Shaltrade.com - Effective Trading Concepts

Folks – I have been forward testing the Forex Alpha EA (Expert Advisor) version 1.1 – which is a trend following trading robot. I have been forward testing an earlier version of the Alpha EA for a month now. I have been testing it on the EURUSD, 5minutes – and so far it has had a profit of 1050 pips, with 60% win rate. Here is the performance graph for a month till today:

What does the alpha EA do?

This EA looks for trends in a smaller timeframe, and enters each trade with a tight initial stop loss (based on price action) and a percentage trailing stop.

So far this strategy has been able to catch most of the big moves, while keeping losses to a minimum during sideways markets.

I am currently working on a newer version of Alpha (version 1.5-5) – which uses

• better money management
• better risk management
• multiple entry orders that can be scaled out using different exit strategies
• multiple exit strategies and
• filters for staying out of sideways markets.

I am going to forward test this newer version on currencies expected to make big trending moves in the next couple of weeks:

• EURUSD - The Euro is likely to break down below 1.31 for a 200-300 point move. Technically it’s at a 50% retracement of its December highs and Early March lows. Fundamentally as well, the Euro looks weak in the short term as because of that European Central Bank is going to reduce interest rates this week without any increase in spending by the major Europe economies.
• USDJPY – The Dollar yen is also at a 50% retracement between August 08 highs and January 09 lows. Both the Dollar and the Yen are seen as safe-haven currencies, though the Yen is likely to be perceived as stronger in the short term since the US automakers have been hardballed. Also, Japan is a trade surplus economy, and the Yen is generally stronger.
• EURJPY – The weak vs. strong arguments apply, with extra power behind them. So the trend is likely to be downward.
• GBPUSD - The trend is very much downward – though there may be a reactive bounce since the trend is somewhat overextended, with quite a few technical divergences. Lots of news events this week (US unemployment, British Manufacturing) may provide excuse for that kind of bounce.

Overall - this is an exciting time in the Currency markets - since trends are going to be stronger and last longe. Breakout systems like Double Eagle are likely to do well on shorter time frames (hourly, 30 and 15 minutes) while trend following systems are likely to do better on longer timeframes (H1, H4, daily).

Disclaimer: Posts on this blog, including the current one, are for education purposes only. Nothing in this presentation is a recommendation to buy or sell currencies and I, the author of this blog, am not liable for any loss or damage, including without limitation, any loss of profit which may arise directly or indirectly from the use of mentioned tools or reliance on such information. Trading in the off exchange retail foreign currency market is one of the riskiest forms of investments available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.