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For the record, these two were not entered due solely to the volume filter. But for the volume filter, the script would have entered trades as described. I verified all the calcs and all checks well. The failure to enter trades on the rest of the pairs was due to the trend filter.
Can you help answer these questions from other members on NexusFi?
Upon further review (haven't had a ton of time lately for this system), there have been several trades (which would have been moderately profitable) that were not entered due solely my volume filter on this script.
Since this is a trend following system, I want it to enter on increasing volume. However, my last trade was entered on March 28, which was one week ago. This is the longest this script (or any variant of it) has gone without entering a trade when running it against so many currency pairs (13 to be exact). The point is that, but for the volume filter, there would have been at least 3 profitable trades over the last week that were not entered due solely to the volume filter. I have not found any instance where the volume filter was the sole filter that would have kept out of a bad trade...but I don't want to dwell on that and, of course, I could be mistaken.
So what is essentially happening is, we are seeing a slightly (just small enough) decrease in volume as a short term trend gets underway. Basically, volume picks up in the lead up to the initiation of the trend but then falls off just before the price actually tips over into the the full swing trend up/down. The trend then occurs on decreasing volume until volume picks back up and we hit resistance stopping/slowing the trend. ...does that make any sense?
My question is not whether I should change my system. My question is: what does this behavior in the market mean?
Looks like we had another fakeout on GBPYJPY, further broadening the contraction zone. As can be shown in my above-quoted post, I kinda felt like we would have had to see another fakeout (but wasn't completely sure) only because since the first one meant the contraction was going to go for a much longer time and the swing back down from the first fakeout would be so strong since there'd be a lot of money thinking that fakeout and reverse would indicate a downward ultimate breakout. But I can't help but feel that, right now, the markets are just bogged-down across the board...meaning that nothing is breaking out of anything, any time soon. Until, of course, it does.
For the record, the low bid hit during this southerly fakeout was 137.066...which sort of fits into my price prediction above. If you enter at the sooner (higher) price of 137.200, then you're not as confident it will keep going. But if you entered at the later (lower) price of 137.000, then you would have more confidence that it would keep moving south. Since the price never touched or went below 137.000, my more conservative entry would not have been triggered but the less conservative entry clearly would have. Then price was pushed back up, and the stops on the shorts were triggered which brought the price swooping back up.
Finally got a new trade on April 6, which was a long on USDJPY. The trade entered at 16:00 chart time at 111.020 and exited via SL at 01:14 on April 7 chart time at a price of 110.526. The TP was set to 11.843 at time of exit. This was a -494 point loss, which is now the biggest loser for this system. In fact, this loss is greater than the sum of the other two biggest losers combined. This one loss nearly halves the net gains made up to this point.
I happened to see the trade when it was at about -106 points down, and I immediately knew this was not a good trade. My mental reaction was this is bad but fk it, let's see what happens. I should have had the intestinal fortitude to decisively say this was a bad trade. A simple look at price action alone, leading up to this trade, shows we were continuing in a pennant type consolidation. The chart shows the long entry with a green arrow. You can see the trade went negative from the start and never went positive. This was a loser from the word go. This trade continues to reaffirm that the current regime is not healthy for this system....or perhaps simply not healthy for my current params(??). And we have been in this poor (non trending regime) since the two losses on EURUSD a few weeks ago (see this post here). Almost every currency pair is showing similar signs/performance. I think I heard Cap'n Obvious say it seems prudent to turn off any trend following systems for now, until we begin a new regime. And...when will that happen? I have no idea.
One thing that I think was interesting is that went I opti'd these pairs, I thought in my mind that the params for USDJPY were the most aggressive of all the pairs and that EURUSD was somewhat aggressive. Perhaps my remembrance of this thought is just hindsight bias, but I really do remember thinking that about USDJPY.
I also wanted to post a chart where a short trade was almost entered on EURUSD. The arrow shows the bar where the trade would have entered, but the trend filter is what prevented it. The volume filter would not have prevented it. The reason the trend filter prevented it was that the price had moved "too sideways" for a long time leading up to what would have been the entry bar. Clearly tho, the TS would have somewhat limited the overall gains even if a trade had been entered. It would have been positive, just not as awesomely positive as it could have been. But that is the point of the TS and the way I have it written...to minimize losses at the cost of losing out on greater returns. Can't have your cake and eat it too, but if we were in a regime that was trending like gangbusters then perhaps taking off the TS or running it with different params or logic would be acceptable. I implemented the TS based on the price action of earlier this year when it seemed the trends were lightening up. Now it appears the trends have evaporated.
I also wanted to post an updated chart of the GBPJPY, just for giggles. The two inner trend lines were the original lines I drew. The two outer trend lines were added and were based on the two north and south fakeouts that occurred last week and this week.
Ok so got a new trade on USDCAD, which is a short entered on April 10 at 16:00 chart time at 1.33472. The trade has not yet exited, but you can see that my TS has moved the SL to a break-even point...actually to slightly better than break even. We are currently at about a +304 point gain, but I am thinking we have essentially petered out and now would be a good time to exit. I will not exit and will see how the system handles the trade on its own...and see if it makes more than +304pt. For purposes of this whole journal, a "point" is a tenth of a pip.
So this trade should (ostensibly) exit with at least a minimal profit. In reality, since this is a demo account, it will exit at almost exactly the the SL/TS regardless. In real life, slippage might cause a worse fill but that should not be significant unless there is some crazy news event or shock.
I guess this goes to show that the params are pretty decent so long as the market is actually doing what this system wants the market to do. Again, this system was designed to forgo large wins in order to prevent large drawdowns. It appears the system is largely doing that, so far. But with this little quantity of time, who can really say yet?
I will re-post when the trade exits. I am considering a time stop, but for now I do not view that as being hugely beneficial. Any thoughts?
Nicely done. From my perspective it is difficult to make a decision on whether to exit or not as I need to see a whole lot more history to get context. This is a good test to see how your system handles the situation so why not leave it to run?
This trade exited, but I haven't had a lot of time to post this week. Just now getting around to it.
To recap, the system entered a short on USDCAD on April 10 at 16:00 chart time at 1.33472. It exited by means of the TS at 1.33311 on April 11 at 10:01 chart time. It was a +161pt gain but would have been a lot more if I had made a discretionary exit as the previous post shows.
As you can see from the chart, the TS did what TS's do...it exited on a retracement. There was a continuation of the down trend following this exit, but the trend filter is what kept the system out of it. The volume filter would not have kept the system out.
Next, the system entered two different trades on the same bar. I will address EURUSD first.
The system entered a long on EURUSD on April 11 at 16:00 chart time, at 1.06141. It exited at 20:00 on the same day, which was the very next bar open, at 1.06045 for a -96pt loss. The trade lasted one bar. The system's normal exit logic exited the trade.
I happened to see the trade somewhat soon after it opened when it was around a -90pt loss. As soon as I saw the trade I had those same old reservations and felt this was a bad trade, but of course let it roll to see what the system does. The system ended up exiting at about the same price I saw the trade, so it worked out to about the same result.
I think my thoughts on discretionary exits, the thoughts that occur when I see a trade entry, are my own mind taking into account support and resistance levels I see in the price action. Then, if I think the s/r is going to work negatively against the trade, I get all those same old reservations. This was one of those times where my reservations were essentially correct even though it eventually spiked up later on. I have gradually become more aware of my "feelings" when I see a trade entry. Generally, I either feel like: a) it is good, b) it is bad, or c) I don't know what to feel. I am going to start applying a label (good, bad, or idk) to each entry that I see at the moment I see it, and then compare that feeling with what happens later. I may also note whether I attribute that feeling to s/r or to something else. This should be more productive than generally describing my "feelings" or other thoughts on the trade when I see the entry. I would label this trade a "bad" when I saw it.
I also drew a red arrow on the chart. This red arrow points to the lowest low before the large spike up. If the trade had stayed on for that long, the SL would have been triggered on this low because my SL and TP contracts as ATR contracts.
The second trade entered on the same bar as the above post was a short on AUDCHF, entered on April 11 at 16:00 chart time, at 0.75489. The TP was set to 0.75012 when the trade exited. The traded exited through that dastardly TS logic on April 12 at 17:43 chart time, at a price of 0.75457 for a net +32pt gain. Obviously since the trade exited on the TS, by definition, it could have closed with more gain...about 200 more points at the absolute best price.
It actually exited at or near the high of the exit bar. However, this is very important: if had not been for the TS, the normal exit logic would have closed the trade 70pts worse than it actually closed, or for around a net -40pt loss (or so) rather than a +32pt gain. So the TS did do positive things here.
When I saw this trade entry, I had a generally "good" feeling about it. I felt good about this one and bad about the EURUSD trade that entered on the same bar. But I feel those good thoughts were not fully realized. I expected it to go farther south. I expected more, and that is probably a bad thing. You should never expect anything from the markets; once you do, you have already failed in so many ways before you even set the expectation in your mind.
