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Heiken-Ashi System

  • #81
  • Jan 18, 2007 2:10pm Jan 18, 2007 2:10pm
Llambert3,

Good question. The answer lies in the doubling value once you get a significant number of losses, which this system does have (up to 7-9 as mentioned before).

Also, spread is taken into account already so that pip numbers below are net.

Take the following example that you came up with below, and just add a few more losses:

Day 1 +55
Day 2 +55
Day 3 +55
Day 4 +55
Day 5 + 55
Day 6 +55
Day 7 +55
Day 8 +55
Total = +440

Total increase in account is $440.00

Now take the below, and just carry the losses out a few more times:

Day 1 -50
Day 2 -100
Day 3 -200
Day 4 -400
Day 5 -800
Day 6 -1600
Day 7 -3200
Day 8 +7040
Total = +690.00

Total increase in account is $690.00 That is $250.00 more in 8 trading days, or $500.00 more in 16 trading days.

As I mentioned, this system does best when stringing together some losses.

Quoting llambert3
Mike, if you are going for 55 with a s/l of 50 (say with 5 pip spread it equals 55 total), then how can your statement above be true?

Example

Day 1 +55
Day 2 +55
Day 3 +55
Day 4 +55
Day 5 + 55
Total = +275

Day 1 +55
Day 2 -55
Day 3 -110 (2 lots)
Day 4 -220 (4 lots)
Day 5 +440 (8 lots)
Total = +110

Therfore, day 5 is just making day 2 a winner. It would seem best to win everyday.

What am I missing?
  • #82
  • Jan 18, 2007 2:24pm Jan 18, 2007 2:24pm
In your first post you write "double up on every loss, maximum 5 losses". So in that case what do you mean by a maximum of 5 losses? Wouldn't the below scenario be more reasonable? Sorry, not trying to argue, just trying to understand.

Day 1 +55
Day 2 +55
Day 3 +55
Day 4 +55
Day 5 + 55
Day 6 +55
Total = +330

Day 1 -50
Day 2 -100 (2 lots)
Day 3 -200 (4 lots)
Day 4 -400 (8 lots)
Day 5 -800 (16 lots - 5th consecutive loss)
Day 6 +1760 (32 lots X 55)
Total = +210
  • #83
  • Jan 18, 2007 2:34pm Jan 18, 2007 2:34pm
Hi Mrmikal,

Please see below:

Quoting mrmikal
MikeJ,

I am trying to understand what's happening here, because the statistics you are providing aren't adding up for me.

In your first post you posted that after 5 months of testing, the system produced the equivalent of 3418 pips. Now, according to your statistics in your 3rd post, you started with $2,500 in equity and ended up with a TOTAL PROFIT of $16,173.40. Your money management rules explicitly say that you're expending 1 MICRO-LOT ($0.10 per pip) for every $3,000...this means that 3418 pips of profit would net you in the neighborhood of $248.83...

What did I miss???
Sorry for the confusion, the fault is mine. The reason this seems difficult has to do with the 2 different software I am using. The first is excel, the second is Market System Analyzer. They do not work well together, and so I have to "trick" excel into coming up with the correct dollar figures, because it cannot adjust pip values but rather only count number of pips.

Quoting mrmikal
Secondly, I couldn't quite follow how the trades are placed...

Do you open and close trades every day? There was a post that mentioned that at 6:55pm est, if the trade has not hit the TP or the SL, you close? This implies that you are not realizing the full TP or SL...if this is the case, do you consider trades that do not close by TP as losses as well?

The reason I ask is because if you are closing trades your "doubling" method may be skewed:
Yes, trades are opened and closed (either automatically by hitting stop loss or profit target, or manually if neither was hit). Yes, if the trade has not hit the TP or SL I close it manually. Yes, that is correct, if it did not hit the take profit or the stop loss (very rare occasions) then the doubling method for that day is "skewed." It cannot be any other way, because there are days when we do not get 55 pips of profit or 50 pips of stop loss.

Quoting mrmikal
Day 1: closed for -30 pips
Day 2: double up and close for +1 pips - it's still profitable BUT you haven't broken even...you have a net loss of -28 pips (-30 + 2).
If I have several losses, and the next profit does not overcome the previous string of losses, I will leave the "doubling" at the present value. Such as this:

1 -50
2 -100
3 -200
4 (+30) 240

Since trade 4 was a win, but it was not big enough (30 pips X 8 = 240) to cover the previous string of losses, I keep the pip value or lot size the same on the next trade. Like this:

5 (+55) 440

then go back to 1 at that point.

I hope this makes sense. If you think about it, what I am doing is simply ensuring that the wins more than equal the losses. So if I get a string of losses, followed by a win that is not the full 55, then I simply leave my lot size the same for the next trade. If the next trade happens to be a loss, then I will resume normal doubling at that point.

Please let me know if this is not clear and I will try to explain further.

Quoting mrmikal
I would definitely appreciate an explanation so I can backtest this accurately using a second source as well as fulfilling an understanding of how you reached your statistics.

Thanks.
Again, the statistics that I have posted are probably not very helpful, being that I had to combine excel, which I use for counting number of pips, with Market System Analyzer, which I use to give me statistics such as you see posted in number 3. Both software starts with different capital and uses different pip dollar values.

The only reason I posted those stats is simply to show the profitability of my backtesting.

I would suggest gathering stats using different beginning lot sizes (pip values on Oanda). Possibly 1000 units (.10/pip) per $3,000.00 is not enough to begin with. I was merely trying to ensure that the dangerous "doubling" method would not blow out my account. Possibly start with 5000 units or more, checking the drawdown carefully, and see if that may be acceptable.
  • #84
  • Jan 18, 2007 2:37pm Jan 18, 2007 2:37pm
Hi Llambert,

Yes, in the process of backtesting further (after my initial post), I ran into a month where I had 9 losses in a row, so I adjusted the rules to say "9 losses in a row". I just cannot figure out how to edit my first post or I would do so. I did edit it over at TSD but can't find an edit button here. Thank you for the correction.

Quoting llambert3
In your first post you write "double up on every loss, maximum 5 losses". So in that case what do you mean by a maximum of 5 losses? Wouldn't the below scenario be more reasonable? Sorry, not trying to argue, just trying to understand.

Day 1 +55
Day 2 +55
Day 3 +55
Day 4 +55
Day 5 + 55
Day 6 +55
Total = +330

Day 1 -50
Day 2 -100 (2 lots)
Day 3 -200 (4 lots)
Day 4 -400 (8 lots)
Day 5 -800 (16 lots - 5th consecutive loss)
Day 6 +1760 (32 lots X 55)
Total = +210
  • #85
  • Jan 18, 2007 2:39pm Jan 18, 2007 2:39pm
nevermind this original post...thanks Mike
  • #86
  • Jan 18, 2007 2:41pm Jan 18, 2007 2:41pm
The EDIT button is on the lower right hand corner of all your posts...right next to the "QUOTE" button (to the left of the QUOTE button).

Quoting mikejody
I did edit it over at TSD but can't find an edit button here.
  • #87
  • Jan 18, 2007 2:43pm Jan 18, 2007 2:43pm
Quoting mrmikal
LL,

you bring up a good point...even so, I still don't understand how we're guaranteed to hit either the TP or the SL...and if so, what really occurs. While I suppose the probability is that the TP or the SL will be hit, in the case of:

Day 1: -50
Day 2: +2 (price doesn't hit SL or TP but is profitable)

On day 3, do we double down? go back to 1 micro lot? or what?

Help, please.
Mike mentioned before that if the target wasn't hit he kept the same lots on next trade.

Mike - I wish it only had 5 in a row though. I can't see going 9 deep on a double-up. That would be tough. What date range did the 9 occur?
  • #88
  • Jan 18, 2007 2:49pm Jan 18, 2007 2:49pm
LL,

I edited my original post, I posted the response to yours at the same time (a few seconds after, actually) MikeJ posted his stuff...I read it and came to the same conclusion.

Quoting llambert3
Mike mentioned before that if the target wasn't hit he kept the same lots on next trade.

Mike - I wish it only had 5 in a row though. I can't see going 9 deep on a double-up. That would be tough. What date range did the 9 occur?
  • #89
  • Jan 18, 2007 3:03pm Jan 18, 2007 3:03pm
Quoting mrmikal
The EDIT button is on the lower right hand corner of all your posts...right next to the "QUOTE" button (to the left of the QUOTE button).
Thank you. I do see the edit button on most all the posts, but it is not there on the original post. Possibly there is a time limit we are allowed to edit posts?
  • #90
  • Jan 18, 2007 3:17pm Jan 18, 2007 3:17pm
Today was profitable, also. Third day in a row now.
  • #91
  • Jan 18, 2007 3:19pm Jan 18, 2007 3:19pm
Quoting llambert3
Mike mentioned before that if the target wasn't hit he kept the same lots on next trade.

Mike - I wish it only had 5 in a row though. I can't see going 9 deep on a double-up. That would be tough. What date range did the 9 occur?
Hi Llambert3,

I cannot remember the date, I'm sorry. And I am doing so much backtesting that it is hard to even remember which month. Most months have a maximum of 4-5 losses in a row, occasionally there is a 6-7 month, but rarely.

As I mentioned, this is the drawback of this system, but what I care about right now is that it is a profitably system that even I can trade.
  • #92
  • Jan 18, 2007 4:07pm Jan 18, 2007 4:07pm
Quoting mikejody
Hi Llambert3,

I cannot remember the date, I'm sorry. And I am doing so much backtesting that it is hard to even remember which month. Most months have a maximum of 4-5 losses in a row, occasionally there is a 6-7 month, but rarely.

As I mentioned, this is the drawback of this system, but what I care about right now is that it is a profitably system that even I can trade.
ok, i guess on a super-mini it wouldn't be that bad. Have you tried the ea? The strategy tester is not showing it working right for some reason.
  • #93
  • Jan 18, 2007 5:01pm Jan 18, 2007 5:01pm
Quoting llambert3
ok, i guess on a super-mini it wouldn't be that bad. Have you tried the ea? The strategy tester is not showing it working right for some reason.
No, I have not tried the EA; the only way I gain confidence in a system is through manual backtesting and demo trading.
  • #94
  • Edited 7:12pm Jan 18, 2007 6:29pm | Edited 7:12pm
I have come across a trading software called . I knew nothing about trading currencies before finding out about this software and now make more money than I could imagine and I don't need to read charts, sit at my computer for more than 5 minutes a day to check the market or worry which way the market moves. I know this sounds too good to be true, that's why I tested it on a demo (well a few different demos actually) for 3 months before going live a month ago. I have made 33% this month on my live account which is in line with how my demos have been going. The beauty of this system is the compounding effect. I started a demo with 15K at the start of Dec and it is now at 29K. My live account has a lot more than 15K so you do the math! I TOTALLY recommend this software, I want to share this as many people as I can because I not only believe in it but I know it works. If you would like more info on this product go {link removed}Or e-mail me on
Or write back to me here. If you would like me to show you my history let me know as I would be more than happy to. You can try the software FREE for as long as you like. Nothing to lose .........
Sean
  • #95
  • Jan 18, 2007 7:50pm Jan 18, 2007 7:50pm
Hi Seanb007,

Most of us are pretty familiar with Freedom Rocks, and this particular thread is only discussing the Heiken-Ashi method, and not a good place to look for people to join your network marketing organization.

A good place to post things like this is in the "classified" section.

Quoting Seanb007
I have come across a trading software called . I knew nothing about trading currencies before finding out about this software and now make more money than I could imagine and I don't need to read charts, sit at my computer for more than 5 minutes a day to check the market or worry which way the market moves. I know this sounds too good to be true, that's why I tested it on a demo (well a few different demos actually) for 3 months before going live a month ago. I have made 33% this month on my live account which is in line with how my demos have been going. The beauty of this system is the compounding effect. I started a demo with 15K at the start of Dec and it is now at 29K. My live account has a lot more than 15K so you do the math! I TOTALLY recommend this software, I want to share this as many people as I can because I not only believe in it but I know it works. If you would like more info on this product go {link removed}Or e-mail me on
Or write back to me here. If you would like me to show you my history let me know as I would be more than happy to. You can try the software FREE for as long as you like. Nothing to lose .........
Sean
  • #96
  • Jan 19, 2007 7:04am Jan 19, 2007 7:04am
Mike/All,

I'm not keen on having to double up so many times to ensure a winning trades - 6 or 7 times is way too much risk in my opinion and using a martingale approach you will *always* wipeout at some point.

Are there any other simple indicators which could compliment the Heiken-Ashi candles?

I was thinking of the addition of Parabolic SAR, and changing the direction of the trade on the first change of either the Prabolic SAR or H-A candle colours

Cheers
Jason
  • #97
  • Jan 19, 2007 7:54am Jan 19, 2007 7:54am
I like the ideas in this thread.

Nice one Mikejody and all contributors.

I think it will work well if a Trailing Stop Loss is engaged to harvest more pips !

Sorry if this has been suggested for the EA - just skimming over the info here. I am not a programmer but just testing manually.

Time to forward test.

Thanks again,

GGR
  • #98
  • Jan 19, 2007 10:49am Jan 19, 2007 10:49am
Mike,

I've been doing some thinking on this, and it would seem MOST systems would probably benefit from the double-down method as described. I think there are 2 reasons why you're doing well here. First of all, your system is based on trend following principals. Secondly, the doubling method overcomes any loss. I would venture to say that any trend following system that has at least a 1:1 RR ratio and a modest (40-60% or higher) win ratio will profit from a martingale bet placement strategy.

This isn't a bad thing by any stretch of the imagination...but as you noted, your consecutive loss probability has maxed out at 9 so far and there occurs, monthly, consecutive losses in excess of 5.

Here's some math for you:

To be able to withstand 10 consecutive losses, you need $5,115 trading micro-lots. HOWEVER, your margin requirement after the 9th consecutive loss is $9,830.40 (you have to buy 512 micro-lots). This means that your total investment necessary is $14,945.4.

Now, in a perfect world, you would average $5.50 a day using your system (that is you would win 100% of the time or end up averaging)...my guess is that your system will probably end up with less than that average, but let's say that's what you end up with...at the end of the year, you've managed $2,007.50 in profit. That's a 13.4% ROI...which isn't horrible if you're in the stock market.

If you start with $3,000 you could withstand a MAXIMUM of 7 consecutive losses...you wouldn't be able to trade after the 7th loss.

If you start with $4,000 you could withstand a MAXIMUM of 8 consecutive losses...

If you start with $8,000 you could withstand a MAXIMUM of 9 consecutive losses...

So, obviously, your ROI goes up to 25% IF you never ever ever hit 9 consecutive losses. It goes up to 50% if you never hit 8 losses and If you never hit 7 losses you get a pretty good ROI at 66%.

The issue is, for that type of return, you would need to averge the highest successful return rate. Basically, you'd be betting on probabilities of the success of the system at this point.

I don't mean to be a stick in the mud here, but I really do think you may have to work out better filters in order to make this system the best possible system it can be. Perhaps you can do a triple-screen method (look at the weekly, if the weekly candle trend is up, and the previous daily is up, you look for a pull-back in the hourly and then enter when it switches from red to blue??)...or perhaps using your double down strategy and riding out each trend? Or adding RSI parameters...I don't know...but basically, you need one of 2 things...a higher RR or higher win% to reduce the number of consecutive losses.

I think you may be on to something...I just think the ROI won't be as high if you always have to have money waiting in the wing in case of getting that horrible streak.
  • #99
  • Jan 19, 2007 9:01pm Jan 19, 2007 9:01pm
Quoting aeu97137
Mike/All,

I'm not keen on having to double up so many times to ensure a winning trades - 6 or 7 times is way too much risk in my opinion and using a martingale approach you will *always* wipeout at some point.

Are there any other simple indicators which could compliment the Heiken-Ashi candles?

I was thinking of the addition of Parabolic SAR, and changing the direction of the trade on the first change of either the Prabolic SAR or H-A candle colours

Cheers
Jason
Hi Jason,

I appreciate your thoughts, as I said before. However, consider that casinos place a "maximum bet" at their tables. Do you know why they do this? It is because they know the "secret weapon" that would allow traders to win, all the time, and that is the "doubling up" option.

Here is some interesting reading on the subject:

"The basis for the Binary Equation Strategy comes from the work of Jean le Rond d'Alembert. d'Alembert was a French mathematician and physicist who lived during the 18th century. D’Alembert made great strides in mathematics and physics, and is famously known for arguing that the probability of a coin landing on heads increased for every time that it came up tails. Other mathematicians provided proofs that his theory was inaccurate, but d’Alembert began a controversy on this issue that continues to present time.

The practical extensions of his work eventually resulted in a gambling strategy of tracking your losses and increasing your bet when a winning streak begins. Not surprisingly, various renditions of this strategy are called “D'Alembert systems”, and are sold to gamblers for thousands of dollars.

Now pay very close attention to the next sentence. The casinos are so certain that their “house advantage” (odds at +50% in their favor) can be overcome by a strategy that increases the bet amount at strategic points, that they eliminate that strategy by establishing limits on each bet. That fact is a bright beacon to illuminate the way to turn “bad odds” (less than 50%) into consistent profits!

The Binary Equation Strategy is not faced with the problems of “table limits” such as people face in a casino. Of course, we still have the limits of how much cash we have to invest, but as long as we start our trading series with a small enough amount (in relation to our total account) we don’t face any practical limit to the size of our future trades that would keep us from being able to successfully conclude a series of trades with a profit."
  • #100
  • Jan 19, 2007 9:28pm Jan 19, 2007 9:28pm
MrMikal,

This is an excellent post and very helpful. You're not a "stick in the mud" at all, but rather have presented some thoughts below that are important. I am in the process of "tweaking" this system so as to eliminate some risk, and will present my findings once I have studied thoroughly.

Thank you again for this post!

Quoting mrmikal
Mike,

I've been doing some thinking on this, and it would seem MOST systems would probably benefit from the double-down method as described. I think there are 2 reasons why you're doing well here. First of all, your system is based on trend following principals. Secondly, the doubling method overcomes any loss. I would venture to say that any trend following system that has at least a 1:1 RR ratio and a modest (40-60% or higher) win ratio will profit from a martingale bet placement strategy.

This isn't a bad thing by any stretch of the imagination...but as you noted, your consecutive loss probability has maxed out at 9 so far and there occurs, monthly, consecutive losses in excess of 5.

Here's some math for you:

To be able to withstand 10 consecutive losses, you need $5,115 trading micro-lots. HOWEVER, your margin requirement after the 9th consecutive loss is $9,830.40 (you have to buy 512 micro-lots). This means that your total investment necessary is $14,945.4.

Now, in a perfect world, you would average $5.50 a day using your system (that is you would win 100% of the time or end up averaging)...my guess is that your system will probably end up with less than that average, but let's say that's what you end up with...at the end of the year, you've managed $2,007.50 in profit. That's a 13.4% ROI...which isn't horrible if you're in the stock market.

If you start with $3,000 you could withstand a MAXIMUM of 7 consecutive losses...you wouldn't be able to trade after the 7th loss.

If you start with $4,000 you could withstand a MAXIMUM of 8 consecutive losses...

If you start with $8,000 you could withstand a MAXIMUM of 9 consecutive losses...

So, obviously, your ROI goes up to 25% IF you never ever ever hit 9 consecutive losses. It goes up to 50% if you never hit 8 losses and If you never hit 7 losses you get a pretty good ROI at 66%.

The issue is, for that type of return, you would need to averge the highest successful return rate. Basically, you'd be betting on probabilities of the success of the system at this point.

I don't mean to be a stick in the mud here, but I really do think you may have to work out better filters in order to make this system the best possible system it can be. Perhaps you can do a triple-screen method (look at the weekly, if the weekly candle trend is up, and the previous daily is up, you look for a pull-back in the hourly and then enter when it switches from red to blue??)...or perhaps using your double down strategy and riding out each trend? Or adding RSI parameters...I don't know...but basically, you need one of 2 things...a higher RR or higher win% to reduce the number of consecutive losses.

I think you may be on to something...I just think the ROI won't be as high if you always have to have money waiting in the wing in case of getting that horrible streak.
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