Super Carry Trade Trading System

Quoting Qman

Disliked

The ultimate unwind on these intrest rate extreme pairs is tied exactly to that... the interest rate spread. As long as that is in place I don't think we would see anything dramatic enough to make a complete melt down in our accounts (cross my fingers and pray never to see it...). One should watch the interest rate adjustments between the two (and not necessarily only GJ), and leave when it stops being -- I don't know -- in the top 4? When/if that happens, find whatever is more favorable. Let the interest rates lead you out of the pair and into another. I think if we do that we'll probably be okay. And since those kinds of moves are unlikely to happen literally over night, I think it is pretty safe. But if it happens, a good trader wouldn't be married to the pair just because it has yielded a fortune in the last 2 or 3 or 10 years, ... whatever.

The neatest thing about this method is that it is in keeping with my ideal state. No bias on what the market wants to do. No guessing. Because it really doesn't matter what I think the market SHOULD be doing. The only thing that matters is what is happening. And then just go with it. Don't fight it. The second you say to yourself the market is wrong you just pulled the trigger on the gun you pointed in your mouth. The market is NEVER wrong. It is also NEVER right. It is a market. Lots of influencers, but no single entity controls. And if you doubt it, then remember... The Bank of England vs George Soros. BOE was betting they could control their own currency. Result: Soros meets a billion dollar pay day. He is hardly my hero, but he knew when the other guy got too smart for their own good, and he wasn't afraid to go with the market, even if it put him at odds with the biggest guy on the block. This system helps take the emotion out. Personally, that is exactly what I need.

Ignored

Quoting Qman

Disliked

Hayseed, I trading through IBFX. The spread on GBPJPY is typically 9 pips. This is significantly different from Dreamliner's OANDA spreads. I'm still trying to determine how that factors with the 10 pip TP. I am considering that it might be better in my case to run with the rules originally put forward in the system he derived from. I don't know, maybe I'm overthinking this. I'm not keen about changing brokers, but the 9 pip thing always stinks. I'll have to run some calculations when I can get to it. But I'm wondering, after you get your EA done for Dreamliner's system, would it be much trouble to adjust it to run the rules of the original method? (No multiple TP orders... Close position each day at a specified time if it is in profit... average in if market moves against... stay in until price exceeds average price, then close all). This is certainly not a demand, just a query. Again, I'm just worried that I'll be paying too much initiating all those positions. Thanks for your consideration.

Ignored

Quoting Qman

Disliked

Thanks TimeFreedom, you are right. I originally thought there was a limitation to what time the evaluation is done, but you handle that, and so much more very elegantly. Only one question. In the money management area, you have something called Deta, default value of 1000. What is that for? And thank you very much for the EA.

Oh, just thought of another thing. Original claim was that this was earning about 8 to 10 percent per month. Looks like the backtest result is "only" 33 percent since last January (2007). Am I misreading something?

Ignored

Quoting TimeFreedom

Disliked

Keep in mind that 2007 has been a bad year for carry trading due to the subprime situation and of course the USD is in the dumps. I am amazed at the 33% return in such bad market conditions. You can make 8-10% with this carry strategy, but you will also suffer big DD. Enclosed you will find backtest results using Ryan Jones MM from '97 to '07 for your review.

The EA gives you the option to use Ryan Jones Fixed Ratio MM. You will have to do some homework on his Fixed Ratio MM to get a better understanding. I am enclosing a description of his MM for your review.

Backtesting Period: 01/01/1997-01/01/2007
Begining Balance: $10,000
Net Profit: $135,615.00 (1356.15%) 135%/year
Profit Trades: 78.70%
Absolute Drawdown: $3,387.46 (33.87%)
Maximal Drawdown: $16,107.92 (68.84%)

TimeFreedom

Ignored

Quoting hayseed

Disliked

hey qman.... timefreedom is probably correct about not reinventing the wheel.... it appears they have spent considerable time coding and testing, so any wrinkles would have long been ironed out....

wheels work best with good traction, so no harm in shopping around for some mud grip tires..... for those rainy market days, if ya know what i mean.....

i tend to cut losses quick, so the thought of coding in averaging down never occured to me..... backtests reveal the pro's and con's.....

his ea will also work in the standard fashion, ie no averaging down.... so when used in that manner there is absolutely no chance of runaway drawdowns..... setting a realistic stoploss, profit target and lot size pays very well..... very very well....


no doubt, we owe dreamliner and timefreedom a couple cold ones......

here is an 2006 to date eurusd backtest..... and when you consider it's long trades only with no consideration for trend, it makes me shudder to think of the true potential...... studyin on it now......h

Ignored

Quoting hayseed

Disliked

hey qman.... timefreedom is probably correct about not reinventing the wheel.... it appears they have spent considerable time coding and testing, so any wrinkles would have long been ironed out....

wheels work best with good traction, so no harm in shopping around for some mud grip tires..... for those rainy market days, if ya know what i mean.....

i tend to cut losses quick, so the thought of coding in averaging down never occured to me..... backtests reveal the pro's and con's.....

his ea will also work in the standard fashion, ie no averaging down.... so when used in that manner there is absolutely no chance of runaway drawdowns..... setting a realistic stoploss, profit target and lot size pays very well..... very very well....


no doubt, we owe dreamliner and timefreedom a couple cold ones......

here is an 2006 to date eurusd backtest..... and when you consider it's long trades only with no consideration for trend, it makes me shudder to think of the true potential...... studyin on it now......h

Ignored

Quoting TimeFreedom

Disliked

The EA I posted is coded like the original strat. from Oanda thread. I even coded the average price horizontal line onto the chart. Take a look at the EA when you get a chance. No need to re-invent the wheel.

TimeFreedom

Ignored

Quoting Dreamliner

Disliked

GPB/JPY
Long trades only (interest positive)
Use .05% of your Net Available Balance on each trade (Oanda does this automatically)

Ignored

Quoting Qman

Disliked

Dreamliner's system has one "weakness" relative to the other system. That is, most of the time, if you place your initial trade, and the market moves in your favor -- only to retrace in the same day -- Then you usually end up stranding 2 positions near the top. Part of this is due to the spread, so if you have a smaller spread there is a smaller possiblity of stranding 2. With the original method, there is no way to strand anything more than your initial position on the first declining day. I factored 9 pips spread, because that is what I commonly see on IBFX.

Ignored

Quoting Qman

Disliked

Well I finally found some time to compute some comparisions between the original method and Dreamliner's rendition. It certainly isn't a broad test. I only worked out trades for the last 18 trading days. I don't know about the rest of you, but those have been some pretty challanging days, with some steep drops and steady climbs back up. I also didn't factor the Swap payments, which would be additional, but it looks like long term, it wouldn't matter much. Here is why:

Original method: Net gain - 500 pips, with 2 positions averaged in and currently waiting for a payoff breakout up.

Dreamliner's system: Net gain - 1,330 pips, with 3 positions averaged in and currently waiting for a payoff breakout up.:surprised

The original method would have a bigger payoff in Swap because it tends to have more positions open at one time. I thnik during this period Dreamliner's system had a maximum of 8 averaged positions, but it didn't carry them as long (I'll explain this a bit more in a minute). But the other method carried a maximum of 8 averaged positions, but carried them over 8 days.

Dreamliner's system has one "weakness" relative to the other system. That is, most of the time, if you place your initial trade, and the market moves in your favor -- only to retrace in the same day -- Then you usually end up stranding 2 positions near the top. Part of this is due to the spread, so if you have a smaller spread there is a smaller possiblity of stranding 2. With the original method, there is no way to strand anything more than your initial position on the first declining day. I factored 9 pips spread, because that is what I commonly see on IBFX.

So, I'm not sure what the swap would be, it really depends on your account size etc. But on a pip for pip basis, during this "challanging" trading period, it looks like Dreamliner's system is far superior. The increased winnings more than makes up for halving the percentage at risk from the original (although the original isn't going to park positions right at the top -- so the reduced percentage at risk is justified by the increased risk introduced by this phenomenon).

So, I'm pretty convinced this is worth continuing to look at in detail. Thanks to Dreamliner, TimeFreedom, and Hayseed for the ongoing, very interesting discussions.

Ignored

Quoting billbss

Disliked

Dreamliner,
I don't understand this part of your system.
If there were stop losses set, I would understand it.
I would trade the correct number of lots, so that if my stop got hit, I would lose only .05% of my balance.

What does "use .05% of Net Available Balance" mean?
Use how?
Let's say your NAB was 10,000. -.05% is $50.
Do you mean that we should open a position that requires $50 on margin?
If so, what margin ratio are you basing this on?

Thanks

Ignored

Quoting Dreamliner

Disliked

Hi Bill,

The best way to understand this is to head on over to Oanda, open a demo account, and in the "preferences" select ".05%" as your default trade size.

Ignored