My Upcoming Trading System

[Merlin]

Here's a quick update on my upcoming trading system.

When you are in the mental conception of a new trading system, you just get bulk ideas as to when to enter and when to exit or reverse a trade but when you start programming it and start looking very closely at those entry and exit points, you get into details and realize that you will need to add MANY small little rules and that slows down the final programming of it.

For example, in the chart below, let's say that whenever the price bars are above the green line, I color the price bars blue and trade on the up (Long) direction and when they are below the green line, I color the price bars magenta and trade on the down (short) direction.

This "overall concept" is the bulk of a system but when you look at it closely, you see that there are times when the price bars are jumping above and below that green line many times in a row (see red circles on the chart) and then you have to stop everything and stat thinking of a solution for this new problem.

I'm telling you this because I just solved one of these little detail problems that can drive mad the most ice cold programmer. They may count for 10% of the entire system but they count for 90%+ of all the time wasted at programming it.

Because you see, for humans with eyes on the chart, you don't trade during those "hovering times" but for an automated trading system (aka trading robot) it's our PC that will need to make the decisions at 4 Am when the market is exploding and you are in the middle of your sleeping period so you will have to predict all kinds of weird days like these and program a set of rules for your PC to follow so that it knows what to do during those times.

Even though I thought I was in the programming Phase, I realize that the Conception Phase is not very far behind but things are moving and it's looking better each day now.

I'm not sure if my High Vibe NAP is helping me solve it step by step as my vibration goes up a bit each day but it's seems to be working as 100% of the bulk of the system is complete and now I would say that 90% of the small details problems are solved.

I also found something VERY COOL regarding backtesting and forwardtesting which could speed up the launching of my system. I will tell you about it in the next post later on today.

Merlin

[actgi]

Hi Merlin...It's been a while since I've visited BUT I'm in!

[Merlin]

Now back to this cool tip that I learned about back and forward testing a system.

Backtesting means testing your trading system to see how mugh it paid in the past and forwardtesting is testing the system in weeks and months that FOLLOWS the backtesting period.

So there are 2 ways you go do this...

First let's pretend that we are May 1st 2014 and we use May 1st 2010 as the starting date for our tests.

One way to do it is to run the backtesting period from May 1st 2010 to May 1st 2014 and then forward test after May 1st 2014 but you will have to wait day after day after day to see if the system pays after that backtesting period and that sucks.

The best way to do this is pretend that you are May 1st 2013 instead of 2014. So you backtest from May 1st 2010 to May 1st 2013 this time and once you have found the best settings for your system, you forwardtest it AFTER May 2013 all the way to My 2014 as if you would finished programming your system in May 2013 and were forwardtesting it for a full year in the future (May 2013 - May 2014).

The reason for doing this is that most system are tweaked and modified so much (aka curve fitting) to get the best results from past trading data but when you test the system after this backtesting period everything falls apart so you need to give yourself a good forwardtesting period to analyze if you have a good system or not.

If you have a system that paid a minimum of $5,000 each month in the past (ex: May 2010 - May 2013) and then forwardtest it and get similar results from May 2013 - May 2014, chances are the system is solid.

You just have to make sure that the tweaking and modifying period of backtesting does NOT include the forwardtesting period.

Since I only have 6 months of Kase bar data, I will backtest between month 1 and month 3 and then once I see good results, I will forwardtest it from month 4 until today. I will also test it using Minute charts but I can predict right away that the results won't be half as good as those with Kase bars for the reasons I explained in a previous post when I talked about the advantages of Kase vs Minute charts.

If the results from the first 3 months are similar to the results of the last 3 months, I think we will be in business and I will offer it to TradeStation as a free trial trading system to lease somewhere during the month of May 2014.

The beauty with this free trial period is that you can watch it run on your demo account for the 1st week and if it pays as usual (around $1000+ per week) then you can use it on your real money account for the 2nd week of the free trial and hopefully make enough money to pay for itself when the trial period is over.

In other words, you will never have to take your own money to pay for it since it will be paid by the profits that it acquired on its own during the free trial period and THAT is really cool.

Cheers,

Merlin

[Merlin]

I just remembered something really cool about an automated trading system.

For the past 10 days or so, the EURUSD chart is doing almost nothing, it's consolidating from the previous big $2,000 move it did between April 6-13. Below is the chart of the EURUSD (Euro vs US $). It goes up and down with no specific trend.

So if you had my system this past 10 days you wouldn't have made a lot of $ right?...or did you hehe

You see, a trading system is not confined to a specific chart just like Stocks, you have the Apple chart, the Google chart, Ford, Microsoft, General Electric charts and 1000s more and with Forex, there are other charts too that you can use your system on and I just looked at another currency pair, the GBPAUD (UK Pound vs Australian $) and this is what it did today.

As you can see on the right, it went from 1.80500 to 1.81500 so a nice $1,000 day move. It's also moving up and down but in this chart, the price moves in a more smooth fashion and you can clearly see the nice uptrend.

Now take a look at this chart below of the GBPNZD (UK Pound vs New Zealand $). Wow It almost did a $2,000 move today.

That's the beauty of having an automated system because when you are trading using your eyes, you can not only miss the big move on the chart that you are normally using each day (ex: EURUSD) because you were sleeping when the big move occurred but even when you are awake and looking at your favorite chart, you may miss the explosion in price that are happening in other charts like in the case of this GBPAUD chart here.

So your eyes may have missed it but NOT your computer and its automated system.

So my clients may pay me $1,000/month for my system but they could make not only between $5,000 and $10,000 on ONE CHART but use it on many other Forex chart and make that amount on each chart too. How cool is this?

As I write this, TradeStation is working with 56 different Forex charts but the majors Forex Charts are: EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF and USD/CAD.


Merlin

[xcfastdude]

Merlin you are beasting it, man. I have faith in your abilities and
can't wait for the free trial so I can make money to lease the real thing and really be rolling in dough

[Merlin]

I found something really cool lately. I now call it my "Christmas Tree System".

Merlin

[Angel]

Merlin is your trading system usable for newbies? my sisters want to pool their money together to start something like this (after completing their NAPS for awhile).

Loving the idea of the automated system....