MANAGED ATC Discussion

Hello friends, I'm proud to announce the start of my new managed account. It has been around nine months since I closed the last managed accounts. There was no crash of the accounts. I mainly lost the profit I had made. In short, I saw loses accumulating and I began to question whether my EA and overall strategy was good enough to survive in the often volatile forex market. Here was my situation in a nutshell:

I had spent several years designing EAs - focusing on one main EA - and my EA performed well on the most recent years' backtests (09 and forward). I was very excited when I reached that point in development. But on certain other years the results were bad. So my thought was that I could manually control things when needed and continue to improve the EA to address the bad years, and eventually a ten year backtest would confirm what I believed - that I had a winning strategy.

Long story short, I couldn't improve the EA or strategy to survive and significantly profit on a ten year backtest, and in the midst of a chaotic market I didn't feel it was responsible to handle anyone's money, so I asked my friend/investors to pull their funds. I went back to the drawing board, working on my EA and strategy, and I vowed I would never come back to forex unless I could produce a strategy that significantly profits on a ten year backtest with a max draw down of 20%. I personally believe manual trading is the most risky thing one can do so I avoid it (a conversation for another time).

After almost 9 months of work (and five years of cumulative work) I now return with a strategy that prospers on a 12 year backtest with a max 20% dd. Accomplishing this goal required a changing of many aspects of my original strategy. For instance, profit goals had to be reduced from a strategy that could produce 100% + returns in one year (but then potentially lose 30-40% in other years on backtesting) to a strategy that may only produce as little as 10% return in a year's time (but averaging 1-5% per month), but only has a worse case scenario max dd of 20%.

I will have a lot to say about backtesting and my new strategy as things play out. Right now I'm just excited to be coming back to the forex I love. I'm brimming with confidence and I believe over time this account and strategy will reveal itself to be a strategy that will be appealing to investors and large capital. I plan to be a CTA in the near future. I will only trade with NFA regulated brokers.

My expectations for this account will be an average of 1-5% return per month. Let's see if the market will correlate to what backtesting says should be the case. Don't get me wrong, there is not a straight and constant rise in profits on backtesting. There is the 20% dd and sometimes months of sideways action, but overall the average should be as I have laid out: a relatively safe and profitable approach.

Best Wishes to everyone
Wayne

A CORRECTION: I just realized that I had incorrectly calculated the average percent of gain for my strategy as taken from my 12 year backtests. I previously stated the average should be between 1-5% (which was actually a 5% average, but which I was stating as an EXPECTATION of 1-5%).

The actual - corrected - average from backtesting is 11.6% gain per month BUT regardless of this figure from backtesting I will still keep my stated expectations at 1-5% per month.

In my opinion a system must - MUST - produce significant profit on backtesting in order to have a CHANCE of working on live trading. And there are of course always unexpected variables. For instance, I will likely not trade NFP days due to the potential DD.

This first month has been rough as some bugs had to be worked out and the market has been quite volatile. This account and strategy, however, will stand the test of time. I am certain of it.

Best to All
Wayne

LEARNING TO LET GO:

In order to chronicle changes in this account I want to state that as of May 25, 2012 I have moved my system to VPS where it is much easier for me to leave things alone. As I explained in my first post, in the past I was NOT completely confident with my system because I knew that backtesting showed there were dangers with the drawdown - based on a ten year time frame. I spent nine months addressing this issue and came back with a system that produces notably less profit but has a max of 20% draw down on a 12 year backtest.

I then started this new system at a bad time in the market and as volatility set in I found myself cutting my trading on and off. The result then was that I missed nearly every successful trade and caught most of the losers.

I had to step back and ask myself what am I doing, this system took me years to perfect and has proven itself over a long backtest. I ran the backtest from March 20 when I stared this new account and the results showed I would be up over 8%, but thanks to my interference I'm down 4%. Not a big deal, but this was enough to motivate me to take control of the situation and move things to VPS where I let the system run and stop trying to outguess the market.

I am completely confident that this poor beginning will be only a blip in the bigger picture of a chart that will rise higher and higher over the course of the many years this system will be running. So I will custom set the time to May 25 and view this as a final fresh start.

To successfully implement a winning system often requires many steps. I believe I'm at the final step now.

Best Wishes Everyone
Wayne

Whether to trade or not to trade NFP with my system has always been one of the most difficult decisions. Nearly every time I have turned the system off I see I would of had a minimal loser or a big winner, but today i lost 3%. I'm pissed.

I picked the worst time of the year to start a new tracked system. Anyway, I know what i need to do. I need to conduct a ten year study of only NFP day trades and see whether these trades are adding or taking away from overall profit, and by how much.

This would be an exhausting study but one which i have always know i needed to conduct. I will update with the results when and if i get through it.

It's not that difficult. I need to locate the exact date for NFP (the first Friday of each month) for the past ten years (sounds fun so far) and then run a back test and look only for the results of trading on the NFP dates. Add and subtract from here.

This will be an interesting study, but not sure how long before i actually get it done.

Stay tuned.

Hello Everyone,

A friend asked me about how my system recovered the 10% loss in basically one day. He asked if this was from my EA or if I manually helped the recovery. I thought this would be a good opportunity for me to say a bit more about my system.

I have reluctantly changed the status of my system to mixed, but I say reluctantly for the following reason:

My EA does most of the work in my overall system. Nearly the first two months of running this system, I was interfering with the operation of the EA (an old habit I had to break from when I had reason to interfere in the past). As I indicated in a previous post I have overcome this interfering by moving to VPS and because I have 12 years of backtest results to give me the confidence that draw down and profit should reach certain expectations (if history is any guide which I believe it is).

So in short, most of the recovery of the losses has been accomplished by the EA, but…

I also use a very strict manual strategy in which I trade with one-third the size my EA trades with and I use a very tight stop loss (usually 15-25 pips). This is why there are so many small trades on the account. This manual strategy is based on trading what I call V patterns and N patterns for continuation of the V direction or reversal of a strong momentum move with the N pattern.

In the frustrating three months that have transpired I have never increased trading size or taken more risk than that which I have established from backtesting. What is most interesting is that the system can recover losses quite quickly, and drawdown is a much slower occurrence.

I look forward to the future and as I have stated before I am completely confident I am on the right track and over time this system will prove itself to hold a max drawdown of 20% and a decent return somewhere between 1-10% per month. Let's see what forward tests confirm.

Good trading to everyone
Wayne

Great week Wayne...... Sometimes the NFP giveth..... Sometimes The NFP taketh away. 😉