The "You can't be serious" system

Took another approach for the trades on 16 July 2021. Took a look at D1, H4 and H1 time-frames to have an idea the directions and to have a bias. Both trades below, I was looking for long signal to trade with the HTF directions.

USDCAD 15min
Prior to European session, price bounced at PP. After London open, there was a long signal. There was a little bit (but sufficient) distance to BRN so that I could move stop to BE. 1st trade hit breakeven. After that another long signal formed at around the same level. 2nd trade end up breakeven too. Both trades went to BRN, would have been good for scalp. After 2 BE on this pair, I stopped looking for trades on this pair.

EURAUD 15min
Overview
Blue line was SR. After London open there was a long signal, but entry would be on BRN, so no trade. Orange highlight showed the area where price found some kind of support at PP + the longer term S/R. Price eventually pierced BRN. There was a slight pullback, so price entry as shown, with a tight SL.

Progress
Trade went well. Price reached R1 (and 1.5950) small round number. Took partial profit and trailed stoploss higher to lock profit in case of strong rejection. In the end the trailing stop was hit on the remaining position.

AUDJPY 15min (London)

Overview
Various HTF charts were in a downtrend. So bias was to short. Short signal formed after London open but there were BRN and S2 as obstacles. Took a short entry after a small pull back which did not close clearly above BRN.

Manual Close
NY open pushed price towards TP. I placed it at 80.37 which was 2 pip above S3. I manually closed it at 80.40 since it was already +2R.

Wow! Time flies when you have fun! My brain cells’ activity is reduced to a minimum, concerned mainly with survival issues: eating, sleeping, avoiding viruses, etc.

Dear Nintethinker, thank you so much for “flying the flag”. Your posts are always very clear, to the point and very honest. I also do greatly appreciate your kind words when I left. They are a motivation to pop in and say hi and thank you.

I am sorry I won’t have time (or brain power) to comment on your posts, nor to add anything meaningful at the moment.

So, I would offer some light entertainment instead.

I observed my quarantine by picking fruits directly from trees (excellent season for apricots and plums!) and reading about how the brain works (still not sure, but some progress) and an exhilarating true story of a Brit who tried to climb Everest alone, after having flown (alone) from UK to India on a Gypsy Moth biplane in the 30s, trying to avoid the Empire’s attempts to stop him. It reminded me of many traders’ stubborn, heroic attempts to “make it”, against all odds and adversities. He was as ill prepared for climbing and for flying as many would-be traders (and probably as foolish, too!) but he made it to Nepal and even to Camp 3, where Mallory had been before! What a journey! What an adventurer! What resilience!

Another great and perhaps more important realisation is that for weeks I have had no idea where the USDollar, GBPound, S&P or oil were and the world is still here! And by a quick look at some charts it looks like it still is a good call .

Mid-morning ice coffee is calling me now . Speak soon!

What a surprise! Good to hear from you capm!

You must really be enjoying the slow and relax pace of your vacation! How I wish I could have this kind of long break once in a while.

I went to Google it, this man, Maurie Wilson ,you are talking about?

You have special style of writing, maybe one day when you are feeling bore, you could consider writing some kind of inspirational yet entertaining book.

No problem to not comment on the posts, there were enough comments, suggestions and hints in your prior posts to keep me busy. Journal was one of things you said was important and I am fine-tuning it so I could derive more insights.

Hope to hear from you again once you are back to trading.

EURAUD 15min

Overview
Small typing mistake when entering order. 1 pip's difference caused me to endure an additional 5 candles of DD. Luckily the price stopped at BRN, and eventually went lower. But this silly mistake made me anxious and very tempted to close the trade for 0 pip when it returned to the entry level from BRN.

Manual Close
Trade was manually closed for +23pip when I saw 3 long wicks hesitating at daily open. Later in the day it dropped further to 1.6025.

GBPUSD 15min (NY)

Overview
Was initially having a short bias as there was a strong down move previous day. However there was no direction from Asian / London to NY open. Around early London session there seemed to be some kind of support near BRN. After NY open, there was a pin bar off the PP. Also I just noticed now that there was another tailed bar off the daily open (2 candles before the pin bar at PP).

Trade Management
Progressed fast and I took half profit as it reached a possible obstacle (shown by the green arrow), also R1 was not far above. Stop moved to breakeven.

Trade Management 2
Price broke R1 and stop was trailed to 1.3666. It was very late after midnight over here and I had to sleep. So I decided to leave the SL at 1.3666 and hard TP was at 1.3740 and see which one got hit. If it hit the trailing stop, I would still get slightly >1R full position.

Manual Close
Woke up before Asian session and saw that the trade was still running, so manually closed it at 1.3714 to bank in the profit.

GBPUSD 15min
Took a loss today.

Green line marked HTF's SR zone. Yesterday's high was near the green line. I thought it would bounced from there. There were LL and LH price action. Broke below the grey SR zone, PP and also previous low as well. All looked OK to go short. Order got triggered and was in the trade for many hours and eventually hit SL.

EURAUD 15min (London)

Review
Decision based on HH, HL action, broke SR zone (gray horizontal zone), broke R1, a pin bar showed rejection of SR+R1. Slightly risky entry above pin bar.
Trade triggered and hit stoploss very soon.

If stop order was above London open candle, might have avoided this trade.

GBPUSD 15min (Asian)
Maybe not ideal as it was outside usual trading hours. This was taken during Asian session.

Good thing it hit profit target before London open, otherwise would manually close it. Price tested BRN during Asian and bounced 25 pips, breaking the gray minor SR zones (highs). Stop order placed when I saw the pullback. Good thing Frankfurt open moved price towards my target.

I was happy with the choice of profit target level although it was only 14 pip. Profit level was placed a few pips before R1 and trendline which would be potential obstacles. Also I was worried London open would changed direction of price.

Well, hello! I am back!
Apart from international traveling nightmares, courtesy of pandemic and Brexit, I had a great time, thanks for asking. But now I am already depressed. My sun tan is fading quickly, I feel constantly cold (from 30 to 18 degrees takes its toll!) Routine is creeping back. Air pollution, junk mail, neighbours’ dog barking, road works and that tremendous, unique, offer from Vodafone broadband are there where I left them. So, unsurprisingly, are markets. So, it’s true, markets go on even if I do not watch them all the time!

You will be pleased to know that I still have no idea what to do with this thread. My hopes that the summer break would clarify my intentions turned out to be just wishful thinking. The temptation of annoying some people is still quite hard to resist. So is the one to interact with people who have showed interest and support.
I will wait for inspiration coming from desperation.

I guess you do not want to hear about my faaaabulous holidays. You want to hear about trading, markets and, above all, magic!
So, I thought of a good re-start post that will alienate some more people and talk about magic at the same time. Hey, how is that for efficiency?

A friend sent me this funny vignette:




The analogy with traders’ personalities came up immediately to me. As always, this is a gross generalisation in the name of higher education and sublime literature!


The top left personalities are the traders that have properly informed themselves about what trading is about and what it takes and act with seriousness and discipline. Some may still have doubts and all are aware that “wearing a face mask” (discipline, commitment, study, etc.) is a pain in the neck (or rather ears and nose.) But they also accept that it is a good way to go about in a pandemic, based on evidence and science. Will they catch Covid (lose their account?) It is obviously possible, but they work to keep the probabilities low. And if they do other things that have proved to work (like vaccines and distance, for example, that in our analogy we could call risk management and journaling, let’s say) they have a good chance of not getting Covid at all or have it in a non destructive way.

The top right personalities do not believe in this. Whatever you think of them, they remind me of those traders who think that “they know best”. Forget science and hard work: all they have to do is watch a chart and their intuition and “feelings” (or their friends’ tips) will make them immune to losses and astonishingly wealthy. Obviously, if there is a virus out there (the possibility of losing their funds) they will have the best chances to get it. But they do not think there is a virus out there, so it’s OK. And if (or rather when) they lose it is because of bloody brokers (well, partially true), their cousin Bob, the Chinese paedophiles and, crucially, the government. They are also usually the most vociferous critics of science (study, discipline, statistics, whatever) and they love to spread their ideas (that trading is as easy as breathing.) There we go: statistically I must have angered between 20 and 40 % of potential readers.

The bottom left personalities are those who, yes, believe that there is something true about science (difficulty, commitment, discipline) but they still think that they do not have to be so strict. They cover their mouths (they follow a system/buy a course/commit to some form of education) but covering the nose too (keeping a journal, re-playing the trades, focus on risk management, working on themselves, etc.) is….c’mon!... really….obsession, exaggeration and way too difficult! Sometimes, it is just laziness. But many times it is just insufficient experience. I have some sympathy for some of these, as they have started in the path of science, but they are still lost, lacking some information here and there and not understanding the bigger picture yet. They made an effort, but it is not enough.

The bottom right personalities are the funniest. They are headless chickens. They are in no territory, really. They think they are doing enough just buying the mask and putting it…somewhere. It is as if they are saying: “Hey, I get you, sure, here is my commitment” but they really think there is a secret, a magic formula that they have not found yet. No point going through all the palaver. They jump from system to system, theory to theory, style to style, add this or that indicator. They bought the mask (besides, you never know, and many successful traders seem to have it) but they are still in the same category of those above them: no protection, but with the added inconvenience of getting and somehow “donning a mask”. But, hey, “magic works in mysterious ways!!!”

Nobody annoyed? I must be getting old! Anyway, let's move on.

This is probably not exactly what many would expect in the YCBS thread (a combination of mechanically generated signals filtered by “superior PA knowledge”) ….but….well… who cares, anyway?
I am going to talk about the SMS (Simple Mechanical System) strategy. Look back in the thread if you want to know what it is, but it is basically the purely mechanical, boring, part of the strategy, unfiltered by the “superior PA Knowledge”.
This is, I should stress, a totally rough and rather unscientific test to gauge the performance of the SMS on 6 instruments over the last 10 weeks. I should also stress that 10 weeks means nothing in statistical terms and that I use this strategy as an example to illustrate some points and I am not advocating to use this strategy as it is and blah blah blah.

Here is a rather unattractive chart:



You will be excused to move on and turn your attention to better, well-crafted equity curves. It does not look like marketing material, right? But, as I said many times: "We are not selling anything here, ladies and gentlemen! We are devoted to the higher vocation of free superior education!"

Well, how did it do, really? Good start, terrible month in July, better last week. No surprise at all: it is a trend following strategy. No direction, choppy markets: losses. Trend: profits. Duh! So you just have to hope there will be a sufficient number of sufficiently extended trends. Incidentally these do not tend to happen very often in the summer months. Here is a hint as to why I take long holidays in the summer months. Ah, yes, this and… my wife tells me so.

But let’s think for a moment. It gave a positive return after all and I would have had to do…nothing for it! It would be totally automated. Theoretically, I could have let it go unattended, go on holiday, forget about it and come back today, after 10 weeks and see what happened. And it would have made money. Not a lot, but still, a few quid while you are lunging in the sun? Not a bad proposition if you asked me!

So, Should I use it? There is much more that we could discover even from this scant data. Here is a performance break down by instrument:


1) First impression: hmmm, I really could not stomach some elements of this strategy. Even if the results are positive, I would not be comfortable with the volatility of performance and some of the drawdown. But that is just me.

2) Obviously, some instruments “do not work”. The DAX in particular (yellow line.) Keep in mind that in the test I use the same parameters for all 6 instruments. There are clear indications that such parameters are not fit for the DAX. Gold (green line) and Dow (light blue) are better but show the highest volatility and offset each other out in terms of performance. We may decide to test with different parameters (oops, I could get in trouble for this with the most serious system developers!) or reducing risk or eliminate these instruments. Each option has pro and cons. Incidentally, to salvage a bit of my tarnished reputation, I knew this all along from past tests. DAX and in general indices do not seem to like this “always in” strategy, for a number of reasons. I have put them in the basket for educational purposes.

3) A better picture emerges for the 3 currency pairs, where we have a smoother upward curve. Here is the Forex instrument cumulative curve (orange) compared to the general one (all 6 instruments, blue) This could be an aspect to investigate further, perhaps with the aim to add other pairs (with the lowest correlations to these) and testing their behaviour.


So, if we let the SMS to trade just the 3 FX pairs we would have had a great surprise on our return from holidays! Again, warning: this is a way too short and simplistic test!

We could go more in depth in our observations and analyse trade by trade.
Unsurprisingly, a look at some of the mechanically generated trades makes me furious! Again, I knew this before for the indices, but also some of the Forex trades were ridiculous!

I know I can do much better than that. BUT the price for it would have been quite high. I would not have been able to go sailing or climbing mountains or work on my sun tanning. I would have needed to be in front of charts and, at the very least, filter some signals and manage manually the trades. This would also mean that the system would change and this test would not be quite comparable. Remember the issues about the impossibility - in my experience, at least- to efficiently code many aspects of the "superior" PA knowledge?

This goes back to my original issue of algo vs. discretion and everything in between. It could also be the subject of a very, very! long analysis trade by trade to show how to apply the “superior PA Knowledge”, which is the other, far sexier part of the YCBS system. It is impossible to properly go through here in the thread and I would need an entire long seminar. No time for it. I will see if I find the time to show some examples.

I am obviously just scratching the surface here. Food for thought, if you like this kind of things. Trust the numbers, not your biased mind!
Bye for now.

Week-end entertainment!

In an effort to develop my obviously pathetic marketing skills, and slightly depressed by the ignominy of having descended into the second page of the directory, I thought of flogging this lucky occurrence of SMS.

I keep kind of pooping this extremely simple mechanical strategy, that “shouldn’t really work”, and yet here are some nice moves, decent trends on our instruments and …voila’, nice results. How could I possibly pass on such a timely gift?

Here it is: equity curves going up! It should have the caption: “This happened when I was on holiday, relaxing on my beach deckchair (or, if one is more entrepreneurial and has a bigger marketing budget: , my yacht!)”




Not that anyone should be excited of course: a trend following strategy working in suitable trending markets? Big deal! What is worse: no fancy superior intellectual insight needed. Just two bloody stupid moving average slopes! So no merit to be claimed for the profits. Where is the fun in it?

On a slightly more informative note: it is still difficult to stomach for me. DAX is detrimental, Dow and Gold very volatile, FX better. I would consider using an algo like this only in very strict circumstances, the most salient being:
- I would need much more testing both on these instruments but above all on a much wider range of instruments, as uncorrelated as possible.
- It could only be a tiny part of a number of uncorrelated strategies running in parallel.
But that’s just me. If you want to buy this magic strategy, send me a million Dollars. Hurry up, though: next month markets may be choppy and I would not be able to show increasing equity curves!

Ok, whatever. Just some week-end cheap entertainment.