The OmiCronFX Foreign Exchange
trading system operates with the Mandelbrot Forex algorithmic trading software
at its core. The software allows for both the historical research which is
essential for the configuration of its parameters, so that it can achieve maximum
profitability for the least risk, and the actual day-to-day trading that the Mandelbrot
program carries out when it has been optimally configured.
Development of the OmiCron
Mandelbrot software has been guided by the principles outlined in the OmiCron
Forex Trading Manual, which is available from Amazon.
Allowing the software to
decide when to place a trade, to determine the size of that trade, how the
trade should be managed and when it should eventually be terminated, ensures
that trading is always systematic, and therefore disciplined. In the OmiCronFX
system, no discretionary trading ever takes place. That is not to say, however,
that the system cannot be changed. Results are constantly being monitored and
analysed to ensure that initial assumptions remain valid. In the event that
changes take place, for example in market volatility, the parameters are open
to being changed as appropriate.
The importance of moving averages
Mandelbrot, as with all other
trading software, requires a trigger for its trades. A series of Exponential
Moving Averages (EMAs) are used for this. The chart above, showing the EURUSD
pair in the hourly time-frame from
earlier this month (21st, 22nd and 23rd of July
2015), illustrates how the exchange rate can, on occasion, respect EMAs, in
this case the one that uses 200 hours as its period for calculation. We use
exponential, as opposed to simple, moving averages, because they give greater
weight to more recent exchange rate data. What has happened in the recent past
is more relevant than what took place a longer time ago.
With Mandelbrot, much work
has gone into the design of the trading trigger. In fact, in the early days of
development, the trigger was all that there was, and at that time it was known
as the OmiCronFX “Silver Trigger”. Since then, Mandelbrot has evolved to
incorporate risk management, profit retention, timing, and other features that
greatly enhance its effectiveness.
When price, or in the case of
Forex, the exchange rate, moves away from the moving average, it is apparent
that something is happening. Something that can be used, in fact, to structure
a profitable trade. Only time and effort, however, can allow the trading
software designer to provide the knife-edge answers to the questions of how far
it can be allowed to go before the software is primed for a trade, when a trade is best aborted and when it should be
allowed to be entered into. Then the whole question of locking in profit (or
taking a loss) and eventually closing a profitable trade comes into play. We do
not like them, but sometimes a loss is the cost of doing business. We place
great emphasis in our research on the idea of having a positive expectation for
every trade that the software is likely to enter into.
All of this is based on the
idea of probability. While moving averages are often respected by the market,
as in the case of the chart at the top, on other occasions price can go through
them as a hot knife might go through butter. Only repeated and well constructed
trial and error experiments, the results of which are analysed using the most
effective statistical processes, can provide the answers to the vital questions
related to when and under which circumstances probability is on our side, and
when it is not.
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