HLHB System Makeover

I missed a couple of my evening shows and stayed up late to back test my system… I’m pretty sure I’ll be making coffee like a zombie at work tomorrow but I think my sacrifices were well worth it as I finally got to see the HLHB System in action! I’ve got the raw data here in my computer but you can take a look at the summary below to see the results.

The HLHB System Back Test Results (Oct 2006 to Oct 2009)

  • Total Number of Trades: 76
  • Number of Winning trades: 42
  • Number of Losing Trades: 34
  • Win %: 55.26%
  • Loss %: 44.74%
  • Largest winning trade (pips): 150
  • Largest losing trade (pips): -275
  • Average winning trade (pips): 140.29
  • Average losing trade (pips): -90.09
  • Longest winning streak: 7
  • Longest losing streak: 9
  • Largest drawdown (pips): -398
  • Average drawdown (pips): -35.89
  • Average Days In Trade: 4.28

TOTAL PIP PROFIT/LOSS IN THREE YEARS TIME: 2829

If I risked 1% of my account every 150 pips (roughly 0.0067% per pip), I would have had an 18.95% return on my capital in the span of three years. If I convert this into an annual rate, I would end up getting a 6.32% return on investment per year.

In my opinion, this is too low considering the innate risk that comes along with forex trading. If this is the case then I’d rather put my money in a relatively safer time deposit account that yields 5% p.a.

Anyway, while I was back testing my system, like one of my readers pointed out, I have observed that my profit target was too tight. There were many opportunities where I could have locked in 200, 300, 400 pips, but my trade was no longer open because my profit target was already hit! In addition to this, I also noticed that my largest losing trade was a whopping 275 pips while my largest winning trade was a measly 150 pip. I think putting a limit maximum pip stop loss seems ideal even if my average pip loss only stood at 90 pips.

Thus, the two major changes that I’ll be doing are:

  1. My stop cannot exceed 150 pips.
  2. I will be trading two positions (while keeping within my 1% risk limit). Once my 150 pip profit target is hit, I will put a 150 pip trailing stop on my second position to enable me to ride the trend and create a risk free trade.

You can check out the HLHB system here.

What do you guys think? Changes for the better or changes for the worst?

  • melisky

    Hi Hucklekiwi,

    the problem with EA is, they just cannot be good all the time. I spent alot of time and money to try to find the perfect system. I was looking for 60% of winning trade.

    Often, a was month is great, the next one was horrible. A very same “system” can be great one years, and be a real nightmare the next one. It’s impossible to win on the long term with a 100% automatic system. Real bank do understand that, of course.

    And, EMA mean nothing at all. You just can’t use it. Think about it, forex is all about fundamental ” economic news”. EMA make no sence as a serious tool to trade, this is only the average of the price in the past. It won’t change a thing when a news come up.

    Still, I will following you anyways. I just hope you’ll prove me I’m wrong. But in the end, I’m sadly sure I’m right, unfortunately.

  • Huck

    Hi Melisky! Thanks for the feedback. I am aware that the profitability of a mechanical system could be affected by economic reports or current risk sentiment. In fact, while back-testing, I noticed that the mechanical system’s profitability varies per year. This could be due to the fundamental events affecting the EUR and USD at those periods of time. However, this is a purely technical system and I intend to stay on the sidelines when major economic reports are due. My use of technical indicators is based on the theory that historical price action could provide some information regarding future price action. And since plenty of traders are probably making use of EMAs like I am, it could have a self-fulfilling effect. Anyway, I’ll continue to test this system out to see if more improvements can be made. Stay tuned!

  • melisky

    Hi Hucklekiwi,

    the problem with EA is, they just cannot be good all the time. I spent alot of time and money to try to find the perfect system. I was looking for 60% of winning trade.

    Often, a was month is great, the next one was horrible. A very same “system” can be great one years, and be a real nightmare the next one. It’s impossible to win on the long term with a 100% automatic system. Real bank do understand that, of course.

    And, EMA mean nothing at all. You just can’t use it. Think about it, forex is all about fundamental ” economic news”. EMA make no sence as a serious tool to trade, this is only the average of the price in the past. It won’t change a thing when a news come up.

    Still, I will following you anyways. I just hope you’ll prove me I’m wrong. But in the end, I’m sadly sure I’m right, unfortunately.

  • TalonD

    with that rate of return you might as well invest in the stock market and forget about forex.

  • moneeeb

    very low return. their are some CDs out there that gives 4 or 5 %. in my opinion making less than 20% per year. is not worth all the headache that comes with trading forex. it is liquid for a reason, to make money not be very conservative

  • Huck

    Hi Melisky! Thanks for the feedback. I am aware that the profitability of a mechanical system could be affected by economic reports or current risk sentiment. In fact, while back-testing, I noticed that the mechanical system’s profitability varies per year. This could be due to the fundamental events affecting the EUR and USD at those periods of time. However, this is a purely technical system and I intend to stay on the sidelines when major economic reports are due. My use of technical indicators is based on the theory that historical price action could provide some information regarding future price action. And since plenty of traders are probably making use of EMAs like I am, it could have a self-fulfilling effect. Anyway, I’ll continue to test this system out to see if more improvements can be made. Stay tuned!

  • TalonD

    with that rate of return you might as well invest in the stock market and forget about forex.

  • moneeeb

    very low return. their are some CDs out there that gives 4 or 5 %. in my opinion making less than 20% per year. is not worth all the headache that comes with trading forex. it is liquid for a reason, to make money not be very conservative

  • kamikazical

    I’ve found back testing the EA I’ve been tweaking always has big losses, while trading it live on a demo account I get big wins and far less losses. Mainly it’s because I set it to require my approval to make trades, and I only trade it during my favourite trading time, midnight to about 7am EST trading the Euro/USD.. In my (limited) experience this pair does all it’s most profitable moves for me during this time.

    I trade a 1 hour chart, and it seems like the pair likes to spend the entirety of these 7ish hours moving in one direction.

    I guess I can’t really have any real opinions on it until I test it with real money, see how I do then.. Got to keep saving up that money so I can start trading.

  • kamikazical

    I’ve found back testing the EA I’ve been tweaking always has big losses, while trading it live on a demo account I get big wins and far less losses. Mainly it’s because I set it to require my approval to make trades, and I only trade it during my favourite trading time, midnight to about 7am EST trading the Euro/USD.. In my (limited) experience this pair does all it’s most profitable moves for me during this time.

    I trade a 1 hour chart, and it seems like the pair likes to spend the entirety of these 7ish hours moving in one direction.

    I guess I can’t really have any real opinions on it until I test it with real money, see how I do then.. Got to keep saving up that money so I can start trading.

  • Synergistik

    Great trading system. Back testing it I notice that based on your conditions, specifically non-over done stochastic, there were still profitable trends when the EMAs cross. Ditto when the stochastic were not in your required range (i.e between 50 and 80 for longs). Though in the latter case the slope was in the right direction. I would appreciate your comments on this.
    I spent the last two days trying to make an EA of your system (a project to get my to learn the language and test my own thinking). It wasn’t exact similar (i.e. didn’t make the program have two positions, one with a trailing stop, just one position with a trailing stop) Though, the system is definitely profitable. Though I’ve learned the best EA is ones own self. There were a lot of trades that I would have not got into base on the history of the market.
    I like your system because it’s in a manageable time frame, one doesn’t have to stay stuck to the computer. The profits are large, given the amount of time one has to put into to find the trades. It’s a challenge though for me, because I want to trade over this time scale, but I happen to be a 15 minute-chart addict!

    Cheers,

    Ian

  • Synergistik

    Great trading system. Back testing it I notice that based on your conditions, specifically non-over done stochastic, there were still profitable trends when the EMAs cross. Ditto when the stochastic were not in your required range (i.e between 50 and 80 for longs). Though in the latter case the slope was in the right direction. I would appreciate your comments on this.
    I spent the last two days trying to make an EA of your system (a project to get my to learn the language and test my own thinking). It wasn’t exact similar (i.e. didn’t make the program have two positions, one with a trailing stop, just one position with a trailing stop) Though, the system is definitely profitable. Though I’ve learned the best EA is ones own self. There were a lot of trades that I would have not got into base on the history of the market.
    I like your system because it’s in a manageable time frame, one doesn’t have to stay stuck to the computer. The profits are large, given the amount of time one has to put into to find the trades. It’s a challenge though for me, because I want to trade over this time scale, but I happen to be a 15 minute-chart addict!

    Cheers,

    Ian