Individual Forex Trading Projects

Each member of the group traded a different currency pair using the automated strategy that was developed for the project. Most of the parameters of the strategy changed for every group member, according to what fitted best for the specific currency pair that was
traded. In the following section, the individual trading projects will be explained for each member of this project; these descriptions will include what currency was traded, the different parameters used, and the backtesting performance.

Antonio’s Trading Project

The currency pair chosen by this team member to trade was the EUR/JPY. After several optimizations and changes to the strategy, the final values obtained were the following:

Bar Length

After evaluating the options discussed with the group, the 60 minute bar was the best option to trade. This amount of time suited the trader perfectly since it gave him the liberty of trading some hours a day. This choice also gave a good amount of trades and profit after the backtesting was applied.

Exponential Moving Averages

The values for the three EMA’s were 5 for the fast length, 15 for the slow length, and 50 for the slower one. The values for the fast and the slow lengths were obtained after optimizing the strategy several times while the value for the slower EMA (50) was chosen by the group after discussing various options.

Long Trend Slope

The value obtained for the long trend slope was 3. This means that the linear regression for the slope of the EMA50 is going to be calculated based on the previous 3 bars. This value was determined after optimizing using a range from 2 through 10 in intervals of 1.

Trigger Lengths

For this strategy, the group decided to have different triggers for the different actions the system was taking. The strategy ended up having triggers for long entry, short entry, and two other triggers, one for exiting a long position and on to exit a short position. The values were the following:

  • Long Entry: 1
  • Short Entry: 1
  • Long Exit: 2
  • Short Exit: 5

Trailing Stop and Stop Loss Amount

It was decided to have a Stop Loss Amount of 400 for every strategy and an optimized value for the trailing stops. After optimizing this strategy several times, the best value for the Percent Trailing Floor Amount was 500, while the value for the Percent Trailing Percent was 5.

Summary of Strategy Settings

Backtesting Performance Summary

The following section shows the performance summary of the automated strategy using the previously mentioned parameters since July 31, 2012.

Equity Curve Line


Figure 35: Backtesting equity curve line for EUR/JPY since 01/31/2012

Monthly Accumulative Net Profit

Figure 36: Backtesting monthly accumulative net profit for EUR/JPY since 01/31/2012

Performance Report

Figure: Backtesting performance report for EUR/JPY since 01/31/2012

Mauricio’s Trading Project

This member of the group traded EUR/USD. The following parameters for this specific trading project were obtained with careful analysis of the market, TradeStation’s optimization feature, and backtesting.

Bar Length

For this particular currency pair, the best length for each bar was 60 minutes. This choice was made as a group in order to suit the trader’s availability and avoid spending many hours a day trading. After backtesting the strategy several times, the results presented a reasonable amount of trades and desired values for trading times, profit factor and winning trades.

Exponential Moving Averages

In order to arrive at the best length values to use for the fast and slow EMAs, the optimization feature in TradeStation was used with historical data to arrive at the best parameters. The fast EMA was usually optimized between two bars and up to twelve bars;
the slow EMA was usually optimized from twelve bars to twenty six bars in length. Finally, the best values for these two parameters were 6 bars for the fast EMA and 16 bars for the slow EMA.

Trend Slope

The linear regression formula calculates the slope of the EMA 50 line. To obtain the best value for the number of bars back that the linear regression uses to calculate the slope, the optimization feature was used. The best value, for total profit, was two bars back. It is important to notice that the linear regression formula is calculating the slope for the EMA50, not for the actual price; so even though in this case it only uses two bars back for the regression, it is using the information of fifty bars back of the exponential moving average to determine a long trend.

Trigger Lengths

The trigger lengths in the automated strategy define that a position will be entered, once all of the conditions for buying long or selling short are met, at the highest high or the lowest low of a certain number of bars back. The strategy has four trigger lengths, two triggers for long and short entries, and two triggers to exit a long or a short trade. The best parameters for this currency pair were the following:

  • Long Entry: 2
  • Short Entry: 5
  • Long Exit: 6
  • Short Exit: 1

Trailing Stop and Stop Loss Amount

The parameters set for the trailing stops for EUR/USD with the automated strategy were set to a floor amount of $250 with a 1% trailing parameter. This was one of the most important parts deciding the strategy and needed to be thoroughly optimized and carefully
analyzed. On the other hand, the stop loss was set to $400 to prevent any larger drawdowns.

Summary of Strategy Settings

Figure: Summary of strategy settings EUR/USD

Backtesting Performance Summary

The following section shows the performance summary of the automated strategy using the previously mentioned parameters since July 31, 2012.

Equity Curve Line

Figure: Backtesting equity curve line for EUR/USD since 01/31/2012

Monthly Accumulative Net Profit

Figure: Backtesting monthly accumulative net profit for EUR/USD since 01/31/2012

Performance Report

Figure: Backtesting performance report for EUR/USD since 01/31/2012

Paolo’s Trading Project

This member of the group decided to trade the AUD/USD currency pair. The values and parameters obtained in this strategy after various steps of optimization were the following:
Bar Length
After checking other options, the 60 minute bar length was the best choice for the strategy. The 60 minute bars are appropriate since they do not get much noise like shorter length bars do, and it suits the team member perfectly, since the trading is less stressful and time consuming.

Exponential Moving Averages

The strategy uses three EMA’s. The values for the fast and the slow lengths were obtained after optimizing the strategy several times. These values were 6 for the fast one, and 17 for the slow one. The value for the slower EMA was chosen by the group to be 50. This value was decided after discussing options we had and analyzing them with our parameters for money and risk management.

Long Trend Slope

The value for this variable was determined after the optimization done from 2 to 7, to obtain a correct linear regression for the slope of the EMA50. The long trend slope for this currency pair is 2, which means that the linear regression is going to be done based on the previous 2 bars.

Trigger Lengths

There are four trigger lengths that have been optimized for this strategy, trigger length for long entry, short entry, and trigger length to exit a long position and another to exit a short position; this because individual trigger length values give better results for the strategy. The values were:

  • Long Entry: 4
  • Short Entry: 1
  • Long Exit: 7
  • Short Exit: 4

Trailing Stop and Stop Loss Amount

The trailing stop values that best suited this strategy were 300 for the Percent Trailing Floor Amount and 2 for the Percent Trailing Percent. The value for the Stop Loss Amount was decided by the group members after various risk management analysis to be 400.

Summary of Strategy Settings

Figure: Summary of strategy settings AUD/USD

Backtesting Performance Summary

The following section shows the performance summary of the automated strategy using
the previously mentioned parameters since July 31, 2012.

Equity Curve

Figure: Backtesting equity curve line for AUD/USD since 01/31/2012

Monthly Accumulative Net Profit

Figure: Backtesting monthly accumulative net profit for AUD/USD since 01/31/2012

Performance Report

Figure: Backtesting performance report for AUD/USD since 01/31/2012

Steven’s Trading Project

This member of the group traded GBP/USD. The values obtained after several
optimizations applied to the final, and the previous strategies are:
Bar Length

The best length bar for this particular currency is 60 minutes bar, considering the time frame determined by the group previously. This length of bar is appropriate to this currency pair because, as it was mentioned in an earlier section, does not get as much noise
as the 5 minute bar gets, but it is still a relative short time frame where to trade. This bar length was decided because of the time commitment that was available to trade.

Exponential Moving Averages

The strategy uses three exponential moving average plots as indicators, two of them are variable since one of them is set constant to 50 bars. The values obtained for the other two EMAs are: 7, for the fast, and 30, for the slow. These values were obtained by applying the optimization to the strategy. The range of values for the fast EMA were from 2 to 12, and for the slow EMA were from 15 to 30; these were the values defined by the group when the strategy was finalized.

Long Trend Slope

The value for this variable was determined after the optimization done from 2 to 7, to obtain a correct linear regression for the slope of the EMA50. The long trend slope for this currency pair is 2, which means that the linear regression is going to be done based on the previous 2 bars.

Trigger Lengths

There are four trigger lengths that have been optimized for this strategy, trigger length for long entry, short entry, and triggers to exit a long position and another to exit a short position; this because individual trigger length values give better results for the strategy. The values were:

  • Long Entry: 4
  • Short Entry: 1
  • Long Exit: 1
  • Short Exit: 5

Trailing Stop and Stop Loss Amount

The best parameters for trailing stop and stop loss amount were $250 and 2%, respectively. These values were optimized with the strategy to obtain the best values for this currency pair.

Summary of Strategy Settings

Figure: Summary of strategy settings GBP/USD

Backtesting Performance Summary

The backtested results show the expected performance of the strategy based on historical
information from January 31, 2012.

Equity Curve Line

Figure: Backtesting equity curve line for GBP/USD since 01/31/2012

Monthly Accumulative Net Profit

Figure : Backtesting monthly accumulative net profit for GBP/USD since 01/31/2012

Performance Report

Figure: Backtesting performance report for GBP/USD since 01/31/2012

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