Note: Today is the President’s Day
Holiday in the USA. This means that trading will be light, and could also be
choppy and unpredictable.
The great Albert Einstein is reported
to have said that “Genius is one per cent inspiration and 99 per cent hard
work”. We can attest that developing a successful Forex algorithmic trading
system is no exception to this.
Among the many things we have
discovered in the journey to bringing our Mandelbrot routine to where it is, is
the importance of timing. Of course, computerised trading systems are, in
theory, ideal for implementing split-second timing, because they “think” in
milliseconds (a millisecond is one thousandth of a second). However, they still
need to be informed, by the correct setting of parameters, how to implement
such timing in practice.
In the Forex world, market moving
events such as GDP announcements, retail sales figures, inflation reports and a
host of other happenings, including of course our old friends the Non-Farm
payroll numbers and the various central banks’ announcements, all have
different characteristics as to when it is prudent to go into the market during
and after when they take place. Go in too soon and you are likely to have
extreme short-term volatility hand you your head on a platter, as our American
friends might say. Go in too late and you will simply miss the boat.
And that is where the effort comes
in. The only way to identify the likely pattern in these cases is by carrying
out extensive research on the historical situation. And that is what we do,
here at OmiCronFX. This will be on-going, because the optimum timing now may
not always be valid in the future. In addition, different events can have
different characteristics depending on, for example, the jurisdiction in which
they take place, or their proximity in time with other, otherwise unrelated,
market moving events. The good news is we can use the very same software that
does the trading (our Mandelbrot algorithmic routine) to carry out the
historical analysis.
A
real live example in GBPUSD
The chart above shows the outcome of
a real live trade that Mandelbrot took and managed on the release of the UK
Quarterly Inflation Report from the Bank of England Monetary Policy Committee
last week. Our research told us that the best time to look for a trade entry
was ten minutes after the announcement. We configured Mandelbrot accordingly,
and left it to work out the direction that the trade should take. As usual it also
calculated position size, stop-loss levels, profit retention measures and other
trade management steps to be taken. The outcome was spot on. (It should be
borne in mind that there was considerable volatility immediately after the
announcement even within the one-minute bars shown).
Is the process described above guaranteed
to work every time? Absolutely not. The very best we can say is that, by putting
in the effort, by coding the activities and safeguards into the software, and
by setting the software to work on a funded account, we can affect, in a
positive manner, the probability that
we will have a profitable outcome.
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