Trend Following end-of-day Channel Breakouts by michal9

what a nice equity spike, as a couple of my trades moved into the money... see my fx book screen
positive 1.89% result on equity, still negative on balance.

almost as if the market gave me the last encouragement to stick to this system... ;-) as today is the day, after trading it live for 3 months, every day, that is time to review and decide what's next.

I have 6 opened trades and all are in the money now. USDMXN, COPPER, AUDNZD, GBPUSD, USDNOK, USDJPY.
Of course, they may all reverse. Anything can happen.

Today's trades review

All are in the money at this time.

GBPUSD.
USDJPY.
AUDNZD.

USDNOK, a very nice turn around after it almost touched my stop. This time I was lucky. Usually I get stopped out by 1 pip.
This time the position was "saved" by 1 pip.

USDMXN showed a nice upmove today.

COPPER trade is also celebrating profits today. Very nice move in favor of my trade.

AUDUSD RRR trade was closed yesterday for a microscopic loss.

USOIL chart showing history to demonstrate severness of the mistake of not re-entering after my broker closed an expired CFD.

(new) EURTRY sell stop on a CB setup.

I cancelled a GBPCAD order, unfilled sell stop, as the ADX turned down.

That's all for today's trade review. It has been quite a day, probably best since I started trading. myfxbook update attached.

I am up 2% on equity. This is also an almost new high on the equity curve. Still negative on balance.
This makes it kind of difficult to assess this period performance... need to think about it... moving on to a journal review over this weekend.

That's it.

Hello M,
I saw your post in the James16 chart thread. I'm not quite sure why you posted it there. James 16 is really all about James 16....Not generating opinions about other methods. Don't get me wrong. I'm not trying to be a smart ass. I think your method is just another indicator based method drowning with the rest of the indicator based methods so prominent at FF. All are doomed to failure. I've been there and tried many. Just look at some of the ridiculous threads I've generated. James 16 is a discretionary method where each trade is evaluated on the merits and not because some indicator says its a good time to go long or short. For me it works and I am profitable. In fact I just started a new journal dedicated to how I trade James 16. I will post all live trades and a trade explorer will be attached. I recommend you dump this thing and move on. Since you sought the opinion of J16 you owe it to yourself to check out J16. It's not what every one says.

Hello Winston,
Thank you for your input. I posted it in j16 excactly to get opinions from more and experienced traders, and I welcome the repiles here.

OK, I got your view as well, I respect it a lot. I believe channel breakouts are primarily price-based and that I added indicator showing trend strength as a filter, does not change it fundamentally, just eliminates some most stupid trades ;-)

Anyway, thanks again, standing by for more inputs as well, and my analysis will follow to decide to move on "to what".

Final conclusions

This is my journal review conclusions.

The performance itself is above, 1% loss on balance, 2% gain on equity, final result will depend on how the open trades will end up.

ADX filter does not appear to provide an edge. Eliminated or delayed some good trades and some bad trades. Moving on I am going to eliminate ADX filter or any indicator except MAs for further trading operations. I am OK to use ATR for stops, potentially, and no other indicators.

Missing just one trade can have a huge impact on lost opportunity. If only traded GBPUSD on September 1st, additional significant profit would be generated. If only my OIL trade CFD did not expire, additional big profit.

Next time before I trade a mechanical system in a mechanical way, I will code it as an EA, for the purpose of testing and trade it only if it is profitable on a larger sample of markets and trades. Larger than I tested with my manual backtests (1.5 years and 5 markets). Some trades look stupid in hindsight. But they were taken following the mechanical rules. It looks like this system did not provide an edge strong enough to offer a good looking equity curve.

Exit rules did not serve me well. Most exits, in hindsight, look stupid. Either I gave back really a lot of profits or exited at the worst place, just before the trend resumed.

Ride the Rejection rule does not appear to be a profitable setup for me, at least during last three month.

Channel breakout trades typically required a very large stop, making the ultimate Reward to Risk ratio also poor, even for profitable trades, combined with exit method that attempted to let the profits run, which means giving back a lot of paper profits.

I need a lower risk way of joining the trend. Places to join with a smaller stop. Not to lose less money (this can be fixed by trading smaller size), but to get a higher R ratio for profitable trades.


Decisions

I stop trading this system. I will manage currently open positions by trailing the stop behind the last swing high or low.

I continue working to become a consistently profitable trader, surely trading end-of-day or H4, likely a trend-following way, to be determined to what extent mechanical vs. discretionary.

I will look for a better discretionary trading approach and I will attempt once again to build a mechanical system, which I will be able to backtest and one that works well on a portfolio of markets. Of course I have no illusions of a holy-grail-system, but I do believe a robust mechanical systems with an edge exist, and can be profitable on H4 and D1, if only traded consistently and with quality over time. Even if I build a mechanical system that satisfies my criteria in backtests, I will trade it manually.

Summary

In summary, to the readers of this journal: thanks for reading & I hope my experience has provided some insights for your trading development. It certainly has been quite an experience for me.

I am very happy that I actually completed this trading chapter and actually executed the planned system, on a small live account, with discipline, daily, for the past 3 months, with myfxbook linked & shared. I did not make money, but I gained a lot of experiences and learned a few things.

Some things I did well: money & risk management, following the system rules. Some mistakes I made as well. And my system choice seems to have been not ideal. Although it is not impossible that someone else would make money with this system at this time.

With this, I end this chapter of my development as a trader and I am looking forward to the next one.

I am going to look for a better system (method, approach) and become consistently profitable using it. I may or may not create another journal here. The method I am looking at will also be a trend-following kind, but I will look for a method that offers a lower-risk way of joining the trend, such as a last bar breakout at a possible end of a correction. But this will be a next chapter. This one is finished.

Thank you. Good bye.

Hi Michal9,
I'm making a very similar experiance, but I decided to code the algo and backtesting in several ways.
My system is very similar to yours; it is a N-Breakout system with ADX filter and SL and TP based on volatility (ATR based).
I suggest you continue your experience because is a path to the profitability you have to do that will lead you to profitability.
If I can, I would suggest to you read the following books:
- "Trading System and Methods" Perry Kaufman Ed.Wiley (tech Analysis)
- "Trade your way to financial freedom" V.Tharp (money management and phsicology)
- "Trading Strategies" - Robert Pardo (algo trading / back testing /walkforward)

Don't look for a better system, check methodology and approach, refine upgrade your system and at the end if the system is not profitable you can leave it. The system you are using is in my opinion a sounds system why not using for example a keltner channel.

In parallel I'm manually trading (and learning) Price Action under James16 umbrella thread, I'm following regoularly the free forum in forexfactory and my learing curve there is verly slow.
In my opinion if you have time, don't abandone the algo trading but if you don't have enough time and you have to choose; focus on one thing at time and choose the Price Action (is the basic and you can build on that knowledge what you want) and for sure your future EAs will benefit of the PA knowledg. Trading discretionarly is really a basic and propaedeutic experiance and when you strat you will never stop but you will build knowledge on that.
Hope my point will help
cheers
Xamarass

Wiston where is your Jouranl ?
cheers

Thanks a lot Xamarass for your points. I appreciate the input and will certainly add the books to my to-read-list (Tharp I already know, but the other two not yet) and, yes, I am not giving up and I do plan to continue both discretionary price action trading and programming in a search for something that meets by backtest criteria :-)

Winston's journal is here and he said he would create a new one. You can subscribe his posts, too. Thanks again.

By the way, this N-breakout system you mention, did you code it already or still working on it? If yes, are the results OK? Do you use MT4 or some better tool?
I wonder becasue in the past i spent many long weekends programming different variations of trend following systems, but they were usually either losing money or curve fitted or, the "best" I created and solidly tested (on quality data, many markets, wider range of params), has been roboust - yes - but had drawdowns 2 times larger than the annual return... and lasting months even if traded on H4... at which point I dropped the EAs... maybe I should return to it.

Michail,
I coded the EA with help of coders (very talented); for that kind of EAs, filtering the entries is a must, and sizing SL/TP based on ATR is recommended (based on my personal experience). The simplicity, the undestanding of trading system are good tools on the way for profitability;
WFA also very useful (NO OVERFITTING !! be careful) but in my persnal experience BAcktesting is only a first little step (little meaning),
important is the WFA, foundamental is to choose the 2,3 parameeters to optimize and choosing the value that garantee the max robustness (I let you know discover how to find them) ....... .... a little tips... you have to works on multivariate dimension so brush up matrix rules if you optimize more than 2 parameeters on the contrary you will not be able to select a robust set of optimized parameeters (3D diagrams can help after sensitivity analysis to choose which parameeters have to be optimized).
Have a fun !

...and yes in my case there is in two years a little but constant return that for me is enough !
Choose daily/weekly time frame (becasue less market noise) and believe in your work, if you adopt a serious and tested methodology
the result will came and the DD will be under control because each single trade will be in a rance of 1-2 (max 3) %.
.. ops last info, my preference in trending system is for USDJPY & EURUSD (but generally speaking the JPY pairs very funny)
.....and when you will start counting bucks.... leave the cents account as quick as possible and split on different brokers
when your accounts will see the the 4th zero !
....ops I forgot the most important thing..........the patience..........................this is my experiance till now

Cheers
Xamarass

Got it, thanks.

remaining open positions enabled an equity curve spike to a highest ever today, a 2% profit, small but still ;-)
funny, as this happens after I stopped trading this system, just managing the open trades.

ok, that was just a final update, thanks.

in case anyone is interested... and for my own records when I come back to this in the future... here is how I am managing the remaining open trades now as I stopped trading this system.

GBPUSD closed at profit, as a trailed stop got hit.
USDJPY surprisingly still holds, but looks like it is very close to a trailed stop, right below the weekly pivot point (yellow line)
AUDNZD closed at profit, at trailed stop.
USDNOK holds.
USDMXN holds, that one is the biggest winner of all so far, but now looks like going to a stop.

thanks for your interest :-)

and a new high on my equity curve... and a balance of negative -0.7%, but now, given stop losses are trailed to the profitable area, it looks like I may even be able to end this exercise back in black, would be nice :-)

USDNOK closed, USDJPY closed, USDMXN is the last remaining open trade. I will post the final note on this thread once this one gets closed.
The last three trades are the best ones... well, there is nothing like letting the winners run ;-)

I am happy to see that the balance of my account is plus 1%.
0.98% to be specific.

Which means that at the end of the day I made money using this system.
The last remainig trade will be a winner too, its trailed stop loss is already deep in profit.

I am happy with this. Sure, this is not a system I will keep on trading, the edge was too small or my execution not good enough, but I learned a lot and I made 1%.
That's well above average I guess, after 64 trades and with equal risk per trade position sizing.
It is also well below my trading goals, as making 1% with a max drawdown of 3.5% in 3 months is far from my aspirations and not what I consider consistently profitable trading.

Well, that's what it is at this time, and I am trying to get better everyday. Thanks for all inputs, here and the ones I got via private messages.

Ok, the last trade opened using this system has just got closed.
USDMXN closed for a relatively large profit vs. initial risk. In fact, this was probably the best trade of this system.

And the final view at the equity curve.

I am very happy to report that I am 3% in plus.
65 trades, 3.5 months starting Sep 1st, 2014, till today, Dec 17th, 2014.
Average winner 2x larger than average loser, roughly 50% winners.
See myfxbook. I may disable this link in the future, once I want to use this account for a different system.

That's all, thank you and this formally closes this journal.
Good bye and please wish my persistency going forward in my trading business.

Jak tam Michał?;-) Mam nadzieje że wszystko w porządku.