Forex Mechanical System Backtest Results: The Trend is Your Friend

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The numbers are in, ladies and gents! Here are the backtest results of The Trend is Your Friend forex mechanical system by donnapinciotti.

As I discussed in my previous blog entry on the system rules, I’ve decided to mechanize it a bit by setting a 100-pip profit target and a 50-pip stop. The rest of the system indicators and rules (EMA 100, RSI 9, reversal candlestick confirmation) were maintained and applied to the 4-hour chart of EUR/USD from May 1, 2013 to May 1, 2014. Here are the trade signals I got:

The Trend is Your Friend Forex Mechanical System

Based on this backtesting period and time frame, the forex mechanical system was able to generate a total of 300 pips for an overall 6% on the account. I assumed that each trade had 1% risk, which means that it would offer a 2:1 return-on-risk for winning positions.

Of course, as I always emphasize, it’s not enough to take a look at the profit/loss figures alone. Other metrics, such as the win ratio or largest drawdown, must be considered. Here are the results based on the 1-year backtest:

The Trend is Your Friend Forex Metrics

The mechanical system’s win ratio is less than 50% (7 wins, 8 losses) for the backtest period, but it was still able to generate a decent return thanks to the 2:1 reward ratio. Despite the 4% drawdown towards the end of the testing period, the forex system managed to escape with a positive account balance.

I’ll save the rest of my comments for the overall review once I’ve finished the forward test results for the month of May. What do you guys think of the system so far?

Until next week!

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  • Sekirata

    Hi Robopip

    The system needs a rework in my opinion, in order to boost its ability to make trades… 15 trades in 1 year just wont cut it.

    • Robopip

      Thanks for the feedback and for checking out my blog. The system owner mentioned that it is usually applied on the 1-hour time frame so that should generate more trades per year, I just no longer have those figures stored in my capacitor so I stuck with the 4-hour time frame.

  • zenmaster1

    A couple of questions on this system. You set I would suppose an arbitrary T/P of 100 pips. However, that seems a fairly large target. Would it have been more advantageous to have used say a T/P1 of 50 pips (taking half the position) and then set another 50 pip stop to close out? I also noticed that the EMA is used in this setup. I took a quick look at the GBP/USD 1 hr chart for this month (indeed May was a washout). Using this method, SANS reversal candle, and using the 100 SMA, resulted in the following:
    June 10th 10:00 GMT a SELL at 1.6786 but was only able to reach 1.6740 (46 pips)
    June 11th 16:00 GMT a BUY at 1.6792 and would have easily produced 50 and another 50 pips of profit. As I am sure you know, the (S)imple moving average reacts more slowly than the (E)xponential. As such during periods of high volatility, this may prevent some ‘false’ signals from being generated.
    I will try and do a little more back/ forward testing but it does show promise. I am curious were you able to write an EA for this? If so can you point me in the direction as to where I could learn how to do that, thanks.