Mechanical Forex

As many of you may know, I am always on the search for new automated trading systems to test and increase the size of our profitable trading portfolio. My criteria before testing has luckily saved me from testing useless expert advisors that would have never been profitable because of their unsound logic, money management, etc. However, some systems have gone through my extensive searching criteria and are now going to be subject of a 2 years long forward testing on one of my virtual private servers.

Today I would like to introduce you to one of this likely long term profitable expert advisors which is the GBP/JPY daily system which was pointed out to me by a newsletter subscriber. The system which was originally proposed to me was however not long term profitable since it simply relied on entering positions on breakouts of the first N bars of each week’s trade on the GBP/JPY and trading then using a fixed SL, TP and money management.

Testing of this strategy gave profitable results for most 2008 and 2009, nonetheless the expert failed dramatically before 2008 as a consequence of a change in market conditions which did not favor the expert advisor. My solution was quiet straightforward, I adjusted every variable of the expert advisor to be adjusted dynamically according to the range of the “box” formed between the high and low determined by the first N bars of the week on the one hour chart.

Testing revealed however that the system was still missing something to be profitable since no matter what we did, the system did not seem to profit between 2000 and 2007. Then it was perfectly clear that the system does not work when the GBP/JPY behaves as a carry trade and only works when it behaves as a trending pair like the EUR/USD. The solution then seemed quiet straightforward. I included both ATR and ADX volatility filters which kept the EA out of all the large losing periods while letting it trade profitably during the times where it would get the most profit. The results ? You can see them below (backtesting from 1999).
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It is evident from this that you can take almost any system that is not long term profitable and with the right thinking in mind turn it into a long term profitable expert advisor. Of course, this system will start to be tested and all my newsletter subscribers will get access to it as well as my weekly comments on it’s trading and performance.
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If you want to learn more about profitable expert advisors and the criteria I use to create them please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed this article !