forex trading systems & structural break

M

man

hi everyone

we've been testing forex systems now for a couple of weeks with mixed results. we have a compilation of three trend following systems on daily data which seemed to do reasonably until 2004, which itself showed positive but below mean returns, whereas 2005 is about -10% so far.

we did something with more complex tools using pattern recognition, but found the same diminishing return pattern for 2004 and 2005. quick glance at the market did not show dramatic shift in trendiness or volatility. thus we see some structural break on the system side in terms of breaking equity curves, but cannot nail it down on the market level.

intraday we tested EUR/USD starting with a system that baruch described in a thread here on ET. the system as such was negative. we did play around with it but it did not work out. another thing we tested intraday shows good figures until mid 2004.

now my question: do other system traders know what i am talking about here?


peace
 
Quote from man:

now my question: do other system traders know what i am talking about here?
More...

I would guess, probably something wrong with the markets, as usual. :confused:
 
"now my question: do other system traders know what i am talking about here?"

I suspect the majority of system traders understand what you are talking about. 80% of system traders (managing >50M) are down for the year as the end of April (avg is -4.9%, largely attributable to FX losses). What has worked in the past has not worked as well in the first 4 months of this year....but that is not all that unusual either. Stick with your systems and you'll be fine. Just ask John Henry :-)
 
I am trading a breakout system that is undergoing a drawdown from the last quarter of 2004. Before I started on it in 2003, a friend of mine has been trading it for more than six years. This is the longest period of drawdown for the system based on actual trade results. The problem is more with swissy, cable and the euro. The yen appears okay after year befores debacle due to BOJ messing with the markets.

I don't know what is wrong, but it is surely testing my patience. I hope I win this battle of discipline.

Maji
 
Isn't that the truth. It was fine for 6 years and when you started trading it, its drawdown reached record breaking proportions...typical isn't it!

Michael B.


Quote from tradermaji:

I am trading a breakout system that is undergoing a drawdown from the last quarter of 2004. Before I started on it in 2003, a friend of mine has been trading it for more than six years. This is the longest period of drawdown for the system based on actual trade results. The problem is more with swissy, cable and the euro. The yen appears okay after year befores debacle due to BOJ messing with the markets.

I don't know what is wrong, but it is surely testing my patience. I hope I win this battle of discipline.

Maji
More...
 
Quote from tradermaji:

I am trading a breakout system that is undergoing a drawdown from the last quarter of 2004. Before I started on it in 2003, a friend of mine has been trading it for more than six years. This is the longest period of drawdown for the system based on actual trade results. The problem is more with swissy, cable and the euro. The yen appears okay after year befores debacle due to BOJ messing with the markets.

I don't know what is wrong, but it is surely testing my patience. I hope I win this battle of discipline.

Maji - there's been no major trend in $/FX since the end of last quarter. The periodicity of the intermediate trends have whipsawed just about any mechanical trend following/breakout system that has backtested successfully in the past. My guess is this is about to change. In the meantime, you may want to try supplementing your current system with one that uses shorter time frames (not replacing a 50 day MA with a 30 day one, but rather look to trade 1 hour bars as opposed to dailys). But in MHO you ought not abandon your existing system.
Happy trading.
 
ESavant,

I think whenever I want to trade any system, the traders who are trading that system ought to pay me not to start :) That way their system will be safe!!!

Mad10,

I believe you are right. Maybe the Dollar's downtrend has exhausted itself and the market is consolidating. Hopefully, it breaks one way or the other. I have been experimenting with shorter time frames, but due to my day job, I need to be automate those. I am trying to learn MetaTrader and a friend is helping me there.

Thanks guys,
Maji
 
Quote from man:

hi everyone

we've been testing forex systems now for a couple of weeks with mixed results. we have a compilation of three trend following systems on daily data which seemed to do reasonably until 2004, which itself showed positive but below mean returns, whereas 2005 is about -10% so far.

we did something with more complex tools using pattern recognition, but found the same diminishing return pattern for 2004 and 2005. quick glance at the market did not show dramatic shift in trendiness or volatility. thus we see some structural break on the system side in terms of breaking equity curves, but cannot nail it down on the market level.

intraday we tested EUR/USD starting with a system that baruch described in a thread here on ET. the system as such was negative. we did play around with it but it did not work out. another thing we tested intraday shows good figures until mid 2004.

now my question: do other system traders know what i am talking about here?


peace
More...


If you're using parameters, is there a possibility that your results for 2004 may have been curve-fitted ? Reading your post that's what comes to my mind immediatly.
 
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