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New Strategy Question

  • #1
  • First Post: Aug 17, 2012 4:25pm Aug 17, 2012 4:25pm
Hi,

I have developed a strategy that I've been using live on the 4 hour charts of AUDUSD and EURJPY with good results, but the backtesting doesn't look too good on other pairs...does this mean that the strategy is not likely to be successful in the longterm or would it be safe to just use it on certain pairs?

Thanks,

Shannon
  • #2
  • Aug 18, 2012 2:14am Aug 18, 2012 2:14am
My system/strategy works best on EU and GU but terrible on most other pairs. I make sure my method works by going back 6 months on chart and forward trading it and collecting data. It's hard and time consuming but it works best for me.

Systems like moving average line trading would work on most if not all pairs.
  • #3
  • Aug 18, 2012 3:09am Aug 18, 2012 3:09am
I read on some forex books where they talk about market theory, is that each currency has their own rhythm/flow/cycles/characteristics/personalities and if you pair them up, sometime they can be quite synergistic and their behavior becomes quite unique, that's why some strategies work on some pairs or not at all.
  • #4
  • Aug 18, 2012 3:49am Aug 18, 2012 3:49am
Quoting shannon
Hi,

I have developed a strategy that I've been using live on the 4 hour charts of AUDUSD and EURJPY with good results, but the backtesting doesn't look too good on other pairs...does this mean that the strategy is not likely to be successful in the longterm or would it be safe to just use it on certain pairs?

Thanks,

Shannon
unfortunately the likelihood is high that it won't work in the long-term. You really need maybe around 10 years of data to be able to say anything viable. There are lots of strategies that work for a couple of months to years only to make you lose your account the following years.
  • #5
  • Aug 18, 2012 9:09am Aug 18, 2012 9:09am
Quoting shannon
Hi,

I have developed a strategy that I've been using live on the 4 hour charts of AUDUSD and EURJPY with good results, but the backtesting doesn't look too good on other pairs...does this mean that the strategy is not likely to be successful in the longterm or would it be safe to just use it on certain pairs?

Thanks,

Shannon

You have to understand what is making your system successful with AudUsd and EurJpy.

Currencies are typically cylical and there's usually underlying reasons why a pair behaves the way it does due to interest rates (swap) and other political & economical influences.

When these influences change rates go up or down or political upheaval the pairs behavior can change. Many different ways it can change: volitility goes up or down, pair range trades for longer periods, pair trends for longer periods etc.

With that said there is no reason to believe your system will always work with these pairs. It might work for years or it might quit working next week... you never know.
  • #6
  • Aug 18, 2012 9:47am Aug 18, 2012 9:47am
To see if a strategy would be good in the long term I always test 3 months, 6 months, 1 year and 5 years then you have a much broader scope of the market and multiple market conditions.

I personally have some strategies that work best on certain pairs for example when I am trading yen pairs I have a strategy that only works on those crosses when trying to trade them on the euro pairs the strategy does not perform well.
that being said know your systems strengths and weaknesses and adapt.
  • #7
  • Aug 21, 2012 1:15pm Aug 21, 2012 1:15pm
Thanks everyone for the advice...I've done a bit more backtesting and it doesn't look like it would have performed too well in 2003/4, it wasn't terrible but close to breakeven. I've also started backtesting on higher timeframes, maybe I'll just have to use it carefully. Thanks again.

Shannon
  • #8
  • Last Post: Aug 22, 2012 12:25am Aug 22, 2012 12:25am
Quoting shannon
Thanks everyone for the advice...I've done a bit more backtesting and it doesn't look like it would have performed too well in 2003/4, it wasn't terrible but close to breakeven. I've also started backtesting on higher timeframes, maybe I'll just have to use it carefully. Thanks again.

Shannon
Some of these posts do provide great points and yes, fundamentals and other factors could affect a pair more than other and for what it's worth - higher timeframes should help more.
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