MY DUE DILIGENCE

Since my last post I've spent time constructing a spreadsheet and I'd like to share my findings here with you.

Many, many months ago I spent $3,000 hard earned dollars on a portfolio of Scott's robots. What would have been great is to just be able to load them up, fund an account and watch them be profitable over time. I was REALLY looking forward to this, but alas, this is the real world and I try my best not to be an idiot consumer. Thus, I did my research and drug the whole process out even farther. Since TradeStation Forex accounts went down the shitter I've since gotten the MetaTrader versions of the robots. Thanks to the fact that I am not a total idiot and no longer trust Scott, I did some simple backtests and came to some startling results.  You will need to click on these images and enlarge them to see things clearly. A link to the PDF I created is right HERE.

Originally, in it's stock setting for the CADJPY, the robot didn't take any trades at all because the settings were set in a way that a trade would never take place... That's not the kind of attention to detail I want in a $3,000 multi-month hellish experience. I ended up using the original TradeStation settings on it. 

I'm getting really close to asking for a refund, and I hope to God he complies if and when I do. I really want to get my hands on the trend following robots and see as much data about them as I can. You only have 180 days to request a refund on PayPal, so time is ticking. 

MORE ISSUES AND I'M GETTING TIRED OF THEM

Ok, It's freaking late and I am tired, but I just wanted to vent for a bit and explain what the hell is going on.

So anyone who has been following this blog knows by now that I have not put a single dime of my real money into the Robotic portfolio yet, it's all been simulated trading and months now of trying to get a hold of some sense of reliability here...

I am a very detail oriented person, and from the very beginning things have not felt entirely right about this whole thing. From the way Scott communicated with me, to how long it took him to send me any info, which was just a slice of what I asked for, to the fact that half the info he sent me was totally bogus because he recorded it with errors on his chart settings, along how long it took us to figure out that was the problem (and him continually assuring me certain concerns I had were of no real concern), to TradeStation being an unstable shiny turd and not taking trades it should have taken, to them shutting down their Forex business, to getting the new MT4 robots that are missing key settings that the other robots actually utilized (Even though Scott has told me they do not utilize them)....

Well, since I couldn't freaking sleep again tonight I decided to take a closer look at the differences between the MT4 robot and the TradeStation robot. The MT4 robots haven't taken a single trade in over 24 hours, which is unusual for a portfolio of 12 robots I thought. So I opened up TradeStation to check and see if it had shown any trades for the portfolio as well. Thankfully there were no trades on that platform either, but I did get to thinking and checked some things out.

I backtested the USD/CHF pair in MT4, and it was profitable in the last year. I looked at the same pair in TradeStation, with the same settings and it had horribly lost money.

What the hell would cause that? Remember the post a little while back about how crazy the spreads are on some of these pairs? Well, that's always been a concern in the back of my mind: If these robots are taking as little as 5 pips profit, (And one of them did) it's very important that the testing include accurate slippage on each trade.

Well, I did some research on TradeStation settings and ran across two very important details that have changed things for me drastically. I found out that not only does TradeStation simulate some trades that will never take place in real life, (Which I'll explain in a moment) I also found out for certain that the only way to account for the spread is to enter the spread in the "Slippage" setting in the properties for the backtest.

I'd like to address the latter aspect first: the spread. Early on, I asked Scott about the spread being accurately represented in the TradeStation settings and the data in his spreadsheet. He has told me and others online continuously "I include enough slippage into the robot so that I actually do better in real life".

The bad news is that according to the live, real-time spreads shown on the actual MT4 platform in comparison to what is set in TradeStation, he is using half of the actual spread, and sometimes even less, which greatly effects the performance results as I will show you below.

The first point I mentioned, is that TradeStation will take a trade in the Strategy side of things at times, and will never actually execute it in real life and visa versa. Why? Because of how TradeStation tests. Listen Carefully and I'll try to make this as simple as I can.

MetaTrader tests with the spread included in the simulated price, therefore, if you set it for a 2 pip spread on the EUR/USD currency pair the buy price is 2 pips away from the sell price. 2 pips would be a price increment of 0.00020 just to be clear. In reality the price would look something like this:

Buy price: 1.11629 (also known as the ask, what sellers are asking for)
Sell price: 1.11609 (also known as the bid, what buyers are asking for)

However, TradeStation uses only the Sell price for both buying and selling in the strategy!

Buy price: 1.11609
Sell price: 1.11609

Why does that matter? I'll explain very clearly why.

Lets Say the market is dropping from 1.11720 and you have a buy order at 1.11609 because you think price will bottom out and turn around there. Because TradeStation backtesting only uses the Sell price to enter, if the sell price hits 1.11609 and price turns without going any lower, the strategy would think you took the trade, but in the real world you can't buy at the sell price. Because of the 2 pip spread, the real price you could buy at would be 1.11629 and that would mean you never actually took the trade.

Let's reverse the logic and say price was rising from 1.11520 up to a buy order you had at 1.11629. Lets say the sell price came up as far as 1.11609 and turned around. In real life, because of the 2 pip spread the buy price would have hit your entry at 1.11629 and your trade would have been triggered, when the strategy tester would have never entered the trade at all.

In both of these examples you can see a huge potential problem. In a currency where the spread is usually 1.5 pips, it may not be as likely that you will run into this problem. However, when the spread is 4 or 5 pips on a pair, this can happen even more depending on the volatility of the currency... It is a wider margin of error theoretically. This is a gigantic problem in my eyes and erodes the confidence needed to believe in this trading system based on TradeStation's method of testing.

I personally can't trust data that accounts for trades that would have never taken place or trades that would have happened in real life, that never show up in testing. Given the volatility of the market, I do think those occurrences would be somewhat rare, But who can really tell?

It may seem like no big deal, but who knows how many trades out of the thousands tested in TradeStation were BIG winners that would have never happened in real life thanks to a few measly pips not accounted for? And who can say there aren't missed losers for the same reason? You'd have to manually go back through the entire chart history and look at each trade to see if price turned around immediately. That would be exhaustive and even then, the robots are not the same for MT4 anyways. They are missing some trade settings. AND YES, THE ROBOTS ARE MISSING SETTINGS THAT THE TRADESTATION ROBOTS USED: An RSI exit that closes the position when overbought or oversold is reached. Here is just one example with the AUD/JPY.

You'll have to click on the image to see it clearly. I know it says "Same settings" but what I mean is "All the same settings besides the missing RSI exit". 

So not only does TradeStation both potentially miss and add trades it shouldn't, it includes the slippage after the fact, which exacerbates the problem. Think of it like a ship in the sea. A small change in the sail at the beginning can produce a drastically different arrival point down the road. I imagine that may be what is happening here... The original TradeStation robot did so-so for 4 years and 9 months at 29%... But the MT4 versions adjusted version came in a half that amount! 15% gain in nearly 5 years is horrible!

That alone is a thorn in my mind, but given the other large problem being the fact that the spread was improperly input into the slippage... Once more accurately represented, it drastically alters the end result.

At this point, the only reliable testing out of the two for me, is MetaTrader, and those results have become unappealing with the more accurate spreads in the testing.

Perhaps a trend following portfolio, where the spread is of little consequence, is the way to go?

The Beginning of My Robotic Trading Career?

Made it back yesterday afternoon. I didn't take my good camera on this trip because I didn't want to deal with carrying it around everywhere, but I wish I had taken it. Chicago was pretty awesome. Frankenmuth (Michigan) was pretty nice as well, and I just would have taken some grand pictures as usual. 

Remember how I said the number 7 seems to like me? Well, I was in row 7 again on the flight home, and during a White Elephant ornament exchange my number was 7 as well. I laughed pretty hard when I unraveled the folded up scrap to see that number! By the way I got a purple stiletto ornament, which is fine by me!

On the flight home I watched a documentary called Billions In Change. I had downloaded it from YouTube months ago and was glad to finally watch it! Another great one, no depressing stuff at all so I highly recommend it!

Anyways, I have some news to announce. After months of effort and researching and emailing, I finally got a portfolio of robots. I have a funded TradeStation account to run them on as well. The offer being made is 5-9 robots for $3,000... So when I was emailed one file of code which had only one file to attach to a chart, I was a bit confused and feeling a little aggravated. Turns out the code is actually just one robot that has tweakable variables. You attach that same robot to every chart and tweak it into profitability. What you are really paying for is one robot and the hundreds (Reportedly) of hours Scott has spent tweaking these setting per each individual currency pair so you don't have to do it yourself. The good news out of all of this is, is that if you have the one File (Robot) you can attach it to any chart you want and tweak away until you discover a way to make it profitable at no further cost! That is something I may do in the future, but for now I have other problems. 

So, let me explain TradeStation to you a bit. It's a relatively sophisticated trading platform designed to robotic trading, but also has in depth features outside of that as well. It is very complex and I think I will be trying to get used to it for awhile. The good news so far, is that my dedicated computer that is already running 3 instances of MetaTrader 4 can also run TradeStation with the 10 robots as well. It has no problem so far. My main issue is that with all the the charts set up and trading, there seems to be a problem I can't figure out yet. The Strategy is taking analyzing the markets and all that correctly, but it's not actually executing trades in the simulated account for some reason. I'll need to fix that for sure. 

One other problem, or issue I'll need to address, is that my backtesting results aren't lining up with the results I was given. Naturally the thought arises that I got scammed somehow, but I haven't been convinced of that just yet. I think there may be some setting that got lost along the way...

Either way, to keep this short I'll say this: My goal is to get everything running smoothly and lining up with the info I was given, and then run the portfolio on the simulated account for at least a month or more, and see profitability. Then, I will go live with small position sizes to see if live trades execute in a manner that lines up with the simulated account. I will keep you posted on all of that as it happens, but I plan to be pretty busy with it and may not be posting about anything else for awhile. We'll see. 

Backtesting update

It's been awhile and I have had some ups and downs in the mean time in some areas of life.

Most people wouldn't think these are issues, but I am obsessive about regimen and perfection in a lot of ways. I should have a lot more backtesting done by now but have not been as disciplined as I had hoped to be. Also, the gym wears me out and the house has had me distracted as well as the internet and random shit.

On a positive note I have already gained about 5lbs, mostly muscle I am assuming since I can already see a difference in my arms and abs. I put on a long sleeve shirt yesterday to go out to dinner and it was uncomfortably tight around my forearms. I have started tracking my Macros and eating healthy and getting plenty of sleep. I am not nearly as sore as I was when I first started and seem to be able to do more output at the gym. I have also found the workout routine of my favorite bodybuilder Tavi Castro. I don't expect to ever look like him, but he is basically my ideal body so I'm going to do what he does.

Tavi Castro

Me












Anyways. I've tested two pairs so far: EUR/JPY and USD/CAD, both on the 1hr time frame for the 2618 trading strategy. here are my results so far.

This will likely be my last update for awhile because I am super freaking busy, and hell, not a fucking soul even looks at this shit anyways so whatever...

First Day of Back-testing

After a lengthy Vacation in Moab and Arches National park, where I got some sweet photos, I am finally home and this is the first day I have my internet back. I have started back-testing a trading strategy called the 2618. It is slow going so far because there are lots of metrics I am tracking. Anyways, I am heading to a concert shortly but I wanted to leave an update after having been gone so long!

Here's what the back-testing looks like:

Sunday update

Hey, some things came across my mind today and I wanted to share them.

First of all, I noticed that the EUR/USD totally tanked on new years eve and at first I didn't think much of it, but then today I realized it was probably people getting out of their positions for the year. Just my guess. It would have to do with an accounting election for traders called "Mark to market". It's for anyone who qualifies really, but what constitutes a trader in the eyes of the IRS is pretty vague.

I should be more clear on what the hell I am about to say but I am not. Anyhow, there is a tax situation where it would be best to exit your position I think.

So, my other news is that it is sunday and the markets opened up and fell dramatically, only to be bought back up again. They crashed through the psychologically significant 1.2000 level. Round numbers are just important like that. Anyhow, that also coincides with major support on the weekly charts from years back. check it out.

I am curious if the trend will be reversing and if it is wise to go long at this price, even if it's just a small position. Who knows, anything can happen and I haven't looked into any fundamentals lately at all.

Lastly, I realized that I can backtest the Robot in my software. I've known that before, I mean, that's basically the highlight of the metatrader platform, but when it comes to backtesting the box I never used a predetermined take profit so it would just lose and lose and lose. Now, if I put in the 1.5 times risk profit target I can get some data. It will not be totally accurate data because the market conditions aren't live and therefore the spread won't change due to news releases and such, but I can at least try and gather something and then run the numbers implementing the martingale risk profile. I intend to spend the rest of the night going through that. Wish me luck

-Francisco