1000 Pips per Month with a Single Indicator 14


Ciao a Tutti,
to be honest the title of this post is not entirely correct, for two reasons: the figure of 1000 pips per month is grossly underestimated (it could be easily twice as much) and the “Single Indicator” is our DuettoFX which – by definition – is the combination of two indicators! So if you want you can read above “2000 Pips per Month with a Duetto Indicator” 😀
This post is the follow-up of “DuettoFX Wins 90 Pips per Day” where I performed an edge ratio analysis of DuettoFX over the last 5 months. I’ve coded a couple of MQL4 scripts in order to be able to automate much of the work involved with this kind of analysis. Therefore I’ve been able to extend the analysis period from 2010.01.01 to 2012.02.15 (25 months and a half) and to 10 hourly charts relative to 5 DuettoFX “inverse” setups (EURUSD vs USDCHF, GBPUSD vs USDCHF, AUDUSD vs USDCHF, EURUSD vs USDCAD, and AUDUSD vs USDCAD). As a result the amount of data I have analyzed this time is more than 6 times larger then the previous analysis (884 trade in total).

Here is the summary table:

A brief reminder: when a candle closes with DuettoFX’s spread <= -2 a short trade  is opened at the beginning of the next candle. When a candle closes with DuettoFX’s spread >= +2 a long trade  is opened at the beginning of the next candle. After a trade is opened we measure MFE (maximum favorable excursion) and MAE (maximum adverse excursion) as number of pips until the next trade in the opposite direction is signalled, as well as the exact number of pips won or lost by each trade. The resulting trading strategy is quite rough, because it keeps the account “always in the market” and it is not able to protect most of the potential profits. Nevertheless this basic strategy is still able to pocket 1 thousands pips per month on average, which is an extraordinary result. My humble opinion is that this result could be doubled once we figure out a fairly good exit strategy (of course we are working on this aspect).

Please note that some of the curves are flat in the end because this chart has “number of trades” on the horizontal axis and such number is different (as low as 78 and as high as 102) across the 5 DuettoFX setups under analysis. The following chart is even more encouraging, because it clearly shows that the profit potential (measured by MFE-MAE) is huge and quite consistent during the entire 25 months period and across all the pairs:

As you can see the profit potential (about 4 thousand pips per month) is 4 times bigger than the profit gained with our “basic and always in the market” trading strategy.

There is also a special way to trade DuettoFX manually that we’ll reveal in a post next week. The last two reversal signals on EURUSD using this method were on the 13th of January and on the 8th of February :-)

DuettoFX will be available tomorrow (or the day after tomorrow at most) so stay tuned 😉


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14 thoughts on “1000 Pips per Month with a Single Indicator

    • Paolo Post author

      Yeah the same sort of feeling I had when I finished elaborating all the data 😀 By the way, the results given by the MQL4 scripts over the last 5 months are identical to the ones I got with my manual backtests, so I’m pretty confident that the figures in this post are accurate.

    • Paolo Post author

      DuettoFX gives entry signals that are pretty reliable. The problems is with exits if you want to use DuettoFX inside an EA. The basic strategy can be easily implemented in an EA which would be already profitable with a PF > 1.5. However we are working on an exit strategy in order to better exploit the profit potential that is available. It’s a pity to see many trades that go in our favor more than 200 pips and eventually are closed with only a handful of pips of profit. A DuettoFX based EA with a solid exit strategy can really rock :-)

  • Paul

    I can’t wait to use this but imho manual trading rocks! What our brain computes when we ‘weigh up’ what’s on the screen etc. is ultra complex and atm it is tricky (if even possible) to code an EA to do this much without causing major bugs and/or cpu problems…

    Come on tomorrow…..hurry up :-)

  • Jono

    Gday A & P,
    this stratergy looks AWSOME !! even if we had an ea to get us in to
    the trades, and then we check it a couple times a day, and close out
    manually ,when we see retracement ,would be good for starters.
    like everyone before me i am eagerly awaiting this product.
    uru4now :)

  • Tony

    During the 25 months test period for DuettoFX can you please advise what was the highest floating loss peak to trough, also the Max Draw-down for closed positions.
    Am I right to assume that the MAE is the floating loss on open positions? Thanks for this fresh approach to FX trading.
    Tony

    • Paolo Post author

      Hi Tony, thanks for this very interesting question. It is not an easy one and honestly I cannot give you an exact answer, because I have the list of transactions per pair and I’m not able to put them all in chronological order in order to assess the true floating DD. However I can say that for EURUSD (when traded alone against USDCHF) the widest excursion in the balance line starting from a peak is about 900 pips (beginning of 2010), for EURUSD (when traded alone against USDCAD) it is twice as much (mid 2011). If you want to limit drawdowns then it is better to skip duettos involving USDCAD. You are correct when you say that MAE measures the floating loss on open positions. However if you trade DuettoFX using sensible SL and TP levels you may never experience the floating loss given by MAE, because in most cases you would have closed your position (with a profit or with a loss) before that point. Good luck with your trading 😉

  • Paul

    Hello Paolo,

    You mention “If you want to limit drawdowns then it is better to skip duettos involving USDCAD”, yet the USDCAD pairs show the greatest cumulative equity – they are the top four curves.

    How is this so?

    Cheers,
    Paul

    • Paolo Post author

      Hi Paul, the four curves involving USDCAD are “on top”, but that doesn’t mean they are “the top” performing. I may have placed them as the first 4 curves in the cumulative equity graph (i.e. at the bottom). Positions of curves in this graph do no matter at all: only the overall sum matters. I suggest to skip duettos involving USDCAD because in the first table you can see they are the ones with the smallest profit factor and net pips. Currently I’m running the DuettoFX Swing Trader EA on AUDUSD versus USDCAD because the dynamic take profit approach ensures a better profit factor and net profit 😉 On the contrary the table on this post refers only to the “always in the market” approach (no TP and SL whatsoever).