My March Currency Trader Magazine Article: Testing Mr.Keltner for Long Term Trend Following Profits

For those of you who aren’t familiarized with Currency Trader Magazine, it is a very recognized online publication dealing with foreign exchange and futures currency trading. The magazine covers both technical and fundamental aspects of currency trading, dealing with strategies, analyst forecasts, system analysis, trading techniques, etc. From the end of 2009 I have become a very frequency contributor to this magazine with one dozen publications within the past 15 months (feels good to say one dozen!). On today’s post Iwill talk a little bit about my contribution to this month’s issue of the magazine – which you can download for free here – giving you some insight into what inspired this article and why it is a perfect compliment to February’s article and a very nice step in the development of systems that tackle “universal” inefficiencies.

If you remember my February contribution to the magazine, I explored the results of a Bollinger Band trading strategy which was evaluated in over 7 different currency pairs with the exact same settings. The article examined the strategy in depth, showing how – with the help of a standard deviation based breakout – long term profits can be achieved in a wide variety of different Forex trading instruments. The strategy definitely showed that there are in fact strategies which are “globally” likely profitable and that the key to building robust strategies that work on all pairs seems to lie in the exploitation of long term market trends.

After building this strategy it then became interesting to explore other types of breakout techniques to see which ones might lend themselves to the creation of profitable strategies for Forex trading. I was particularly interested in other channel type indicators and the Keltner Channel seemed like the perfect choice to do this. This indicator – which portrays the distance between a central moving average and a multiple of the ATR – gives us the perfect tool to enter breakouts using an ATR adjusted criteria.

Within my March article I deeply evaluated a Keltner Channel based strategy on 7 different Forex currency pairs on the daily charts. The results of the system – available within the article – show precisely how this strategy works and how it differs from other strategies like the Bollinger Bandit – explored last month – and the Turtle trading system. It is particularly interesting to note that the strategy presents some very unique characteristics which separate it from most other long term trend following strategies, giving its best results on pairs which usually do not perform as strongly with this type of technique.

With the development of these two systems – Keltner Channel and Bollinger Band based- it now becomes clear that the use of different channel indicators to enter breakouts yields systems with very different characteristics. However certain things – such as the usage of long indicator periods – still prevails showing how the best inefficiencies to capture from a “universal” perspective seem to manifest themselves primordially on the long term on the daily charts. This article gives yet another powerful tool for those of you who may be interested in the building of systems with the purpose of capturing movements in the “longer term”, strategies that are robust, work on many different instruments and are therefore very likely to continue to work for decades to come.

After writing these articles I am starting to work on the creation of a new Asirikuy system which will attempt to build a “portfolio EA” of several of these long term, very robust strategies into a single automated trading package, certainly such an EA would allow us to benefit from the combination of all of these different systems to amass great robustness and the ability to trade several of these long term systems within a single piece of code (like Atinalla FE does with its EUR/USD strategies). If you would like to learn more about my work in automated trading and how you too can learn how to build robust systems please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach towards automated trading in general . I hope you enjoyed this article ! :o)

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2 Responses to “My March Currency Trader Magazine Article: Testing Mr.Keltner for Long Term Trend Following Profits”

  1. josh says:

    Having a portfolio EA for the purpose of robustness sounds like a great idea, and one that I was hoping you might have the time to do, (although how you have the time to do so many things, I still do not understand) the question that I have is would it be to complex to add to another portfolio, so as to add robustness to a “cherry picked” type of portfolio? Would this be a reasonable use for the portfolio EA that you are creating?

  2. Maxim says:

    Daniel,

    I’ve read the article with a great interest!
    It looks like the system has more investigation/theoretical value than practical one. The AYP/Max drawdown is far away from other Asirikuy systems.
    Therefore, a lot of effort will be needed to make the system, presented in the article, “a first class citizen” of Asirikuy.
    Additionally, are there enough trades to state that the results are statistically important?
    I would also like to propose to present figures and tables in the same format. I’ve compared those for “Bollinger bandit” and for this article,-currently they are very different.
    To my opinion, establishing such format will make system comparing process much more strightforward.

    Maxim

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