Automated Trading Systems - A Technical Study.

Note: For information purposes only.

Some traders expect too much from a trading system.

A trading system is just a set of computerized rules, so that it can be followed without any emotion to interfere with the logical execution of the trades.

The ATS-EUROfx is a simple system, driven by 2 indicators.

1. A propriety modified SMA.
2. A modiified MACD indicator.

When these 2 indicators synchronize, the system BUYS or SELLS.

Both these indicators are market driven. However by their very nature they lag the market.
The system however tries to find a good trend in the market, and then takes full advantage of the trend.

The system has other functions to manage the trades better and control risk, loss and profits:

1. A stop loss function to limit looses in case something goes wrong and the market moves against the trade suddenly.
2. A trailing stop function to lock in profits and to prevent a winning trade from turning into a loss.
3. A sideways filter to prevent the system from trading if the market moves sideways for a prolonged period of time.
4. A set of 'Loss Control' filters that work with the trends of the market, to manage trades better.
5. A set of 'Profit Filters' that work with profitable trades and the trends of the market, to exit with max profits.
6. The system uses a 'Delayed Entry' method, to eliminate 25% of the losing trades and improve the performance.

These indicators, functions and filters shift the odds in our favour. If a system is traded consistently over a long period of time the chances are that it will be profitable. In this business nothing can be guaranteed. All we can do is design the system. Use logical generic formulas, back test properly using sufficient data to get reliable results, and then follow the system.

A market can only do one of 3 things:

1. The market can go up.
2. The market can go down.
3. The market can go sideways.
4. The market can also be fast, slow, volatile or quiet.

A realy good system should have adaptive functions, indicators and filters that can adapt to changing market conditions. This makes a system much more efficient and profitable, because it can adapt itself to changing market conditions and automatically adjust the parameters accordingly.

I have made a study of the profitability of the ATS-EUROfx Automated Forex Trading System and have found out that the system derives all its profits, from about 7% of all the trades.

That is why it is imperative to let the system run, never interfere, and let the profits run.

Below is a list the biggest winning trades sorted in descending order. As you see the system makes all the profits from just 48 trades. 48 of the biggest winning trades. The other trades just cancel each other out. This is why when trading a system, it must be left alone completely. 

NOTE: These are hypothetical results not real trading results.

The testing period is November 2002 to May 2008, 67 months.
The system is producing 2 big winning trades every 3 months.
During the testing period there were 684 trades in 67 months.
Average number of trades per month: 684 / 67 = 10.2.
Total pips profit during the testing period = 9488 pips.
Average profit per trade: 9488 / 684 = 13.87 pips.
Average profits per month: 13.87 * 10.2 = 141.47 pips, or $1414 per lot.
The leverage used to trade the system is $15,000 per lot.*
A profit of $1414, equals 9.4% on a margin of $15,000.

Note that commisions and performance fees were not deducted from the results.

The system is built on sound principles, and properly tested. It took over 2 years to come to this point, and I am sure I can improve it even further.

A system is a work in progress. It is never finished. It can always be improved in one way or another. The mission of AutoFX Trading Systems Inc. is to continue to work to improve the system, to make it more profitable, and less riskier to trade.

The system will have drawdown periods. The important thing is to be conservative, and to have a long term objective. Every business goes through cycles. It is the nature of the general economy. We are all part of the general economy, and Forex is no exception.

When you download the demo, you will be able to login to a practice demo account with the Forex dealer of your choice and watch the system trading live in real time. You can also perform back tests on 5 years of 15 minute data using different parameters. 

NOTE: These are hypothetical test results of the 48 biggest trades.

                               PROFIT
 DATE   TIME    CLOSE        TRADE TOTAL  
27JAN03 02:45  1.0867 L-EX    296   296     1   
01JUN05 11:45  1.2222 X-EX    291   587     2                                   
30SEP07 17:00  1.4273 L-EX    290   877     3                                   
15AUG07 21:15  1.3401 X-EX    290  1167     4                                   
02SEP05 04:15  1.2586 L-EX    290  1457     5                                   
01AUG03 03:15  1.1172 X-EX    290  1747     6                                   
07APR03 05:00  1.0565 X-EX    288  2035     7                                   
06JUN08 16:00  1.5768 L-EX    264  2299     8                                   
04JUL06 07:00  1.2793 L-EX    243  2542     9                                   
16NOV03 19:30  1.1813 L-EX    241  2783    10                                   
01MAY03 11:00  1.1236 L-EX    235  3018    11                                   
16MAY05 04:30  1.2625 X-EX    212  3230    12                                   
17DEC02 09:45  1.0298 L-EX    212  3442    13                                   
08JAN07 04:00  1.3018 X-EX    210  3652    14                                   
12JAN04 05:45  1.2850 L-EX    210  3862    15                                   
14JUN06 00:45  1.2564 X-EX    209  4071    16                                   
03MAR04 00:15  1.2191 X-EX    207  4278    17                                   
24APR08 14:45  1.5680 X-EX    205  4483    18                                   
13SEP07 07:00  1.3883 L-EX    204  4687    19                                   
05JAN05 09:30  1.3262 X-EX    189  4876    20                                   
01APR03 01:00  1.0885 L-EX    189  5065    21                                   
22JAN08 03:45  1.4436 X-EX    188  5253    22                                   
06MAY03 19:15  1.1413 L-EX    188  5441    23                                   
14MAR05 00:15  1.3434 L-EX    187  5628    24                                   
10JUN04 08:30  1.2077 X-EX    183  5811    25                                   
12MAY03 09:30  1.1561 L-EX    183  5994    26                                   
27JAN04 05:45  1.2496 X-EX    182  6176    27                                   
17MAR08 00:00  1.5843 L-EX    176  6352    28                                   
19MAY03 06:45  1.1664 L-EX    168  6520    29                                   
26AUG04 14:15  1.2108 X-EX    167  6687    30                                   
22FEB04 22:00  1.2507 X-EX    167  6854    31                                   
26NOV04 02:15  1.3273 L-EX    165  7019    32                                   
06FEB08 09:30  1.4646 X-EX    162  7181    33                                   
23FEB05 01:30  1.3223 L-EX    161  7342    34                                   
06MAY04 06:15  1.2116 L-EX    161  7503    35                                   
05NOV02 12:15  0.9987 L-EX    158  7661    36                                   
14DEC05 12:45  1.1996 L-EX    155  7816    37                                   
16DEC07 20:15  1.4436 X-EX    150  7966    38                                   
13JUN05 11:30  1.2072 X-EX    150  8116    39                                   
27DEC04 20:30  1.3593 L-EX    150  8266    40                                   
09DEC03 07:45  1.2241 L-EX    150  8416    41                                   
06AUG03 05:45  1.1385 L-EX    150  8566    42                                   
31OCT07 19:15  1.4467 L-EX    149  8715    43                                   
18APR07 08:30  1.3570 L-EX    149  8864    44                                   
21JAN04 07:00  1.2610 L-EX    148  9012    45                                   
26MAY03 23:45  1.1864 L-EX    148  9160    46                                   
20NOV07 20:30  1.4816 L-EX    147  9307    47                                   
08JUN07 08:30  1.3361 X-EX    147  9454    48 <- total 9488 pips   
---------------------------------------------                                
12JUL05 05:00  1.2162 L-EX    147  9601    49
Risks of Forex Trading: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Without proper risk management, this high degree of leverage can lead to large losses as well as large gains.* Please note that Forex trading is very risky and past results are not necessarily indicative of future results.

Please read the following CFTC warning: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.

One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

Past results are not necessarily indicative of future results.

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