Automated Trading – Week 4 Observations
This is an update of trades (both open and closed) made during the fourth week of my evaluation of FXCM’s Forex System Selector. This evaluation uses a selection of 10 different models against a test account with FXCM. Since the demo account lasts for four weeks, I expect that this will be the conclusion of this particular evaluation. Read on for an update of how this has gone and what has been learned.
My previous observations showed that the account was virtually at break even. Some profitable trades were made early this week, but then there was a surprising turn of events – one of the models opened multiple simultaneous positions. These are still open, but the marked to market value is approximately $12,000 down. This is substantial for one trade and in the context of a $100,000 account. This is not what I was looking for when I selected models that would produce a smooth equity curve.
When I set up the parameters, I restricted the number of contracts that each model could trade per position. The models appear to get around this restriction by simply opening multiple simultaneous positions (all positions were opened within one second).
In future evaluations, I will make some changes to model selection and setups. Firstly, I will restrict the number of open positions. Secondly, I will set the maximum risk per contract to around 70 pips (I think that in the context of short term trades with the models selected that it is unlikely that they will turn around from a 70 pip adverse movement).
In addition, I have some more details of which models work in real life, and which do not. One lesson is to go for the models with a long track history, as evidenced by those with a lot of trades.
I’ll be using this initial evaluation period to remove some of the models, while retaining those that have performed.
September 27th, 2008 at 3:23 am
Any update on the system selector? I began studying this a week ago and have attempted to “score” the systems based on factors such as length in existence, maximum number of positions, pips per trade etc.
I was just about to go “live” when I decided to check the Quants Carnival trade by trade report to see what the intra-trade drawdowns were like. To my horror, I saw that this “Max 1 Position” system had, at one time 15 open trades, all executed within minutes and closed within the same time frame. So this brings into question the integrity of the whole system. Have you found any other errors?
March 5th, 2009 at 5:01 am
I am also interested as JRT, I would appreciate any input on this interesting topic. I will share more on your response, just to verify you are still in this blog
Thanks