Trading System Test: 3 Ducks Trading System

*beep beep boop beep*

Salutations, my dear earthlings! As promised, I spent some time to mechanize the parameters of the 3 Ducks Trading System before I crunch the numbers and conduct some backtests.

The one thing about the system that caused my circuit breakers to go berserk (in a good way of course) was its simplicity. The system makes use of just ONE simple moving average – the 60 SMA, making it quite easy for the average human to pick up.

The only “tricky” part is that it makes use of three time frames: the 4-hour, the 1-hour, and the 5-min chart.

The system has three simple steps:

Step 1- The First Duck : Check if price is above or below the 60 SMA on the 4-hour chart.

Step 2- The Second Duck: Check if price is above or below the 60 SMA on the 1-hour chart. If price is above or below the 60 SMA on BOTH charts, then we can proceed to the third duck. If they aren’t, then we have no signal and do not need to proceed any further.

Step 3 – the Third Duck: We are now looking for price to cross above or below the 60 SMA on the 5-min chart. For example, if the 4-hour and 1-hour charts both show that price is above the 60 SMA, we will wait for price to cross above the 60 SMA on the 5-min chart. Once it does, it would mean that price is above the 60 SMA on all three charts, giving us the signal to buy.

If price was below the 60 SMA on the 4-hour and 1-hour charts, we would be waiting for a crossover below the 60 SMA on the 5-min chart before going short.

According to Captain Currency, this would mean that “all 3 ducks are lined up in the same direction.”

Simple, is it not?

Unfortunately, Captain Currency did not set any hard profit targets or stop losses. This is where the Robopip mechanization process begins.

The first change I did was to tweak the system a bit by including the 15-min chart rather than the 5-min chart.

The reason I’ve decided to go with the 15-min chart is because most charting softwares allow only a certain number of bars per time frame. By adjusting the smallest time frame from 5-minutes to 15-minutes, I feel that it would give more flexibility for you earthlings if you decide to do some backtesting of your own.

Time frames used: 4-hour, 1-hour, 15-min

Pair traded: EUR/USD

Amount risked per trade: 1%

Entry conditions

1. Buy conditions:

  • Price must be above the 60SMA on both the 4-hour and 1-hour charts.
  • Buy on candle close when price crosses above the 60SMA on the 15-min chart.

2. Sell conditions

  • Price must be below the 60SMA on both the 4-hour and 1-hour charts.
  • Sell on candle close when prices crosses below the 60SMA on the 15-min chart.

Exit conditions:

The original system had no set stop loss or take profit points. He did mention that 25-30 pip stop losses could suffice.

1. Stop loss: Place initial stop loss 30 pips above or below trigger price.

2. Profit target: Place profit target 30 pips above or below the entry price in the direction of the signal.

3. New crossovers: Close trade if price crosses back above or below the 60SMA. This would signal that the 3 ducks are no longer aligned.

For now, I shall retreat back to my pod and allow my upgraded aluminum alloy processor to churn out the backtesting results. Until then, I trust that you will be sitting on the edge of your seats eagerly awaiting the system’s grades based on my framework for mechanical systems.

This is Robopip, signing out!

  • Master Tang

    Instead of swapping out to the 15 minute, and distorting the results a bit, why not use a 5 period MA, a 60 period MA and a 240 MA all on the 60 minute chart?  That’s all three period MAs aligned correctly, in relation to each other.

    • Lorenz

      Hello,

      because your calculations are simply wrong: do the math correctly and you’ll see that what you propose is not like this method.

      Regards.

      • Master Tang

         Show me the math to prove I’m wrong. 

        And show me where I’m not in principle with the thread it’s based on.

        • Lorenz

           Hi there,

          kein Problem :-), it’s dead easy:

          1) Foolproof method: open MT4 and simply check the value of 240MA in H1 vs 60MA in H4. For example.
          2) Not so foolproof: just consider that a 60MA in H4 takes just 1/4 of the data set taken by the 240MA in H1. Why could you expect that the final value is the same?

          Regards from Germany.

          • Master Tang

            Your logic isn’t coming through.

            It’s basic math.

            Considering 60 is exactly 1/4 of 240, I would expect that the final value would be the same.

  • Arwin69

    hi i have seen a nice site with the SOLUTION ,
    go to
    http://www.itmfinancialbonus.com

  • RazorX

    Hi Robopip

    If I may be so bold may I ask why only a 1:1 R/R ratio? The system would have to have at least a 50% win rate just to break even. Is there a particular reason you have gone 1:1 instead of 1:2 or 1:3?

  • trade forex

    IT is a Very easy, but professional as it reveals clearly how the pattern has designed over several time frames. Almost a pity about the R/R rate, I would recommend starting two roles and ending one at TP while allowing the other journey.

  • forex brokers online

    Almost a pity about the R/R rate, I would recommend starting two roles and ending one at TP while allowing the other journey.

  • Duff McPip

    Hi folks,

    Great system. Very simple, but genius as it shows clearly how the trend has developed over multiple timeframes. Almost a shame about the R/R ratio, I would suggest opening two positions and closing one at TP while letting the other ride.

  • Junaid Malik123

    can you do this process on crude oil?

  • http://hermosaprogramacion.blogspot.com/ James Revelo Urrea

    Nice!