System Review: 3 Ducks System

*beep beep boop beep*

Greetings, humans! After one week of crunching numbers, I come to you with the results of the modified 3 Ducks Trading System backtest. You can view the parameters I followed by checking my previous post.

Before I go on, let me just highlight a couple of things again. The 3 Ducks System I have tested is a mechanized version of the original one. To ensure consistency, the profit target and stop loss levels were converted to hard numbers (30 pip profit target and stop loss).

Also, instead of using the 4-hour, 1-hour, and 5-minute charts, I zoomed out a little and used the 4-hour, 1-hour, and 15-minute charts.

Without further ado, here are the results:

Modified 3 Ducks System Stats

Profitability: 16/20

Even though it only had a 31.51% win rate, it ended up with a spectacular 7.40% gain. This is an extremely good win rate considering the profit target is restricted to 30 pips and my backtest only spanned a total of 8 weeks’ worth of data.

In addition, based on my observation, the net gain could be much more if the profit target was increased. This was completely my fault, so I’m not going to deduct points for this.

Risk Tolerance: 12/20

I’m giving this system a bit of credit in the risk tolerance department because it does a pretty good job of limiting losses. I particularly like its use of new crossovers on the lowest time frame as a signal to jump ship and cut losses early. This neat feature actually saved the system from taking a full hit on a number of occasions!

On a less positive note, you may need to trade this system with quite a bit of capital (i.e., start with a large beginning balance) if you plan on withstanding its drawdowns. In my studies, I noted a few strings of tiny losses that added up to big hits. I’m giving this mechanical system a score of 12/20 for risk tolerance.

Newbie-friendliness: 7/10

Aside from the fact that you have to look at three different charts, you don’t exactly have to be a rocket scientist to trade the 3 Ducks System. It should be easy enough for a newbie to pick up, as it is essentially a simple crossover system.

Entries and exits are clearly defined and easy to follow. Plus, I think that its many signals (averaged almost 2 trades a day!) will be appealing to even the most impatient and trigger-happy newbie!

Bonus points: + 2

I’m granting this system 2 bonus points for its use of multiple time frame analysis. Even on my planet, it’s not that often that I see mechanical systems that consult THREE different time frames!

Total Score: 37/50

Overall, I’m giving the mechanized version of Captain Currency’s 3 Ducks System a score of 37 out of 50, which I believe is a pretty fair rating considering the system’s strengths and its weaknesses.

As with most crossover trading systems, it showed vulnerability to false breakouts while showing the ability to catch nice, strong moves. Methinks that a filter of some sort, such as entering a certain number of pips from the crossover candle’s closing price, would help tweak odds to be more favorable.

Though the modified 3 Ducks System seems promising, I can’t help but feel that we must continue our search for the Holy Grail…

Holy Grail system… Find you, we must!

  • Ohbrother

    Having fixed profit targets while using a trend following system is an oxymoron. 3 ducks is not a mechanical system, all it does it, more often than not get you on the right side of the market. Trade management is what will or won’t make you profitable and with a trend following system that means letting your winners run, not cutting them at 30 pips.

  • RazorX

    Hmm my human brain is befuzzelded (It is early in the morning)
     
    Here are some facts: 23 winning trades, 50 losing trades. 30 pip Target and SL. Now (unless you manually shift the SL during trades) the numbers should be 23*30 = 690 pips gained. 50 * 30=1500 pips lost. = Net 810 pips lost. So how did you end up with a winning % of 7.4. and a net gain of pips of 252? Surely logic dictates that if you have a target and SL the same and presumably lot size the same, then any win/loss rate less that 50% is going to result in a net loss?

  • Bedek

    Hello Robopip, good work on the review! 31.51% win rate should be good considering that we want to lose small (stop out) but win big on the breakout. Most effective systems have success rate of below 50%. Too high success will mean the system stop out prematurely with potential breakouts filtered.

    Just wondering, will you be able to share the program?

  • Pelle Svanslös

    Maybe I’m slower than usual, but how can a system which has a 1:1 Risk/reward setting produce 23 winners and 50 losses and still come out with a 7% account increase?

  • Marcel Balaz

    why only 8 weeks of BT?

  • Bobkat2

    Let me get this straight. You change the parameters of the trade by altering the 3rd Duck from M15 to M5…you don’t know the correct exit rules…you provide points for some unknown risk value and you call this a review? Sorry…but this is a travesty and is unfair to Captain Currency whether or not 3 Ducks is a solid performer. My conclusion is the results of your reviews are highly questionable at best. Oh…and why don’t you call this the misguided 2 1/3 Ducks review?

  • Black Legacy

    I don’t think that the bonus should have been given for multiple timeframe. One gets better result with one timeframe or you can use 2 timeframe for further refining your trade.

  • Andrew Ho

    Number of trades = 73
    Long Trades = 35
    Short Trades = 35

    What happened to the other 3 trades? :-)

    • robopip

      Ah, it appears there was a small bug in my system. I have corrected this. Thank you for pointing it out, Andrew Ho.

  • alwjmonster

    yeah, i’ve also wondering the same thing as pelle said.. how possible 1:1 risk to reward ratio could turn out profitable while losses outrun wins

  • RazorX

    Ah right early exit – forgot about that one. Figures make sense now. Thanks  for clearing that up.

  • robopip

    Greetings Earthlings! Ah, it seems there is some confusion. According to the system rules, you have to close the trade if price crosses back below or above the 60SMA. This means that losses can be cut earlier from time to time!

    See Exit Rule 3 in http://www.babypips.com/blogs/

    As I said, I gave this system a bit of credit in the risk tolerance department
    because it does a pretty good job of limiting losses. I particularly
    like its use of new crossovers on the lowest time frame as a signal to
    jump ship and cut losses early.

    • christinaa

      Can you please back test this again with 1:2
      i dont know how to back test going through 3 Time Frames, and your good at backtesting giving us all the statistics. Pretty please

  • Captain Currency

    Hey Robopip, I’m humbled that you used your time and effort on my simple system.

    And I’m delighted it gave you a positive performance.

    Andy Perry
    Captain Currency