How it Works
TRENDPILOT is a hedged quantitative forex trading Robot for cTrader
Our trading robot follows a simple “trend following” strategy based on the very basic indicators and price action trading principals. Indicators used:
Fast Simple Moving Average
Slow Simple Moving Average
Relative Strength Index
Average True Range
It is optimized to run on 1-hour timeframe, you may set it up and optimize it to run on other timeframes. The trend recognition is been confirmed in 4-hours and 1-day timeframes.
The strategy it is partially based on the Grid paradigm, however, with some fundamental modifications to reduce risk and maximize profit. While the original Grid system doubles the volume each time a hedged order is opened, we increase the volume only by factor one and moving the Take Profit closer to the last hedged order opened, see figure “Hedging” bellow.
TRENDPILOT is been tested and optimized to run all 28 major forex assets simultaneously:
EUR/USD, EUR/GBP, EUR/JPY, EUR/CHF, EUR/AUD, EUR/CAD, EUR/NZD, GBP/USD,GBP/JPY, GBP/CHF, GBP/AUD, GBP/CAD, GBP/NZD, USD/JPY, USD/CHF, USD/CAD, CHF/JPY, CAD/CHF, CAD/JPY, NZD/CHF, NZD/CAD, NZD/JPY, NZD/USD, AUD/USD, AUD/JPY, AUD/CHF, AUD/NZD, AUD/CAD
Forex historical data generating too much statistical noise; Our quant research has shown, the only way for a trading robot to work, is by hedging big price corrections.
When trend and volatility is detected, the system opens a drive order. If trend continues, drive order hits take profit and closes positively. If price goes to the opposite direction and after a predefined distance in pips (usually 30-50 pips), system opens the first hedge order. This is the Grid part of the strategy, however unlikely the Grid system that doubles the volume, we just increase volume by factor one and we limit the number of hedged orders to four.
In some cases, it makes sense to let the system open a 5th and in some extreme cases even a 6th hedge order. The 5th hedge order will open in double distance of the total of the first five orders and the 6th it will open in double distance of the 5th hedge order. Be aware that in this case, the drawdown will increase significant, you must be sure that the price will come back soon, otherwise you will create a big equity drawdown.
Trend Following Dilema
As long a trend is unbroken and volatility is high, one should keep trading the trend, therefore, keep winning position open or open new ones in the direction of the trend. This is the very fundamental rule of the trend following strategy. The key question is, when is the trend going to break. Another way to put this question is, when trend stops and reversers, is this really a trend reversal or just another price correction. This is the trend following dilemma.
It is your responsibility to find out if it is worth to keep hedging a position or close the whole bundle (drive order and hedge orders) because the trend is broken.
Optimization is a double-edged blade. On one hand it is necessary, on the other hand it may be overdone.
Over-Optimization leads to great results in backtest but poor performance in forward-tests and real-life environment. If you run optimization to find the perfect SMA period for a specific asset, and you run a range 50-150 by step 1, you will get very good backtest results, however the settings will perform poor in the future because they are to specific.
While you want to search the optimum parameters, you should keep parameters as universal as it gets. To find a good SMA value for a specific asset, use a range 50-150 by step 50. If you like to run optimization for smaller time-frames, you may use a range 10-50 by step 10.
Also, the period you are optimizing is very important. If you optimize the last 5 years, you will get very generic values which they will perform poor in the future. The same goes for a too tight period of 3-6 months. The perfect period to optimize is one year. To see how optimization impacts forward/real trading, optimize any asset for the period of 2018 and then run a forward-test from 2019 until now.
Along with TRENDPILOT trading robot , we deliver a set of parameters for all 28 major assets. These sets of parameters are not too general and not too specific; therefore, they deliver good results in all periods you may backtest it and in real-life situation.
While some assets deliver good performance because of high volatility, other deliver excellent or poor performance. The final profit it is not that important when it comes to optimization. One should look for as much trades as possible and the Equity Drawdown should not exceed 5%. Find bellow some examples: