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| Technical Report : 10-March-2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Friday trading offers good trading opportunities - but there is the associated news related risk that goes with it. PhiBase PRO trades as per the technical pattern formations, when Fib levels and indicators are in agreement. A brief technical analysis of EURUSD and what the PhiBase long term indicators internally show is explained below: The screen shot shows the pattern encompassing the EURUSD. The pair is in a clear ascending channel formation, the top which was shorted by the EA for on 28th February booking in gains between 125 to 250 pips on different accounts. The reversal at 1.3090 on 7th February clearly confirmed the pair continuing to hold within the confines of an ascending channel formation. Prior to the Short on 28th Feb, the EA had a LONG trade (1.3275) on 23rd Feb which also booked in gains in excess of 100 pips - This trade was riding the newly formed channel's leg which was going up. On Friday, PhiBase had calculated the support at 1.3140 based on Fib level and channel support. With all indicators being supportive, the EA waited for the retracement to touch the 38.5% fib level from the bottom at 1.3090 to the interim high of 1.3285 and then entered the BUY at 1.3225. Technically the trade was valid, with the potential target at 1.3500 and a strong support between 1.3150 to 1.3090 levels. The risk reward was at a very attractive 1:3 ratio. The level 1.3288 was the 50% Fib level - but the short was not valid since the EA first looks for a pattern, then Fib levels and finally the supportive indicator values. In this case no pattern matches were valid for the sell. However the Long trade was warranted based on the double bottom formed at 1.3090. Predicted Reaction to NFP Release by Barbara Zigah Scenario A: If the labor data is better than expected and the previous month’s data is also revised upwards, the EUR/USD might fall 100 pips.
Scenario B: If the data is worse than expected, and given what appears to be a positive resolution to the Greek debt swap, the EUR/USD pair might break range to the upside and could swing 100 pips higher.
Scenario C: If the data is mixed, we could expect that the EUR/USD pair would continue to trade within a range between 1.3200 and 1.3300.
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Friday Trading - Should PhiBase PRO be allowed to trade on Fridays? Trading during major news release is very tough - The market usually prices in and positions itself based on consensus estimates/expectation of the news. This pre-release price action generally provides PhiBase PRO with some good trading opportunities. We have conducted some detailed backtest to increase user confidence in the trading strategy used. The following backtests have been conducted using Dukas Copy tick data (April 2007 to December 2011). The forthcoming PhiBase update will incorporate the option to let users stop the EA from opening fresh trades on Fridays. The back tests presented below shows the EA's performance when allowed to trade on all days and when it Friday trading is disabled. We have also conducted a back test which presents results obtained by allowing ONLY Friday trades (trades allowed between +1 hr GMT till Friday Close). The trades were allowed to be carried over the weekend and close as per the EA's logic. Please note that the version used for the backtest is exactly the same as V1.23 - Only a option to enable/disable Friday trading was implemented in v1.24 Beta to enable testing. Fixed Lot size of 1.0 was used to show undistorted results of the trades. |
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| Back Test with and without Friday trading (v1.24 beta) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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All tests conducted with the following settings: Targetlevel_1=0; TrailSL_1=0; Targetlevel_2=0; TrailSL_2=0; Higher_Band=150; Lower_Band=100 Fixed Lot Size - 1.0 - Friday Trading = True Trading Allowed on All Days 
Click Here to download complete MT4 Strategy Tester Report Fixed Lot Size - 1.0 - Friday Trading = False Trading Disabled on Friday between (+1 hr GMT to market close) Positions were allowed to be carried over the weekend and trade exit was as per EA's logic 
Click Here to download complete MT4 Strategy Tester Report Fixed Lot Size - 1.0 - ONLY Friday Trades Trading enabled ONLY on Fridays between +1 hr GMT to market close Positions were allowed to be carried over the weekend and trade exit was as per EA's logic 
Click Here to download complete MT4 Strategy Tester Report |
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The BackTest results show that the EA performs better when it is allowed to trade on Friday and during news. The market anticipates and positions itself based on consensus estimates - PhiBase PRO is able to capture these price actions with reasonable accuracy. The back tests show that PhiBase PRO has a success rate of over 60% even during Fridays. A concise and brief technical report on the trade setup from PhiBase view point will be updated two hours prior to the NFP release (The report will also sent by email). Members can study the report to decide if they would want the EA to trade during the news release. They may also decide to let open positions run or close based on their risk appetite. Some of the popular Chart patterns have a success rate of about 50-60%. When combined with the human trader's instinct, ability to interpret news, cross-referencing with other parameters and factors, this becomes profitable manual trading strategy. We have used a few popular and commonly used chart patterns. Our implementation is to enable trading these patterns automatically. Due to the complicated nature of implementing news interpretation/human intelligence, other methods like indicators, predictive trades are being used to put odds in the EA's favor. Trading patterns only, without using additional information will result in success rates between 35 to 50%. This is almost the same as trading solely based on Fib/Classical/Camarilla levels. Sometimes the levels/patterns will be respected to perfection but at other time they will seem non-existent. PhiBase takes in quite a large array of indicator values - H1 time frame based indicators are used to minimize GMT related differences. Very slow indicators are used to provide inputs to know what is happening on the larger timeframe (H4). These indicator along with the H1 bars enable the EA to identify a set of points which we use as a pattern bounding box. Instead of relying on absolute values of bars and indicator values, the normalization is used to eliminate time-price range related info to produce simplified set of 8 point pattern within the bounding box. So the indicators being used will help in minimizing broker related differences. The indicators also use median values instead of closing values. This better since the closing values vary between brokers (especially on historical data). Difference between brokers cannot be totally eliminated. Most trades will be similar when considered over longer periods of time. If the popular chart patterns work in future, PhiBase will also work. The chances of it continuing to work even other wise is slightly more because it does not depend on completed patterns for trading. The important thing is : we have implemented good features to put odds in the EA's favor. We will continue to develop this further and not be stagnant in an ever changing world. |
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