A topic (EA) unexplored for a while...?

[sammurray]

Murray Math EA Using Entry At 1/7/8 0/8/8 +/-1/8 +/-/2/8 with hedging/stop option at "+/-/'3'/8"

[edits for presentation + adding links]

I have been running circles with a 2011 EA by Steve with credit given to Pippopotamus (at that time of FXFac, now of here also). It's that old chestnut - Pippo - a Murray Math trading system making use of recovery lots with various options. I'll link to the FXFac pages later.

I'm using the old version, because the newer version won't strategy test for some reason I'm not sure yet how to debug.

Due to the recovery system, at the end of a backtest, there is always a closure of the latest trades to be running and they can be in a horrendous loss. I'm a little unclear on this aspect of the system.

There's an opportunity to hedge in the code, when the trade overshoots the fourth entry point by a distance equal to the distance between one entry point and the next highest/lowest. There's also an option to close the trades ("trade basket") at this level.

From the graph below, the system seems very profitable indeed over the long haul with sufficient funding, and this is using an aggressive number of lots as well and basically a default setting.

My query is due to lack of experience using recovery/hedging basically. The last two trades are "close at stop" - presumably they are closed out as the EA has been stopped running or the end of the test. However, they are closed at a much higher loss than any other trade the EA makes.

The are clearly the result of an entry at the third and fourth entry points (see the attached graph and report). I need some help in interpreting the results of this strategy test.

Would you agree that the test looks very promising leaving aside the last two trades?
Am I missing something very important about the Martingale/Recovery aspect of the system that renders my test null and void?

Why do these last two trades close at such a big DD? What part of the system is being followed for these losses to be incurred on autopilot?

Can these losses be mitigated from within the current EA settings - shouldn't they be being mitigated anyway?

How come these last orders run at such a high loss when this does not occur in the rest of the testing?

I might try adding a filter or two to the entry requirements of a trade, like something to quantify the trade "running out of steam" aside from the number of pips it has had to go.

The answers to my queries will be obvious to many of you I expect - especially concerning the recovery lots causing a great loss at the end of the test. If you can help it would help!

Thanks in advance,

Sam

PS. Original FXFac thread:
http://www.forexfactory.com/showthread.php?t=297805

PPS. Follow up FXFac thread with newer version (which for me seems to need debug for ST in Empty4)
http://www.forexfactory.com/showthread.php?t=306988

PPPS. It could be that this EA is inappropriate for backtesting for whatever reason, but it seems to be okay as the code from the origina indicator is within the EA. Please correct me if wrong.

[Fossek]

Just a guess: Big losses in backtests occur when there are open trades at the end of the backtest history data. These will be forced to close. So in that case you see the big balance dip at the end of the backtest (same amount of money was your floating loss before the trades closed out)

[sammurray]

Thanks Fossek, it makes sense completely. I am just not sure why those trades were allowed to get into such sticky DD situation in that such trades did not occur earlier on in the test. For large Acc Bal. it seems not to matter too much, just the issue of admitting to investors the floating losses.

[garyfritz]

Those big open losses didn't just "happen" to occur right at the end of the test. The way those recovery systems work, you probably had huge open losses frequently (or continuously) during the test. But System Tester totally ignores this, which is one of many reasons why many people don't trust ST results. ST will show you a lovely straight equity curve, and not tell you you had to endure 80% drawdowns every few weeks along the way. If ST showed the open equity during the test -- which is what you're really going to be paying attention to, since it's the actual value of your account -- then I doubt it would be such a pretty picture.

And then there's the problem that, sooner or later, market conditions work against you badly enough that the system blows up completely and empties your account. That's one of the lovely features of Martingale-type systems.

[zTB]

I might try adding a filter or two to the entry requirements of a trade, like something to quantify the trade "running out of steam" aside from the number of pips it has had to go.

Why not give a little more thought how you would exit?

The answers to my queries will be obvious to many of you I expect - especially concerning the recovery lots causing a great loss at the end of the test. If you can help it would help!

Why not cut losses while they are still manageable?

Garyfritz, I think, is spot on.

Z

[nonlinear]

I might try adding a filter or two to the entry requirements of a trade, like something to quantify the trade "running out of steam" aside from the number of pips it has had to go.

Why not give a little more thought how you would exit?

The answers to my queries will be obvious to many of you I expect - especially concerning the recovery lots causing a great loss at the end of the test. If you can help it would help!

Why not cut losses while they are still manageable?

Garyfritz, I think, is spot on.

Z

Also agree with Gary. I have tried closing all open positions on similar systems, for example on a 10-15% floating loss. This works occasionally on some pairs, for some time, but more often than not kills returns. Better off trying to trade non-martingale type systems. Or try to figure out how to exit at major reversals without overly destroying your expectation (very difficult).

[shayanjameel08]

Great to see this work continue I'm still new to understanding this movement, but so far its going well.
My result on metals with mostly default settings on 15 min TF, haven't even started to try and optimize. IMO metals is the best market to trade this EA. Steady, low drawdown profit, due to their huge retracements and seeming respect for murrey.