Wednesday, September 12, 2012

Fractal backtest COMPLETE

Finally finished my backtest on my fractal breakout system. I decided to only analyse fractal breaks where ADX(14) < 18 on the USDJPY and EURJPY and skip the rest. The USDJPY had a positive expectancy, and EURJPY slightly negative.
After deleting duplicated trades from all five pairs tested (EURUSD, USDJPY, AUDUSD, USDCAD, EURJPY), the system has a positive expectancy of 26%. Total sample size is 265 trades. It's low, but I don't have any more low-correlation pairs to test. GBPUSD and USDCHF are highly correlated with EURUSD, NZDAUD with AUDUSD, and GBPJPY and AUDJPY with EURJPY.
I thought about testing the more obscure cross pairs like EURCAD, but I don't really want to trade them because of higher spreads and illiquidity.
Here is the final equity curve for the system from 2001 to 2011, using 2% risk and 2.67 R:R. All trades are in chronological order. Duplicated trades that occured on the same day between multiple pairs were deleted, with the trade from the most liquid pair kept.

It's not the most sexy equity curve. The system is prone to bouts of drawdown if ranging conditions prevail for too long. The longest losing streak was 14 trades at 2.67 R:R. I'd recommend a risk level of less than 1.5%.

I'll post more details in my next entry. It's past midnight here and I need to sleep.

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