ETMA_The Evolution

Shhhh... Lets keep it between us or else she will spend every penny shopping and traveling.

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Automated trading in's and out's as seen by Zorro Software developers, the truth about Automated Trading naked and bold.

Regular income with automated trading

Even when you got a profitable strategy, like one of Zorro's Z systems, it's not trivial to squeeze a regular income out of it. The markets go through periods of different efficiency and cause a high fluctuation of trade results. Systems that generate a relatively safe income are mostly based on mid-term or long-term strategies, but can still suffer long drawdown periods of several months, even up to a year. Drawdowns are no strategy flaw, but a logical and mathematical consequence of profitable long-term trading.

Admittedly, a 12-month drawdown does not sound well suited for a regular income. But there's a simple trick to overcome drawdown periods: Do not rely on one single trading algorithm and one single asset. With many different algorithms and assets, a drawdown on one combination is cancelled by a win series on another - at least in theory. In reality, you'll find that most assets are correlated, either positively or negatively. Still, a combination of different assets and trade algorithms gives you the relatively steady profit curves that you can see from Zorro's included Z strategies.

Seven ways for losing money with automated trading

The fact that people have no clue of strategy design does not hinder them to develop, publish, or sell them. More than 90% of all trading systems and strategies that we've found described on web forums and in trading books are unprofitable and will reduce the invested capital instead of increasing it. That's normally good for you, as someone else must lose when you're winning. But you should not fall into that trap yourself. Below you'll find the seven most certain methods to lose money with a trading strategy.

1. Buy a robot. Many websites sell software products with fanciful names like "Forex Pilot" or "Million Dollar Robot" that claim to make you rich through automated trading. They usually have an impressive live trading record with several 100% profit per year on their website. And they all get rave reviews on robot test portals. So why has my recently bought Forex Turbo Growth Bot yesterday wiped my account? You'll learn in workshop 8 how a robot vendor can produce any review, backtest, or trading record.
   Theoretically, a well programmed robot could indeed generate profit. But apparently none is offered for sale.
2. Trust other people's systems. Trading book authors recommend lots of systems in their books without ever having tested them. Some even admit ignorance of system coding and testing, and are proud of it, as "backtests are useless anyway". Which is correct insofar as a profitable backtest does not mean that the system is profitable. But an unprofitable backtest means with 100% certainty that you'l lose money with that system. We've tested many popular systems published in trading books or on trader forums, and found that almost all were losers - and this was obvious with a simple backtest done in 5 minutes.
3. Follow signal providers. Many trade copy services offer signals by successful traders or automated systems that can be followed for a small fee in form of a slightly worse spread. Theoretically, that's a good idea - you earn money without having to care about actual trading. Sadly, a look into the 'Top Followers' list of those services usually reveals that few have earned anything. Most lost all their money - and this despite the straight rising equity curves of the top signal providers. How can that happen? Reason are the systems that are mostly traded on those services. For getting a high rank and collecting followers, signal providers must show a steadily rising equity curve. This forces them to use grid trading, martingale, or similar methods. As soon as they've hit the first drawdown, they just collect their rewards, disappear from the service, and reappear under a different name. Following signal providers with unknown trading methods is one of the fastest ways to lose all capital.
4. Listen to recommendations. This guy on the trader forum bought that robot four months ago and already made $50,000 with it - so that's certainly a good deal? Not always are such claims posted by the system vendor in disguise. Sometimes even real customers defend the scam product they fell for: a psychological effect causes fraud victims to justify their expenses against all better judgement. The profit could even be real, as even a losing or randomly trading system can win half of the time. On the other hand, if all profits bragged about on trader forums were true, trading would be the easiest and most lucrative job in the world.
5. Get esoteric. Lack of control leads to superstition. This is true for all activities whose success depends on chance, but especially for trading. Many private and commercial traders are betting their money on Elliott waves, Gann lines, Fibonacci numbers, financial astrology, moon cycles, or similar fortune telling methods. They all work - for their advocates who publish books and sell trade systems. But they most likely won't work for you. We've never encountered an esoteric system that would survive a simple backtest.
6. Use unoptimized parameters. This system is already profitable enough without any optimization. So I can certainly trade it with confidence, as it can't be overfitted? It most likely is. Only the optimization process reveals the robustness of a system. It happens surprisingly often that apparently random parameters are just at a profit peak in the parameter space - especially when you take over this system from someone else. Trust only systems that you've trained yourself.
7. Enforce profit. It is relatively easy to start with a lot of winning trades. You can use a martingale method. You can achieve a high win rate by placing a low profit target and a distant stop loss (or no stop at all). You can use a grid trading system that takes profits early. Unfortunately, as easy as it is to gain profit at the begin, as hard it is to keep it. Under Strategy you can find an brief overview of such methods, and a formula to determine after how many days they will blow your account.

Seven rules for earning money with automated trading

1. Have enough capital. The minimum capital for a modest regular income is in the $5000 range. The free Zorro version limits your account size to $7000 (see restrictions), but you need not all your capital in the broker account - you can keep it in a savings account and remargin when your equity drops dangerously low. Have at least twice the required capital from the performance report at your disposal. Most brokers support fast depositing funds by credit card in a few minutes.
2. Know your broker's trading platform. You should be able to observe and manually close trades anytime in case of an emergency, ideally from your mobile phone. If a trade was not correctly opened or closed due to a software glitch - this happens rarely, but it can happen - know how to deal with the problem. If it was a glitch of the broker's server or software, know how to contact the broker and request a refund. If it was a bug in Zorro or in your script, you'll get our compassion, but no refund.
3. Know your strategy. You must understand how it basically works and what risk and performance you can expect. Test it under different spread and margin settings to avoid nasty surprises. Never trade with systems based on algorithms that you don't know or understand.
4. Pull out in time. Examine the trading results regularly and compare them with the simulation performance. If you start losing too much money, don't hesitate and stop the strategy. There is likely something wrong. The strategy might be expired due to a change of the market, or it was not profitable at all due to a biasedbacktest.
   How much money is "too much"? The simplest way is comparing the loss with the required capital - when you lose more, you've exceeded the normalized drawdown and should stop. A more precise estimate is the following formula: E = C + P*t/y - D*sqrt((t+l)/y). E is the expected minimum equity, C is your initial capital (= the Required Capital of the simulation), P is the test profit, t is the trade time, y the test period, D the test drawdown, and l the drawdown length. Example: the test shows $8,000 profit after 5 years with a $2000 1-year drawdown, and $1500 recommended capital. You invest it and are down to $1000 after 6 months. E = 1500 + 8000*0.5/5 - 2000*sqrt(1.5/5) = $1204. You're below minimum profit. Pull the plug.
5. Do not pull out early. The equity curves of all systems are subject to fluctuations that are normally larger than the upwards trend (see chart below). That's why the Total down time of successful strategies can be in the 90% range, and that's why at some point after starting a strategy you'll be almost always below your initial capital - otherwise you would need no capital at all!. If you stop the strategy just at the first drawdown, the money is gone. This is a frequent mistake of beginners to automated trading, and results in losing money even with highly profitable strategies. Be prepared for fluctuations and drawdowns as bad and long as in the backtest: they will really happen, and they can happen anytime and right at the begin. A streak of 20 successive losses with real money is admittedly a special experience; grit your teeth and sit it out - at least when the backtest suggests that such a streak can happen.
6. Do not tamper with the strategy. It's hard to see profits dwindle in a drawdown, but the strategy is already optimized. Any manual intervention will only make it worse. For the same reason, don't often stop and re-start strategies: this closes open trades, initializes any intermediate parameters the strategy might use, sets back the lookback period, and thus more or less reduces the performance dependent on the strategy. Any manual closing of trades can cost several hundred pips and can convert a winning strategy in a losing one - no matter if those trades were in the profit zone or not. For 'soft stopping' a strategy without loss, set the margin to zero so that no new trades are opened, then wait until the strategy itself has closed all open trades.
7. Do not get greedy. When your profits accumulate, you'll be tempted to increase the margin. This will of course also increase drawdowns. But the average drawdown size and duration increases anyway with the square root of the trading time. So you'll need to put aside a part of the profit for compensating this effect, and can not reinvest it. Raising the margin too fast is the second-most frequent mistake of beginners to automated trading, and can wipe out any account regardless of the strategy performance. Avoid increasing the margin proportionally to your equity, as most beginners to trading tend to do. For every doubling of your equity, raise the margin only by a factor 1.4, not by a factor 2. For the same reason, do not withdraw all your profits, but keep a part on your account - look under money management for details.

http://zorro-trader.com/manual/images/z5zulu3.png
Typical live equity curve of an automated trading system (Zorro Z5). Note the equity fluctuations and the negative peaks during the first weeks due to the increasing number of open trades. Although the system is steadily winning, pulling out at any initial equity downpeak would end up with a loss. It takes about 8 weeks until enough profit is accumulated for keeping the equity curve safely above zero. Other systems have even higher equity fluctuations and longer drawdown periods.

The DX (USD) and after forming a Double top and a break below is Still a sell, is it gonna follow through or reverse ?, we will soon (The end of this week) know after the NFP.

Simultaneously the EU Have made a double bottom and broke that DB Resistance is it gonna follow through also?.

Some Donchian 55 - 30 Long term Signals.

Sell in May and Go away, or not : Barclays Has Three Reasons Investors Should Not 'Sell in May and Go Away' This Year
The truth about 'sell in May and go away'
Sell in May and Go Away? No Way! - Wall Street Journal
Sell in May and go away at your own peril - CNBC.com

Trend following when it works, my account status.

As related to Trading.

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Great looking charts! Are they ninja or trade station? I apologize if this was already asked previously.
Thank you. Have a good weekend. --Sally

S., these are NinjaTrader Charts.
Here are some more Long Term Charts for Brent, Apple, S&P 500 and the USD (DX), as you can see long term trends are well established on the higher timeframes, we even have an LT short signal on the USD but i doubt that will materialize for the Rate Hike is just around the corner, but who knows.

Thank you!

Monday Morning, another week another trading day, hang in there guys and keep on improving and correcting your Mistakes to eventually be left with none, zero, zip.

Discipline, Patience and consistency is key in everything you do in life, trading included.

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Have a Great trading week.

This concept is so important that i want to share it with you here :

The quote from the Wolf Of Wall Street, Jordan Belfort comes to mind

I want you to back yourself into a corner. Give yourself no choice but to succeed. Let the consequences of failure become so dire and so unthinkable that youll have no choice but to do whatever it takes to succeed.

This is undeniably, absolutely, irrevocably true, it is really the Difference between Success and Failure in life and Trading.

6 Things That Separate The Pro From The Amateur Trader That You Can Change Right Now
Rolf - Tradeciety.com

A professional trader is not the one who was more trading screens, better equipment or the better indicators. A professional trader is defined by how he approaches his trading mentally and how he evaluates his trading routine. Therefore, every amateur trader can easily acquire the mindset of a professional trader by following a few principles and changing his approach. The following article walks you through the 6 most common trading principles that make the biggest difference between an amateur and a professional trader.

#1 Distractions and focus
Amateur: Watches YouTube videos, is online at Facebook, chats in Skype or watches TV while trading. The amateur loses focus easily and does multiple things when there is no setup in sight or markets are currently slow. He, therefore, misses trades easily, makes mistakes when calculating his position and when executing trades.
Pro: When the professional trader is trading, he is 100% focused and does nothing else besides watching his charts. He might have a website open to monitor news releases or watch the news ticker on a TV channel (on mute!), but that’s it. The pro knows how important it is to be 100% focused and when there is nothing to do and no trading setup in sight, he turns off his platform, works on his trading skills or just takes the day off.

#2 Wasting screen-time
Amateur: Amateur traders tend to watch charts for hours at a time and randomly flip through timeframes on the hunt for a trade. The myth that screen-time will help a trader become better is still accepted among amateur traders. Watching charts for the sake of it has no value whatsoever if you don’t know what you are looking for.
Pro: The professional trader has a detailed trading plan and knows exactly what he is looking for and when he is going to trade. He does not flip through timeframes, but just waits patiently until the trade comes to him. He does not waste his time by sitting in front of his charts all day long when there is nothing to do.

#3 Overconfidence after a winning streak
Amateur: The amateur trader believes that after a few winning trades in a row he has acquired superior skills or that his trading strategy is suddenly a money machine and cannot fail anymore. The problem is that after a few winning trades, amateur traders use too much risk and take trades that are too big or violate their trading rules because they ‘can feel’ what will happen next.
It’s not uncommon that after 4 or 5 winning trades, traders lose all their profits on only one trade. Are you guilty of that too?
Pro: The professional trader knows that he is not suddenly a super trader and cannot predict what is going to happen next. A winning streak is normal and will happen time after time; it is just how trading works. A professional trader ALWAYS sticks to his plan, always follows his risk and money management rules and NEVER lets one losing trade wipe out a significant amount of his capital.

#4 Loss of confidence after a losing streak
Amateur: When having a losing streak, the amateur trader loses confidence in his skills and his trading strategy. An amateur trader tends to change his trading strategy when he enters a losing streak or breaks his trading rules because he wants to make up for his losses.
Losing streaks are dangerous for amateur traders because they often lead to even bigger losses when traders try to make up for lost money.
Pro: For the professional trader, winning and losing streaks don’t matter. They are inevitable and will happen over and over again. A professional trader knows that over the long term, his trading strategy will make him money, no matter what. A professional trader sticks to his rules and never loses his mind.

#5 Taking losses personally
Amateur: It is hard to accept that your trade idea was wrong and that you are going to lose money. Especially new and inexperienced traders can’t accept to be wrong and when they see that price is about to hit their stop loss order, they will do one of the following things:
– Setting a stop loss further away to delay the loss
– Adding to a losing position to get out of the loss faster when price turns around
– Taking off the stop loss order completely because eventually, the price will have to turn around
All these tactics will lead to large losses and to margin calls. A trader who is engaging in one of the three mentioned scenarios is as far away from becoming a professional trader as possible.
Pro: The professional trader lives by the following two principles:
– One trade is just one trade and the outcome of one single trade does not matter
– The stop loss order is the price where you fully accept that your trade idea was wrong and where you WANT to exit the market
The professional trader knows that the outcome of one trade is totally irrelevant to his trading career. Whether a single trade is a winner or a loser does not matter because there will be 400, 500 or 800 trades coming soon where he can make money. A professional trader also accepts that a stop loss is the place where his trade is wrong and that he is happy to exit the trade because it is not going to make him money.


#6 Do you need money fast?
Amateur: What is your trading objective? Do you believe that trading is a way to make a lot of money in a short period of time? Research showed that traders who believe that they can get rich quick with trading lose the most amount of money.
Pro: For the professional trader, trading is a regular job. The professional trader does not trade for the excitement or because he wants to make a fortune with a few lucky trades. Trading is not an easy profession and it requires time, hard work and a lot of hustling before you can make money. In the end, being a trader is a job like many other jobs.


Conclusion: Fake it until you make it
To become a professional trader, act like one. Behaving like a professional trader does not require a lot of capital or expensive equipment. You can trade like a professional trader RIGHT now. Analyze your trading behavior and then see how you can make the adjustments to take your trading to the next level.

Trading Cards.

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Negatively correlated, DX and the Euro, new signals.

Yen, Ranging on support.

Trend Following Wizards – April 2015
All the wizards are caught USD long.

Thanks Bass. April was a poor month for the trend followers. Only Saxon made it into positive territory. :-)