• bold
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Topic: Fractal short after gap down

Can anybody help me to explain what happened to me this morning and how fractal entry should exactly work?

My DAX M15 strategy showed a fractal short entry at the DAX level 11412 (= local low from yesterday evening). However (my broker FXCM) opened DAX with 2 minutes delay at 6:02 with a gap down, at the opening price 11380. My short trade was opened shortly after that at 6:02:12 at the price 11381 in MT4.
(Trade arrows are not visible on the right chart, because I mistakenly erased them by switching the strategy off and on.)

When I loaded these MT4 data into FSB Pro, the backtest (Bar Explorer) showed that the position should have been entered only at 6:05, after DAX returned back up to the "correct entry price" 11412.

Where comes this confusion from?

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  • Popov
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Re: Fractal short after gap down

This is a correct behaviour. The trader via the bridge and the EAs open a position when the market price becomes equal or breaks through the order price.

When you have an entry order in the gap between the bars, the program opens a position at the first price available.

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  • bold
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Re: Fractal short after gap down

Well, if the trade was opened correctly, then must be something strange in the FSB backtester. It namely shows that the entry has waited until the price returns back to the "ideal" value 11412. See the attached screenshot.

The fact is that due to the gap my trade did not reach TP and finished with a loss later. On the contrary, the FSB backtester shows a profit, because the TP was reached.

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  • bold
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Re: Fractal short after gap down

Have you dealt with this issue in the latest early access version 2.8.7.? 
I have just re-checked the discussed situation and have found out that FSB Pro backtester always shows the incorrect entry.

  • Popov
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Re: Fractal short after gap down

The short entry is exactly on the Down Fractal on your upper screenshot, or I'm wrong?

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  • bold
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Re: Fractal short after gap down

Not exactly.

The upper screenshot (1st post of this topic) shows on the left side of the picture the correct entry, as it was performed in MT4. Because the day started with the down gap, the position opened not at the level of the Down Fractal, but near the Open of the first white candle, 31 points bellow the Down Fractal level. This correctly performed real trade finished with the loss later.

On the contrary, the bottom screenshot (3rd post of this topic) shows the incorrect behavior of the FSB Pro backtester. Instead of entering immediately near the candle Opening, it had waited until the market returns up to the level of the Down Fractal. Thus the backtester shows an incorrectly optimistic result, even if it is set to the Pessimistic method.

Can you see this difference?

  • Popov
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Re: Fractal short after gap down

You states that:

I have just re-checked the discussed situation and have found out that FSB Pro backtester always shows the incorrect entry.

Yes there is a difference. However, the backtester is correct in that case.
Can you show a proof that the backtester opens an entry far from the upper or the lower Fractal?

The discrepancy between the backtest and the trade comes from the gap.
You can prevent such cases if you trade only if the market conditions are normal.

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  • bold
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Re: Fractal short after gap down

I am sorry, but I am a little confused now.
In 2nd post of this topic you wrote that the short entry @11381 at 6:02:12 in MT4 was correct.
Now you wrote that the backtester was correct (short entry @11412 somewhen later inside the first M15 candle)?!

Next, you want to show a proof: I thought the proof is in the 2nd screenshot, where Bar Explorer shows the short entry at the Waypoint 3 (= 11412 = low of the previous signal Down Fractal). However according to your statement in 2nd post the correct entry should be at Waypoit 1 (= 11381 = at 31 points down gap at the opening of the candle).

If you will write both entries are correct, how can I believe in backtester then, if it shows optimistic, but not achievable results in real trading?
Until now I have believed that, with identical data sets downloaded directly from the MT4 trading platform, backtest signals and signals in real trading platform must be 100% identical (of course, excluded occasional slippage and spread differences)!?

Then you advise not to trade in "unnormal" market conditions. Do you mean I should prevent entries at day opening? But how can I anticipade and exclude that a signal appears exactly at the day opening like in this case? Why FSB Pro offers Day Opening Entry Point when market conditions in this point are not quite normal?

Once more sorry for so many questions, but my brain got stuck anyhow. smile

  • Popov
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Re: Fractal short after gap down

Do you mean I should prevent entries at day opening?

Does you strategy enters at Day Opening? I think we speak for entry at a Fractal.

Not the day opening is wrong but the gap. We can create an indicator that prevents entries after a predefined gap.
Other solution is to prevent entries on Monday.

In 2nd post of this topic you wrote that the short entry @11381 at 6:02:12 in MT4 was correct.

FSB uses pending orders internally. These orders are executed when the previous price is below the order and current price is equal or greater than the order.

Now you wrote that the backtester was correct (short entry @11412 somewhen later inside the first M15 candle)?!

The backtester is correct. It works in entirely different environment where the data are static. It executes the orders at the order price.

The current issue happened because of the gap. The gaps are not normal conditions. When there are gaps the traders pay the difference. The prices are determine by market makers. They don't care for your profit. You are retail trader and do not have a chance to complain or change the rules. You trade at he market, the broker gives you and with the tools the broker gives you.

FSB doesn't make the rules. All we can do is to try to overcome as many edge cases as we can. In that case we can try detecting the gaps and to prevent the entries.
Why you don't complain against your broker that there war a gap in the quotations? Because you know the answer.

No matter the unavoidable issues, FSB is one of the best tools designed for the traders. How do you think the original MT Fractal works? Set a simple expert with fractal and start the trader in visual mode. You will see that the MT Fractal repaints the signals. (You'll see plotted fractals that mysteriously disappear in several bars.) You complain here but not complain against Metaquotes. Why?  With FSB you have a failed order (due to a gap). In MetaTrader you have a repainting indicator. Why do you think all brokers provide "free" MetaTrader and no broker provides FSB?

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  • bold
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Re: Fractal short after gap down

Dear Mr. Popov,

First of all:
I am your big fan and I appreciate your huge effort much!

I would never afford to use the word “complaint” when discussing any issue concerning your “magnificent baby” Forex Strategy Builder. All I do here is purely a friendly effort to help you to make your product a little better from time to time. English is not my mother language, therefore sometimes my words may sound sharply, but this is not an intent, only my imperfection.

Now back to the issue (some statements may sound provocative, but I only try to express shortly and clearly what I want to say, nothing more):

Day Opening vs. gap
Yes, I know that the gap is the problem. I used Day Opening only as an example that it basically also always starts trades in more or less unnormal conditions. Otherwise, I have developed several very promising strategies using this kind of entry. I only hope my MT4 platform will allow to trade them successfully also in real trading conditions.

Gaps, Brokers
I know that brokers are bad guys who always try to steel my money. But this is the game and in the case of opening gaps the rules of this game are more or less foreseeable for me. Therefore I have no reason to complaint against my broker in this discussed case. My broker just played the game I had expected = he performed my signal in the proximity of the initial gap.

My worries invokes the behaviour of the FSB backtester – why it does not allow to show trades performed in more similar way, like (bad) real brokers do that? I would rather appreciate when the backtester showed worse performance of the strategy, but closer to later real conditions. In our discussed case the backtester should rather enter at the Waypoint 1 than to wait until the market returns to the ideal entry level. This was nice, but less realistic.

Moreover, when the testing Method shows to “Pessimistic”, I would really expect that the backtester shows the worse possible scenario and that the later trading reality will be the same or better. In the case of the discussed trade this trade even was not marked among “Ambiguous bars”. So that I got no warn sign from the backtester about the danger of later problems in real trading.

Once more thanks for all and kind regards,
Bold