My April Currency Trader Magazine Article: Creating Systems From An Edge Ratio Analysis

A few days ago the latest edition of Currency Trader Magazine was released and within it my latest article was included. For those of you who are not familiarized with this magazine, Currency Trader is a widely recognized online trading magazine carrying very useful information about currency trading both from a fundamental and technical point of view. The authors who write on the magazine contribute articles ranging from economic news and events to trading system design, specific trading tactics and fully disclosed trading strategies. My articles – which often fall under the last category – attempt to help people design and learn about new trading systems I develop to trade the Forex market. The last version of the article is always available at absolutely no cost here.

On the April edition of the magazine I decided to write an article which was complimentary to my January contribution which did a somewhat in-depth study of classic indicator rules on the four majors through an edge ratio analysis. On this article we discussed the possible inefficiencies related to classic indicator rules on the daily charts but there was no precise system designed from these observations or any hint as to how this would be done. In order to give traders a better idea of how to use an edge ratio analysis to derive successful trading tactics I decided to write an article pertaining exclusively to trading system design from an edge ratio analysis.

My latest article takes a piece of the January issue observations related with the MACD indicator and uses them to generate a system which has profitable simulation results on the daily EUR/USD charts for the past 10 years of trading. The article explains the criteria used to decide on a classic MACD tactic for this pair and then goes into detail as how this leads to a fully functional trading system. Through this article you can see how the edge ratio analysis gives me the initial information to build a system and how I choose a particular exit tactic against another in order to avoid any over-fitting of the strategy.

What you have in the end is a trading tactic which is generated from an edge ratio analysis with adequate considerations as to avoid “bad” development practices. The end result is a system which has a rather “smooth” equity curve during a 10 year period with good profit and draw down characteristics. Certainly the article will allow anyone interested in developing systems through an edge ratio analysis have a better idea as to how this could be done to generate good systems that deliver. If you have the January issue of the magazine – which you can buy through the CT page – you will also be able to use those charts in order to create other systems in a similar way as this MACD strategy.

With this article I wanted to show mainly that strategy design can be carried out in a somewhat systematic fashion with the ability to eliminate possibilities that will not yield significant results through an initially extensive edge ratio analysis. Since performing and edge ratio analysis is easier – and gives a better and wider perspective – about which strategies might yield useful results, learning to join the edge ratio analysis with a system design process is of vital importance for anyone seeking to create strategies in a more transparent way. This process therefore allows you to reach strategies with a better understanding of their potential, applying trading tactics which are in line with what your strategy attempts to achieve.

If you would like to learn more about my work in automated trading and how you too can get a full education regarding automated system design and evaluation for retail Forex trading  please consider joining, 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)

Print Friendly, PDF & Email
You can leave a response, or trackback from your own site.

Leave a Reply

internal_server_error <![CDATA[WordPress &rsaquo; Error]]> 500