Monday, April 20, 2015

EURUSD Looks to Have Topped as Projected


The EUR/USD has appeared to have to topped as projected last week.  It has followed the channel resistance well so far.  A nice close beneath the previous low will also break down the upward sloping channel at 1.0710.  A nice close beneath that level should trigger heavy selling pressure with the wave ii) high remaining intact.  Once we get a convincing move downward I will restructure the chart and channels to the downside.  Look for lower levels immediately from here.

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Thursday, April 16, 2015

EURUSD 30min


Looks like I was too early on the calling an end to the euro's correction so I had to relabel my wave count.  The rally is in choppy overlapping waves so I have little doubt this is a correction.  There is a confluence of resistance from the 61% Fibonacci level and the hasty channel I drew at 1.0837 that should cap the rally.  We might get some volatility tomorrow morning with CPI data coming out, so a nice shot higher and reversal lower would be a good sign a top is in.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Tuesday, April 14, 2015

EURUSD 15min Tuesday




The euro is playing out as expected, more or less.  I count a nice 3 wave move, ending with an impulsive wave "c" and stalling at the 50% Fibonacci retracement level.  So the correction could easily be completed right now.  If so, the euro should be headed down immediately and not come near the 1.0812 level, which is the wave i) extreme.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Saturday, April 11, 2015

EURUSD 15min Chart


Let's get to some good old fashioned wave counting.  The EURUSD is in a clear downtrend, however the 15min chart suggests modestly higher levels when the session starts Sunday afternoon (US).  This should bring about a good opportunity to sell.  Look for Fibonacci and wave iv resistance at 1.0690 for wave iv) to end.  It could carry higher, but the rally should be capped at 1.0800, however I doubt it will get that high at all.


Looking at the Elliott Wave channel we can see that it has held very well so far, so let's also look for this channel to contain the EURUSD rally.  There is a confluence of Fibonacci and channel resistance at 1.0640 should this correction higher meander for several hours.  If it's a sharp rise right at Sunday's open, then I'll be looking for 1.0670 to contain the rally.

Either way, don't over think this one, the EURUSD remains in a strong downtrend.

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Friday, April 10, 2015

EURNZD 4hr



I found this strategy using StrategyQuant Pro v3.8, and I trade it in the Principle Analysis Portfolio.  I like using larger timeframes for cross pairs like this one since I believe they are more volatile and erratic pairs, and therefore harder to identify a long term pattern on short timeframes to trade from.  The larger timeframes you use, the more smoothed out that volatility and erratic behavior becomes.  I also feel it's hard to find trending strategies in these pairs, so for this pair I looked for, and found, a range strategy that is fairly complex.

So here I found a nice 4hr timeframe strategy that captured 23,172 pips over the past 9 years.  Like all my strategies, I use .01 lots on MT4 and a $5,000 account balance to base this data on.  You can see that drawdown is minimal, only $126, or 2.5%.

I also like to make sure that a lot of trades have been executed because the more trades executed with proven success means the more likely it is that this strategy will work moving forward.  In the larger timeframes like the 4hr and daily, this can be difficult.  But here I have just over 500 trades over 9 years which works out to be about 55 trades a year, or about 1 trade a week.  For a 4hr strategy, this is perfect.  Also note the outstanding Return/Drawdown ratio of 18.38.  This means that this strategy makes $18.38 for $1 of drawdown.  This is excellent in my view.



This chart shows exactly what I'd expect when reading that initial data; a solid move from the bottom left to the top right of the chart with minimal drawdown.  The stagnation period was short and occurred at the start of the data period tested (shaded in red).  The blue line represents the optimized strategy that has a slightly better performance than the original strategy (gray line).



This is the Trade Analysis and is something I like to see, which is a lot of green and blue.  You can see that every year this strategy made money; granted, 2006 was basically flat, the following years show solid and steady gains as reflected in the previous line chart. This strategy trades well in almost all hours of the day except in what appears to be the early hours of the European session.  However, since this is a 4hr strategy it is difficult for me to filter those two hours out without eliminating the profitable hours surrounding them as well.  So I'll leave them in place.  Friday is the most traded and most profitable which tells me this strategy likes the Friday morning volatility of the US session, probably due to big data releases and positioning prior to the weekend from the EURUSD, which will effect this pair.  The fact it is a range strategy also makes sense why this day is a good day for this strategy to trade.

The main thing I look for here is to have profitable years every year.  I will tolerate one, or maybe 2 losing years, especially if the losing years were early in the sample period.  But I do not want to see that most of the overall profits were made in just a year or two as this probably just means that the strategy worked well in only a specific market condition that occurred during that period, but that it will not endure through all types of market conditions moving forward, and therefore it is not robust.  So far, this strategy looks good as it can profit over a long period of time consistently.  So let's move this strategy forward.


Now on to the tough tests, the robustness tests.  Here are the results form the Monte Carlo analysis I performed on the strategy.  These are not fantastic results, but still overall pretty good as all of the runs went from the bottom left to the top right of the chart, and there is a 95% probability that the strategy will have resulted in a gain of $1,984 if the data was altered to simulate the strategy moving forward.

However, the Net Profit still dropped over $300 from the original strategy, and the Drawdown % more than doubled.  What's most concerning here though is that the fantastic Return/Drawdown I talked about earlier declined from 18.38 to 5.45.  That is a huge drop and suggests more volatility and drawdown with less returns will occur moving forward.  Not what I wanted to see, but taken in the proper context, this is still a viable strategy.  But let's see further test the robustness of this strategy with the Walk Forward Optimization results.


Walk Forward Matrix Optimization is a very rigorous optimization and robustness test for strategies.  Because of this, it is very difficult for many strategies to pass this test.  Walk Forward Matrix Optimization is a set of Walk Forward optimizations performed with a different set of optimization periods, parameters, and out-of-sample percentages (robustness tests).  The results will tell if your strategy will benefit from periodic optimizations, and if the strategy is robust enough to sustain a solid profit in the future.

You can see from the results that this strategy performed well during Walk Forward Matrix Optimization, and actually had a small increase in Net Profit from $2,317 to $2,510.  The report shows that 25 out of 30 parameter combinations passed, the best grouping of combinations passed 9 out of 9 times, and all runs produced solid in-sample and out of sample net profit results.  Lastly, the test tells me that this strategy is best reoptimized every 239 days with a history of 717 days on 11 runs with 25% out of sample.  Basically what this means is that every 8 months I will reoptimize the strategy on about 2 years' worth of history data.

This strategy shows a steady profit with minimal drawdown over a 9 year period, the currency pair and timeframe along with the type of strategy make sense, and robustness tests show this strategy can do well moving forward.

Follow the performance of this strategy and others at Principle Analysis Portfolio.
Find and develop your own strategy: StrategyQuant Pro v3.8


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Friday, April 3, 2015

GBP/JPY 5min Strategy


I trade this strategy in the Principle Analysis Portfolio.  The GBP/JPY is a very volatile pair and can be tough to trade manually as a result.  Trying to find viable large timeframe strategies on this pair would be a challenge in my view as this is more of a short term, sharp moving, pivoting pair.  So I used StrategyQuant Pro v3.8  to develop small timeframe range method that uses the Average True Range volatility indicator to catch big moves in a short period of time, and sustain a profit over a long period of time.

These reports are traded based on a $5,000 account with the smallest lot size of MT4's .01 lot size to allow everyone to easily do the relevant math to translate that to their own trading lot sizes.  This strategy made 18,426 pips in about 8 years with a minimal drawdown of $273 (5%), and a Return to Drawdown ratio of 5.72.  This means that it returns 5.72 times more money than the money lost during drawdowns.  You can see from the above chart that although 2008 was a stagnate year for the strategy, all other years have a nice smooth and steady increase.


This is quite simply the monthly performance of the strategy returned in US dollars per every .01 lots.



The above charts breakdown the trading timeframes a little more.  I like strategies that can trade well and in the profit every year and every day of the week.  2008 was not a profitable year, however the loss was small, and anomalies in market behavior should be allowed at some degree.  In forex, I allow for strategy success during a specific timeframe because some pairs are more active in certain sessions than others.  And some strategies rely on volatility and volume to be successful, and so picking a specific session in the 24 hour cycle is definitely an acceptable method that does not reduce the robustness of the strategy.  As you can see with this strategy, this pair trades well during the European/London session (timezones in chart are GMT +0),  This makes sense since this pair includes the British Pound, and the most profitable period surrounds the opening hours of the session.



This the Monte Carlo analysis I ran on the strategy.  This tests strategy robustness, which basically determines if the strategy is form fitted to specific set of data and/or timeframe, or if it's able to be successful in any period and data selected, which is how future market movement would play out.  For this test I randomized the order of the trades, strategy parameters with a probability of 20% and a max change of 20%, starting bars with a max change of 100, and I randomized history data with a probabiliy of 20% and a max price change of 10% of the Average True Range volatility indicator.

The results are what I could call decent, but definitely not outstanding.  The test returns a 95% degree of confidence that the strategy will not produce a result below $1097.  This is quite a bit beneath the original strategy result, which is something I have to watch for moving forward.  But again, this currency pair is extremely wild and volatile, and I'm trading it on the 5min timeframe.  So any amount of stability in the strategy is something to hang on to.  You can see that all the robustness tests did perform fairly well (different colored lines on the chart), so regardless of the reduction in profit from the original strategy, every test still produced a solid profit nonetheless.



Walk Forward Matrix Optimization is a very rigorous optimization and robustness test for your strategy.  Because of this, it is very difficult to pass this test.  Walk Forward Matrix Optimization is a set of Walk Forward optimizations performed with a different set of optimization periods, parameters and out of sample percentages (robustness tests).  The results will tell if your strategy will benefit from periodic optimizations, and if the strategy is robust enough to sustain a solid profit in the future.
You can see from the results that this strategy performed well during Walk Forward Matrix Optimization, and actually had a small increase in Net Profit from $1,566 to $1,626.  The report shows that 8 out of 18 parameter combinations passed, the best grouping of combinations passed 7 out of 9 times, and all runs produced solid in-sample and out of sample net profit results.  Lastly, the test tells me that this strategy is best reoptimized every 321 days with a history of 747 days on 7 runs with 30% out of sample.  Basically what this means is that every 2 years I will reoptimize the strategy on about a year's worth of history data.

I feel that with the parameters, trading method and timeframe established for this pair, along with the timeframe and currency pair used, this strategy is robust enough to trade in my portfolio and is now an active part of my portfolio.

Follow the performance of this strategy and others at Principle Analysis Portfolio.
Find and develop your own strategy: StrategyQuant Pro v3.8

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Tuesday, March 24, 2015

EURUSD Poised to Fall

EURUSD looks like its round of 2nd wave rallies is coming to an end. On the 30min chart it printed new high followed be a new low. This might be a subtle clue that resistance at this level will hold.

If the count is correct, it's dollar bullish so look for the dollar to recover and move higher across the board soon.