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Greetings, fellow Happy Hunters! The trading week is done, so let’s take stock of how the two variants of the Happy Hunter Price Action Trading System fared this past week, shall we?

Oh, if you’re a first-time reader, I insist that you read the “Must-Read For New Readers” part. I even deliberately titled it that way. It’s admittedly a rather unimaginative title, but if it gets y’all to read, then good.

Regular readers, meanwhile, may wanna skip that part and use the relevant jump links below to go directly to the actual review.

Must-Read For New Readers

If you’re a first-time reader who stumbled across this write-up for some unknown reason, and you have no idea what this is all about, then just know that I crafted a purely mechanical trading system, pursuant to My 2018 Trading Resolution.

If that perks up your interest and if you may wanna know more, then click on the links below to read about and understand the rules of the system.

However, let me just give these statements/disclaimers:

  • Firstly, I make no claim to the profitability of this system (I’m forward testing it after all), so if you use the system to trade real money without doing your own tests, that’s on you, whether you lose money or get lucky and make money
  • Secondly, there’s no central exchange for the forex market, so there may be discrepancies in our data feed, and it’s highly probable that I may have a valid signal based on my charts where none exist on yours (and vice versa)

Also, here are the parameters/assumptions for my tests, just in case you wanna follow along:

  • Currency pair for the tests is GBP/NZD and only GBP/NZD
  • We only use the 1-hour chart to trade
  • Trading day begins at 12:00 am GMT+2 and ends at 11:00 pm GMT+2
  • Starting date of tests is February 1, 2018
  • Starting account balance is $10,000
  • Max risk per trade is $50 or 0.50% of starting account
  • The lot size is variable, so learn to use (and love) the Position Size Calculator
  • As I’ve been stressing since I laid down my plans in My 2018 Trading Resolution, I’m assuming a fixed spread of 12-pips in all my tests; this system was designed with strict cost control in mind, so variable/floating spread wasn’t even considered
  • In cases where there are weekend gaps that would make the trade invalid (i.e. the market opens way beyond the TP or SL level), it’s assumed that the broker cancels pending orders, just like most of them usually do in real world conditions
  • But for orders that were filled before the weekend gaps, it’s assumed that we get out at TP (even if the gap greatly favors the trade) or at SL (even if the gap is not in favor of the trade) because it’s assumed that the broker guarantees our exit levels, well, that or it’s assumed that we complain and/or threaten to close out our account with the broker

With all of that out of the way, it’s time to finally discuss how the week went.

Below you’ll find a chart for the testing period from February 19-23. And if you’re wondering what the numbers on the charts are about, they refer to the trade #, based on the chronological order when the signal was generated, not necessarily when the trade was executed. The details of each trade are contained in the table below the chart.

And if the numbers on the chart don’t look very clear or are too squished together, you can have a better view by checking out the chart in the relevant daily update below:

The Fixed TP Variant’s Trade Details

GBP/NZD: 1-Hour Forex Chart
GBP/NZD: 1-Hour Forex Chart
Trade Details (Click to enlarge)

Note: Trade # 84 is still open and wasn’t included in the table of trades. It’ll be included in next week’s review.

The Trailing Variant’s Trade Details

GBP/NZD: 1-Hour Forex Chart
GBP/NZD: 1-Hour Forex Chart
Trade Details (Click to enlarge)

Note: Trade # 84 is still open and wasn’t included in the table of trades. It’ll be included in next week’s review.

This Week’s Performance

Both Variants are actually net losers for the week, with the Fixed TP Variant down by 0.97% while the Trailing Variant was down by a much harder 3.46%.

GBP/NZD: 1-Hour Forex Chart
GBP/NZD: 1-Hour Forex Chart

The poor performance of both Variants was due to the choppy, sideways price action that started last week, persisted for most of this past week, and finally came to an end on Friday.

Well, we don’t really know for sure if GBP/NZD’s price action will finally return to normal, but the day’s range on Friday was 217 pips, which is closer to GBP/NZD’s historical average daily range of 225 pips and is a very promising sign that GBP/NZD may finally be returning to normalcy.

In contrast, the daily range during the prior nine trading days only averaged 127 pips. Moreover, some days were super tight, with this recent Monday’s 70-pip range being the tightest.

Incidentally, the super tight trading conditions on Monday and early Tuesday is when both Variants suffered heavy losses. And since intraday price action was choppy and volatility didn’t pick up until late Thursday, both Variants had a hard time recovering from the string of losses.

The Trailing Variant really took it hard, though. And that’s because the Trailing Variant was crafted specifically for GBP/NZD’s tendency to have strong intraday trends that usually last for two days (or more).

However, volatility was abnormally low, intraday price action was choppy, and GBP/NZD was practically trading sideways (with a downward tilt) for a prolonged period of time, so the Trailing Variant just couldn’t function as it was designed to.

Basically, the Trailing Variant was like a fish out of water.

Also worth noting is that the back test period also had periods of sideways price action. However, those only lasted for two or three days, followed by strong trends, so the Trailing Variant suffered during those two or three days but quickly recouped its losses when GBP/NZD began trending.

But in the case of the forward test, the system was subjected to nine consecutive trading days of sideways price action, so the Trailing Variant just didn’t have a chance to recoup its losses.

But if last Friday’s surge in volatility is a sign that GBP/NZD is returning to normal, then there’s still hope for the Trailing Variant to trim its losses some more (or maybe even eke out a small win for the month).

The “Bigger Picture” View

Equity Curve Comparison (Feb 1-23)
Equity Curve Comparison (Feb 1-23)

Despite the 0.97% loss this week, the Fixed TP Variant is still on track to closing out the month with a +2.30% gain, which is a bit low compared to the back test results.

I’m not complaining, though. After all, a win is still a win. Also, a +2.30% gain is still relatively good since the trading conditions for the back test period was mixed, while trading conditions for February (so far) is net negative since one week of normal trading conditions was followed by two weeks of nightmarish trading conditions. And I’m not even exaggerating that last bit for dramatic effect. It really was that terrible.

As for the Trailing Variant, it did well enough and even outpaced the Fixed TP Variant during the first week when trading conditions were relatively normal. However, it went on a skydiving expedition when volatility dried up, forcing it to surrender its 3.42% gains and then some.

The Trailing Variant is still doing okay enough, though, given the prolonged period of terrible trading conditions.

The System In A Zero-Spread Environment

Trading conditions were terrible this February. However, the system’s true enemy is the fixed 12-pip spread that I incorporate into each and every calculation.

In fact, not only did I consider GBP/NZD’s statistically “normal” behavior when crafting the system, I also intentionally created the system to defeat the spread problem.

The Fixed TP Variant’s gains for the month, despite terrible trading conditions, is a testament to this. As for the Trailing Variant’s performance, well, that’s got more to do with GBP/NZD not behaving normally for nine consecutive days.

Anyhow, I’ve ranted about the spread problem before when I developed Prototype Version 1.0. And back then Version 1.0 was profitable in a zero-spread environment but immediately became a loser when I applied a fixed 12-pip spread.

After that, it was a battle not just to beat the market, but to defeat the spread problem as well, and I went on another rant about spread when I introduced Prototype Version 1.1.

And today, I’m gonna go on yet another rant about spreads. Just kidding! As the heading says, I just want to show you how the system would have fared in a zero-spread environment.

Feast your eyes on these (and then cry):

Equity Curve Comparison (Feb 1-23)
Equity Curve Comparison (Feb 1-23)

Pretty amazing, right? In a zero-spread environment the Fixed TP Variant would already by up by 11.96%. That’s a $1,196 profit in just three weeks from a $10,000 initial investment.

The Trailing Variant, meanwhile, would underperform  the Fixed TP Variant, but would still be 5% in profit.

From this we can conclude that the system is inherently profitable… probably (I’m still in the forward testing phase after all). However, because of the heavy cost burden of the relatively large 12-pip spread that’s assumed for every trade, the system’s actual performance gets taken down a few notches.

But what if you find a broker that has, say, only a 9-pip fixed spread on GBP/NZD? How would the system fare, I hear none of you ask?

Well, pretty okay enough. Definitely better than with a 12-pip spread that’s for sure.

Equity Curve Comparison (Feb 1-23)
Equity Curve Comparison (Feb 1-23)

But why do I insist on assuming a 12-pip spread, you ask?

Well, partially because most brokers who offer fixed spreads have a 12-pip spread on GBP/NZD. There are a few brokers out there that offer fixed spreads of 9 or even 8 pips on GBP/NZD, but I still chose 12 pips because I’m a masochist. Just kidding! I chose 12-pips to serve as a hurdle.

If the system can survive and thrive despite this hurdle, then it’s pretty much guaranteed that the system will thrive even more in a 9-pip or 8-pip environment.

And it goes without saying that if (or when) the system passes the forward testing phase and is ready to trade real money, you bet I’ll be using the broker that has a fixed spread of 8-pips.

But why do I insist on using  fixed spreads? Well, this is a day-trading system with tight stops, so cost control is very critical. Also, it makes the back testing phase easier to do.

Anyhow, I went on a bit of a rant there, but I hope you found it educational or at least entertaining. And as always, I enjoy your feedback. So if you have any questions, or if you see a possible error in my work somewhere, or if you just want to say “hi” then don’t be shy and write a comment down below!

Cheers!

Happy