Thanks Dave. 

Much appreciated

Yes I agree, Net Balance is "worst" in terms that it doesn't distinguish how your strategy win.

It's the "best" in terms of allowing me to have a variety of different types of strategies (irregardless of how they win) to be selected in my portfolio so that I have a more "diversified" portfolio.

Cos I don't want my portfolio to all make up of a certain types of strategies but a mixture of scalper, breakouts, ranging, whatever could be their reasons for contributing to part of their winning methods.  Cos the end result is a profitable portfolio.  Of cos from the net balance, I will then further filter out some poor performance metrics for certain strategies that I think aren't very stable to have in a portfolio.

There a few factors to weigh to select EA.  Profitability, Stability/Reliability and Opportunity Cost (missed opportunities).  If in order to have a "stable" or Reliable EA, I missed out lots of good trading opportunity, then it is not really attractive to me, per se.

I'm not sure how good is Sharpe Ratio being applied to Forex trading.  I've the impression that forex trading is not like stock or shares with certain "normal return distribution" in terms of certain consistent percentage returns to investments.  And hence I wonder is it a good metric to use. 

Van Tharp admits to some issues with SQN

He points out that if you have a system with a SQN of .4, and you add say a huge winner to the mix, it would actually lower the SQN score. This is because it effects the deviation more than it does the average size of winners.   

So my guess is, a breakout would then have low SQN since it 1 big win among many small loses (in between each breakouts).  Probably, SQN is good for looking for consistent winning strategies, which sounds to me, ranging EA or Intraday strategies that goes in and out of a trade with short duration to get those consistent profits.

Lastly, Van Tharp admits his metric does not account for trade opportunity (opportunity cost, ie. missed trades).

For example, if you have what Van Tharp terms a 'Holy Grail System' (SQN >.75), but you get very few signals over the course of your trading period, your opportunity to profit from the system is simply absent. Consider a very strong system, with an expectancy of 2, and a more average system with an expectancy of .5. If the first system trades just once per week, your monthly return is about 8R. But lets say the second system trades twice per day. That would be about 20R per month, more than twice the return.  Info taken from https://futures.io/psychology-money-man … tharp.html

So imagine if I'm a beginner with certain pre-conceived ideas about certain metrics and I'm searching for a good breakout system, thinking that SQN is a good metric, I may inadvertently, setting up myself for failure by putting certain minimum criteria acceptance for SQN metric, thinking the higher the better.  So in order to avoid such mistakes, I use Net Balance as a "safer" measurement and then examine the strategies behaviours from the demo results to determine which strategy's behavour patterns most suited my trading style/psychology.  Which kind of trading behaviours are the ones I can tolerate better (psychologically speaking) in terms of it's risk and returns behaviours, ie. taking the 3 factors into consideration (Profitablity, Stability and Opportunity Cost).

Hi Steve,

1st of all, I suck in statistics, so you can discount most of what I written here (I'll leave it to those statistical experts in this forum to correct me).  Statistics is also way over my head too. 

So I go for simple ones that I can understand better and use.  Hence,  I use Net Balance mainly for my own EA's demo results comparison, not so much for using it as FSB's sorting or ranking.

Net Balance/Profit in my own limited experience, help me have an overview and I like it.  After Net Profit, I look at the EA's PF.  A good EA with a winning edge, will tend to have slightly improved PF over time.  Since it tend to win more than it loses, the Profit over Loss should reflect better and better results and hence better and better PF.  In addition, because I use FxBlue statistics, it doesn't show me metrics such as SQN or Sharpe ratio and hence it becomes a natural elimination process of not using these metrics that aren't available for me to make such comparison or analysis.

USING ACCURACY STATISTICS TO IMPROVE ONE'S TRADING STRATEGY

I link the post here for those who are interested https://forexsb.com/forum/post/48446/#p48446

I agree.   The best/accurate result to trust is in the following sequence, 1st being the best alternative.

1) Live

2) Demo

3) Backtesting

Nevertheless (for cost and time saving) we often start shortlisting EA with backtest results and then transfer them to demo testing and then ultimately to live trading.

That's why I do extensive demo testing because it's the next best (but not exact) results to live (provided the demo data feed is the same as live feed).  With backtesting results, there is still a big question of whether it will be profitable in Live but with demo testing, there is little doubt left (not completely but little).

Have a Happy New Year Dave and I hope this coming new year, you reached your dream target!

Best wishes
Hannah

Portfolio Diversification and Risk Management

The benefit of using software to develop or generate strategies is that we ended up with tons of profitable strategies and we are left with the decision of how to manage these hundreds of strategies, which to choose, how to choose them.

A) Risk Management - the use of MAR and Sortino Ratio

In term of risk management, the MAR and Sortino Ratio are recommended because their take into account of the risk exposure of the strategy.  Though the Sharpe ratio has it's benefit, the MAR and Sortino Ratio put more emphasis on the downside standard deviation, ie. max DD.  The upside standard deviation doesn't pose any threat to the portfolio risk exposure and hence, the MAR and Sortino Ratio are more favored as the metric to use.

In order to diversify our portfolio, there at least 2 types of methods.

1. Diversification via different Markets/Symbols, and
2. Diversification via different strategies (namely Divergent Strategies and Convergent Strategies)

B) Diversification via Different Markets

Don't put all your eggs in one basket.  Hence, when choosing different markets to trade, pay attention to the correlation metrics of the currency pairs. 

Basically, the currencies are grouped into 2 different types

a) Consumer Driven - such as currencies traded in USD, JPY, CHF

b) Commodity Driven - AUD, NZD, CAD, GBP

Thus, if you are going to diversify, choose pairs that are in these 2 different baskets, otherwise, they are essentially the same (albeit, varied volatility)

C) Diversification via Different Strategies

Basically, most of us are either Breakout Traders (Divergent Strategies) or Range/Mean Reversion Traders (Convergent Strategies).  These two approaches are mirror opposite in their outcomes.

A convergent strategist believes that fundamental value approaches can be used to get an idea of the intrinsic value of an asset. The price will eventually converge to this intrinsic value, i.e. return to the mean.  The convergent strategy has many small gains and catastrophic losses.

A divergent strategist believes that past patterns can predict future patterns. He believes that past patterns are due to changing and adaptive actions by investors. These reactions are driven by investors’ emotions and irrational factor. 

In addition, a lot of factors non-quantitative effects due to government intervention, war or politics, are not quantifiable in fundamental analysis methods. Furthermore factors of adaptation, as well as behavioural biases, may influence prices which differ substantially from their intrinsic value and hence cause breakout.  The divergent strategy has many small losses and euphoric wins.  And it's weakness is, if there is a prolong period of ranging, the portfolio would be at a risk.

Though I tend to favor Divergent Strategies (cos I'm a breakout trader), most strategies—and investors’ portfolios, for
that matter—are convergent-focused.  Reason being, the market is ranging 75% to 80% of the time and thus the saying goes, make hay while the sun shines.

However, the market is irrespective of what you like or favor (whether you are a divergent or convergent trader).  The winner is the one who is most adaptive to what the market dictates.  Hence, balancing our portfolio with both Divergent and Convergent Strategies, is another form of risk management one need to consider during strategies selection for a portfolio.

Generator Bias?

a) Win/Loss Ratio Bias

If we were to understand the characteristics of Divergent and Convergent Strategies, we also realised that Convergent Strategies tend to be the easiest one to be identified/searched/generated.

A Convergent Strategies have many wins and a few catastrophic losses (due to breakouts period) and hence, if one were to use the Win/Loss Ratio, one would most likely ended up with Convergent Strategies. 

I propose that we have another type of Acceptance Criteria.  That is Maximum Win/Loss Ratio.  Whereby we want to search for strategies with Win/Loss ratio not more than 50% or 35%.  Divergent Strategies have lower Win/Loss Ratio and they tend to make many small losses in between the Breakouts, hence limiting the Maximum Win/loss ratio, we prevented the Generator to search for Convergent Strategies that tend to have higher Win/loss ratio.

b) Time Period/Data Horizon Bias

Since the market is ranging 75% to 80% of the time, at any given starting point, Convergent Strategies would be the one being identified as winning strategies (till a breakout come along) and hence, I'm curious whether the Generator somehow would be bias towards generating Convergent Strategies because once you click the Start button and the generator run through the data horizon (time line), which types of strategies would start making money first?

Therefore, it's no wonder whenever I run the Generator in both FSB Pro and EAS, I tend to have Convergent Strategies in my collection.  Often when I examine the trading rules of these Convergent Strategies, they contain (anti trending rules, ie. mean reversion rules).  Part of the reason why I don't really use the Generator (in the past) is that 1) I'm a breakout trader and 2) I don't believe that convergent strategies are good for the long run...you need only a black swan to one day blow up the account...which we seen many portfolio blew up during such events.

EA Studio has a max of 200k bar and if we were to use any time chart below H1, we would have very short period of data horizon and thus I believe with such short data horizon, the Generator may be exposed to Convergent Bias - has the tendency to generate Convergent Strategies (because how many black swan events occur within 3-4 yrs?).  If we want a more robust strategy/portfolio, we don't just hope such black swan event don't occur, we are always prepared for the worse.  Hence, convergent strategies do look better than Divergent strategies in the short run but if we were to examine them in a longer scope of time, the Divergent strategies are the one, most likely stand the test of time.

I once suggested to remove anti trending rules in the Generator, i.e do not use rules such as Falling, below than, change direction down, cross downward etc in Long/Buy position and vice versa, do not use rules such as Rising, higher than, cross over and change direction up for Short/Sell positions.

However, on hindsight, what I suggested would then make the Generator to be Divergent Bias, i.e. search for Divergent/Breakout/Trending Strategies.

Since we need to ensure our portfolio contain both Divergent and Convergent Strategies.  It would be good, we have greater control of the types of strategies we generate.

Hence I suggest that we have the option to check on a box, "Trending Strategies Only" or "Divergent Strategies Only" and "Convergent Strategies Only" whereby trending rules are eliminated in the search.

In another words, I hope Popov could add in the generator algorithm to search only trending rules if we tick the box "Divergent Strategies Only".  And the algorithm for the Generator would use only trending rules.  That would cut down the possible search number by half and speed up our process of finding Divergent/Trending/Breakout Strategies (cos the other half of the options such as Falling, cross downward, lower than etc would not be use at all in the search of Long/Buy rules).

Convergent and Divergent Strategies are exact mirror of each other in terms of

a) Trading rules, one uses mean reversion rules and the other uses trending rules,

b) in terms of trading period, one trade during ranging and calm market and another trade during breakout and volatile market. 

The whole idea of using Correlation Metric is to prevent our generated strategies in the Collection ending up with similar strategies. 

With the option of switching in between Convergent and Divergent Search/Generation (by removing either convergent rules or divergent rules from being generated), we would have a broader spectrum of different types of strategies that are non correlated.  I believe this method of sieving out strategies by trading rules would be a more efficient method than simply using correlation metric because we go straight to the source/cause of why strategies are not correlated, due to rules and not simply some statistics differences.  It's the strategies rules that contributed to the statistics but statistics don't make the rules, it's the rule that make the statistics cos we are measuring the strategy performance outcome based on their trading rules.

In conclusion, I propose that Generator (both FSB Pro and EAS) has the added function to opt out certain types of trading rules in our search and the option to choose when to turn on/off this function so that we are in greater control of the Generated strategies outcome/quality/types.  By clicking on the option to choose between generating Trending rules or not, I can therefore deliberately create both Convergent and Divergent strategies in my portfolio.  Currently, most of the time, I ended up mostly with Convergent strategies due to the possible Generator Bias as I mentioned above. 

Note: To read more about this option to turn on/off, read this post I put up "Increase Generator Success Rate"

https://forexsb.com/forum/topic/7293/in … cess-rate/

Wonderful post -- I enjoyed reading it and learning from it.  Thank you, Hannah

Dear All,

I came across a very powerful and versatile trailing EA and would like to highlight it here.  By far, this is the most comprehensive trailing I've ever seen. 

I managed to negotiate with the developer to let FSB users have this Trailing EA FREE only for a limited time period (and on the condition that those who download it would give a fair and honest review on the Developer's MQL product review page.  The developer took 2 years to code this EA and I think it's only fair to give him the due credit and kindness for him to share with you his EA for free. 

Kindly go to https://www.mql5.com/en/market/product/35425 to download this FREE Trailing EA (limited time period ONLY).  Thereafter, if any users want to buy, kind contact the developer directly (not via me).

Here is a write up about the Trailing EA

What makes TrailOS unique?
8 TrailingEA´s for each Order - select up to eight different Specialists, of stalking your Order, all at the same Time

individual FliterSettings - each TrailingEA has an adjustible Filter, so that you can decide which Orders he shall handle

auto BrokerPoint - TrailOS detects the digits of your Broker, so you can forget about Pips, Points and Ticks

invisible SL/TP - you can decide whether you want invisible or hard SL/TPs or choose Virtual&Hard, then the hard is set as soon as possible, but the virtual will always close..

StopLoss -  10 different Methods for StopLoss in each TrailingEA (Distance,%,Pikes,Fractals,ATR,MA,SAR,Degrees,CandleBorder,Fractalborder)

TakeProfit -  10 different Methods for TakeProfit in each TrailingEA (Distance,%,Pikes,Fractals,ATR,MA,SAR,Degrees,CandleBorder,Fractalborder)

TimeFrames - each Method can be calculated on selectable TimeFrames

Agility- multiple Options for the SL- and TP-agilities (Fixed, Floating, Fixed if dominant, LossFixed&WinFloating)

Martingale - each TrailingEA can be advised to open new Orders when closing

InputParameters (most relevants)

Use Account protection?- disabled / only SaveStop / only EquityTrailing / SaveStop&EquityTrailing
Appearance - ShowInfos / PlaySounds / TextFonts / TextSizes / Colours
Style - Metatrader (horizontal Lines) / TrailOS (diagonal Lines)
ChartCleaner - show: Labels / Closeline / Label&CloseLine / Nothing
Results - in Points / in AccountCurrency
TrailingEA Names - give each activated TrailingEA a relevant Name
TriggerParameters - open Orders if..

Now the TrailingEA Parameters (there are eight TrailingEA´s Inside..)

enable TrailingEA - true / false

Visual - Colours for SL,TP / LineStyle / draw on all TimeFrames?

Method for SL - no StopLoss / Distance / % of OrderProfit / PikeOfCandles / Fractals / AverageTrueRange / MovingAverage / ParabolicSAR / Degrees / Candleborders / FractalBorders

Method for TP - no TakeProfit / Distance / % of OrderProfit / PikeOfCandles / Fractals / AverageTrueRange / MovingAverage / ParabolicSAR / Degrees / Candleborders / FractalBorders

TrailingEA Timeframe - currentTimeframe / biggerTimeframe / smallerTimeframe / M1 / M5 / M15 / M30 / H1 / H4 / D1 / Weekly / Monthly

Stalk - loosing&winning / only loosing / only winning

Agility - Floating / Fixed / FixedIfDominant / LossFixed&WinFloating

Set - Virtual / Hard / Virtual&Hard

when closing - just close / opposite OrderType / same OrderType

Martingale - LotFactor / maxLot

FilterComments - ALL / certain Comment

FilterMagics - ALL / certain Magic / only Manual Trades

Close - Buy / Sell / Long&Short

MinProfit - TrailingEA SL/TP wont be set, if calculated SL/TP, is closer to OrderProfitPoint than this Value

MinLoss - TrailingEA SL/TP wont be set, if calculated SL/TP, is closer to OrderProfitPoint than this Value
set MinLoss - if true, TrailingEA SL/TP will be set to MinLoss if calculated SL/TP is in MinLoss Area

MaxLoss - TrailingEA SL/TP wont be set, if calculated SL/TP, is farer to OrderProfitPoint than this Value
set MaxLoss - if true, TrailingEA SL/TP will be set to MaxLoss if calculated SL/TP is outside MaxLoss Area
adaptive Distance - possibility to set an addaptive Distance to calculated SL/TP

Method Details - insert Details for the SL/TP Methods you selected above..(e.g. 50% for OrderProfit)

I would like to continue my post above (https://forexsb.com/forum/post/54525/#p54525) here in my thread

Ideally, I hope to have at least 8 or more opening/closing slots cos we need different indicators to measure the market pulses.  In fact, I wish I can have as many as those in FSB Pro.

There are 4 aspects of market pulses to measure/gauge, namely

1. Price (moving average indicators)

2. Volume (volume indicators)

3. Time (use of multi time frame but for EA Studio cause, convert higher time frame parameters into low time frames parameters)

4. Movement (momentum indicators)

for even more in depth analysis, we would also have multi markets comparison (but not applicable for EAS/FSB).

Hence to read a market correctly, we need to consider using indicators from these 4 aspect to give us a better/clear signal of the market movement and hence eliminate false signals.  And having more open/closing slots for EAS to generate would enable us to build/generate more robust EA.

One of the best way to improve our trading performance (EA Studio) is to use an existing profitable EA and set it as a Preset Indicator.  You will often find that your next new batch of EA will have better trading results than it's original EA (Preset Indicator/EA).

The 1 round of search by EAS are generally made up of Component 1 rules.  Rules that generate profits.  Hence one of the ways to improve the EA trading performance is to use a profitable EA as preset indicator and let EAS (EA Studio) generate the 2nd round of new EA/Collection.

We are essentially directing the software/EAS, to search and add rules to this existing EA to improve the trading results and how does one improve an existing EA's trading results?  It's by reducing it's overall loses, i.e cut down losing trades due to "bad" signals.  In another words, when we use a profitable EA as a Preset indicators, we are essentially searching for Component 2 rules, Rules that prevent EA from losing money.

So for those who have poor performance EA, don't lose heart and discard away your EA. 

Put your EA back to EA Studio (EAS) as Preset Indicators.

Look for those EA (of yours) that has the highest of Gross Profit but because of it's losing trades (Gross loss), it's overall Net Profit/PF is low.  Use this profitable EA as Preset Indicator and let the EA Studio search and add more rules to it and you will soon get far more better results than if you were to solely rely on the EA studio to search for EA only through 1 round of search.  This 2nd round of searching via Preset Indicators would yield far better results than round 1 EA(s).

So if EA Studio has more opening/closing Rules, we essentially can turn every losing EA into a winning one, simply by adding rules to eliminate losing trades and putting the EA through several rounds of search/adding rules.  Note: assuming in the 1st place these EA at least have some trading edge.  With more opening/closing slots, we can put the EA through 2nd or even 3rd round of searching and eventually ended up with a very stable and robust EA.

Another method....

Choose one of your EA that has highest Gross Profit.  Optimise the EA and then choose one of these optimised EA as your Preset Indicator and let EAS go through a 2nd round of adding more opening rules.  Again, you will probably will get better results than the original EA's trading performance.

Ok folks, I hope these tips would help you to build better and more robust EA and hopefully Popov see my line of reasoning and add more opening/closing slots to EAS so that we can put our EA through a series of Preset indicator search method like the ones I described above.

Entry Rules = Determine Risk

Lastly, I understand my train of thoughts may run contrary from those conventional ideas of having minimal trading rules so that the EA has greater degree of freedom.  I personally defer from this line of argument.  I think that the greater the degree of freedom an EA has, same goes the margin of error. 

In another words, the broader/vague our trading rules are, the more margin of error (i.e. lower PF value) the EA will have.  Having just 1 opening rule would give the EA a very broad trading allowance/scope.  Imagine giving your children only 1 house rule, the kids will run amok because a lot of things/actions become permissible.  Likewise the same goes for an EA.

Less rules = Broader Scope = low entry accuracy

More rules = restricted scope = increase entry accuracy

Broader scope = Higher margin of Error (EA having low PF value).

Higher Margin of Error = Higher SL setting needed

With broader scope = Broader SL allowance.  Because the rules are few, there is greater margin of error, you need to give the EA more room for error (floating loses = bigger SL setting).

When an EA has vague i.e only 1 entry rule, it generally has a very broad rule, that means, a lot of market conditions are acceptable for this EA to trade.  Along comes with such degree of freedom to trade is the greater the margin of error. 

Good entry rule(s) reduce Risk.  It uses more rules/filters to reduce the risk of exposure by having good Entry accuracy.

Good entry rule(s) increase entry accuracy.  Entry accuracy means that EA enters into trade in a timely manner. 

In another words, Bad entry rules = EA enter wrong timing and hence sustain high floating losing (negative profit) and hence imposed greater risk.

I find it impossible and highly challenging to build a robust EA only based on 1 or 2 entry rules that can so well determine such good entry rule(s) and resulted to having high entry accuracy. 

Can anyone name me 1 super powerful indicator that can is so excellent to achieve good entry accuracy?

Thus, I believe good entry accuracy can only be obtained by having more rules to eliminate false signals so that essentially only those worthy market conditions that is worth the risk is considered as good trading opportunity.

No, Price move is not for long orders only, it opens both ways depending on the move, you can check it on chart.

You set logic for the long positions in FSB pro in EA Studio. The programs automatically compose and apply the mirrored rules for the short positions.