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This is a little study I did back in January of 2010 when I was interested in demonstrating which popular futures markets exhibit more trending behavior. To do this I devised a simple trend following strategy that consisted of a single 50-period simple moving average on a daily chart. The system only takes long signals. It enters a new trade when price crosses above the moving average and closes that position when a daily bar closes below the MA. I'm not attempting to create a trading system per say, but creating indicator that measures a market's trending characteristics. The rules are below: Because this is a trend following system, it should perform better on markets that exhibit trending behavior. I tested this system on some popular stock index futures markets and currency futures markets. The chart below is organized from left to right with the best producing market. Notice which markets are grouped to the left and which markets are grouped to the right. 2000 - 2009 Daily Bars – No Commissions – No Slippage I think this provides some evidence that the stock index markets do not have nearly the trending characteristics of the currency futures markets. More specifically, the Euro really shines as a trending market. I know from personal experience that I generate consistently better results when I trade my trend following strategies on the Euro currency futures as apposed to S&P Emini. In fact, I no longer trade S&P Emini with my trend following setups. If you have a trend following system and trade the stock index markets maybe you will want to take a look at the currency futures.
I decided to post up the Euro's cousin, the British Pound/USD Futures. Mainly, because I am trading it live every day and I've been able to put together a reliable and robust tradeplan using UTA. I trade a 144 tick chart and like the Euro, I begin my trading at the start of the US Equity Session, 9:30 est. Also like the Euro, the BP trades on the CME so we'll use exchange times as our time reference. Like the EC, I backtested about 6 weeks of trading, Feb 1 thru Mar 12th. I researched a tight plan with the intention of getting my trading done early each session. Two wins and a positive result meant I was done for the session, or, by 11 am cst if I hadn't yet hit my goal, I'd be done. Over the first 6 weeks I tested 83 trades, 60 winners and 23 losses! Not bad. 72.3% winners and a nifty +505 points. Since then, as of today's date, I've been posting my real trades (the trades I take and call live in the traderoom that I host every day). I now have 191 total trades, including the backtested trades; 132 winners and 59 losses for a respectable 69.1% win rate. April was a tough sideways month, with wins and losses evenly distributed, yet we were able to hang out just below our equity highs and remained poised to break out to new profit levels, which happened last week. Today we hit new equity highs again, and have amassed +819 total points. The stair stepping is forming nicely as you can see from the attached screen shot of our equity curve. I am using HVMM 2010 for this market as well. It's a great compliment to the EC. The different timeframes 144 vs 233, and the different rhythm that each trade in, make them not correlated enough to worry about. Their results do not track too closely day to day, other than the fact that they both seem to be consistent performers. Too much correlation is something to be concerned with but I just don't see it being a real factor in this case. Check out the Trade Distribution Frequency Histogram too. What a beautiful distribution of trades. Notice the strong bias on the positive side with the majority of our winners hitting around 16 to 18 points. Notice also how our tight trade mgt plan has ended up with about 10% of our trades stopping out with just 1 point. Many of those trades would have wound up losing, but we were aggressively eliminating our risk while also covering the cost of our commission. No pip spreads to worry about with futures! Notice also how our longs and shorts were very simimlar in personality. This is the type of thing we like to see. It shows a stable trade system that does equally well going long or short. Feel free to post comments, questions or whatever is on your mind. Start a new thread and share the results that you are discovering on your favorite markets. It's amazing what the UTA reveals to us. Get in the habit of posting your trades to UTA every day and soon you'll build up a valuable history of trade data that will help you improve your trading.
I thought I would start this out by posting up some results I've been getting trading Euro Currency Futures (EC). Everyone is trading EURUSD forex which is great. But so many overlook the fact that you can trade Euro/USD Futures contracts and get great results. I've got a UTA spreadsheet that I started backtesting the EC with. I began my backtest on Jan 25th with a 233 tick chart. I backtested a very tight and concise ruleset. Start time is 8:30 cst (exchange time) I tested a two position strategy. The 1st position gets out at a fixed target and the 2nd position uses a trailing stop. I'm using the HVMM 2010 trade strategy If a trade sets up, while my trailing position is still live, I will take the 'reentry' with the fixed position only. Quitting strategy was 2 fixed target winners and a positive result or, quit by 11 am cst. The strategy is to take what the market will give while quitting positive on most sessions. Trailing stop considered a bonus trade and didn't count towards quitting goals. The only caveat was that one of the trades had to have made more than just 1 tick to qualify for my stopping goal. I began posting my live trades in April. Here are the results after 351 trade entries. Remember, each position is entered as a separate trade, so if you put on two positions as described, you enter each one as a unique trade. So 351 trades is closer to 160 or so actual trades. Wins: 239; Losses: 112; 1 BE 68% win rate Profit Factor: 1.82 Expectation .26 Total Net Points: + 988 @ $12.5 per point Pre Cost Profit: $12,350 You can see by the diagram below that I started with some losses. In fact, January was relatively flat. But by sticking to it, the tradeplan finally took off and put together a great rally for about 2 months. Then a one step back occurred in April. Finally, you can see the two steps forward kicking in as the winners started to come in again. This is what should expect with a solid trade strategy that is winning about 2/3rds of its trades. One step back, two steps forward. Remember, wins and losses come at a random distribution. We can't control that. But, by backtesting and then posting our real trades into the UTA, we can determine a very real EDGE in the market. So long as we stick to the plan, the odds will work out in our favor and we'll get a natural action move to the upside with our equity curve, and then a reaction that flattens out or draws down some, and then a new action move to the upside again. This is the beginnings of your classic stairstepping equity curve, up and to the right. UTA and the vision it has given me, has instilled the confidence in me to show up tomorrow, and take my trades according to this plan.