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FHT - Four Hour Tour

Hi Everyone,

I’d like to indroduce my Darwin FHT and provide some details on how the underlying strategy is traded.

Personal Introduction

I’m a retail trader with about 6 years experience. As most traders I have made lots of mistakes and experimented with many different strategies (there’s a hint in my username :slight_smile: ) before finally settling on the strategy I’m using now. It has been quite the learning experience and rollercoaster of emotions, until I stopped babysitting my trades and started adopting more of a “set and forget” mindset.

Trade Strategy rules

  • FHT trades the majors and most crosses
  • Entries are based on H4 candlestick charts and patterns
  • The Underlying Strategy trades with initial risk of ~2% or less per individual opened trade
  • The Darwin should see Risks of strictly less than 2% per individual opened trade on the default Risk settings
  • Exits are based on a Profit Target set at a Risk:Reward of > 1:1, but trades can be closed sooner if there are indications we’re not going to hit the Profit Target. For trades which are opened with an expectancy of long duration, and very high R:R (> 1:5) a trailing stop will be used to lock in partial profits.
  • There is a limit of 1 simultaneous trade per pair. Hedging may occur across different currency pairs.

Investible Attributes

  • Ex: No account migration, so experience is still low, but ever increasing
  • Mc: Should remain high. There is no bias for a given currency, only technical arguments
  • Rs/Ra: Trade sizes will evolve with account size to get a consistent exposure per trade measured in %. The only variation expected here would be the number of simultaneous open trades. Entry signals for additional trades may be ignored, or may trigger the close of an already open trade on another pair, in order to limit the impact on the Rs/Ra attributes.
  • Os/Cs: The Open Strategy shows that earlier entries were better, later entries were worse. This fits the underlying strategy, which usually waits for directional confirmation rather than trying to catch tops or bottoms.
    The Close Strategy will be more random due to the different criteria for closing trades (see previous section)
  • R+/R-: R+ is not expected to have a high score. R- on the other hand should remain high. This is explained because there is a fixed ‘Risk’ exit, but not a fixed ‘Reward’ exit.
  • Dc: There are no time limits imposed on open trades, so I do not expect a high score on Dc
  • La: This attribute is expected to have a high score, again because of a fixed ‘Risk’ exit.
  • Pf: Not much to say here. Both you and I hope this score will remain high for ever
  • Cp: Since the underlying strategy trades H4 charts, there should be some divergence allowed.

My personal trading focus

  • Primary focus: keeping the Risk Aspects (Rs/Ra and R-/La) high.
  • Secondary focus: trying to improve the Reward Aspects (Os/Cs and Pf).

Communication strategy

I’m planning to provide monthly updates at the least, and reply to questions as soon as possible.
Should you have any more questions and/or suggestions on what to include in the monthly updates, please do let me know, and thank you already for taking the time to read this introduction.
Good luck to all traders and investors alike! May the fortune be with us :wink:

14 Likes

October has passed, so it’s time for a monthly update.

In this topic I won’t spend much time on presenting stuff that you can easily find out yourself by checking FHT’s page, like this month’s Gain or Loss and changes in DrawDown. I would rather talk a bit more about things that are not (easily) found on Darwinex, like why some values are what they are, and the underlying strategy, otherwise known as “the trader’s edge”.

  • VaR settling at ±15% in October


    When I started trading this account in its Pre-Darwin stage, I did not consider what my Monthly VaR would become once it was calculated and I was trading at a Risk level I felt comfortable trading myself. Now that the Darwin exists, we can see that it’s settling around 15% on the underlying account. I am very satisfied with this value and there currently aren’t any plans to modify my trading behaviour specifically to impact the VaR. As a provider, I think it inspires confidence for investors, knowing that I am trading more carefully with their money compared to my own. After all, every loss will hurt me 1.5× more than it will hurt my investors, and every drawdown will be 1.5× less severe for my investors than it will be for myself.
    (Note: I was on vacation in September and entered a lot less trades that month. For reference, October is more representative of my usual trading style).

  • October’s Trading Journal


    So here we’ll dissect a bit what happened in October, and since it’s the first update post, also shed a little light on my trading style.
    First off, the yellow line: In order to keep my VaR stable, I aim to have around 5 trades open at any given time. Of course, this is not a fixed rule, since I do not forcefully look for a setup once I have less than 5 trades open, and I don’t pass up on a good setup if I already have 5 trades open, although usually when I have 6 trades on the board, I’ll be more actively looking to close one of the 6 (which you can see by the short amounts of time with 6 trades). It is also not unusual that among those 5 open trades, there are cross-pair hedges against one single currency, for example a short bet and a long bet on the euro on two different eur pairs. This serves the purpose of keeping drawdowns limited during sudden increases in volatility.
    Then, the blue circles: These show periods in the month where I wasn’t positioned on the good side. Here you can see Stop Losses being triggered, by the decrease in equity as well as number of trades. This, in combination with my La score, should act as evidence that I am trading with fixed risks per trade. The underlying strategy trades with maximum risk of ±2% per trade. Combine that with a standard situation of having 5 open trades, the maximum exposure would be around 10%, and if you couple this back to the strategy trading at 15% VaR, it should translate to the Darwin having a risk exposure of 6.67% if for some reason all my trades would simultaneously hit their Stop Losses.
    Last, the purple circles: These are the things we all love to see. These were trades that either hit their Profit Target, or were manually closed in profit territory. In my edge, it usually takes (a lot) longer for trades to be profitable than being losses, which you can see in the long stretched circle in the 2nd half of october. There were still some small draw downs there, and they were mostly caused by trades that were stopped out rather quickly after they were opened.

  • Results of the Strategy per currency
    LOG
    This is an overview of all the trades that were closed during October, so the ones that are still open now are not included. This table shows a bit my performance or accuracy on predicting the movements of currencies. In October, I was apparently not very good at interpreting what NZD. CAD and GBP are close to 0%, while AUD, CHF, EUR, JPY and USD were bringing all of the profits. The way these numbers are calculated is best explained by an example: If I close a EURUSD Long trade with €10 profit, €5 will be assigned as EUR Long, and €5 will be assigned as USD Short. This is just more of a ‘fun infographic’ and no definitive conclusions should be drawn from this (note: for November so far, NZD is the top performer :wink: )

  • Closing statement
    So that was October for FHT, but I’d like to add two more things to this month’s update.
    First, I’d like to give a huge thanks to my first two Angel Investors. October saw two people investing in FHT (the first investor was me myself and I :slight_smile: ) and during the month, they were happy enough with the performance to increase their investments. So THANK YOU very much! You two know who you are! :slight_smile:

And secondly, I have joined @Livenemaxx’s Discord server where I am available to chat in the group channels, or by Direct Message if you have any questions. I highly encourage everyone here to join as a means of interacting live with traders and investors alike.

Happy trading/investing to all, and see you early December for the next update!

6 Likes

November is over so we’re due for an update.
It was a rough month.

Many more Stop Losses were hit compared to Profit Targets.
In the trading journal, we can see 3 periods. First a decline in the underlying strategy of about 11%. Then a period of stabilization with some hopefull pullback out of the drawdown, and then ruthlessly slammed down again for 7% from ~ -6 to ~ -13%.
The first period was caused by a personal bias that USD was about to weaken, based on the DXY chart at that time, but this didn’t happen and I got a bunch of trades going against me.
The third period was caused by an expectation of JPY to strengthen, and here again the opposite occurred, resulting in a -13.68% November for the underlying strategy, translated to a -8.29% on the Darwin due to my trading at 15% VaR. I’ve lost money this month, along with my investors, but I’ve gained more insights.

Va

Log

Another thing that “went wrong” this month is that I was analyzing the October performance. I work with a few different signals to enter the market and during November, I was not acting on the weakest performing signals of October. In hindsight that was a big mistake, because if I would’ve just acted on all my signals, like I did in previous months, November would’ve closed slightly above break even.

But it’s not all bad news. One thing that FHT was lacking up until now is robustness, by demonstrating that it has the ability to recover from a drawdown. The opportunity to prove that has now arrived.

So what does that mean for December? Well, we’re going to act on all signals again, and we’re going to be less “stubborn”, or “getting stuck” in a bias about a currency’s strength or weakness. Back to “Trading what you see, not what you expect”.

As for Investors, I got one additional investor in November, right about the time I posted my October update. Unfortunately for this new investor, they bought FHT at the all time high quote, so they are experiencing the drawdown to great effect right now.

For my investors I have the following message: For most of you, the Performance Fees are due in 2 Months. Currently I’m getting 0.00€. By the time the Quarter ends, I do sincerely hope to get my first batch of Fees, and the only way for me to do that, is to get out of this drawdown and make a new high, so that is, and always should be, the most important goal moving forward.

As always, happy trading/investing to all, and see you in January for the next update.

2 Likes

Hi everyone,

A bit sooner than ‘End of Month’ comes the December update. I’m posting now already because last week Friday my last open position closed, and I was never going to open any new ones this week. Trading on FHT will resume on January 6th

As mentioned in the November update, I was not going to exclude a selection of entry signals anymore, and also reevaluate our currency biases, and it showed. FHT has had a green month again, and even better, it was the best month to date (thanks Pound Sterling!). In fact, FHT is only 1 or 2 winning trades away from a new All-Time High. To my investors, I want to say thank you for not giving up on FHT after the bad November, and I hope to reward you even more for your confidence in 2020.

As you can see from the journal we had one little D-leverage spike. This spike appeared when I opened a Long EURGBP trade on 16-Dec with a short GBPUSD trade still open from right after the general election results in the UK. I used the same position sizes as I normally would, but the algorithms must’ve deemed double exposure on GBP as a noteworthy increase in D-Leverage. Luckily it didn’t hurt the Risk Stability attribute too much.

Speaking of Risk Stability, this brings me to:

My plans for 2020 with FHT

I have noticed that I’m doing pretty well on the D-Score front if I compare FHT with Darwins with equal or less experience. (at the time of this post, FHT’s Experience was exactly 2.80 but I had to set the filter to 2.9, or FHT was not included in the results).

This leads me to believe that I would actually have a good shot at DarwinIA allocations starting from mid-2020, when I have a few more months of Experience. To further increase my chances for allocation, I have decided to bring the VaR of the underlying strategy down from ±15% to ±10%, but not lower, to avoid the PnL swing to become too big for my investors. This will be done by funding the account a bit more rather than reducing position sizes, again because of DarwinIA reasons, so that IF I would ever get a Top 80 spot, I’d get as much actual allocation as possible.

December Trades per Currency
Here’s the underlying strategy’s performance in December per currency.
Log
JPY kept going against my expectations through December both in Long and Short directions and was therefore the worst predicted by me. The Lion’s share of profits in December came from GBP, and as you can see, I only went short. No pre-election positions were opened to avoid any unpleasant surprises, and all GBP trades were taken post-election when GBP’s direction became more clear.

The next update will be posted in early February. In the meantime, happy holiday season and a successfull January to all!

5 Likes

Nice start FHT - a few quick observations - approx. two-thirds of your trading pairs lose money and mid week trades also ( Tues/Weds), as I am sure you are already aware; so anything you can do to minimise this going forward would really help your P&L. My guess is that these are your hedging trades yes? Overall your positive/negative excursion chart is one of the best I’ve seen on DX. Your great LA & RS values together with acceptable divergence makes this a very promsiing Darwin!

1 Like

Thank you for the kind words @marketserpent,

For the Currency Pairs Statistic, the stats would look slightly better if the 50/50 pairs were green rather than red :wink:

Also noteworthy is that it’s not necessarily true that pairs in red on the pie diagram lose me money, or pairs in green gain me money for that matter, let’s have a look at two selected pairs:
EURJPY: 9 trades, 44,44% winners (thus in red), but total PnL on this pair +57.89€
NZDCHF: 5 trades, 60% winners (thus in green), but total PnL on this pair is only +6.77€
(sorry I couldn’t find an example where pie chart was in green, but PnL was negative :slight_smile: )

My strategy works with Entry Alerts whenever something happens on the chart, and then I evaluate the relative strength of both currencies in that pair against all other major currencies, it’s chart and price action, and any recent news or economic numbers related to one of the currencies. Only then will I decide to act on the Alert and enter the market or not.
I am monitoring this particular statistic and I’m evaluating on an ongoing basis whether these “less than 50% profitable pairs” are producing more fake Entry Alerts on average, or if I’m just worse at analyzing and “pulling the discretionary trigger” on these pairs. I believe the sample size is currently too small to have a definitive answer either way, and the situation gets even more difficult to evaluate if you know that I sometimes cannot act on entry signals that in hindsight turned out to become a good trade, just because adding an extra open position would harm my personal risk appetite, and also the RS attribute. For now, it is too soon for me to completely exclude certain pairs from my watchlist, but it is possible that it could be done in the future.

For the Weekdays Statistic, I’m fairly sure this is just due to the sample size for now. As you can see from the Assets & Timeframes page, my trades are open for more than 2 days on average, so it’s not necessarily trades that are opened on Tue and Wed that are the bad ones. Also, as far as I understand Darwinex, this Weekdays stat is based on (floating) equity, and not (fixed) balance, so a winning trade that was opened on Monday or Tuesday, could be floating in loss at first, then turn profitable later in the week, then close firmly on profit on Friday, and still have caused negative performance on Tuesday and Wednesday.
Envision a Weekly candle on a chart. If it is a strong bullish candle, the low will most likely have formed in the first half of the week.
In any case, the combined negative performance on Tue and Wed = -7.21% at time of writing. Monday (+7.99%) and Friday (+15.73%) individually completely cover those on their own, and Thursday (+6.49%) almost does so :slight_smile:
I am not actively looking for ways to improve the Weekdays stat to get all green days.

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Thanks for the comprehensive response…yes that floating equity always gets me :wink: Great December performance and recovery - well done:)

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Nice recovery from November :grimacing:

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Due to the upcoming changes to the Risk Manager detailed in this Blog Post, there is no longer any point in reducing the VaR on the underlying account as planned. In fact, it would be disadvantageous to do so for at least the first 6 months. Therefore, I am stopping my VaR adjustment strategy, and will keep trading at around ±15% on the underlying account.

3 Likes