Data continues

The algorithm data continues at pace. Now at nearly 60% profitability with a 2.88 profit factor or reward/risk ratio for EURGBP. But that is not the whole story.

The above is the figure for our best pairing. The one on which Nick has focused. However, a dozen others (majors and a few significant minors) run a close second.

Each pairing is individually tested, and the algorithm adjusted as needed. For example, best market entry timings are specific to each currency and its pairing based on volatility look back.

And determining the market cycle has been improved by introducing a Japanese line break chart—a movement chart rather than a time-based chart.

A minimum Euro VIX (volatility index) is incorporated in the algorithm which—being USDEUR based—will require testing as to its applicability (if any) on other FX pairings.

Nick’s test is designed for an hourly chart and looks for entry/exit solutions over the past 750 days—figures above are providing trades (tested yesterday) on 223 days. In other words, we’re seeing trade entries from one to three days on average.

This delicate balance of ratios provides the best net profit. However, Nick can make adjustments to the algorithm (in the VIX and others) whereby per cent profitability increases significantly and the reward/risk balloons, amazingly, to well over five.

However, in this instance, the number of trades closed and the net profit achieved decreases substantially. In this instance, we could increase each transaction to a higher average per cent per entry (currently trading at one per cent of account), but we know that to do so is not sustainable or practical in the real world—drawdown for some trades could go through the roof for one.

I do remain a discretionary, rather than a system, trader—for the time being at least. But Nick has brought a quantifiable aspect and improvement to our methodology. This week, I found that taking trade entries from Nick’s quantified indicator system and transferring them to James’ subjective value drawings (rather than the other way around) have worked very nicely thank you.

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