Perfecting my system (inputs greatly appreciated)

Hello everyone, I've finally finished my own holy grail late last year, with great backtesting result.
The backtesting result is considered reliable is because the system is not a high frequency trading system, it takes 1 or 2 trades daily, sometimes no trade at all, or no trade for several days, I went a step further to make it 99.9% backtest quality but actually it doesn't matter even if it is not, because generally the lower the system's frequency of trading, the less likely the backtest result is to be inaccurate.

Without further ado, I will describe the core part of my system, actually it is quite simple, really, has been under our nose all this time.
"Buy low, Sell high".
There are many indicators out there that can help you find the "reasonably low" and "reasonably high" price for you to take the trade, research and then find the one that suits your taste, preferably you understand how the indicator works and its logic, whether the logic is sound or not.

Then, close your Buy trades at "reasonably high" price, and close your Sell trades at "reasonably low" price.
How you want to determine that price is up to you, pick your own indicator and craft your own system that is similar to mine.

For timeframe, mine is daily, basically it means, what is the "fair high price" and "fair low price" for the day.
Only place trade at those prices to ensure optimum result.
The downside is, if market did not move enough, you will not have trades for many days if your Fair price is a little bit far away.

Lastly, put in the indicator that helps you identify the trend, ideally the indicator do not change trend too often, you may put a higher period number to make it less sensitive if for example you are using some sort of moving averages. The trend indicator helps you to determine if you should prioritize entering Buy trades or Sell trades, this is to prevent you to keep entering Sell trades if currently there is a very strong Uptrend, you will definitely blow your account.
Set a limit, in an Uptrend (as told by your indicator), do not let number of Sell trades higher than your Buy trades, this way you will be safe, risk controlled.
Remember, always manage your risk.

I've had great success using this system after going live, and has pumped in serious money to make the growth faster, after all my goal is to trade full time to get away from desk job.
The system is fine the way that it is, but 1 issue is griping me recently, this is the 2nd time happened to me so far.
Before that, first I will lay out the conditions that the system will earn you money:
1. Ranging condition, this is the best, the price will keep reaching the high and low, you keep closing your Buy trades at high, and your Sell trades at low.
2. Lightly trending condition, trend is ok, but preferably with many decent pullbacks to keep triggering the Fair prices, and then resume trend to take profit at another Fair price.
3. Strong trending condition with pullbacks, this is also ok, and possibly can net even greater profits compared to Ranging, your with-trend trades will have very high profit, while your counter-trend trades will suffer and hit SL. Since the losers hit SL earlier on and the winners keep running due to strong trend, overall your PNL is net positive.

OK, now comes the part that gripes me, and it is only 1, which I'm trying to solve now.
1. Strong trending condition with little to no pullbacks.

If you have no trades to begin with, then it will be boring to have upwards of 10+ days with no trades triggered.
Why no trade trigger? Because for example in an Uptrend, you will want to place Buy orders first, and you will only place it when it reaches a Reasonably low fair price, but market never reaches there and therefore no trades.
Worse if you have any counter-trend trades still active, they will hit SL just like that.

Usually I will leave some counter-trend trades behind, just in case the trend change is a fake one and changes 1 or 2 days later, then I will be right to leave the counter-trend trades open, further increasing profits. But it hurts when I'm wrong, the trend change just keep going that 1 direction and don't look back, bringing those counter-trend trades to SL.

What if I just close those counter-trend trades? Nope, if I do that, in case of fake trend change, the system would have entered a few Buy trades in a "fake long trend", because the price keeps moving down and trigger the "Fair low prices", then the next day the trend is now "Short trend", leaving those Buy trade entered yesterday suffering losses. Hence I would prefer leaving some counter-trend trades open to combat Fake trend changes. Market ranges more often than trends according to statistics.

Any ideas how can be combat "strong trending condition with little to no pullbacks"?
Ideally if this condition happens, the original system will suffer some losses while the backup system earn a fortune.
On the other hand, when this condition does not happen, the original system will earn a fortune while the backup system will just suffer some losses.
Overall I want a net positive PNL when dual system PNL combined.
I understand this can reduce overall profit because 1 system performance somewhat offsets the other one.

Thanks in advance, by the way I solely trades GBPUSD. I find this pair the most volatile, and have an easier time hitting those Fair high/low prices.

There’s quite a lot of your post that I don’t understand at all, to be honest.

Specifically, I think I don’t understand what you mean by “fair,” which is obviously a hugely important part of what you’re writing about, as we can see from how often you use the word.

What does “fair” mean, in the context of market prices?



I’m interested (and very surprised!) that you use the word “combat” to describe how you want to deal with these circumstances.

Many/most people I know are deliberately waiting for and aiming to identify those times, because trend-following trading is the easiest and safest kind for most people to use.

But clearly, for you they seem to be the problem, which I find puzzling.

I think you're doing great by trading just the daily as it is the easiest and probably most profitable(imo of course) time-frame for trading.
but what you really mean by 'fair low and high'?

your system works best if you have pullbacks. perfect
Unfortunately the market has several working conditions and cannot be forecasted in advance because of the market makers manipulation.

if you find yourself in unfavorable market condition you have basically 2 options:
1) take the loss and move on hoping your strategy recover the losses on the remaining market conditions
2) develop a strong money management system that can help you to resist during these strong trends.

I'm facing same issues on my system as well but no cure yet

Yes, "fair" is part of a key component of the system.
The "fair" price can be determined via many ways, for example you can use Fibonacci, at certain level you can deem that it is low enough to place a Fair buy trade.
Or, you also may use Moving average, when price trend upwards and return back to moving average, that is considered a fair price after a pullback from Uptrend.
So there are many ways, really. It's up to you to decide which method suits you best for determining the fair price.
The very purpose of this fair price is to minimize risk, to ensure you are always trying to buy low and sell high, but the downside is, you are kind of trying to counter trend trading instead of with-the-trend trading. With-the-trend means when price break out to upside resulting in uptrend, you place buy order, but that also means you buy at higher price because it broke out upwards.

Is the word "combat" less frequently used? That's what came to my mind when I write the post, basically I just mean to counteract the downside of the system.

To determine whether now is a trend or range, i dont think neither one is easier, when we already spot the trend or range, it has already formed, it means we are late to the party.

You see, that's the problem with majority of the traders, trying to find what is the current status of the market, is it range? is it trend?
For my system, I am totally not worried about that, that's the beauty.
As you can see from my 1st post, the system works fine in many condition except for 1, it works good during trend and also ranging, it's perfect right? Because market only has 2 condition, Ranging and Trending.
But still, the system's profitable depends on how the price moves.
It is very dependent on pullbacks, the system assume market dont move in straight lines, when there is no pullbacks just like GBPUSD in May 2024, this whole month I didn't really earn much, and my counter-trend trade is suffering, no chance for the trade to exit at a "fair price", because the open and close of the trades dependent on fair price points. Of course there is SL for every trade that it will cut loss if the fair price never reaches. Risk management comes first, it is no.1 for every serious trader.

The strategy definitely can recover loss, in the long run it is profitable, just that I would like to have a smoother equity curve to be able to see profit every month.
This system, when market is in normal condition with sufficient pullbacks, it will be profitable for that month, if the price action is chaos and erratic, spike up and down, it is even better, possibly can earn twice as much for the month.
But when market is just trending and not giving pullbacks, the system either will have no action at all, or suffering some kind of losses.
I may earn totally nothing for that whole month, the worst record is 3 months from Nov 2023 to Jan 2024, the market moves in a way that doesn't allow the system to capture the profits. But majority of the month it is working fine, some months even exceed expectations. When losses incur, losses are limited, all in all still a great system, but it could be better, maybe I'm missing something, the final piece of the puzzle to solve the last pain point of the system.

Yup, definitely is your point no.1, take the loss and move on, for now. By not letting the losses continue accumulate is itself a money management.
I hope you can find the cure someday if you brainstorm everyday in your free time, someday you will be able figure it out, just like how I figure out this system of mine in the first place.

Ok, I get what you mean. The only thing I can reach to it now, is that you can trade more markets! Trade those that have pullback at that moment. I think it will give you more profit

Hola @Reverso
Got your point and btw you are doing great judging just from your profit & loss sheet.
However 78.39% profit for your short program looks very very high for any standard.
Was that just a fortunate luck or high risk MM was used?

or trade a basket of not correlated instruments in order to lower the risk of facing strong trends.
You profit curve should become smoother as well.

I thought of that too, but when I put other pairs into backtest, the result is not good, it only works for highly volatile pair like GBPUSD.
But thanks for the reminder, I think I will revisit the possibility of trading multiple markets to see if I can adjust some settings to make hitting the Fair prices easier so that the system can be used on other pairs.

If I were you I would focus more towards the center of the picture, the column named "Monthly", this is what I would get each month if I smooth out the equity curve.
Every row you see in the sheet is considered 1 cycle, it has a start date and end date, for the 78% you can see the start date is 2 Aug 2023, end date is 3 Nov 2023, about a little over 3 months, it simply means over a span of 3.10 months, I earned 78%, it translates to 25% per month, this is the type of scenario where you get almost double your expectation per month when the trend is strong while also giving you chance to enter trades in the pullback.

No high risk MM was used, as for luck, yes I will need the market to give me sufficient pullbacks for me to trigger more trades and realize more profits.

Hi Reverso,

My thoughts:

1. Real trading has to be boring, in my opinion. You should just use some money from your trading's profits to add a "no boring" part in your real life ; )
2. If your system works on other pairs too, you can just run it on a few more, uncorrelated pairs, so this way you'll probably get a more smooth equity curve without "10+ boring days".
3. It's nearly impossible to create a system that will be working on all market enviroments. You should have heard this J. Livermore Quote: “There is time to go long, time to go short and time to go fishing.”

I'd also add this one: "Don't fix what isn't broken". So just relax and be happy that you've already found a working and profitable strategy!

Good luck with your journey ; )

Just now spent time to scan thru non-correlated pairs and I find the result to be promising by just looking through how the price is going to hit my fair prices.
Currently downloading the reliable history data for those pairs, it is going to take time, after that will backtest to find out for real.
I have a feeling this might just be the cure to the smoothed equity curve instead of trying to invent another system just for the 1 downside scenario, like the other forumer says No System is perfect, and dont fix what is not broken.

Thanks once again for leading me to brainstorm and revisit on the idea of non-correlated pairs!
Will post result after I backtested.

Glad to hear that and looking forward to see the backtest results
I think you are very close to retire soon.
Well done

I have not read all the text. So I might have the wrong picture. I believe that your problem is to get into a very strong trending market, if you did not get in in the first place.

My cure is that I have a PlanB "easy to get in" strategy. If trend is North and seems to go on for a long time, then I use the PlanB. It could be getting in after "3 white Soldiers" or a MA Crossover. You might find your self in a loss right after if the trend stopped after all, but that is the price you must pay for having to be subjective.

Another possibility is to add to the trade at all positive pullbacks - if you have a trend with pullbacks of cause. SL below the pullback. Not a solution to your problem, but could make even more money.

Thanks for your input, I think just recently I came across your thread or post, with insightful content, didn't expect I would have an honored guest such as you to visit my little thread.

Let me give you a quick summary of the issue, my entry criteria is a little strict, I use a certain % of daily ATR as entry, objective is to get the optimal price as often as possible, because this will ensure I buy cheap at lower levels, and sell at higher levels. I have my own custom trend indicator that doesn't change trend often, so I determine my trend bias using that.

If in a long bias, I would prioritize enter buy first before entering any sells, and I put in a rule to ensure the sells that will be triggered cannot be more than number of buys in a long bias, vice versa. It will mean I need to wait for pullbacks in uptrend to even start my strategy, if no pullbacks then no entry will be made.

Secondly, because my TP is also based on a certain % of ATR, sometimes in a downtrend, all my Buys already hit TP, but my Sells not yet, because market just don't want to go down lower to hit my Sells TP, worst if there are many Sells still floating. When the trend suddenly changes and also aggressively, my Sells would be slaughtered. But such condition don't happen often, market ranges more than it trends, and often times even if there is trend, there will be reasonable pullbacks, my strategy would shine under all these conditions, except aggressive trend with no pullbacks.

Recently I faced this drawdown again and made me think hard and came up with something. I plan to add hedge feature to my EA.
If aggressive trend shift happens, and so happens that I have many floating counter trend positions, after a certain drawdown the hedge will trigger and open positions in direction of new trend.

This reply of yours definitely sparked some ideas in my mind, many thanks for that.
Instead of putting entry trigger a little far away due to trying to get best price possible while risk missing the strong trend / suffer big DD on counter positions, I can just start adding positions in the direction of trend whenever there is any pullback at all, even 5 pips or 10 pips.
Keep the lot size small so that repeated entry will not create too much risk.
SL will not be too tight to avoid triggering it too often.

Oh, you are using an EA. I did not see that. In my EA I have right now built in 6 totally different strategies. A number 7 is on it's way in. I can change strategies just by a tick box. My EA is not running the same pairs and not 24/7. So I often experiense that I was late for a pull back entry. Then I tick the "Easy to get in" box. Now the EA runs 2 strategies at the same time and I get in to the trend.

Yes Hedging is a wonderful SL.

I am working on a new EA which I think works a little like yours. Trading yesterday HI/LO. In case of BO it will trade the trend. In case of reject at the boundary it will trade the range. Not using a fair price priciple though. Price is HI/LO.