Introducing Watukushay No.7 (Sapaq) : Our First Counter-Trending System

One complaint I have always received from some people within Asirikuy is the fact that I have focused the development of Asirikuy only on trend-following systems. Although this stopped being true after the release of Atipaq – for which an Asirikuy member found counter-trending successful uses – it is still true that none of the systems within Asirikuy have been designed to use counter-trending techniques from the beginning. On today’s post I am proud to introduce Watukushay No.7 – which will be called Sapaq – our first counter-trending Asirikuy system trading the EUR/USD and a few other currency pairs. Through the following paragraphs I will explain a little bit what Sapaq is about, what the name means and what I intend to achieve with this system.

Certainly this is not the first time I have attempted to create counter-trending techniques for use in currency pairs such as the EUR/USD. If you have been reading my blog for a while you might remember my posts about the ADX in which I built one of my first “successful” counter-trending system exercises. However up until now it had been elusive for me to create a more successful counter trending approach since these inefficiencies are much harder for me to find than regular trending inefficiencies (perhaps because I have trained my eye to follow trends?). Nonetheless, after a lot of work and analysis I finally came up with Sapaq, Asirikuy’s first answer to the question of counter-trending inefficiencies.

The idea for Sapaq’s logic is however not new, it is actually based on the research I did for a few Currency Trader Magazine articles dealing with the successful mechanical trading of the Asian session by exploiting an inefficiency created during European trading. This clever tactics makes use of the predictability of the Asian session in order to find conditions in which the following sessions are predicted to reverse the past 24 hours of trading directionality, something I noticed while I was performing a statistical analysis about the predictability of Asian session trading while developing my June CT article (which deals with the historical characteristics of the Asian session on the EUR/USD, EUR/GBP and EUR/CHF).

Sapaq is nothing more than the culmination of this work into what I believe is a sound counter-trending system that achieves successful 11 year backtests (note that 2010 however was not included in optimizations). Although the results of this system are not brilliant by any means, they are in fact at least as good as those of Watukushay FE, being worth using in the sense that it provides significant diversification against many trend-following systems as it effectively hedges many of their losing trades successfully. Certainly the profit and draw down targets of Sapaq are nowhere near those of Atipaq or Teyacanani but it is in fact a key system for future improvement of portfolios due to its added diversification. With another key point being the achievement of successful counter-trending results on other pairs such as the GBP/USD which exhibit similar Asian session related inefficiencies.

For those of you who are curious about its name, Sapaq is the Quechua word for “different” a name I assigned this EA because it is simply different from all other Asirikuy systems in the sense that it has been devised from the beginning as a counter-trending system. I certainly like this trading system very much and I believe that it will bring a lot of additional value to Asirikuy not only as an addition to some future or current portfolios but as a portfolio EA on its own (trading several Sapaq instances on different pairs).

If you would like to learn more about Satipaq and how you too can create and analyze trading systems please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach to automated trading in general . I hope you enjoyed this article ! :o)

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2 Responses to “Introducing Watukushay No.7 (Sapaq) : Our First Counter-Trending System”

  1. Maurizio says:

    Dear Daniel, did you try to exploit this kind of inefficiency on EURCHF and EURGBP, too? In theory they should have the right features, I mean a rather steady asian session with price starting to move at the open of London session.
    Thank you.
    Kind regards.
    Maurizio

    • admin says:

      Hello Maurizio,

      Thank you for your comment :o) Sadly the problem with these pairs is that reliable long term simulations are not possible because historical spread variations are way too high. The movement within the European and American sessions is also rather limited and therefore the above mentioned problem becomes even more important. If you read my articles my original Asian session statistical research involved these pairs but I didn’t include them within the article in which the system’s basic core was developed because accurate simulations are simply not possible with the available data. I hope this answers your question ! Thanks again for your comment,

      Best Regards,

      Daniel

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