HLHB Version 2 Results

I promised you last week that I would finish backtesting the second version of the HLHB. And I did! I have dark circles under my eyes from staying up too late but I owe it to you guys for pushing me to apply for the assistant manager position. Y’all are so sweet!

So without further ado, here are the results:

The HLHB System Version 2 Back Test Results (August 2008 to January 2011)

Total Number of Trades: 30
Number of Winning trades: 9
Number of Losing Trades: 21
Win %: 30%
Loss %: 70%
Largest winning trade (pips): 358
Largest losing trade (pips): -150
Average winning trade (pips): 227
Average losing trade (pips): -176
Longest winning streak: 3
Longest losing streak: 8
Largest drawdown (pips): -1428
Average drawdown (pips): -178
Total Pips: -1800
Total %: -7.95%

As I expected last week, the final results aren’t that great. In fact, they’re much, much worse than those of version one. Just look at that 7.95% loss!

I observed from my testing that the system caught a lot of false signals and failed to catch a lot of really profitable ones, which is completely the opposite of what a mechanical system is supposed to do!

This is such a total bummer… But I guess that’s what backtesting is for – to find out whether a system works or not! So, with that said, it’s back to the drawing board for me. For now, I’ll stick with the old system until I can come up with something better.

If you have suggestions, please feel free to comment below. I’ll check them out later after I get my hair done. You know, just in case someone decides to ask me out on Valentine’s Day.

Skadoosh!

6 comments

  1. traco1

    try using multiple time frames, 4 hr and daily. Im using similar system with some success. See where the adx is on the daily.

    Reply
  2. traco1

    try using multiple time frames, 4 hr and daily. Im using similar system with some success. See where the adx is on the daily.

    Reply
  3. gh0stJPY

    ok my 2 cents (or 2 pence! UK), looking at your link
    and 4H chart you have set EMA, at Trade (1) are
    you saying that ADX was a valid BUY signal as it
    was low and therefore rising? if so that is crazy
    as the EMA trend is gong down? trade 2 also is
    trending up, ok so next candle did not meet your
    setup but EMA WAS going up again.

    I think you should use the 4H EMA to show the
    ‘overall’ trend, when you have a signal then
    zoom in to a 1H timeframe to verify, rem using
    the same EMA. I use EMA on 4H and 1H for verication,
    you can clearly see the recent 4H EMA trend was
    UP until 2nd Feb, and has since dropped and ranged
    past 2 weeks, this is clear on 1H and u could
    have rode the 1H on the down, then up, then
    down trend again.

    The indicators you need get rid of, they lag and
    are false, i never use them and if you backtest
    the 4H & 1H trends from start of year see what results
    u get. anyway just my opinion! GL

    Oh and Happy Valetines ;-)

    Reply
  4. gh0stJPY

    ok my 2 cents (or 2 pence! UK), looking at your link
    and 4H chart you have set EMA, at Trade (1) are
    you saying that ADX was a valid BUY signal as it
    was low and therefore rising? if so that is crazy
    as the EMA trend is gong down? trade 2 also is
    trending up, ok so next candle did not meet your
    setup but EMA WAS going up again.

    I think you should use the 4H EMA to show the
    ‘overall’ trend, when you have a signal then
    zoom in to a 1H timeframe to verify, rem using
    the same EMA. I use EMA on 4H and 1H for verication,
    you can clearly see the recent 4H EMA trend was
    UP until 2nd Feb, and has since dropped and ranged
    past 2 weeks, this is clear on 1H and u could
    have rode the 1H on the down, then up, then
    down trend again.

    The indicators you need get rid of, they lag and
    are false, i never use them and if you backtest
    the 4H & 1H trends from start of year see what results
    u get. anyway just my opinion! GL

    Oh and Happy Valetines ;-)

    Reply
  5. tradecraft

    Hey Huck,
    Sorry your new system idea didn’t work out. I would still suggest you try option three. As you now probably realize, ADX is not simply a drop-in replacement for stochastic. They each provide different but useful information. Stochastics was providing the information you wanted, it is just a matter of using it a bit differently. I recall that you said you were using the absolute level of ADX as an index of trend strength(ADX > 25 = trend). I have never had success using ADX this way. You might try testing option three. If that shows improved results, try using the slope of the ADX line rather than the absolute ADX reading. When ADX is rising(whether in an up or down trend) use a trend following strategy. When it is falling, either don’t trade, or switch to hit-and-run trend and counter-trend trades trades for quick, small profits. Adding ADX and getting it to work well takes a bit of thought and planning to get it to mesh with your other indicators depending on whether the time frame for ADX is longer or shorter than your other indicators.

    Good luck and good trading.

    Reply
  6. tradecraft

    Hey Huck,
    Sorry your new system idea didn’t work out. I would still suggest you try option three. As you now probably realize, ADX is not simply a drop-in replacement for stochastic. They each provide different but useful information. Stochastics was providing the information you wanted, it is just a matter of using it a bit differently. I recall that you said you were using the absolute level of ADX as an index of trend strength(ADX > 25 = trend). I have never had success using ADX this way. You might try testing option three. If that shows improved results, try using the slope of the ADX line rather than the absolute ADX reading. When ADX is rising(whether in an up or down trend) use a trend following strategy. When it is falling, either don’t trade, or switch to hit-and-run trend and counter-trend trades trades for quick, small profits. Adding ADX and getting it to work well takes a bit of thought and planning to get it to mesh with your other indicators depending on whether the time frame for ADX is longer or shorter than your other indicators.

    Good luck and good trading.

    Reply

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