FXCM/DailyFX Signals and Strategies

Continued from previous post http://www.forexfactory.com/showthre...48#post4243148 .....


The result of the optimization (image below) shows that the ideal simulation it found was to set the stop amount at 138 pips and the limit amount at 178 pips which would result in a net profit of about $2046. Not bad when you compare this to the previous backtest with the default settings.

http://img30.imageshack.us/img30/549...4201012290.png

Next, add the new stop and limit into the strategy and run the backtest. Below is an image of the results which we can compare to the previous backtest with the default inputs.

http://img510.imageshack.us/img510/5...1420101234.png

As you can see, the net profit has jumped to $2,046, an increase of nearly 7X previous backtest, while the number of trades placed is a little less than double the previous backtest. I hope this example of changing the inputs and optimizing the numbers has shown you how the inputs you select can greatly impact how an indicator performs.

A word of caution!!!!

This is not the key to finding the holy grail of trading!!! This type of backtesting optimization will find the optimal results over the past period selected on your chart. This by no means indicates that future performance will be the same as past performance. It simply indicates the optimal settings over the previous period selected. Additionally as you increase or decrease the amount of data you backtest over, it will also change the backtest results. To give a quick example, I doubled the historical data on the chart, and the results of the backtest for the previously optimized data turned negative!

http://img153.imageshack.us/img153/1...rgerperiod.png

Nonetheless, I hope this gives you some insight into how changing indicator variables will impact the performance of the indicator. There are tools out there to help you such as optimization in Strategy Trader. In the end, backtested results will not mean the same results can be expected in future performance. What I would do is look at what type of market condition my strategy performed well in during the first backtest, then look at what happened in the second back-test. Identify what caused the losing trades and see if you can create some type of filter that negates trading during the periods that tend to cause drawdowns in your strategy.

That was a long post. Thanks for reading!

This could be interesting. Thanks for sharing!

Another interesting setup in EUR/CHF I noticed this morning after reading over the DailyFX Analyst picks. Joel Kruger issued a new pick to " BUY @1.2730 FOR AN OPEN OBJECTIVE; STOP 1.2630. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON WEDNESDAY."

If you pull up a chart of EUR/CHF you'll notice that today it tested the previous record low set back in Sept 2010. Looks like Joel is thinking we could see a reversal at the low, which the market is already trading about 50 pips off of this mornings low. But if you like to buy at major support levels to play reversals, this could be interesting.

http://img836.imageshack.us/img836/6...01092948am.png

DailyFX has released their Top Forex Trading Ideas for 2011. One interesting point is that 6 out of the 7 analysts have a bullish bias for the US Dollar. I'll try to post more about it once I've had the time to fully read through their outlook.

Finally seeing a little excitement with EUR/USD today in breaking through the range support developed during the month of December.

http://img543.imageshack.us/img543/4...1720101057.png

The Breakout1 and Momentum2 strategies have both generated signals to the downside for EUR/USD.

http://img80.imageshack.us/img80/468...2010105856.png

If you look at the weekly SSI graph for EUR/USD you'll notice positioning was net short during the first two weeks of December. During this time, we saw EUR/USD move higher from 1.3000 to 1.3400.

EUR/USD positioning flipped to net long Friday afternoon. SSI is a contrarian indicator so this could signal a further drop in EUR/USD. It's testing the 1.31 level and a move down to 1.3000 would be the next significant support level.

Here's a screenshot of the SSI report released on DailyFX+ earlier this morning:

http://img834.imageshack.us/img834/1...10103938am.png

The Strategy Trader contest ended on Dec. 3, and the winners have been announced. See below for a list of the winners. Each demo in the contest started with a balance of $10,000.

http://img339.imageshack.us/img339/7...derresults.png

The next automated trading contest for Strategy Trader is already being planned and it will have $100,000 in total prizes. Look for more details in January 2011 with the contest to begin as early as February 2011.

hello,am asking if anyone here using fxcm automated trading signals,am using it since 2 weeks and it seems good to me,i wanna know if any body using it ?

Not yet! FXCM is internally testing the automation. So we're waiting patiently. Perhaps they will release the top 3 20k challenge strategy code while we wait. It is Christmas time!

Speaking of that, any plans that you've heard Jason regarding what the company is going to do with the winning code? Sell, give to loyal customers, perhaps only FF FXCM customers with some egg nog???

Here's an interesting setup. USD/CHF has been in a downward channel since the beginning of December. It's now testing support for the 3rd time which also happens to be support from back in November.

http://img146.imageshack.us/img146/5...01090913am.png

Looking at this morning's SSI data on DailyFX+, the majority of traders are also long USD/CHF which plays well to a possible breakout lower in USD/CHF. Here's the SSI figures from DailyFX+:

http://img256.imageshack.us/img256/6...201091516a.png

No plans as of yet, but we should probably know in the new year.


And speaking of the new year, we're getting everything organized for official beta testing of the automated DFX+ trading signals in January. I should have more details the first or second week of January along with an invitation to join the beta testing.

-Jason

Hi Everyone,

I will be away from the forums from Dec 22 through Jan 2, 2011, and I will reply to any questions on Jan 3. Please remember about the changes to FXCM's trading hours for the holidays.

I have also attached the changes to trading hours for the CFD products. And lastly, please remember about any forex rollover changes due to the holidays. The rollover calendar on DailyFX lists the changes to any currency pairs (www.dailyfx.com/fcalendar). If you need help understanding the rollover calendar, please see the guide I posted here http://www.forexfactory.com/showthre...12#post4158412 .

Wishing everyone a happy holiday and a prosperous 2011!!

See you in the new year.

-Jason

first,thnx so much for replying,but i think you get me wrong,am talking about the trading signals(breakout,momentum,range) not the automated one.

Jason,

Have a nice Christmas,

Pipwarrior

Happy New Year! I hope everyone is off to a good start for 2011, and I'm finally back to watching the markets and posting.

AUD/USD
Taking a look at AUD/USD, it reached a record high on Dec. 31, 2010 pushing above 1.0200 but it's now fallen back to 1.0050. There's been a lot of negative news surrounding the Australian economy due to flooding and the NY Times had an article today titled "Floods Take Toll on Australian Economy". It will be important to note the economic implications this has on the Australian Dollar. Here's an excerpt from the article:

Of particular concern is damage to fruit crops and cotton, which supply both the domestic and export market, and Queensland’s production of coking coal, which is used in the production of steel. Queensland produces just under half the world’s supply of the commodity.

Flooded mines and transport disruptions, which have left export stocks dwindling at the port of Gladstone, mean the coal industry could take months to recover, pushing up global prices, the spokeswoman said.
Source: http://www.nytimes.com/2011/01/05/wo...australia.html

What we could be seeing is a buy the rumor sell the news type of play whereby traders are now pricing in the economic downturn due to flooding. So something important to watch if you're trading AUD/USD. Jamie Saettele of DailyFX notes regarding AUD/USD that:

The pair has dropped to short term Elliott channel support, which should hold if the larger bias remains bullish. A daily close below 10030 would signal potential for a top.
http://www.dailyfx.com/technical_ana...ttWave=AUD/USD

If you pull up a 4 hour chart and throw on a fibonacci retracement of the most recent uptrend that started in December, you'll get a better idea of some possible targets to the downside if the sell-off continues:

http://img10.imageshack.us/img10/828...011112935a.png

Gold Discussion

Ilya Spivak of DailyFX mentioned on Monday a possible triple top in gold. Yesterday we saw gold drop through the $1,400 level and continue down to $1,370 today. Ilya is now suggesting a retracement down to $1,326 level which would be the 38.2% fibo retracement level from the July 2010 - December 2010 advanced. Here's a look at the gold chart with the fibonacci drawn on:

http://img709.imageshack.us/img709/9...hart152011.jpg

Here's the technical outlook for gold from Ilya's commodities update yesterday:

Technical Outlook: As we suggested yesterday, a triple top may be taking shape at $1424.60, with confirmation required on a daily close below rising trend line support set from late October (now at $1375.96). This would open the door for continued selling to $1326.50, the 38.2% Fibonacci retracement of the 7/28/10-12/7/10 advance.

Full article can be found here http://www.dailyfx.com/forex/fundame...C_Minutes.html and Ilya writes a daily commodities update on gold, silver, and oil.

Gold trading can be found on accounts with FXCM UK under the symbol XAU/USD. More details found here.

How crazy is this....John Kicklighter just posted this message on twitter about NFP estimates:

Gotta love NFP-fever. Seems there is a lot of chatter about some economists/analysts predicting an increase close to half a million.
Source: http://bit.ly/eJDhfT

An increase of nearly 500,000 jobs would be an incredible figure indeed. DailyFX has the NFP estimate at 140k and Marketwatch increased their compiled estimate to 175k after the ADP release. Should make for an exciting release, but watch out for market volatility if you plan to trade it.

DailyFX will be holding live coverage of the release along with trade analysis starting at 8:15am ET. There is an audio/video component to the trading room and you can also submit questions for the analysts. http://www.dailyfx.com/live_forex_trading_room/

I hope everyone had a great NFP. I would recommend adding this DailyFX article to your weekend reading list: http://www.dailyfx.com/forex/fundame...e_Outlook.html . Looks like next week's ECB and BOE meetings could be big events to watch. Here's excerpts of the ECB and BOE portions of the report:

ECB and BoE Likely to Force Major Moves in Week Ahead
By DailyFX Research Team (Written by: Alex Rodriguez, James Russell, and Christopher Vecchio)

http://img714.imageshack.us/img714/4...etings1720.png


European Central Bank
The European Central Bank left its key short-term interest rate unchanged through its December 2 meeting, forcing little reaction from the Euro as few expect the bank to shift policy through the foreseeable future. Noting that “price developments [are expected] to remain moderate over the policy-relevant medium-term horizon,” the Governing Council found the 1.00 percent interest rateappropriate for the time being. In his remarks, President Trichet asserted that the European Central Bank’s monetary analysis “confirms that inflationary pressures over the medium term remain contained.” Given the non-standard measures enacted over the past year in order to enhance credit support, monetary policy will retain its ability to make acute adjustments at any time if necessary.

The economic recovery continued to find footing in the latter part of 2010, as evidenced by 0.4 percent growth in the third quarter—a marked improvement over GDP growth in the second quarter at a meager 0.1 percent. Given the “recent statistical releases,” President Trichet noted, “the positive underlying momentum of the economic recovery in the Euro area remains in place…this implies ongoing real GDP growth in the fourth quarter of [2010].” Ignoring the underlying economic statistics, the European Central Bank might be forced to alter its monetary policy going forward should problems rooted in the sovereign debt crisis arise. Should additional European countries, such as a Portugal and Spain, require bailout funds, there is some doubt that the European Central Bank could support the burden of another rescue; accordingly, rates could drop in order to facilitate the necessary expansionary credit policies to support such actions. Looking ahead to the next meeting, on January 13, 2011, the European Central Bank is expected to leave the benchmark rate on hold for the 21st consecutive month. Yet markets will pay especially close attention to any news of fresh sovereign debt purchases and the ECB’s efforts in containing the fallout from the ongoing crises.-CV

ECB Statements can be found at: http://www.ecb.int


Bank of England
The Bank of England left its key interest rate unchanged at record-lows of 0.5 percent through its December 9 announcement and left its asset purchases program unchanged £200 billion. The recovery still continues to find footing in Britain, with the annualized third quarter GDP rate at 2.8 percent. The unemployment rate continues to linger just below 8 percent, a good sign considering that the labor market took a beating during the recession. The Bank of England noted that, while currently, such problems have yet to have an effect on the British market, there exists the possibility that “a prolonged period of financial market tensions” spilling over from the Euro-zone might have an effect on British domestic demand. Such distress may have already set itself upon England, as exports decreased in the third quarter to 2.2 percent growth after increasing by 3.1 percent in the second quarter. Similarly, industrial production contracted by 0.2 percent in October after rising by 0.4 percent in September. All in all, the British Trade Balance deficit continued to widen, falling to -£3.946 billion in October from -£3.79 billion in September.

Looking ahead, the main bank rate is likely to be left unchanged at 0.5 percent. Unemployment is expected to persist at 7.7 percent for the first half of 2011, while GDP growth is expected in a band of 2.75 percent to 2.9 percent for the first two quarters. Underlying price pressure is expected to increase as the year progresses, at around 3.35 percent for the first half of 2011. Despite no change forecasted after the January 13, 2011 meeting, with an implied bank rate of 0.85 percent in March 2011, rate hikes could be expected in the near-future if the recovery continues along its current path as the economy continues to heat-up. -CV

The most recent BOE Minutes can be found at: http://www.bankofengland.co.uk/publi...10/mpc1012.pdf

The full report discussing the remaining central banks can be found in its entirety here http://www.dailyfx.com/forex/fundamental/central_bank_watch/2011/01/07/Central_Bank_Interest_Rate_Outlook.html

Hi Jason,

Any news? I can't wait for that invitation....

EUR/USD is testing the 1.2900 level and the majority of traders are long. Here's the latest SSI release from DailyFX earlier this morning.

http://img254.imageshack.us/img254/1...01185911am.png

DailyFX Analyst John Rivera noted that the "Next major support at 1.2800 where we find the 61.8% Fibo of June-November rally. 1.3000 now resistance". Here's a look at the fibo level on EUR/USD chart to see exactly what John is looking at:

http://img38.imageshack.us/img38/333...01185719am.png

This week's trading forecast is looking for more Euro weakness due to fiscal problems becoming a distraction yet again:

Euro Forecast to Fall Further amidst Euro Zone Fiscal Crises
Disappointing sovereign bond auctions and generally disappointing news out of the European Monetary Union forced considerable Euro weakness, and overall momentum favors continued EURUSD declines into the coming week’s trade. Portugal was forced to pay a significant yield premium on a six-month bond auction, and Portugal-Germany yield spreads nearly hit fresh record-highs amidst the ensuing market tensions. The European Commission likewise forced further stresses when they sad that investors may need to shoulder part of the burden in future domestic bailouts. And though their recommendations would take years to implement, the mere suggestion was enough to show that appetite for further bailouts had waned significantly through recent events.

It is increasingly becoming a question of ‘when’—not ‘if’—a country such as Portugal is forced to take financial assistance amidst poor demand for its fresh debt issuance. Just recently the Swiss National Bank announced it was no longer accepting Irish and Portuguese bonds as collateral for lending. If domestic central banks are no longer willing to accept Euro Zone periphery debt, it underlines why private investors may likewise shun risky investments. It will be exceedingly difficult for the Euro to post any sort of significant rally against major counterparts amidst such worries over the solvency of individual member states.

Written by David Rodriguez of DailyFX.com

Source: http://www.dailyfx.com/forex/fundamental/forecast/weekly/eur/2011/01/07/Euro_Forecast_to_Fall_Further_amidst_Euro_Zone_Fiscal_Crises.html