calculations and confirmation

First of all a big compliment for this forum, i am lurking a couple days now and i have read a lot of good topics and reactions !

A small introduction before my questions (as it might be relevant). I am a system programmer with a lot of programming experience and a lot of interest in the currency market. I am developing and testing a lot of trading systems, most of them are based on books i have read. and idea's of other people.

All the testing (backtesting and forward also) is done on my own programs.

I am doing this for 6 months now and it seems that i have a nice system that gives me an average of 14 pips per trade (without commissions, slippage etc).

I have tested this over 10 currency pairs over 3 years. on average i have 30 trades a week. (without piramiding etc, just 1 position per currency pair open).

I am planning to test this via an API in the following month on a couple demo accounts for brokers that allow API access. to see what to expect for slippage etc, the system does not trade news etc active.

Please understand that i am not here to shout how good the system is or how good i am.

OK, here are a few questions i have :

1. If i take for example the EURUSD pair and i substract 2 or 4 pips (roundtrip) per trade, i still have a lot of profit. On average 3 trades a week with 12 pip profit. With a margin of 100:1 it seems that i could make 36% per week for the price/amount of lots i buy.

However if i see all kind of funds and statistics it seams that a lot of funds have a performance of 20% a year or lower.

if i believe the numbers it seams like my calculations must be incorrect, i dont believe i am some sort of genius or that i can outsmart the market, therefore i am really interested in some feedback, is it really true that 20% or more a year is outstanding ? or are my calculation incorrect and for example the EURUSD pair has a (lot) higher spread or more slippage etc.

Another question is what amount moves the market (very rough) I saw some threads about this and googled sometimes, however almost all the answers state that a daily turnover of the forex market is around 3-4 trillion a day. This is offcourse (i think) spreaded over a lot of different currency pairs. So for the eurusd pair does 10Million or 100Million a fair amount to move markets a little ? I do not expect to trade this myself but it was more a question to understand the forex market better.

Thanks a lot for the input !

extra info : this system is not based on double-up or anything like that, its just pure pips !

You mean 14 pips profit per winning position? And what is the winning rate? And average losing position? That's quite important . And yes, 20% a year is a very good performance.

As to your volume question. I guess 10M/100M (unleveraged of course) will have some impact on the quotes for EUR/USD. But it will be rather small and very short-term.

Enivid,

Thank you for youre reply, i meant on average 14 pips, that is including losses.

Later today i will adjust my software to display win/loss ratio and some other factors (like sharp ratio etc).

100:1 does not mean you multiply your profits by 100. It means that your broker is offering you that leverage and it means that he will hold back 1% of your position in margin.

I dont understand,

if i buy a standard lot eurusd, it will cost me $1000 with a 100:1 margin right ? every pip is worh $10 with a standard lot.

That means that every pip is 1% of the margin right ?

so if i sell after 50 pips, i will get back my $1000 + 50*5=500. that is 50% profit.

No, it will require $1477 in margin.

Only for currencies ending in USD when quoted in USD.

No

No (see above)

That value depends greatly on the broker and may vary. But it will be no less than $1,000.

Not true. He stated 100:1 margin. It's just math.

Then it'd better to tell us how many trades are profitable and how many are losing (win/loss ration), then average losing and average winning. It's also useful to know how many trades per time period are made.

Please, show me your math, because I've just opened a 1 standard lot position with 1:100 leverage and it used a little less than $1,300 margin.

You'll have to ask your broker why they don't follow conventional leverage rules. I can't answer for them.

If you buy 1 contract of EURUSD @ 1.4770 you are borrowing enough USD to purchase 100,000 Euros. Obviously that will cost you $147,000 USD. 1% (100:1) of that is $1470.

Enivid,

Thank you for youre interest,

The test covered about 3 years of data , and consists of 10 currency pairs, every pair has only one active position at a time.

the stats are as followed :



total loss : -2509436
average loss : -14.568
losses : 172249
------------------------------------
total profit : 5420298
average profit : 132.079
count profit : 41038

max loss (dd) : -106
max profit : 1000 (system has a take profit of 1000).

I will post other info later. btw, all info above are exclusief spreads/commission and/or slippage.

Oh... Sorry. You are right. For some odd reason I've always thought that I purchase $100,000 worth of euros. We learn as we live, I guess. Still don't understand why some brokers show somewhat random margin for buying 1 standard lot on EUR/USD, although all my accounts have 1:100 margin and are in USD... Thank you, anyway.

You will not average 36% a week. I thought that figure alone would've had you asking questions. Leverage isn't used in that way. Take your 12 pips per trade and divide that by the number of pips you risk per trade. Calculate that as a percentage of your capital. Multiply that by the number of trades you make per week, and that's the weekly return over your sample.


Apples to oranges. Let's see how you do if someone told you to manage 10 billion for investors will little tolerance for risk! Huge funds and institutions have varying aims and disadvantages, so their returns can't be compared to those of a indepedent trader.


Use 1 pip for the spread, and more if you pay commissions.