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WFJ - TradeSignalMachine

This post is in response to a request from @CavaliereVerde who asked if I could publish some information about my trading system (underlying the WFJ DARWIN). I don’t expect anyone to necessarily comment on the post, but hopefully it might be of some use to other fellow Darwinexers in addition to @CavaliereVerde :slight_smile:

The system underlying WFJ is 100% algo based, and just runs day-in day-out like a trooper. I check it 4 or 5 times a day to make sure that it is behaving and that no errors are raised. I’ve run this now for about 4 years and so problems are very infrequent these days. The only issues I tend to have now are when my VPS goes down for any reason (also rare).

The system is based on 3 levels of processing as follows:

• Level 1 – Filters
• Level 2 – Signal
• Level 3 – Trigger

Level 1 – Filters - I use two filters: i) A Trend Filter (based on a proprietary indicator I’ve developed) and ii) A Volatility Filter. The trend filter classifies the current market into UP TREND, DOWN TREND, or RANGING/SIDEWAYS. The Volatility filter classifies the current market into HIGH, MEDIUM or LOW volatility. WFJ only ever trades in a trending market (in the direction of the prevailing trend), and in HIGH or MEDIUM volatility. If the filters are not suitable I don’t even bother processing level 2 (the signal) or level 3 (the trigger).

Level 2 – Signal – I simply look for a substantial pullback on the H1 timeframe from the current trend, using a oscillator indicator. If a signal is not actively saying ‘trade’, I don’t bother looking for a trigger.

Level 3 – Trigger - I look for the start of a movement back in the direction of the trend using the M1 timeframe.

To close the position I look for a signal based exit, where I look for an extension in my favour (based on a percentage of the preceding pullback) for my profit taking exit and also have an emergency stop loss in place for losing positions. I also exit if any of the filters (mentioned earlier) turn against the position.

I don’t use tick data – I use bar close data, and algo processing is triggered by a bar closing (completing). I find this to be more than adequate when trading off the H1 chart, and it makes back testing SO much quicker.

I have recently (in the last 18 months) changed my opinion of how to back test and optimize parameters of the system. This has been one of my biggest revelations as a trader. I used to optimize with a single in-sample (optimization) stage and a single out-of-sample (validation) stage. However, I went through a really rough patch between January 2016 and October 2016 as can be seen from my chart.

I eventually put this down to an inability for my optimization and back testing process to cater to changing market conditions. My system seemed to get completely out of sync with market conditions at that time. This forced me to look at my entire development and testing methodology. After much research and development (as I suffered the pain of seeing my system continue to fail), I eventually found what I needed to change, which was to adopt the use of ‘Multi-Stage Walk Forward Optimization’ (sometimes called Walk Forward Analysis).

I decided to document a case study about this in July last year after I started to see my system turn around and become profitable again, following the changes I’d implemented. The system continues to remain profitable to this day, and so generally I am very happy with the changes I made to my optimization process. If you want to read more you can do so in the case study here.

Does that give you the kind of info you were after @CavaliereVerde ? :slight_smile:

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Thanx, very detailed!
Inspirational also for other algorithmic traders!
:sunglasses:

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Impressive return!
Nice job!
:clap:

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Thanks. Hopefully indicative of improved back testing :slight_smile:

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I noticed good fundamentals also on KGL and a nice robust growth on last 1Y .

I am considering to buy but some info on the strategy would be welcome… :wink:

Hi @TradeSignalMachine
Maybe you missed my prevous comment.
I am interested in KGL but I need an answer. :wink:

Hi @CavaliereVerde,

Apologies, I did miss it.

KGL is an automated trending system operating on AUDUSD, NZDUSD AND EURUSD in the M15 timeframe. It attempts to enter the trend, but only following a pullback ‘against’ the trend.

Sorry I missed it first time you asked.

@TradeSignalMachine

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FIVE years of trackrecord for WFJ !
~100% return
Congrats @TradeSignalMachine , impressive job.

It is a shame that there are only 7 investors, the general lack of maturity is really disappointing.

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Thanks @CavaliereVerde - How time flies when you’re having fun! :smile:

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@TradeSignalMachine
I really dont’ understand why investors ignore your WFJ
Probably it is because of a bullshit like low Loss Aversion score.
FIVE years of native trackrecord have much more weight than every score.

Thanks @CavaliereVerde.
I know you have been a loyal investor for a long time. To be honest I can’t really answer your question. I agree that a long track record is probably more important than scores, but I guess if investors have filters set up to filter out low scores in certain attributes then WFJ gets overlooked. And yes, my ‘Loss Aversion’ score is bad - but I am not loss averse. I am an algo trader and algos don’t suffer from loss aversion! - it’s just that the rules I have defined tend to fool the Darwinex loss aversion metric into thinking I am :frowning: ). There’s nothing I can do about it, so I tend not to worry too much. I just carry on working hard, and try to be the best algo trader I can. But thanks for your comments, I appreciate it :slight_smile:

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200% agree LA is just the RR of the trades and that RR is set to make pips at the end of the year, it is a parameter like every other for an algo trader.

What I want to say is that if Darwinex does not provide an AUM of more than 500k to a darwin with 5 years of native trackrecord and 2 MM of capacity there is something wrong that have to be fixed.
Different scores or different ways to give visibility to true traders.

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I doubt it is visibility. He is in top 50% return filter.

it is more likely, there is very little tolerance for flat to slightly negative years.

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50% return is a crowded filter, 150 darwins and 100 have less than 20 investors.
Being in that filter is almost useless.

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not the point!

he has plenty of visibility

this is the first filter I go to check darwins and I suspect most other as well

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Hey @TradeSignalMachine,

Congratulations on your success! And thanks for sharing some great details of WFJ :).

I would like to echo @CavaliereVerde in his surprise/confusion in your low number of investors you have. I just arrived here (as an investor) and just doing some basic analysis of different Darwins, looking at numbers and also valuing qualitative signs of seriousness/profesionalism of the trader behind, WFJ stands out to me: Very long track record + someone serious behind + good returns… Is not something thaaaaat common.

Anyway! If you don’t mind…I got a couple of questions (both, to understand WFJ better, and Darwinex itself).

  1. What happened on Jul 16? What could cause the DLeverage to spike that much for few days?

  2. Since June19 it’s increasing steadily. Do you know why?

Thanks for your time in advance! :slight_smile:

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Hi @Qaytarlah

Thanks for your feedback. It is appreciated. Just to answer your questions:

What happened on Jul 16? What could cause the D Leverage to spike that much for few days?

This was because I started to trade an additional strategy based on UK100 (the FTSE 100). Unfortunately at that time, the minimum lot size for UK100 was 0.1, compared with 0.01 of forex pairs, so I was forced to increase my leverage for this reason. (Note that Darwinex now supports a min lot size of 0.01 for UK100 so it is no longer an issue). Also since this, I have learnt lessons and now use separate accounts for anything that will adversely affect the leverage or trading style. Now WFJ is focused on currency pairs.

Since June 19 it’s increasing steadily. Do you know why?

Yes I know why. This is an intentional gradual increase in leverage. I have recently performed some in-depth analysis of my position sizing strategy and concluded that I am actually under-leveraging. I am increasing this gradually so that the Darwinex algos can keep up and adjust the DARWINs risk, so that investors are not affected.

I hope this answers your questions

Thanks again for the feedback :slight_smile:

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Thanks for your reply, it’s very useful!

You pointing out that (I understand) you moved the UK100 strategy to another Darwin, made me notice you have 13 Darwins!

Can you help me navigate them?
Are you invested (significantly) in all 13? If so, in which breakdown?
Another form of the same quesiton… Would you say all 13 Darwins are suitable for buy&hold long term investing? Or some are sort of experiments and you would not advise investment (yet)?
Why does TRO exist, it seems to be the same as WFJ?
Are you by yourself or there’s a team behind this?

Sorry for giving you a lot of work haha. Don’t rush your reply! Nothing is urgent here ;).

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Hi @Qaytarlah

One of the major benefits of being an algorithmic trader is that the vast majority of the work is up-front before you ever trade a system. Obviously a manual trader would find it extremely difficult (if not impossible) to trade so many accounts. But for an algo trader it is very possible. Once the up-front work is done (strategy premise, development, testing, robust optimization, test in demo), all that is then needed is monitoring of the system to ensure it is doing what it should, and re-optimization if and when required. Having done both manual and algo trading in the past I can safely say I will never be a manual trader again :slight_smile: The benefits of being an algo trader are simply so compelling.

In terms of the DARWINs I have, I would say they are all investible (to varying degrees - clearly some are more successful than others). I would never publish a system as a DARWIN unless I considered it was investible. I have other trading accounts with Darwinex for systems that are still being tweaked (and some may eventually be turned off) that I have not published as DARWINs because I do not feel anyone should invest in them just yet.

So the ‘experiments’ as you term them, are there behind the scenes, but you will not be able to view them.

TRO vs WFJ was meant to allow me to form a comparison of the same set of trading rules with different execution speed (a speed optimised EA). I wanted to see what difference this would make, if any. However, as you suggest they are actually very similar.

It’s just me working away here, however, I do have quite a few peer sessions with other like-minded traders on a frequent basis which helps to bounce ideas around and get peer input. These sessions are great for both traders from the perspective of generating new ideas for systems.

It’s always great to get an investor’s viewpoint on Darwinex. Good to chat.

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BTW it is quite evident that WFJ is the flagship:

  1. longer trackrecord
  2. more trader’s equity
  3. complete description

@Qaytarlah
In case of multiple darwins I always follow the smart money, the money of the trader. :wink:

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