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Chapter 31, Part II. Mechanical System Creation Framework. Page 7

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 27, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Test your system with hardware.

    We will not test it with hardware, because it will be very difficult to show it in writing and describe the process, but we will pass through it manually and watch what will happen. Our start point is 1.42 area on daily time frame in May. I will show you testing with details initially. We will assume that our trading prices are close prices at corresponding days. During rest of the period we will show just results:


    Chart #1 | EUR/USD Daily and All Necessary Indicators
    [​IMG]

    1. Our first signal at 05 May, 2011. We do not take this signal, since oscillator at -248 – market is oversold.

    2. Next signal is on 27 May, 2011. We’ve entered and exit 11 June, since oscillator has hit 241 level of overbought. Our stop has not been triggered, profit 354 pips;



    3. 13 June 2011 Sell signal at 1.4394 (stop was not triggered; high on next day was at 1.4456). Exit 15 June at 1.4132 due to oscillator signal. Profit 262 pips;

    4. The next trade will be on 29 June at 1.4416 (not shown). On the next day our stop loss was moved to breakeven, since market has passed 40 pips in our favor. But this trade has not led to profit, since position was not closed due oscillator (it has not quite reached 241 level), so our stop has been triggered.

    5. And so on… Here is a second chart, if you want to pass through this system:


    Chart #2 | EUR/USD Daily - All Necessary Indicators and Trades
    [​IMG]

    I have marked all trades till the current moment. Of course you have to use a longer period of testing. This is raw system and it was used just to show you approximate process of system creation. Personally I see at least one way of possible optimization and fine tuning of this system. First, if you take a look at most recent solid decline on market, you will find that you have to skip it, since in the moment of signal oscillator was at oversold level, but it has corrected on the next day. Probably it makes sense add some expectation period. For example enter in trade is possible not just in day but for 2 or even 3 days after penetration of the MA has happened, if MACD supports trade and oscillator come out from oversold/overbought.

    Pipruit: Cool! I really start to like this stuff. With your example this is much easier to understand. Still, I want to ask you something.


    Commander in Pips: Sure, go ahead.

    Pipruit: If I’m not friendly with programming. Can I trade mechanically but manually?
     
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