One Leg Trading With DuettoFX 3


Salve a tutti,

We can’t be happier about the great success of the DuettoFX indicator. Your emails and comment are enthusiastic.

We are also receiving a lot of ideas mainly about exit strategies. We are working on them and we’ll probably come out with the DuettoFX EA in 2/4 weeks.

We already have a version running but it was “for us” and we have to work on it and improve performances to exploit more of the fabulous profit potential of the DuettoFX strategy.

Today I want to suggest you a simple yet effective approach to trading with DuettoFX: one leg trading.

You know that when we got a signal from DuettoFX we enter long and short on two pairs. This is what I call a “two legs” trade. One leg is short and one is long.

By doing out statistical analysis (aka “backtests”) we’ve seen that there’s always a pair of the “duettos” that does perform better and is more “reliable” than the other.

One of the approaches that I’m using is to trade only one of the two legs… of course the best between the two :-) That way I reduce risk and have a better profit factor (PF).

Take this table:

DuettoFX PFs

If we take only the best pairs:

  • USDCHF (in EURUSD-USDCHF duetto) – PF 1.91
  • USDCHF (in GBPUSD-USDCHF duetto) – PF 2.05
  • AUDUSD (in AUDUSD-USDCHF duetto) – PF 2.05
  • EURUSD (in EURUSD-USDCAD duetto) – PF 1.40
  • AUDUSD (in AUDUSD-USDCAD duetto) – PF 1.43

We have an overall 1.71 PF instead of 1.55 with the two legs approach. We also reduce the spread to pay (we do only one trade and not two) and risk.

So the concept of this approch is: take the signal from two pairs to trade just one. Doing so we take a signal that is also confirmed by an opposite signal on an inverserly correlated pair. That makes the signal “stronger” and so more reliable.

Fundamentally indicators should help you have the odds in your favour 😉

That’s all for today. I go back to coding and testing.

A presto,
Andrea


Leave a comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

3 thoughts on “One Leg Trading With DuettoFX

  • Jono

    Gday guys ,
    interesting observation will give it a go :)
    when do you think the forum will be up and running
    as i think we can all learn from sharing our mistakes
    and our succeses.
    thx4 keeping up the awsome work
    uru4now :)

  • Jim

    Andrea/Paolo
    In one of your introductory Blogs about Spread Trading I think you mentioned that using two correlated pairs could give a measure of ‘Hedging’ (The non-directional approach).
    This suggestion of ‘One Leg Trading’ set me thinking that so far DuettoFx has been using the ‘directional approach’ which contains no hedging and for the faint hearted like me would need a stop loss.

    Is my logic correct ?

    I must say I admire your work rate, your rapid responses and general attention to your customers – please keep it going.
    Jim

    • Andrea Post author

      You’re right. We are mainly using it in “directional” mode by using inversely correlated pairs. In reality this is less risky than it seems as we rely on something that is “statistically” proven (the inverse correlation between a couple of pairs) and that is somehow “needed” by the market.

      The one leg trading is an even less risky approach and potentially even more profitable (if you choose the “best leg”).

      If you want to use stop losses you can. No problem with them. You can use the average MAE value as a referral point for setting your stop losses and choose the lot size of your trades accordingly. The good in trading Forex is that it is scalable. You can decide how much to risk by choosing a lot size that fits your risk aversion.

      I hope this explains why we decided to go in the “directional” way with DuettoFX. But feel free to experiment. In the coming days we’ll also give a list of “non directional” duettos, meaning set of currency pairs that are directly correlated (not too much).