I’Ve hang up the gloves on manual trading.
For those who read my Forex Strategy Guide (garnering almost 500 hits daily), this may come as a surprise. I’ve amassed steady and consistent revenues using the MegatrendFX indicator combined with Tom Yeoman’s Accustrength meter and two moving averages. Augmented by news spike trading using straddle stops, manual forex trading had been exciting and rewarding. Here are some of my best practices
So why stop now?
I’ve found a cbot that, when set up properly, can give massively good returns. This AI is created by Clickalgo- a renowned name in Ctrader products, and they have a flagship product called the ClickAlgo Switchback Forex autotrader.
First, advanced notice: I’ve long abandoned swing trading. Leaving positions open over night gave me nightmares. Watching currency pairs implode at news reports didn’t sit well with me. I day trade and scalp a maximum of 20 pips per pair per day. My principles include:
- No more than 2 trades per currency pair per day. Jumping in at points of exhaustion can lead to annoying reversals.
- Small profit on hand is worth much more than large imaginary profits that manifest days or weeks later. I like to lock in profits immediately.
- It’s been my best practice to set an average take profit of 25 pips per pair, but with 50% to 80% of volume closed in 5 pips. This ensures I already have the bulk of the position locked in profit.
The ClickAlgo SwitchBack Forex Autotrader is the only reliable commericial cbot that lets me customize the parameters I relied on for manual trading and which provided low risk, consistent returns.
When I used the MegatrendFX I had the ability to to consult 10 time frames and 144 indicators consolidated into one percentage value. Read my strategy here. As a result, I entered markets only at the point of a building trend. The MegatrendFX provided cues of exhaustion using the same 144 indicators. I exited the trend at that point. To date, I recall no losses whatsoever from this method.
The ClickAlgo SwitchBack Forex Trader is the closest I get to the megatrendFX and on automatic pilot. It’s the first Cbot for Ctrader that allows the AI to consult 5 Trading Cycles and confirmed by the diNapoli Stochastic and ADX set at one timeframe. For all intents and purposes, it’s a superior creation.
Customization of the ClickAlgo SwitchBack Forex
When I first ran the ClickAlgo SwitchBack, I used the recommended settings and incurred a whopping zero trades over a week. The default time frame settings cater to swing traders looking for large swings over weeks or months.
I don’t wait and I like my profits in the first day. Using the logic I’ve learned with the megatrendFX, I set my time frames to M2, M15, M30, H1 and H4. The Hull Moving averages then signaled exploitable trends at least 5 times a trading day.
The second step ensures that I enter orders only when the trend is strong. The ADX is key and I set the ADX indicator to a threshold of 26 on the H1 timeframe. The factory default setting of 20 is inadequate. I’ve incurred a few losses on 20. Below 25, the market is ranging and unsure. At 26, the hourly trend pressure had built up , and guarantees TP in almost 20 minutes after a position opened. Like a rocket.
For maximum safety, set a threshhold of 26 to 30 on the D1 timeframe. When the algo trades this way you’re entering only when the Daily master trend is chugging in one direction. This makes it safe to trade on micro timeframes.
Tip to the developer: Including two more timeframes to the ADX will make the Clickalgo Switchback iron clad. Seeing the logic of MegatrendFX, I’ve found that confirming signals of ADX at the M15, H1 and H2 timeframes will provide perfect entries. Currently, the single ADX timeframe opens traders to some risk.
The third step is to disable the pip step for the grid , set the Average take profit to 25 and let the bot close 80% of its volume in 5 pips. Combined with a trailing stop loss set at an 8 pip trigger with a 4 pip step, you just can’t lose. Twenty five pips is desirable, and sometimes the AI would reach that. If it doesn’t, I got 5 pips in the bank.
Liftoff timing is vital. I set the AI to trade only during the London open from 8am to 5pm. It overlaps the US open. Strong trade trends develop at the London open and the bot’s multiple currency pair instances tend to close in profit before the US reaches 10am NY. Don’t trade the Asian open. Market pressure is limp as a spent porn star. No strength, no trend.
Backtesting the parameters doesn’t appeal to me as news events always skew the results, and makes any bot look bad. No bot can factor in news spikes. Forward testing, on the other hand provides concrete proof of concept.
My parameter setup will be frowned upon by folks who like 200 pips swing profit. Their methods bring one time big time results.
I prefer stead consistent profits daily with zero losses. Yes zero. I hate losses. I’m a practicing attorney as well as a hotelier and I’m in my comfort zone in blacks or whites.
No losses under this set up. You just need to follow discipline. The average trader will follow this advice and probably set up twenty trades a day. Utter folly. The bot will jump in late in the London session when trend power is exhausting- only to be stopped out by reversals.
So do I plan to manual trade?
I’m hanging up manual trading for now- even with the awesomeness of the Megatrend. The Clickalgo Switchback provides all the trading I need automatically. I’ll be exploiting the news manually for the massive spikes and that’s it (I’ve coded a simple bot for this). But all in all, I’ll leave the technical automated trading to Switchback. It’s an awesome tool and I look forward to further improvements on the code (particularly the ADX multi time frames)
Feel free to download a trial version of this AI here. I strongly recommend buying it. The $99 investment was earned back in a day.
Update to the Strategy Feb 11 2020
I’ve learned that the developer is building in new changes to this already stellar cbot. Among them includes 5 time frames for the ADX and a close positions timer during news trades. Given this, I can imagine the probability of losses going down to nil even for newbie traders. The following comprise best practices for the new version of the cbot
- Trade only 3am to 11am NY time for Major pairs. Market volume drops thereafter and trend trading gets difficult. For strictly eurozone pairs such as EURCHF and GBPCHF, limit trades to 3am to 10am NY. I’ve found that eurozone pairs lose trend power and tend to range after 10am NY. This implies potential losses as European institutional traders begin closing positions at this time (it is 5pm London).
- For day traders, set your Hull Moving Averages time frame to M2, M15, M30, H1 and H4. For Swing traders, set the time frame to H1, H4, H8, D1 and D2.
- For day traders, set the ADX to M5, M15, M30, H1 and H2. Your thresh hold should be set 26 to 30 which signifies a strong trend. ADX below 25 signifies no trend. The M5 ADX can be set to 2 periods for very sensitive detection of power trends. For the 2-period ADX, we are using a 2 bars to catch low risk entries in a trending market. The concept underlying the 2-period ADX is to find the perfect pause in the market. By using such a short look-back period for the ADX indicator, it becomes extremely sensitive. Hence, it rarely falls below 25. When it does, it is a signal that a break-out is imminent. Thus, the ADX detects small and fleeting trends and rises above 75 easily. These short-lived trends are common but not profitable for trading. On the other hand, it takes lots of inaction for the ultra sensitive 2-period ADX indicator to drop below 25. When it does drop below 25, it has found the rare eye of the storm, the absolute calmness before a significant breakout. For the other ADX time frames, I recommend 14 periods.
- Ensure that the God-sent News Manager pauses trading 90 to 60 minutes prior to news and closes positions 10 minutes prior to news. This allows open trades to close with lower or zero draw-down
- Set the average take profit up to 30 pips, but instruct the bot to close 80% of volume at five pips. You’re locking in profit. I ignore the fixed stop loss and set a trailing stop loss triggered at 6 pips about 4 to 6 pips behind.
- Let the cbot trade a maximum of once per day for minor and exotic pairs. The default setting of 20 might let the bot jump in multiple times during trend exhaustion. Most of my losing trades came end of the day- at the second or fourth trade. Major pairs can be allowed to trade up to thrice a day. Don’t be greedy. I’d rather trade large lots once than tiny lots twenty times. That can lead to nineteen losses.
- Finally, close open positions after 12noon NY especially on a Friday. When the market stagnates , there tends to be a large break next trading day- and sometimes opposite to your expectations.