Delay in Releasing Hypothetical May Results

I will not be posting the potential results for May until the autotrader is at a point where it is bug free and trading exactly according to the trading rules created in our system upgrade period. Once that occurs, I will post both the hypothetical results using the parameters from April as well as a second set containing additions that have been added since April ended.

UPDATE (JUNE 5, 2008): Here are the hypothetical results for the Intraday strategy. The GBP/USD strategy has yet to be debugged. Once the GBP/USD is ready to test May, I will post the results as well as the final hypothetical May results for the system as a whole.

May 2008, Intraday Strategy ONLY

	Currency	Starting Balance	Ending Balance	Profit	Return %
May	EUR/USD	$114,896.00	$117,058.00	$2,162.00	1.88%
May	GBP/USD	$104,259.00	$107,544.00	$3,285.00	3.15%
May	USD/CHF	$106,210.00	$109,154.00	$2,944.00	2.77%
May	USD/JPY	$103,155.00	$102,592.00	-$563.00	-0.55%
May	EUR/GBP	$109,602.00	$108,055.00	-$1,547.00	-1.41%
May	EUR/CHF	$106,877.00	$107,297.00	$420.00	0.39%
May	EUR/JPY	$113,336.00	$114,984.00	$1,648.00	1.45%
May	GBP/CHF	$109,474.00	$109,754.00	$280.00	0.26%
May	GBP/JPY	$117,885.00	$121,003.00	$3,118.00	2.64%
May	CHF/JPY	$99,264.00	$99,712.00	$448.00	0.45%
			Month End Total	$12,195.00	10.61%

Another New Broker Update

Still no word from FXCM on our application. Keep your eyes pealed for details once it does get approved.

Testing Update

I wish I had more to post this week. As soon as the week is over I will post the results of our live testing this week. I don't think they will look that great nor will they be very accurate considering we started the week trading the auto trader 2.2 and will be finishing with version 2.5 (meaning we have found a lot of bugs and made a lot of fixes and changes). I am hoping next week's results will be much more accurate and consistent. Our lead programmer is doing a fantastic job working long hours to get it up and running for us.

Through this design process I have come up with an idea that I believe could profitably allow us to trade the system during slow hours and could double the number of trades to as many as 2000 per month (2000 trades is assuming we continue using 13 pairs which is looking more and more unlikely). If this idea works, it would allow us to cut our per trade risk even further.

New Broker Update

We submitted our application to FXCM last week and are waiting for approval. I was hoping this would have been finalized last week but we are still waiting. Once this occurs, I will pass along sign up information.

Testing Update

We have been forward testing the auto trader every night since Thursday (Friday morning and Monday morning). The results have been mixed but our progress good. On Friday morning, the trader only made 14 of the 34 expected trades which was some cause for concern. We worked all weekend on the errors and the result was a much cleaner trade last night. Last night, the trader still had errors but not nearly as many.

As for past hypothetical returns, it is still not to a point where we can test before April. We are working on gathering data from months prior to April. We also have had some problems calculating position sizes for each individual pair. Until that is completed we will not have accurate past performance potential returns. The same goes for our forward tested results. Until the major bugs are fixed (we are getting close) we will not have accurate numbers to work with. However, the most important part seems to be working great, which is the entry and exit indicators and prices.

I will post an example of our live demo traded results from tonight, tomorrow. Keep in mind the results will not be completely accurate until our position sizes are nailed down but it will at least give you an idea of how it looks when it is trading.

Oil on it's way to $150 per barrel.

This story hurts to read. This probably means a continued drop in value of currencies paired against the Yen as investors shy away from the Carry Trade.

Auto Trader Live Testing Update

The Auto Trader traded through the night on multiple pairs for the first time. It gave us a chance to find more bugs in the code. Here are a few that we will be fixing today.

The program has a glitch when making short trades. It enters correctly but then closes out immediately. It was having the same problem with long trades yesterday and was easily fixed but we must have not corrected the problem when taking short trades.

All of our testing up until last night was done on the GBP/JPY. When I added the GBP/USD and the EUR/USD last night the program had errors in calculating those pairs' lot sizes.

We had overlooked adding a "maximum spread" condition when taking a trade. Last night, the program signaled an entry long soon after a news announcement when the EUR/USD's spread was 4 times the norm. We will add a condition that requires the spread to be less than or equal to an amount we choose.

Those were the major bugs we found from our testing last night. The exciting thing is that the program is hitting our entries, stop loss changes, take profits, and other adjustments perfectly. We are extremely excited by the progress thus far and highly optimistic about the upgraded system's potential.

FXCM Update

I will post later this week the instructions for signing up with FXCM. I have spent quite some time with them on the phone of late and I am impressed with their customer support. I hope you all will have the same impression. Look for further details here coming soon. I will post a permanent link on the right side of the page under our "45 day testing updates" section explaining the steps you will need to take to get your account open with FXCM.

The Auto Trader's First Day

The auto trader traded it's first complete day today! It is not without it's bugs but we are making good progress in finding and fixing them. We have only run the auto trader on one pair (GBP/JPY) and so we will begin to implement more pairs simultaneously to test it's capacity tomorrow.

Programming Update

The coding for the auto trader has been completed and the testing begun. Of course there are glitches. We are first running the program through every conceivable scenario. We want to see how the program reacts to a wide variety of market conditions and signals. I am in the process of opening a "mini" account at FXCM so that live testing can begin this week with a small account. Once we believe the program is reasonably stable, we will test it live on our mini account until our comfort level allows us to trade a larger portion of our own money. At the point when we are completely confident trading all of our own personal money, we will offer managed accounts again.

As for a timeline. It is a tough thing to know because we don't know what unforeseeable bugs might arise in the code. But we do feel we will have an auto trader sufficiently stable by tomorrow to begin live testing our "mini" account.

GBP/USD Strategy

Here is the day-by-day breakdown of the GBP/USD results for April.

April 2008
GBP/USD Strategy
DATE	GBPUSD %	GBPUSD Profit
April 1, 2008	0.00%	$0.00
April 2, 2008	1.12%	$1,166.67
April 3, 2008	2.00%	$2,030.66
April 4, 2008	0.50%	$524.88
END OF WEEK SUMMARY	3.72%	$3,722.21
April 7, 2008	0.50%	$520.05
April 8, 2008	0.00%	$0.00
April 9, 2008	2.01%	$1,976.72
April 10, 2008	-1.00%	-$1,021.38
April 11, 2008	-3.00%	-$3,115.86
END OF WEEK SUMMARY	-1.58%	-$1,640.47
April 14, 2008	2.00%	$1,974.24
April 15, 2008	1.90%	$1,948.94
April 16, 2008	1.62%	$1,691.51
April 17, 2008	3.48%	$3,696.18
April 18, 2008	0.50%	$549.15
END OF WEEK SUMMARY	9.99%	$9,860.02
April 21, 2008	2.91%	$3,519.46
April 22, 2008	2.61%	$3,362.35
April 23, 2008	0.50%	$661.81
April 24, 2008	-3.00%	-$3,990.71
April 25, 2008	0.50%	$645.17
END OF WEEK SUMMARY	3.47%	$4,198.07
April 28, 2008	0.50%	$648.39
April 29, 2008	3.03%	$3,952.83
April 30, 2008	0.00%	$0.00
END OF WEEK SUMMARY	3.48%	$4,601.22
	GBP/USD %	GBP/USD Profit
April Totals	20.74%	$20,741.05

The upgraded GBP/USD strategy in testing is a great improvement over the old strategy. Even though we are taking half as much risk per day (max 3% loss per day), the new upgrades allowed the strategy to finish the month up 20.74%.

The most exciting prospect of the upgraded strategy is the much improved win-loss ratio. In April, when the strategy had a winning day, it averaged a +1.61% return/day. When it lost it averaged a -2.33% loss/day. This is a 1.61/2.33 win-loss ratio. The strategy won 16/19 (84%) of the days that it had an entry in April. This is in contrast to the 1.88/6.5 win-loss ratio of the previous version of the strategy or 3.6/12.5 win-loss ratio of the first version.

One more possibility that we will be testing with the new computer trader is the idea of adding other pairs using similar rules used by the GBP/USD strategy. The pairs we are considering include the EUR/USD, EUR/GBP, EUR/CHF, USD/CHF, and the GBP/CHF. If one or more pair(s) were added, we might be able to decrease the per day risk even further.

Intraday Winning Percentage

Here is the per trade winning percentage breakdown for the Intraday Strategy in April:

Intraday Win %	Intraday Wins	Intraday Losses	Intraday Trades
34.38%	273	521	794

At first glance, you would not guess that this is a strategy that through these 794 trades made 21.35% in one month taking just a 1/4 of 1% risk per trade. What is happening is that the strategy makes far more per winning trade than it does per losing trade.

The strategy's worst day in April was -5.69% on April 7th (Monday of Interest rate announcement week) while it's best day was +9.21% on April 18th. It lost 8 and won 14 of the 22 trading days in April.

Pair-by-Pair Breakdown for April

Today (hopefully), our first protocol of the computer trader will be completed. It's completion will mean we will begin to lock in which pairs are most productive. Here is a look at how each of our pairs faired in April.

GBP/USD Strategy = +20.74% (26 Trades)
**(We also will consider using the EUR/USD, GBP/CHF, USD/CHF, EUR/CHF)

GBP/JPY Intraday = +2.69%
USD/JPY Intraday = +1.93%
GBP/USD Intraday = +3.92%
EUR/JPY Intraday = -0.22%
EUR/USD Intraday = +7.25%
EUR/GBP Intraday = +1.19%
AUD/JPY Intraday = -1.22%
AUD/USD Intraday = +0.55%
EUR/AUD Intraday = -1.15%
CHF/JPY Intraday = -2.73%
USD/CHF Intraday = +4.00%
EUR/CHF Intraday = -2.83%
GBP/CHF Intraday = +6.13%
--------------------------------
Total Intraday = +21.35% (794 Trades)



While 5 of the 13 pairs ended the month of April in the red; that doesn't mean we will remove those pairs. One of the concepts of the strategy is that by using corresponding pairs (example: GBP/CHF, EUR/CHF, EUR/GBP), one of the pairs in a set will often lose while the other two will make up for the loss. This strategy relies on a market that is active and a market where some currencies are strong and others weak. Lets imagine that in a given day, the Euro is weak while both the British Pound and the Swiss Franc are strong. In theory, the GBP/CHF would have a losing day while the EUR/GBP and the EUR/CHF would have a winning day. The strategy does NOT work on days when the markets are in "standby mode" waiting for direction such as those days when a major economic news announcement comes out (ie. Non-Farm Payroll), the Monday preceding a major interest rate announcement, holidays, the last day of the month, etc.

EUR/JPY Correction

When writing my Pair-by-Pair post, I realized that I had not tested the EUR/JPY for the first 15 days of April. This is an example of human error coming into play. I will do the test and update my previous posts accordingly. I will post an "update" addition to this post when the changes have been made.

UPDATE 11:15am: I have made a few corrections in addition to completing the EUR/JPY tests for April 1-15. I also found an error in how the balance was being calculated and for some reason the spreadsheet had not compounded the profits from the first half of April towards the second half. I have posted the corrected changes under the Aprils Results. It made a slight difference in the numbers (percent return, max drawdown, per day averages, etc.) which have been corrected in the relevant posts.

Upgraded System Update

My posts have been sporadic in the last week or so but that does not mean we have not been making great progress on the updated system. We have reached a point where we are deep into the source code. The challenge has been, and continues to be to build a computer program that is able to duplicate the system and it's latest upgrades exactly as has been back tested by hand. The 820 hypothetical trades that the upgraded system signaled in April made a 42.09% hypothetical profit while experiencing a max drawdown of 6.2%. The 820 trades took me over 80 hours to hand execute. We are excited by the April potential results but until the computer trader is completed, it will be impossible to gather more in depth and accurate long-term results.

It appears that we will have our computer trader framework done by tomorrow and then the process of testing it for bugs/fixes will begin. I will keep you up-to-date regularly on our process as it occurs.

April Final Hypothetical Results

I know, I am posting this later than I was hoping but it took much longer to perform the 820 trades for April. I estimate that I spent between 80-100 hours logging the trades. Keep in mind, when "backtesting", the sample does not include live market circumstances that can effect performance (such as slippage, liquidity, human error, etc).

Here are the results of the hand trades we made as part of our research into the effectiveness of the changes to the system. The results are impressive but only reflect one month. Once our computerized trader is complete, we will be able to extend this same test over a couple years. Two exciting things to note: Over 820 trades were executed with a max multi-day drawdown of 6.2% from April 4th(day non-farm payroll report was released) through April 9th. The system finished the month up a hypothetical 42.09%. This is with a max risk per trade on the Intraday strategy of 1/4 of 1%. The max drawdown in one day came on April 7th losing 5.19% of the days starting balance. The highest return in one day came on April 18th making 9.71%. The average return per day was 1.91%.

Here is the day-by-day breakdown.

April 2008		STARTING BALANCE
Intraday and GBPUSD Combined		$100,000.00
DATE	PROFIT	ENDING BALANCE	% RETURN
April 1, 2008	$3,923.14	$103,923.14	3.92%
April 2, 2008	-$2,390.11	$101,533.03	-2.30%
April 3, 2008	$3,442.68	$104,975.70	3.39%
April 4, 2008	-$964.73	$104,010.97	-0.92%
END OF WEEK SUMMARY	$4,010.97	$104,010.97	4.01%
April 7, 2008	-$5,395.31	$98,615.66	-5.19%
April 8, 2008	-$158.86	$98,456.80	-0.16%
April 9, 2008	$3,681.23	$102,138.03	3.74%
April 10, 2008	$1,724.10	$103,862.13	1.69%
April 11, 2008	-$5,150.10	$98,712.03	-4.96%
END OF WEEK SUMMARY	-$5,298.94	$98,712.03	-5.09%
April 14, 2008	$3,936.74	$102,648.78	3.99%
April 15, 2008	$1,793.72	$104,442.50	1.75%
April 16, 2008	$3,326.57	$107,769.07	3.19%
April 17, 2008	$2,610.05	$110,379.12	2.42%
April 18, 2008	$10,720.61	$121,099.73	9.71%
END OF WEEK SUMMARY	$22,387.70	$121,099.73	22.68%
April 21, 2008	$7,899.93	$128,999.66	6.52%
April 22, 2008	-$169.38	$128,830.28	-0.13%
April 23, 2008	$3,946.29	$132,776.57	3.06%
April 24, 2008	-$3,056.56	$129,720.02	-2.30%
April 25, 2008	$2,570.05	$132,290.07	1.98%
END OF WEEK SUMMARY	$11,190.34	$132,290.07	9.24%
April 28, 2008	-$1,750.76	$130,539.31	-1.32%
April 29, 2008	$9,944.97	$140,484.28	7.62%
April 30, 2008	$1,610.72	$142,095.00	1.15%
END OF WEEK SUMMARY	$9,804.93	$142,095.00	7.41%
April Totals	$42,095.00	$142,095.00	42.09%

In the spirit of full disclosure. I need also to disclose the live system's results for April. We traded the first two weeks of April before placing the system on temporary hold. You can see our reasoning here. The first half of April was not good on the system causing about a 15% loss through the first 15 days of the month. Had we continued to trade we would have made up that loss but would have finished the month close to breakeven.

Greetings from Beautiful Boise Idaho

As many of you know I have spent the last year in the country of Panama. It was an unforgettable experience and I will miss the country and it's people greatly. I am now back in Boise and still dedicated to building and updating a world-class Forex system. I am getting ansy to trade my money in Forex again but I also believe that the upgrades and changes to the system will help smooth out the ups and downs and will improve our overall results. Having the trading placed on temporary hold and going through the hassel of changing brokers will be, in the end, well worth it all.

Possible Delay

The programming/coding of the computer trader has taken longer than expected. We do not want to rush the auto trader into use until we are fully confident that it is free of glitches. We also have to deal with moving our accounts from our existing broker to the new broker and all the paperwork/time that is involved there. With that being said, I anticipate that getting back to live trading will be delayed a few weeks. At this point I can not say with certainty how long the delay will be but I will keep you up-to-date as the timeline becomes more sure.

UPDATE (MAY 21, 2008): We are 13 days away from our target restart day. And while the auto trader seems to have fewer bugs than I had expected, I don't believe I will feel comfortable trading it with all of my personal money by that day. My commitment to our clients has always been that I will never trade their money unless I am 100% confident trading all of mine. I will continue to assess the situation as the day comes closer but at this point, I still predict that there will be a delay on getting back up and running. It is important that we protect all of our investments and not rush prematurely back into the market.

UPDATE (MAY 29, 2008): Well, it is Thursday of the week prior to the week when trading is suppose to get back up and running and here is where we are. The auto trader, due to continued fixes going on, will not be ready to trade large sums of money by the deadline. Also, our new broker setup has not been completed. I wish I had better news for everyone but I don't. Good things come to those who wait... right? I am hoping this wait will mean consistent high returns for my personal money. How about the rest of you?

UPDATE (JUNE 5, 2008): We will be live testing the auto trader on a small amount of money for the next couple of weeks to be sure that the program is stable and executing as desired.

UPDATE (JUNE 18, 2008): Progress Report

UPDATE (JULY 3, 2008): We have started running, a live demo account using the full system including all three trading strategies. The account is available to Tradewinds clients to watch real-time. Once this demo account has run successfully for 3 weeks without error we will begin trading our own personal funds again.

Programming Update

I spent much of the week adjusting our profit/stop loss triggers based on the data that I was able to pull from our April results. The month of April ended with phenomenal results but it is just one month. We have now reached a point where the auto trader programmer is a necessity to continue the testing process. We do not know if the April results were typical or out of the norm.

I had a good long discussion yesterday with our lead programmer and things look to be on track. I hope to have a hard update on our timeline for completion of the auto trader. We downloaded the Metatrader API needed to bridge our auto trader with the FXCM platform. Our FXCM account was also approved this week. We have all but settled on FXCM Institutional as our broker for the upgraded system.

I spent two days this week traveling back to the United States. I will spend much of the summer in the U.S. working side-by-side with our progammer, meeting with Forex brokers, and trading the upgraded system.

More U.S. Economy News

More surprising (good) news on the U.S. Economy coming today.

1. Unemployment drops; Economy only lost 20,000 jobs in April (expected to lose 75,000)
2. Factory Orders in the U.S. Increase
3. Fed implements more measures to bolster liquidity
4. More speculation the Fed will hold the benchmark rate at 2%

Latest April Back Test/ Demo Test Results

I have, so far, back tested 5 of the 13 pairs and the GBP/USD strategy for the first half of April. I hope to have the last 8 pairs finished over the weekend so that we have a complete picture of how the upgraded system performed throughout the entire month. The results so far for the first half of April are similar to those of the second half. The GBP/USD strategy gained 6.13% in the first half and 14.11% in the second finishing the month netting 20.24% gain. The 5 Intraday pairs are up thus far 3.33% on 132 trades. I will post the final April results just as soon as I have them completed.