Trader platform from FXCM (same as Multi-Charts I believe). However, this platform is no longer supported, and for the last year my trading has been manual only.

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