Then it occured to me that perhaps it was possible to develop a long term profitable system based on short term breakouts if the parameters of such breakouts were adapted each week against changing market conditions. Each week would have its own custom criteria fitted to each week’s particular volatility and this would most likely yield improved results over the non-adaptive formula used by most programmers out there. After a significant amount of research I was able to come up with a long term profitable weekly breakout system which is explained in detail in the current version of Currency Trader Magazine (February 2010), you can download the magazine for free and read the article here.
However I still knew that more improvements could be made over the trading technique exposed in the magazine and after some tweaking of the initial setup explained on the article I was able to greatly increase the profitability of the trading system on several currency pairs. Below I show you the backtesting equity curve for the EUR/USD in testing from Jan 01 2000 to Jan 01 2010. A 10 year test of the trading system.
The fact that the system seems to struggle in 2009 is a mere consequence of the fact that lot sizes traded are much bigger than in 2003-2004. A very similar draw down period occured within those years as you see on the graph.
This new trading system which is the third development in the series of Watukushay expert advisors is called Kutichiy which is a Quechua word which translates most accurately as “answer”. I named it like this because Kutichiy is the answer I was looking for regarding short term breakout systems. This expert advisor adds another weapon to our portfolio for long term profitability. The expert advisor is already being tested in a live account and the expert advisor plus all backtesting statements and an introductory video explaining its use and logic are available within the member’s section in asirikuy.
Of course, as part of the Watukushay project an ebook section about this system will be developed within the next few weeks. If you would like to know more about watukushay expert advisors and the watukushay project please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !