Counter Trend Trading — Bob got a new trade idea: Bob: Last month I ran into Warren Buffett and asked him for a trading advice. That's what he said: 'Be greedy when others are fearful'. Alice: Interesting. And what does it mean? Bob: He didn't ...

Automated Trading & Backtesting Course - Part 2: System Development

Logging trades — If you want to check the trades of this strategy in detail, add the following line to the begin of the script: set(LOGFILE); LOGFILE is a flag - something like a "switch" that can be on or off. Such switches are turned on with ...

Automated Trading & Backtesting Course - Part 2: System Development

Storing signals — Alice had defined a new series for storing the trade signals: var *Signals = series(0); This series has the value 0 unless set otherwise. This happens when a peak or valley is encountered: if(valley(Trend)) { ... Signals[0] = ...

Automated Trading & Backtesting Course - Part 2: System Development

Improving a system — Alice had noticed that the losing trades are all clustered around sideways price movements, while the wins occur during long up or down trending periods. This effect can be used for filtering trades - suppressing trades as ...

Automated Trading & Backtesting Course - Part 2: System Development

Just for anyone further interested in Martingale and its derivatives, here's a small Zorro script for Martingale trading: function run() { Spread = 0; Slippage = 0; Stop = ATR(100); Profit = ATR(100); Lots = pow(2,LossStreakTotal); if(NumOpenTotal ...

Martingale - the sad truth

Let's look further into the performance of our first automated strategy. Although 60% look better than the usual 4% of a savings account, Alice is not too excited about the result. The low Sharpe ratio (SR) tells her that this result comes at a ...

Automated Trading & Backtesting Course - Part 2: System Development

It's not a literal martingale, but if I understood it right, it works similar. The martingale relies on loss streaks not to exceed a certain limit, and your system relies on prices not to exceed a certain movement range. As both assumptions are only ...

Martingale - the sad truth

Obviously, a strategy is worthless as long as you don't know how it will perform. For this you need to run a backtest over at least 4 years. Start up Zorro, select the [Workshop4] script and the [EUR/USD] asset, leave the [Period] slider at 60 ...

Automated Trading & Backtesting Course - Part 2: System Development

Commercial members apparently can not post in other forums - at least I can't, so I have to post here.

Martingale - the sad truth

The next line in Alice's system places a stop loss limit: Stop = 2*ATR(100); Stop is a predefined variable that Zorro knows already, so we don't have to define it. It's the maximum allowed loss of the trade; the position is sold immediately when it ...

Automated Trading & Backtesting Course - Part 2: System Development

We're now going to analyze the code. At first, we can see that the function is now named "run" and not "main". "run" is also a special function name, but while a main function runs only once, a run function is called after every bar with the period ...

Automated Trading & Backtesting Course - Part 2: System Development

Let's start. The point of trading is knowing the moment when it's good to buy, good to sell, or good to do nothing. Any trade system uses market inefficiencies - deviations of the price curves from random data - for predicting future prices and ...

Automated Trading & Backtesting Course - Part 2: System Development

The second part of the course, about system development and testing, begins here: url If anything was unclear in this first part of the course, just post your question here.

Automated Trading & Backtesting Course - Part 1: Programming

Thanks, that's good. I found it very hard, if not impossible to develop a profitable system on 1-minute bars, so even the modest profit factor 1.1 can be considered a success. Which spread and slippage were you using for your simulation?

Would you invest in this system?

Before even looking into the report, the most important info is how you produced it. Is it in sample or out of sample? In sample backtests are meaningless - you can produce any backtest report with a trade simulation from the same data for which the ...

Would you invest in this system?

At the end of our programming introduction let's do a practical example of a while loop. Run this in Zorro: function main() { var n = 0; while(n < 10) { n = n + 1; printf("%.f ",n); } } This little program adds 1 to the variable n, prints the ...

Automated Trading & Backtesting Course - Part 1: Programming

Systems almost never fail because they trade in the wrong direction. They fail because they generate their trade signals from random noise in the price curve.

Automated Trading & Backtesting Course - Part 1: Programming

We've talked a lot about expressions, but what is an expression? An (arithmetic) expression is a sequence of variables, numbers, operators, etc that are linked together. You can have simple expressions that look like the one below: if (indicator > ...

Automated Trading & Backtesting Course - Part 1: Programming