OndaFX 28


Bollinger Bands are probably one of the most famous and used indicator by every trader. It shows a sort of wave (“onda” in Italian) that helps you understand when a price can be considered “high” or “low”.

Despite the fact that this indicator is quite easy to read it’s not that easy to trade.

We just developed a simple but effective strategy that can be automated and that has proved to be consistently profitable on EURUSD.

That EA is OndaFX.

As you probably know Bollinger Bands is a technical analysis tool invented by John Bollinger in the 1980s. This volatility indicator is available on the vast majority of trading platforms, including MT4 of course. Bollinger Bands are made up of three lines:

  • a moving average in the centre
  • an upper band that tries to define when prices can be considered “high”
  • a lower band that tries to define when prices can be considered “low”

In order to make a profit in the markets we always do our best to “sell high” and “buy low”, hence an indicator that pretends to measure the “highness” or “lowness” of the price surely grabs our attention :-)

However blindly selling when price breaks above the upper BB and buying when price breaks below the lower BB is NOT a strategy that can be profitable on any financial instrument and any timeframe. As usual we must find our “sweet spot” where this strategy can work profitably. That means finding a financial instrument, timeframe, reasonable take profit and stop loss levels and some trading filters that in the end make up a complete and reliable trading strategy.

I’m going to describe some building blocks of  OndaFX, so you can understand and trade this strategy.

First of all the best currency for trading this strategy currently is EURUSD, probably because it is the most traded pair with a high “mean reversion” personality. Secondly focus on H1 charts only and evaluate trading signals only when a bar closes. If a H1 bar closes outside the BB, then you can enter a trade in the opposite direction and aim at 20-40 pips, like shown in the picture below:

As you can see we have 4 trades (1 short and 3 long): each of them is opened at the open of the candle “after” the signal and easily grabs 40 pips.

Now let’s see the rules when a trade goes in the opposite direction from what we expect. In this case we just try to close the transaction at breakeven or with a small loss. This is a very conservative approach that works best in the long run, because it avoids bad trading scenarios when price continues to go straight in one direction after the BB breakout. Let’s see this picture as an example:

We add another short trade only when a candle closes below the median line, and only if the distance from the entry price of the first trade is reasonably big (from 20 to 40 pips according to volatility). Then we close the transaction at breakeven. This example (that comes right after the 4 winning trades shown before) suggests that we could make a handsome profit also in this situation, however our tests show that the conservative approach (closing at breakeven when more than 1 trade must be opened) is fairly superior for the overall profitability of this strategy.

Of course OndaFX EA incorporates other rules and automatically adapts to market volatility (unless the user wants to specify fixed pip levels), but the strategy is basically built upon the two observations shown above.

It may seem weird that a trading system so simple and based on a widely known technical indicator can actually be profitable, however we also know that keeping things simple is often a good design principle for trading systems.

That’s why the KISS acronym (“Keep It Simple, Stupid!”) is being used for more than half a century now to remember that most systems work best if they are kept simple rather than made complex 😉

There are a few simple but critical aspects that account for the profitability of the strategy implemented by OndaFX EA:

  • apply the strategy to a currency pair with good tendency to reverse to the mean (EURUSD is a nice choice in this regard)
  • select a timeframe that can be reasonably exempt from too much market randomness (like H1)
  • fix a take profit adjusted to current market volatility (we use ATR – Average True Range – for that)
  • if the trade goes in the wrong direction open another trade only after confirmation of a reversal (the BB median line is used for this purpose)
  • try to reduce the risk as much as possible by closing bad trades at breakeven or even with a small loss
  • open more than 1 trade in the same direction only if the entry prices are reasonably far apart from each other (the ATR is used in this case too)

When following all these basic rules we have a good chance of success on our side :-) Actually over the last 24 months this strategy  – applied to EURUSD only – could have easily tripled a trading account.

As an example OndaFX from the beginning of this month (June 2nd 2013) has generated 408 pips with 13 trades (8 short and 5 long), despite the fact that the last 3 weeks were not a “ranging period” for EURUSD (it rose more than 400 pips instead) .

Now I’m going to show some of these trades in order to better understand how OndaFX works. The first picture below shows the trading activity over the entire month:

The indicator at the bottom is ATR which is used mostly for take profit and stop loss levels. The 200 SMA (the orange line) can be optionally used to filter trades that go against the main trend. Applying this filter OndaFX would have executed only 5 long trades for a total 0f 240 pips. The advantage of course is a smaller floating drawdown during trending periods like this one. However I usually like to keep this filter disabled and control the risk with proper money management (in other words: keeping reasonably small the lot size associated to trades).

The beginning of the month was pretty exciting with 120 pips grabbed in the first 24 hours, thanks to high volatility and a long plus short trade right on the spot:

In many circumstances long and short trades are interleaved, in other words OndaFX hedges its positions according to the swinging breakouts of upper and lower band (by the way “onda” means “wave” in the Italian language 😉

In this scenario a long trade was opened when two short trades were still running, thus virtually locking in some profit of the second short trade. Then a short trade was opened when the long trade was still running, again virtually locking in some profit before the take profit was actually hit on the next candle.

We decided to record video showing a livebacktest of OndaFX on EURUSD. In this way you can easily understand the typical floating Profit&Loss involved by this strategy and the windfall pips potentially generated over the last 24 months. We are speaking an average 417 pips per month (or 10 thousands pips in a 2 years period).

And here is OndaFX in action (4 minutes video):

As you can notice Equity line and Balance line grow smoothly during the entire backtesting period 😉

But as for all our EAs, OndaFX is a real trading tool. You can customize every aspect of the EA and discover yourself new pairs and timeframes to trade with.

For example we’ve found that AUDUSD is another very good performer with a 130% gain over 18 months of trading. As a bonus I’ll provide you with the settings for AUDUSD as well!

OndaFX can easily become your private “lab” for understanding how to make the most from Bollinger Bands on different pairs and timeframes. You can change BB settings that are not available with the standard Bollinger Bands indicator of MT4, and you can choose from several “BB breakout rules” that are coded into the EA. You’ll also have complete control over the money management settings, so that OndaFX can safely run on accounts of any size, starting from 1K USD.

OndaFX uses a proprietary Bollinger Bands indicator that we have called HyperBB: the number of “standard deviations” can be expressed as a fractional number (instead of an integer), and the median line can be any Moving Average of your choice (instead of only SMA). HyperBB is provided as a bonus along with OndaFX, so that you can easily follow on chart the trades executed by the EA, in case you want to experiment with some non-standard input parameters of Bollinger Bands.


Here’s the detailed 2 year backtest:


EURUSD 1H (2 Years)


And here’s the forward test we are running:



Suggested Broker

Although the strategy can work pretty well on any reputable broker, we personally use and suggest FinFx which offers top-rated liquidity providers and very competitive spreads.

What You Get

  • OndaFX EA
  • Setting Files for each pair and timeframe we backtested successfully
  • An online manual with instructions
  • Bonus: HyperBB indicator (fully customizable Bollinger Bands)

Ready To Buy?

If you are interested in the OndaFX EA you can buy them from here.


OndaFX EA for MT4 – FREE


OndaFX, the Bollinger Bands based EA with best settings.

The EA works on every MT4 platform.

Bonus: the HyperBB indicator used within the EA.


Learn how to get it for FREE!

OndaFX EA for MT4 – $149,99


OndaFX, the Bollinger Bands based EA with best settings.

The EA works on every MT4 platform.

Bonus: the HyperBB indicator used within the EA.


BUY IT

Please review our Refund Policy


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28 thoughts on “OndaFX

  • Dan

    It looks pretty robust and a very nice backtest. :)

    After being bitten a few times before I like to see a myfxbook forward test for a few months at least before I make a purchase. So the sooner you can share a myfxbook forward test the sooner I can build enough confidence in this system to make a purchase 😉

    Thanks,
    Dan

  • Song

    I agree with dan and would like to see forward test result on myfxbook before purchase. I also would like to have at least 30days quaranty so that I can backtest myself. thanks

  • Bert

    Hi guys!

    I’d like to know why your BT aren’t 99% modeling quality?

    I would think that an EA on such a high TF as H1 would not really matter of the quality, so why not show a 99% BT?

    Thanks.

    Regards,

    • Andrea Post author

      Hi Bert,

      the 99% quality is reached by collecting tick by tick data and that is definetly not necessary for such an EA while it’s fundamental for a scalper.

      You said… for an EA trading the H1 timeframe is doesn’t really matter the quality… and that’s why we didn’t spent too much time on it but focused on development and testing 😉

      Cheers,
      Andrea

    • Paolo

      Hi Chucks, yes it can trade on any type of account. We suggest at least 500 USD of account balance for trading 1 micro. So if you want to trade 1 micro on two pairs (with two instances of the EA) you need at least 1K USD of account balance.

  • paul

    Hi Andrea and Paolo,

    This is a great tool :)

    I’m a little confused by the take_profit_2 (-1) and take_profit_3 (-1) values.The negative number will produce a negative ATR value, and if “0” is used, the ATR value will be zero. How is the actual TP price equated from negative and zero ATR values?

    Many thanks,
    Paul

    • Paolo

      Hi Paul, take_profit_2 is taken into account only when there are 2 trades opened in the same direction, and take_profit_3 only when there are 3 trades opened in the same direction. They are both cumulative take profit levels. If you assign the value 0 to any of these input parameters the EA will try to close the trades at breakeven. If the value is negative the EA will close the trades for an overall loss. As an example if ATR=0.0024 and take_profit_2=-1 the 2 trades will be closed when their overall PL is -$23.00 (in case the lot size is 1 minilot).

  • paul

    Hi Andrea / Paolo

    I notice with the AUDUSD and EURUSD set files there’s no Stop Loss setting should the price make a significant move against the 3 open positions. This will invariably happen at some point with the potential to wipe out all those wonderful gains. What would you advise for managing a large DD senario?

    I’m running backtests with the goal of trading a basket of pairs on OndaFX, each with a fixed SL that meets both the criteria of acceptable risk management and profitability.

    So far results look promising with the basket approach spreading the risk and providing a nice smooth equity curve. I can backtest and optimise over two and a half years of data but I’m wondering if this can be relied upon for future results or am I just curve fitting?

    Once completed I’m happy to post my findings if you’re interested.

    Thanks for a great product,
    Paul

    • Paolo

      Hi Paul, the strategy we suggest for managing large DD scenarios is always the same: allocate only a portion of your balance to any given EA/manual strategy so that even during bad times the possibility of the account being burned out is very unlikely. On each EA/strategy you may set a stop loss level like 50% of the allocated balance, so that when running a portfolio of strategies (like 5 strategies running at the same time) that would only mean a 10% drawdown of the overall balance. With OndaFX you can also automate the stop loss feature using the “stop_loss” input parameter.
      Regarding backtesting and optimization, always remember to perform just a bland optimization, finding the absolute best input parameters is a waste of time (and a waste of money during live trading).
      Ciao, Paolo

  • Andrew

    Hello again

    Sorry, I should have read the Manual first. I now understand the Stop setting for the set of trades using money values.
    Cheers, Andrew

    • Paolo

      Thanks for your appreciation :-)
      Don’t forget that a correct money management is crucial for the success of most strategies. We prefer to run multiple strategies on the same account, and to allocate only a portion of the balance to any given EA/manual strategy.

    • Paolo

      Hi Dylan, thanks for your interest. Yes OndaFX is available and we are still trading it with default settings on the hourly charts of EURUSD and AUDUSD. As of today (after about 5 months of trading) we have closed +32.48% of profit and we have a -11.45% floating drawdown.

    • Paolo

      Hi, OndaFX is a standalone EA. Optionally you can integrate it with NuovaFX, but that is not a requirement. OndaFX does not require any custom indicator. Thanks for your interest.