Saturday, January 12, 2013

Week in Review: 6th January 2013 - 12th January 2013

It's been a good week. I opened two trades and made some profit.



I've been working on a daily timeframe version of my Daikoku low volatility system, and found an entry signal on the AUDUSD after Monday. I used a 0.4:1 reward-to-risk ratio and won the trade.

Price came within a pip of hitting my SL before reversing. I seriously thought about closing my trade once I was halfway towards my stop loss, but I held my nerve.

It's a similar story with the NZDUSD, although price moved in a straightforward manner and hit my TP quickly.

I didn't like the high correlation between the AUDUSD and NZDUSD. Even though both entry signals occured on different days (AUDUSD on Monday, NZDUSD on Tuesday), both trades ended up staying open and trading in the same direction at the same time. But I had to trade my system according to its rules.
This has become a tedious process. I've manually backtested the USDJPY on the daily timeframe with success, although the system experience significant drawdown between 2005-2009.
So far I've backtested the AUDUSD and USDJPY. The profit factor is around 1.3 with little optimisation. It's all right. The frequency of trades is insanely high though, in my opinion. From these two pairs alone, there are over 800 trades between 2001 and mid-2012. That's about one trade per week from two currency pairs only, and I intend to focus on eleven (all the majors and Yen crosses). Very nice indeed.
With two pairs tested, I "only" have nine more pairs to go through. At this rate, I may finish by March!
I've got three entry signals that look promising.
Two signals are on the daily timeframe: the AUDJPY and EURUSD. I especially like the AUDJPY. Correlation between the two pairs is relatively low.
On the weekly timeframe, we have XAUUSD (silver), which whipsawed the previous week:

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