*beep beep boop beep*
Greetings, humans! After one week of crunching numbers, I come to you with the results of the modified 3 Ducks Trading System backtest. You can view the parameters I followed by checking my previous post.
Before I go on, let me just highlight a couple of things again. The 3 Ducks System I have tested is a mechanized version of the original one. To ensure consistency, the profit target and stop loss levels were converted to hard numbers (30 pip profit target and stop loss).
Also, instead of using the 4-hour, 1-hour, and 5-minute charts, I zoomed out a little and used the 4-hour, 1-hour, and 15-minute charts.
Without further ado, here are the results:
Profitability: 16/20
Even though it only had a 31.51% win rate, it ended up with a spectacular 7.40% gain. This is an extremely good win rate considering the profit target is restricted to 30 pips and my backtest only spanned a total of 8 weeks’ worth of data.
In addition, based on my observation, the net gain could be much more if the profit target was increased. This was completely my fault, so I’m not going to deduct points for this.
Risk Tolerance: 12/20
I’m giving this system a bit of credit in the risk tolerance department because it does a pretty good job of limiting losses. I particularly like its use of new crossovers on the lowest time frame as a signal to jump ship and cut losses early. This neat feature actually saved the system from taking a full hit on a number of occasions!
On a less positive note, you may need to trade this system with quite a bit of capital (i.e., start with a large beginning balance) if you plan on withstanding its drawdowns. In my studies, I noted a few strings of tiny losses that added up to big hits. I’m giving this mechanical system a score of 12/20 for risk tolerance.
Newbie-friendliness: 7/10
Aside from the fact that you have to look at three different charts, you don’t exactly have to be a rocket scientist to trade the 3 Ducks System. It should be easy enough for a newbie to pick up, as it is essentially a simple crossover system.
Entries and exits are clearly defined and easy to follow. Plus, I think that its many signals (averaged almost 2 trades a day!) will be appealing to even the most impatient and trigger-happy newbie!
Bonus points: + 2
I’m granting this system 2 bonus points for its use of multiple time frame analysis. Even on my planet, it’s not that often that I see mechanical systems that consult THREE different time frames!
Total Score: 37/50
Overall, I’m giving the mechanized version of Captain Currency’s 3 Ducks System a score of 37 out of 50, which I believe is a pretty fair rating considering the system’s strengths and its weaknesses.
As with most crossover trading systems, it showed vulnerability to false breakouts while showing the ability to catch nice, strong moves. Methinks that a filter of some sort, such as entering a certain number of pips from the crossover candle’s closing price, would help tweak odds to be more favorable.
Though the modified 3 Ducks System seems promising, I can’t help but feel that we must continue our search for the Holy Grail…
Holy Grail system… Find you, we must!
