I'm currently testing a mean reversion grid EA. This EA requires some manual help as at the begining of the week we set a center mean to which the Grid buys below and sells above the mean.
I've set it up on relatively uncorrelated fx pairs on the live account to test results. Not bad results as picking the right currency pair is almost as important and the timeframe and let's not forget the grid distance at that.
Though at the moment I'm having some issues with the open orders of the EA, it happens to open just too many orders right now so there's a little bug fixing that's required. Stay tuned for more info, however you can check out the results in our Omega Portfolio Live Results Here..
I'm still having some trouble automating this EA exactly the way I want it to be. Right now from all the trades you see going on in the Omega Portfolio you'll see quite a bit of Grid Mean Reversion trades happening, but these are all manually entered. Meaning I've setup pending orders with set TP's manually and not through any EA.
Now that I look through the process of doing so, I don't mind so much. The reason why I don't mind so much is that it forces me to have to take a look at the charts twice a day and always re-evaluate my thesis for each currency pair versus setting and forgetting an EA to trade without any brains if the market changes suddenly.
My goal here is consistent and low leverage gains over months and years. My experience has lead me to believe that 100% returns per month are certainly possible but at high risk which is not something I want to achieve if protecting my principal is my highest priority.
So for the moment I'll continue to work on an EA, but at the same time manually trade the system as well.
I'm having some success with this system so far this week, as you can see in the portfolio account. Despite the string of small losses that you see early in the week and last week. The reason for the losses was that I was testing the systems out. I don't actually test in demo but instead juice up the time frame and see how it does sending live orders. I'm willing to take that risk, but I watch carefully at the same time.
Anyway this week the portfolio account has seen only Mean Reversion Grid trades being taken on it, and all of them closing well in the positive hitting their target goals. I'm happy so far, with very little open drawdown.
Volatility on these currency pairs that I'm currently trading has been relatively low these days which is a great thing despite all of the trouble going on with the Italian debt markets in the Eurozone.
I'm certain that an increase in volatility will come but when is a different matter as I'm not sure which FX pair it will impact first and whether it will be all of them. Thus I'm watching correlations carefully at this time to ward off any systematic risk through out the EURO pairs.
Which if the Euro fails I'm sure will make things very interesting for me at this time. I'm betting that it won't be broken up into it's component parts and the European Central Bank instead prints cash to get out of this mess similar to the Federal Reserve Bank of the U.S.
I don't believe Europe has any stomach in breaking up the Euro at this time, but then again time will tell. I'll be prepared for a disaster like that as I'm currently trading very small lots in the portfolio account and watching things very carefully.
One last note, despite the very negative news coming out of Italy yesterday and some positive news today about speculation that ECB will print to get out of this mess I'm seeing in the currency pairs I'm trading like EURCAD, EURGBP that the EURO is strengthening rather then weakening. Looks like other traders don't buy the idea that the Euro is going to breakup any time soon either.. or we're all dreaming. Again.. time will tell.
Well It's been an interesting week so far. With the Eurozone debacle in full swing I had seen the AUDJPY break down significantly over the last couple of weeks. This FX pair is very risk adverse as many large hedge funds are just carry trading it due to the large interest rate spread. With Australia still having a fairly healthy 4% interest rate while Japan still continuing to have only a 0.55% interest rate as well as continued intervention risk on the upside for this currency pair.
This all means that when the AUDJPY pair is down significantly near lows, it's time to buy it and ride it up! It's important to watch to see if this pair doesn't exactly what you intend to do however. Since the ride up is slow and steady while the ride down can be rather fast and accelerate quickly on this fx trading pair.
It's always important to watch the volatility and look for turn arounds. You can profit substantially when the currency pair slows down and looks to the upside.
My methods include buying when this currency pair is at extremely low stochastics on the daily chart time frame and holding through during consolidation. Sometimes over days.. so patience is key. Since this currency when it's distance from it's 200EMA was great I bought looking for a mean reversion trade.
I then scale out of the trade closing lots after 100 pips or so in order to lock in profits. Since these AUDJPY trades take a long time to work themselves out, as sometimes I hold positions for weeks I never short it as I like to capture the interest rate swap during the entire period.
You have to also understand that currency trading the AUDJPY is not a zero sum game as many individuals like to espouse. Although trading can be a zero sum game to some individuals when they're hyper scalping. When an individual is swing trading you capture a great deal of interest over the course of the trade and so AUDJPY over time will ALWAYS go up because of the interest rate differential. In the short term it may quickly crumble down but large institutional traders will always want to buy this currency pair because of the carry trade. It's a no brainer, it's all however a matter of timing and getting into the right position.
A hybrid mean reversion and grid EA has been created called CorsairFX the results of which is going to be tracked here. Feel free to follow it in that particular forum. The EA for metatrader is now trading live accounts and all results will be shown.