In case you’re wondering why I’m skipping ahead to the forex mechanical system review, it’s because the Triple SMA Crossover system didn’t generate any valid trade signals for my forward testing.
Anyway, based on the backtest results I posted last week, I guess you have an idea of how the grades might turn out! Here they are:
First, the good news. The system did end up profitable during the backtesting period, as it generated 2.39% in returns, for a total of 361 pips. The bad news is that most of these gains were a result of a single winning trade, without which the system would’ve wound up with a 2.71% LOSS!
The winning trade was scored during a rare instance when the forex market was exhibiting very strong dollar trends. This suggests that, save for that instance, the Triple SMA Crossover system doesn’t fare so well under most scenarios.
Risk Tolerance: 10/20
I think this system deserves decent points for having a pre-determined stop loss based on the pair’s average pip movement, which takes into account the usual volatility and is able to limit losses. However, I also gave deductions since the stop size still seems too small and ends up getting hit on wide retracements. Perhaps an adjustment needs to be made?
This system is definitely newbie-friendly, as the rules are straightforward and easy to implement. It simply makes use of basic technical indicators such as moving averages while entry and exit points are easy to understand.
Total Score: 25/50
Bahh, just one look at the total score shows that this forex mechanical system definitely needs a lot of work! Based on my observations, the valid SMA signals are generated late during the trend and the trailing stop appears to be too tight.
Any other recommendations for tweaks? Or do you think we should add another technical indicator? Looking forward to seeing your feedback on this system!