There are two mathematical principles on which systematic long run successful trading is based:
1) There are hidden almost periodicities on the volumes and volatility of the prices. The most characteristic are , the daily cycle , the monthly cycles and the annual (or quarter) cycle.
2) The duration of the trends is usually a multiple of the characteristic half-periods as above, and they also follow approximately the distribution of the capitalization sizes of enterprises, in other words a Pareto or a Power distribution.
3) The demand-supply functions under the three coupling modes a) Domination b) Competition c) Cooperation, and as result of this the 3 basic price patterns of spike, trend, and flat channel, emerge.
3) The demand-supply functions under the three coupling modes a) Domination b) Competition c) Cooperation, and as result of this the 3 basic price patterns of spike, trend, and flat channel, emerge.
If a uniform randomness would rule the markets (efficient markets assumption) , the probability of long duration trends would be much less that what it is observed, and their distribution would be a geometric or exponential, and not Pareto or power. Thus the law of "universal attraction" in enterprise formation makes also the markets non-efficient and more predictable that the academic world believes.
Spike Hunter
Spike Hunter is a fully automated strategy. It opens positions whenever spikes appear.
In addition it trades at reaction spikes, of terminal spikes of trends. Therefore there is the psychological and risk management advantage that we should not fear sudden crisis, unpredictable news based crisis etc. In all such crises it locks profits. The logic behind the algorithm applies to the world balance and competition of the two major currencies only, the US Dollar and the Euro (EUR/USD). US-dollar down-spikes or EU-euro up-spikes are stronger and usually related to panic.
In addition it trades at reaction spikes, of terminal spikes of trends. Therefore there is the psychological and risk management advantage that we should not fear sudden crisis, unpredictable news based crisis etc. In all such crises it locks profits. The logic behind the algorithm applies to the world balance and competition of the two major currencies only, the US Dollar and the Euro (EUR/USD). US-dollar down-spikes or EU-euro up-spikes are stronger and usually related to panic.
Spike Hunter avoids opening positions at the particular time when all bank-sessions are closed (Asian, European, and American). It takes advantage of the daily periodicity of the volumes of transactions and its dynamics to open positions. Trailing and pyramiding and group of open positions take profit, are utilized.
Spike Hunter makes on average 0.8 trade per day but when it opens positions usually it is more than one in the same day. There are weeks that no position is opened.
Usually the trades do not last more than a 24 hours. Approximately 91% of the trades are winning, and with a maximum annual draw down less than 10% it has an annual rate of return of about 20%-30%. If the profits are reinvested, and the positions size proportionally increased to the balance, the annual rate of return is even higher. About 2/3 of the months are profitable.
The income from forex automated trading is on the side of counter-balancing the over-debt that the privatised banking-monetary system creates in society.
The income from forex automated trading is on the side of counter-balancing the over-debt that the privatised banking-monetary system creates in society.
Some good features of the spike_hunter are
0) The spike hunter as the title suggests, is based on the appearance of spikes at the hourly time frame. Therefore panic and extreme crisis in the markets is not something to fear in this system, but on the contrary it locks profits. The system performs exceptionally very well at the years of crisis 2007-2008 etc.
1) it makes about 1 trade per day (0.8 exactly)
2) it has 91% trade success rate
3) At 60%maxDD it has 100% monthly rate of return (=1mds=1monthly doubling speed). At 33% maximum Draw Down has an average monthly rate of return of about 40% (measured for the last 6 years:2006-2011).
4) Contrary to scalpers the robot avoids trading during the hours that all banks are closed: sessionless time zone
5) It utilizes the daily volumes periodicity to open trades on spikes
6) A further remark about why all trades are buy: There is no restriction for sells. But the filters of favorable spikes give the buy spikes so far. No guarantee that in the future there will not be a sell spike. Panic spikes are by far stronger than optimistic spikes. And US behaves much more emotionally than EU. panic-spikes in US are buy-spikes in EURUSD
As seem from the performance below and the classification of commercial forex algorithmic trading robots of the web (in http://www.bestforexrobots.net/ ) the Spike Hunter robot is among the best 10 robots of the web.
Comparisons with the CD-auto-fast (post 50)
Spike Hunter
Advantages: 90% succes rate in the trades
Disadvantages: Average profitable trade is 5 times smaller than the rare avearge loss trade
(this creates the effect of gaining, gianing, gaining then a larger loss , etc)
Notice that the slope of the diagram of rate of return versus maximum draw down in the spike-hunter is of significant larger slope from the corresponding of Carpe-Diem that is why at 30% maxDD it has almost double the performance of Carpe-Diem.
Notice that the slope of the diagram of rate of return versus maximum draw down in the spike-hunter is of significant larger slope from the corresponding of Carpe-Diem that is why at 30% maxDD it has almost double the performance of Carpe-Diem.
While CD-auto-fast:
Advantages: Average profit trade 1.3 times larger than average loss trade
Disadvantage: Low trades success rate: 49%
(this creates the effect losing, losing losing, then a larger gain etc)
Strategy Tester Report
Spin_navigation_weaver_9
AlpariUK-Micro-1 (Build 419)
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Notice that the slope of the diagram of rate of return versus maximum draw down in the spike-hunter is of significant larger slope from the corresponding of Carpe-Diem that is why at 30% maxDD it has almost double the performance of Carpe-Diem.
For publication and detailed analysis of the above backtest by the MT4i
http://en.wikipedia.org/wiki/Larry_Williams_(a_publisher_and_promoter_of_trading_ideas)
Or with the trading results of Chuck Hughes that also about 0.4MDS
here http://www.chuckhughesonline.com/
Or with the trading results of Dan Zanger that are about 0.42MDS here
http://en.wikipedia.org/wiki/Dan_Zanger
