Topic: Nice Strategy - but why does it work?

I have generated a nice strategy for the AUDJPY which gives a smooth equity curve and a nice profit.

Here it is:-

Strategy name: AUDJPY30minGenerated1
Forex Strategy Builder v2.64.0.0
Exported on: 9/13/2011 9:16:41 AM

(This description might be outdated!)

Automatically generated on 9/6/2011 10:28 AM.
Out of sample testing, percent of OOS bars: 50%
Balance: 28131.00 USD (1/6/2011 6:30 PM  Bar: 8200)

Modified by the strategy generator on 9/6/2011 11:19 AM.
Out of sample testing, percent of OOS bars: 50%
Balance: 30000.00 USD (1/6/2011 6:30 PM  Bar: 8200)

Market: AUDJPY 30 Minutes
Spread in pips: 30.00
Swap Long in pips: 10.00
Swap Short in pips: -20.00
Commission per lot at opening and closing in pips: 0.00
Slippage in pips: 10

Maximum open lots: 20.00
Entry lots: 1.00
Adding lots: 1.00
Reducing lots: 1.00

Intrabar scanning: Not accomplished
Interpolation method: Pessimistic scenario
Ambiguous bars: 0
Tested bars: 16308
Balance: 33390 pips (43390.00 JPY)
Minimum account: 0 pips (10000.00 JPY)
Maximum drawdown: 3569 pips (3569.00 JPY)
Time in position: 44 %

[Strategy Properties]
     A same direction signal - Does nothing
     An opposite direction signal - Does nothing
     Permanent Stop Loss - 915
     Permanent Take Profit - 689
     Break Even - None

[Opening Point of the Position]
     Entry Hour
     Enter the market at the specified hour
     Base price  -  Open
     Entry hour  -  0
     Entry minutes  -  0

[Opening Logic Condition]
     Money Flow
     [ A ]   The Money Flow falls
     Use previous bar value  -  Yes

[Opening Logic Condition]
     Bears Power
     [ A ]   The Bears Power falls
     Smoothing method  -  Simple
     Smoothing period  -  92
     Level  -  0.0000
     Use previous bar value  -  Yes

[Closing Point of the Position]
     Top Bottom Price
     Exit long at the bottom price
     Base price  -  High & Low
     Base period  -  Previous week
     Vertical shift  -  -870

Here is the bit I don't get and maybe some of you guys have an answer. The strategy opens a position at the start of the day 00:00. The strategy will only work when a position is opened at the start of the day, if I put any other time in I end up with a whacking loss. Another question that springs to mind is "Is the strategy over optimised?" as it only works on the day opening?

Any ideas?

Re: Nice Strategy - but why does it work?

Top Bottom seems to be over optimized (OO), if I look at that shift... That it works only at 0000 hours is not a major problem. RRR is not too good in my opinion, bigger SL works everytime when backtesting, but, trust me, it will work against you when the actual stuff takes place.

The hard part (for me at least) is that it's bloody hard to set up more or less objective and adequate parameters or conditions which define OO.

Re: Nice Strategy - but why does it work?


Re: Nice Strategy - but why does it work?

SpiderMan wrote:

What is RRR?

Risk-Reward ratio. Sorry for that, should have written out properly.

Re: Nice Strategy - but why does it work?

I just twigged what you meant by RRR so changed my original post. I was thinking that RRR might mean Real Rate of Return.

The RRR is a difficult one for this strategy but the Win/Loss ratio is .67. On that basis don't you think the RRR is acceptable?

Re: Nice Strategy - but why does it work?

Exactly! Backtest shows pretty good W/L ratio, but that's backtest, it's not 100% sure it will go on like this. That's why I think it's better to have higher TP, it should be definitely higher than SL, because if W/L drops (which it most often does, that's at least my experience), you'll still have a decent chance to break even in the worst case scenario.

Whole another aspect is closing point. Which kicks in earlier, SL or Top Bottom? If SL, then RRR is the one to watch. If it's another way around, then I'd look for winners to be bigger than losers, just to make sure I have a chance in case W/L turns against me (basically still targeting a good RRR).

Hope this gives food for thought.