Project Rigor Update – Friday 19/9
I am currently having the opportunity to test the strategy during a sideways market. For a strategy that until now had an average hold period of 1-4 hours (over the last few weeks), it has now been in the one trade for 4 days. The range its contained by is 1.4540-1.4065.
Slightly concering is that the 5 cent range is quite sizable, and not what many FX traders would define as a range bound market. I am comforted buy the current maket volatility that it will eventually pick one side of this range an move into profit soon, however until then my equity growth will be modest. This highlights the need to find subsequent strategies on alternative pairs to ensure there is dependable and consitent account growth over time, but more on that later.
The $25K demo account has increased to $30,256.70 over the last 3 weeks. However, over the last 4 days it has been in an unrealised drawdown of up to $8K (based on a moderate risk level), representing ~26% of equity. Note that this is unrealised and that throughout this period it has found other ways to make profits whilst being range bound. So actually, most of the $5,256.70 profit has been realised in 11 trading days with the last 4 days only slightly contributing to that total.
From the software makers self promotion, they claim that at the current risk levels, a maximum of 30% drawndown is likley. So this could be as bad as it gets.
The cost of holding these trades (the swap), is undetermined at present however it may errode up to 25% of the trades profit target when it is finally reached. I will need to crunch the numbers to work it out exactly once the trade is closed and will update you then. That said, it would be nice to exit the trade today and avoid the additional cost of holiding over the weekend.
I took the opportunity at the start of the week to start a simlutanous test on the same strategy at the aggressive risk level. Becuase it commenced at a different time, it didn't suffer the same drawdown however all things being equal, the unrealised draw down could be up to 50% when the same scenario occurs.
The $50K account has grown to $56,931 or 13.8% and we haven't even reached Friday's close.
As mentioned earlier, the need to balance this strategy with others is important despite its stable equity curve. If I am going to rely on this at some point in the future to provide my sole income, it needs to be bomb proof! This week I have discovered some secondary strategies to test. As time permits, I will commence testing those however I expect it to be towards the end of my project rigor testing which I expect to last another 6 weeks. I will establish another project name and subsequent updates accordingly.