System Review: The (ALMOST) Perfect Swing Trading Using Trend Lines

Before we go any further, let me first erase… Err, I mean, refresh thy human memories about Pipcompounder‘s system.

Unlike most of the strategies that have been featured in the Art of Automation, this one doesn’t trade any of the major pairs. Instead, Pipcompounder uses it on the 4-hour chart of GBP/NZD. Talk about exotic, huh?

The (ALMOST) Perfect Swing Trading Using Trend Lines is relatively more discretionary than the other systems I’ve tested. This could explain why my results differ from those of its creator. I have outlined all the tweaks I had to use in order to be able to backtest it in my previous post for your reference.

Now on to the exciting part. Drum roll, please! Here’s how The (ALMOST) Perfect Swing Trading Using Trend Lines system fared against the Robopip Standard for Mechanical Systems:

Almost Perfect Swing Trading Results

Profitability: 8/20

That grade isn’t high at all because I still feel bad that I did not have a Valentine this year. (But I do admit that I don’t understand why an extra-terrestrial robot cannot find any date.) I’m terribly sorry to report that the Robopip-modified version of the system was unprofitable from February 2011 to January 2013. Over the course of two years, it incurred an 11.37% loss.

Looking at the stats, it’s actually pretty interesting to note that the system’s average wins were bigger than its average loss. However, with only a 34.43% of the 183 total trades that materialized, there were just too many losses. Perhaps adding an indicator or two to filter fakeouts would help improve the system’s returns.

Risk tolerance: 10/20

Since the system makes use of trends, it turns out to be very unprofitable when the market is in a ranging environment. Perhaps it would’ve been better if there were an additional indicator or rule that could tell the trader to stay out when the markets are ranging.

In addition, I noticed that my titanium alloy processors began squeaking loudly every time the 100-pip trailing stop was about to get hit since it seems to be too tight. The system often ends up missing out on big moves because of the tight trailing stop. I do have to give some props for setting a maximum loss of 100 pips or 1%.

Newbie-friendliness: 9/10

As for newbie-friendliness, I decided to give the system a 9/10 since it’s fairly easy to understand and implement.

Total score: 27/50

All in all, the (Almost) Perfect Swing Trading Using Trend Lines was able to garner a total score of 27/50. It’s below the perfect score but the system’s owner did say that it was ALMOST perfect!

While the system could use a few tweaks here and there, you might want to try it out yourselves so you can also figure out what can be improved. Besides, it could be interesting to keep implementing this system as it is applied on exotic pairs and not the usual major currency pairs.

With that, the search for the Holy Grail System continues! Join our quest by sending in your entries for the March Forex Trading System of the Month.

Participating is as easy as 1-2-3 since you just need to create a thread explaining your system’s rules and posting a link to that thread in our Best Forex Trading System of the Month for March forum.

May the forex force be with you!