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Super Carry Trade Trading System

  • #521
  • Jul 17, 2008 12:11pm Jul 17, 2008 12:11pm
I have been noting your tweaks to dream liners strategy and believe there is a lot of logic behind them. The move from 10 to 15 pips TP will cut down on the cost of doing business/spread and the reduction of NAV percentage after a large fall is also very conservative.

I do have a question however. If you open a new market order every day that the average price of the position exceeds the ATR(10), do you build a totally new Limit Ladder also?

Hypothetically you could have a position down say 200 pips and enter a market order today with your 15 pip TP and a 100 pip Limit Ladder at 15 pip intervals. The market goes up, take out your original market order for a 15 pip profit and then drops back down to its original position (negative more than ATR). On the next day would you enter a new market order and a new Limit Ladder? Would that not give you two Limit Ladders at the same level so that instead of one position getting hit/opened, you would have two or perhaps even more if the trading pair had been in a tight range (such as the AUD/EUR).

I have been using the original strategy since march 08 with real money results of about 7% per month with a maximum drawdown so far of 20%, but of course I am always looking for a better mouse (or in this case PIP) trap.

Thanks for your input.

DrZ
  • #522
  • Jul 17, 2008 12:26pm Jul 17, 2008 12:26pm
This is the very issue I am correcting in this system, Dr. Z. I just sent you a PM about it. Nearly finished with it now.

Quoting kvzambo
I have been noting your tweaks to dream liners strategy and believe there is a lot of logic behind them. The move from 10 to 15 pips TP will cut down on the cost of doing business/spread and the reduction of NAV percentage after a large fall is also very conservative.

I do have a question however. If you open a new market order every day that the average price of the position exceeds the ATR(10), do you build a totally new Limit Ladder also?

Hypothetically you could have a position down say 200 pips and enter a market order today with your 15 pip TP and a 100 pip Limit Ladder at 15 pip intervals. The market goes up, take out your original market order for a 15 pip profit and then drops back down to its original position (negative more than ATR). On the next day would you enter a new market order and a new Limit Ladder? Would that not give you two Limit Ladders at the same level so that instead of one position getting hit/opened, you would have two or perhaps even more if the trading pair had been in a tight range (such as the AUD/EUR).

I have been using the original strategy since march 08 with real money results of about 7% per month with a maximum drawdown so far of 20%, but of course I am always looking for a better mouse (or in this case PIP) trap.

Thanks for your input.

DrZ
  • #523
  • Jul 17, 2008 1:39pm Jul 17, 2008 1:39pm
Quoting kvzambo
I have been noting your tweaks to dream liners strategy and believe there is a lot of logic behind them. The move from 10 to 15 pips TP will cut down on the cost of doing business/spread and the reduction of NAV percentage after a large fall is also very conservative.

I do have a question however. If you open a new market order every day that the average price of the position exceeds the ATR(10), do you build a totally new Limit Ladder also? Yes and remove old ladder.

Hypothetically you could have a position down say 200 pips and enter a market order today with your 15 pip TP and a 100 pip Limit Ladder at 15 pip intervals. The market goes up, take out your original market order for a 15 pip profit and then drops back down to its original position (negative more than ATR). On the next day would you enter a new market order and a new Limit Ladder? I am able to monitor my position hourly and I tell you I will reopen new position on same day if market order PT is hit and , price drops back down and next buy limit wasn't hit. Still only one new position. Would that not give you two Limit Ladders at the same level I cancel old limit ladder and make new one to match new positions always. so that instead of one position getting hit/opened, you would have two or perhaps even more if the trading pair had been in a tight range (such as the AUD/EUR).

I have been using the original strategy since march 08 with real money results of about 7% per month with a maximum drawdown so far of 20%, but of course I am always looking for a better mouse (or in this case PIP) trap.

Thanks for your input.

DrZ

Hope that is helpful
  • #524
  • Jul 17, 2008 1:59pm Jul 17, 2008 1:59pm
How often do you close out your dangler positions (i.e. once a week, once a month, etc.)?

thanks,

Walt
  • #525
  • Jul 18, 2008 7:59am Jul 18, 2008 7:59am
Hi all,

I've been testing & refining this system since the begining of this thread.
I've changed the method here & there to suit my patience threshhold.

For last 30 day or so, been using the same rules un altered.
I skipped the danglers part for simplicity.
Have ignored, for now, the swap rates.

Sized positions per ATR relationship.
Next step is to re-size according to ATR relationships as well as growth factor.

Been doing both long and short sides of same pairs, to get close look at money management aspects and position size factor.

Looking at 6 different pairs.

On the long side I've got:

30+% net profit
34% Draw down
-14% open trade position P/L

On the short:

19% net profit
45% DD
-36% Open trade P&L

It looks like this has potential for 6% (avg) equity growth per week, or 25%+/- per month....on both sides long & short.
Account is only 1-3 positions (ATR dependent) per $10,000 acct. balance.
6 pairs.

I'm really encouraged by this method.
In closing, through all my previous testing & rules changes, I couldn't get it to lose money....provided the rules were followed never fail & pay no attention to the draw-down, becauyse it's only temporary.

Great method, Dreamliner.
Thanks.

Peter O.
  • #526
  • Jul 18, 2008 9:33am Jul 18, 2008 9:33am
Hi Peter O,

Why do you think that the Drawdowns are temporary? For individuals, trading this method since last year, it's very likely that the 251.35 long entry may never recover...

Walt
  • #527
  • Jul 19, 2008 8:44am Jul 19, 2008 8:44am
Ok I am having a hard time figuring out the lot sizes. I know that Dreamliner stated .5% of net available balance and that Oanda does this for you but I'm using mt4 so I am figuring this out manually.

So according to my calculator:

$1000.00 net * .5% = 5

so (using a 800 pip drawdown for looking at figures)

5 mini lots * 800 pip drawdown = no more account
a lot size of .50 * 800 pip drawdown = $400
lot size .05 * 800 pip drawdown = $40

So my question is which one is the correct lot size per the original rules? I'm guessing the second one with the .5 lot size but not sure.
Shootist - Have Pip Shooters Will Travel
  • #528
  • Jul 19, 2008 12:45pm Jul 19, 2008 12:45pm
Shootish,

If i'm not mistaken, 0.5% of net avail balance means that if you have a $1000 account, use $5 for each trade (i.e. $5 as margin requirements). Assuming 100:1 margin, you can only buy $500 worth of currency, which is only half of a microlot.

The other way to mitigate huge drawdowns due to carry trades unwinding, is to add to positions only when a certain criteria is hit, such as minimum 1 or 1.5 ATR down from the current average entry.

The beauty of this method is that one need not monitor charts or price movement all day. Have just started trading using this method, the results of others so far are quite encouraging.

There is a possibility of using ideas from another carry trade concept.
http://www.forexfactory.com/showthread.php?t=67211

Quoting Shootist
Ok I am having a hard time figuring out the lot sizes. I know that Dreamliner stated .5% of net available balance and that Oanda does this for you but I'm using mt4 so I am figuring this out manually.

So according to my calculator:

$1000.00 net * .5% = 5

so (using a 800 pip drawdown for looking at figures)

5 mini lots * 800 pip drawdown = no more account
a lot size of .50 * 800 pip drawdown = $400
lot size .05 * 800 pip drawdown = $40

So my question is which one is the correct lot size per the original rules? I'm guessing the second one with the .5 lot size but not sure.
  • #529
  • Jul 19, 2008 6:08pm Jul 19, 2008 6:08pm
In interest payments it wont matter will it?
I can easily make 30% interest a month on GJ with my eyes closed. That is 360% per year.

And we will see 250 before se see 180. And that is where I am betting my money. 214.50/60 next, then kiss her good bye for another few hundred pips.

positive swap Drawdowns are like money in the bank. She is obligated to come back to 251.

Quoting jones247
Hi Peter O,

Why do you think that the Drawdowns are temporary? For individuals, trading this method since last year, it's very likely that the 251.35 long entry may never recover...

Walt
  • #530
  • Jul 20, 2008 8:43am Jul 20, 2008 8:43am
Hi Jones 247,

Yes, your point is accurate.
But the object in averaging down here is that you buy into a deficit position to minimize the potential loss.

Say you get in at 251.35 & then the pair tanks -200 pips to 249.35.
Yikes! So, now you buy in a position to average the deficit.

Now you stand at:

#1: -200
#2: +/- 0

Average position now is only -100 (effectively 250.35), so yo don't need to get back to 251.35 to BEP, but only 250.35

Further, next day, say the position recovers to 250.00 from the last of 249.35.
Now you are looking at average position of -35

And, say next day, it gets up to 250.70. You're still 65 short pips from that original 251.35.....BUT
Thanks to your averaging, you position is really + 35. And that's X2 for 70 pips profit. So you dump both those & start again.

As far as drawdown...maybe better defined as a fluctuating constant. It's always there, but never a factor till you close out everythin, because you never close out a loss, or if you run out of account baqlance. See RRAM2's
# 531 post above....said as well as any.

I hope this helps you. I see through the thread that you are really trying to get your arms around this thing. Keep at it. There's plenty of friendly helpful folks here to assist. Just ask.

Good luck

Peter O
  • #531
  • Jul 20, 2008 12:31pm Jul 20, 2008 12:31pm
Quoting Shootist
Ok I am having a hard time figuring out the lot sizes. I know that Dreamliner stated .5% of net available balance and that Oanda does this for you but I'm using mt4 so I am figuring this out manually.

So according to my calculator:

$1000.00 net * .5% = 5

so (using a 800 pip drawdown for looking at figures)

5 mini lots * 800 pip drawdown = no more account
a lot size of .50 * 800 pip drawdown = $400
lot size .05 * 800 pip drawdown = $40

So my question is which one is the correct lot size per the original rules? I'm guessing the second one with the .5 lot size but not sure.

Why don't you open FXGAME account with oanda and figure out lot sizes from that. The .5% is .5% of available MARGIN. for oanda this is variable, but I use 50 to 1 margin. Also, it's the us dollar exposure which changes depending on the pair. I don't have any desire to try to explain this. You can get free demo with FX trade and figure it out yourself. I have oanda account.

GL
  • #532
  • Jul 20, 2008 12:35pm Jul 20, 2008 12:35pm
Quoting rrram2
In interest payments it wont matter will it?
I can easily make 30% interest a month on GJ with my eyes closed. That is 360% per year.

And we will see 250 before se see 180. And that is where I am betting my money. 214.50/60 next, then kiss her good bye for another few hundred pips.

positive swap Drawdowns are like money in the bank. She is obligated to come back to 251.
You operate with that kind of leverage and you deserve to have your account wiped out
  • #533
  • Jul 20, 2008 12:39pm Jul 20, 2008 12:39pm
Quoting ftraderx
Further, when my total exposure equals account balance, I open buy down only when price is 2 x ATR (10) below average price. When total exposure is 2 x my capital, I go to 4 X ATR(10) and I start taking losses from the top positions. This means I open a buy down position and close my very first position only at a loss. (This is greatly reducing my total risk and the loss is small because of previous interest and PT target profits. If my situation of losses taken plus current open position losses exceeds 25% of my total capital, I will close everything and start over.
Ftraderx,

Along with your newest tweaks (3 currency pairs, 0.5% / 0.25% position sizing), are you still planning on using the 2 and 4 x ATR factors, taking losses off the top, and 25% closeout techniques in your method during unwinds?

Thanks for sharing,

Glen
  • #534
  • Edited 2:37am Jul 21, 2008 2:27am | Edited 2:37am
I did up a simple EA based on what I understand of Dreamliner's rules in his first post.

I ran a back test of 2 months and the results were encouragin (approx. 13% per month) but i must say the green equity line is rather scary.

I don't think too much of it cos my modelling quality sucks...I can't seem to setup a MT4 client to do proper backtesting. if anyone can help me or point me in the right direction, I'll be eternally grateful.

I'm now forward testing the EA to work out any bugs and how it'll perform under IBFX's brokerage.

the attachment is what i have so far and the backtest graphical results as stated earlier.

here are the inputs explanation

extern int EA_MAGIC_NUM = 511112;
extern int StartHour = 19;
extern int LadderHeight = 400;
extern int CarryBuffer = 200;
extern double Slippage = 3.0;
extern int TakeProfit = 10;
extern int StopLoss = 0;
extern bool MoneyManagement = true;
extern double RiskPercent = 0.5;
extern double Lots = 0.1;
extern double MaxLots = 15.0;
extern double MinLots = 0.01;

StartHour is the hour the EA should start the ball rolling and/or check if the current price is above or below the Current Average position. I'm using GMT. you should change to whichever hour you want. but according to Dreamliner's first post, it doesn't matter when you start, as long as you keep to a 24hr cycle. and this hour is the only time the EA will do any work at all. The rest is up to the currently opened orders and price action to do the job.

LadderHeight is how high you want the pending orders to go.

CarryBuffer is the level at which you'll start a new ladder when the current price falls below the current Average by that amt of pips.

TakeProfit only applies to the pending orders as the position at the bottom of any ladder will have no TP and SL at all.

MoneyManagement if set to True will use "RiskPercent" of your Account Equity to calculate what position size to open for the orders. if you set it to False, it will use Fixed lots instead as defined in "Lots".

Try it on Demo first as I've yet to sort our runtime bugs if any. any suggestions and feedback are welcome.

regards,
Zen

p.s., the drop at the end of the graph is due to the strategy tester closing off all opened positions at the end of the test so they're not to be taken into consideration as far as the system is concerned.
Attached Image (click to enlarge)
Click to Enlarge Name: SuperCarryTradeGraph.jpg Size: 54 KB
Attached File(s)
File Type: ex4 Super_Carry_Trade_ver1.ex4   14 KB | 486 downloads
File Type: mq4 Super_Carry_Trade_ver1.mq4   11 KB | 646 downloads
Programming for a better future.
  • #535
  • Jul 21, 2008 4:04am Jul 21, 2008 4:04am
Quoting gnllr
Ftraderx,

Along with your newest tweaks (3 currency pairs, 0.5% / 0.25% position sizing), are you still planning on using the 2 and 4 x ATR factors, taking losses off the top, and 25% closeout techniques in your method during unwinds?

Thanks for sharing,

Glen

Yes. In fact I did so in June when NZD/USD dropped from above .7900 all the way down below around .7400. I am also evaluating a kind of matrix where I would buy down at increasingly larger gaps down based on price falling by 3 or 4 atr rather than just price being X atr below average price. The matrix kicks in when there is no doubt a serious unwind is occuring and price is not fluctuating in a reasonably predictable range. I have also realized that in the event of big unwind, my currency pairs are all gonna drop even though NZD/USD and USD/JPY should and currently do, move in opposite directions.

I am trading now as I first described, but I am working on ways to reduce the risk without completely killing profits.
  • #536
  • Jul 21, 2008 4:14pm Jul 21, 2008 4:14pm
@ Zen;

Here is an article on how to get 90% modelling quality. You can find historical data from this link.

TimeFreedom

Quoting Zen_Leow

I don't think too much of it cos my modelling quality sucks...I can't seem to setup a MT4 client to do proper backtesting. if anyone can help me or point me in the right direction, I'll be eternally grateful.
Attached File(s)
File Type: pdf Modelling Quality.pdf   331 KB | 794 downloads
  • #537
  • Jul 23, 2008 6:35am Jul 23, 2008 6:35am
Hi Dreamliner
Have you corrected the drawdown issue in your system ?
  • #538
  • Jul 23, 2008 7:56am Jul 23, 2008 7:56am
Made some amendments to the ordering logic.

ver1 close off primary ladder and opens a new one prematurely.
rectified in version 2.

version 2 also contains one more input. "CustomSpread". This is actually the additional spacing between the buy stop orders. so the space between each order is TakeProfit + Spread. It does cut down on danglers but you'll get less trades as well. if you don't need this additional spacing, just set it to 0.
Attached File(s)
File Type: ex4 Super_Carry_Trade_ver2.ex4   15 KB | 626 downloads
File Type: mq4 Super_Carry_Trade_ver2.mq4   12 KB | 1,139 downloads
Programming for a better future.
  • #539
  • Jul 23, 2008 10:33am Jul 23, 2008 10:33am
Hey Zen, great work on the EA! The ver 1 has made over 10 percent on my demo, how ever it is refusing to work on IBFX mini accounts, i see no messages such as "Ea is working/Ea is sleeping"

Also the the experts tab says "2008.07.23 19:27:03 Super_Carry_Trade_ver1 GBPJPYm,H1: zero divide"

Is this something to do with ibfx having a 'm' after the trade symbol? Such as GBPJPYm?

Quoting Zen_Leow
Made some amendments to the ordering logic.

ver1 close off primary ladder and opens a new one prematurely.
rectified in version 2.

version 2 also contains one more input. "CustomSpread". This is actually the additional spacing between the buy stop orders. so the space between each order is TakeProfit + Spread. It does cut down on danglers but you'll get less trades as well. if you don't need this additional spacing, just set it to 0.
  • #540
  • Jul 24, 2008 9:55am Jul 24, 2008 9:55am
Quoting bhupinder
Hi Dreamliner
Have you corrected the drawdown issue in your system ?
Every system has drawdowns, but yes I am indeed lessening it.
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