DriverDan's Investment Challenges

Forex Challange Starts!

My one month Forex challange started yesterday. For those who don't know, Forex is the foreign exchange market where currency is traded. Searching the internet will reveil plenty of information if you don't know much about it.

This time around I will be running one automated system. The system runs on the MetaTrader 4 platform (http://www.metaquotes.net) as an "expert advisor". After working on a few systems that were unsuccessful in backtesting I found this one: http://www.moneytec.com/forums/showthread.php?t=16388

I took the Expert Advisor offered there and modified it slightly. My modifications reduced losses in backtesting by almost 55%!

My internet connection is intermittent right now so I will probably miss some trades (like this morning). However, the results should be pretty accurate.

I am starting with a $5000 demo account. I am starting by trading 2 lots at a time using the GBPUSD and USDCHF pairs. Leverage is 1:100. For those who don't much about Forex, that means I will be using $2000 per trade to control $200,000 worth of currency. Gains are typically referred to as "pips". A pip, with these currency pairs, is $0.0001. With leverage of 1:100 every pip returns somewhere around $7-9, depending on the currency rate. I will be posting my pip and dollar gains.

Final Comments and Conclusions

The past month has been an interesting test of 3 different systems. It has been a great learning experience. I will now disclose the systems I used and my opinions about each system.

Quick note: I was just looking at the stocks I had been using in S1. Had I not liquidated all assets yesterday it looks like today would be a HUGE gainer, with may of the stocks returning 1-10% today!

S1
Site: Circular Logic Daily Trigger List v2.0
S1 was the system I was most interested in. It proved to be the best overall system. The other two systems were thrown in to compare to this one. Although the exact picking methods are not disclosed, this site provides many stocks to choose from and detailed stats on each. The author does not hype the system and claims to trade it himself. There is a support forum with daily discussions about the system, the markets, and more. Well worth the small monthly fee of $29.95!

S2
Site: Sleep Well on Collective2
I didn't have any expectations for S2 when I started. I have no idea how the system works since the person running it doesn't explain his picks. Half way through the month the system was having steady gains. Then it had steady losses all the way to the end of the month. I looked at the closed positions for the past few days and it was down quite a bit more. I would not recommend this system. Price is $40 per month.

S3
Site: The Pitbull Investor Weekly System
S3 turned out to do surprisingly well. However, it is a roller coaster system. Daily draw downs of over 1% were frequent, with rebounds following shortly after. The nice thing about this system is that you can learn it yourself. I was using a free trial which allowed you to view the system's automated picks. However, if you buy the system for $59.50 it teaches you exactly how it works AND gives you access to the automated picks. When I have more time I will probably buy this. It is a variation of the CANSLIM system which has been proven to work quite well.

Day 30 - Final Results

S1 had some nice gains today. If you look at the graph you can see that every day this week has been a winning one for S1. S3 had a large draw down today. Both outpaced the S&P 500's gains in the last month.

Final Overall Results
S1: 7.49%
S2: 0.37%
S3: 5.54%

Today vs Yesterday
S1: 0.57%
S3: -2.17%

One day left

One more day left! At the end of tomorrow all positions will be liquidated.

Yesterday was the last day for S2. I will not include it with today's and tomorrow's results.

Day 29 Results

The S&P 500 rose 0.71% and the Nasdaq composite rose over 1%! Both S1 and S3 had good gains as well.

Overall
S1: 6.88%
S3: 7.84%

Today vs Yesterday
S1: 0.67%
S3: 1.33%

Day 28 Results

S1 had a nice gain today. I dropped S2 to save the subscription fee. All S2 positions have been liquidated.

Overall
S1: 6.16%
S2: 0.37%
S3: 6.44%

Today vs Friday
S1: 0.95%
S2: 0.17%
S3: -0.13%

S2 may be dropped

I may drop S2 this weekend. If I don't I'll have to pay the $40 subscription fee. I don't think it's really worth it for a few more days of trading.

Day 25 Results

S3 saw another great day! S1 was sideways and S2 was down slightly.

Overall
S1: 5.16%
S2: 0.20%
S3: 6.55%

Today vs Yesterday
S1: 0.00%
S2: -0.40%
S3: 1.57%

Day 24 Results

It was an up day today. S3 rebounded with an amazing return today and S1 had a nice return. S2 was down a small amount.

Overall
S1: 5.15%
S2: 0.60%
S3: 4.92%

Today vs Yesterday
S1: 0.85%
S2: -0.33%
S3: 5.63%

Day 23 Results

Looks like my expectations for S1 were wrong. Positions were against the market and it declined again. The biggest problem S1 has is that it will frequently go against the market which kills a lot of its profits.

Overall
S1: 4.27%
S2: 0.95%
S3: -0.66%

Today vs Yesterday
S1: -1.43%
S2: 1.08%
S3: 0.56%

Day 22 Results

Another down day. S2 and S3 both have negative returns. However, the good news is that S1 has a realized profit of over $2000. I expect a decent increase in S1 tomorrow.

Overall
S1: 5.78
S2: -0.15%
S3: -1.14%

Today vs Yesterday
S1: -1.76%
S2: -0.32%
S3: 0.86%

Day 21 Results

Everything was down today. S3 has been all over the place and is now down overall. S1 is now at the top as I expected.

Overall
S1: 7.68%
S2: 0.17%
S3: -1.97%

Today vs Friday
S1: -1.85%
S2: -1.66%
S3: -4.45%

Day 18 Results

What an interesting week it has been. This week saw an average return of almost 5%! S1 has made up for it's early losses with some HUGE gains. S2 has declined a bit and S3 has been up and down all week (ending up).

Overall
S1: 9.71%
S2: 1.85%
S3: 2.61%

Today vs Yesterday
S1: 2.99%
S2: 0.42%
S3: 3.19%

Day 17 Results

Results continued to follow the market today. Everything is down from yesterday. S3 has been a roller coaster.

Overall
S1: 6.59%
S2: 1.41%
S3: -0.54%

Today vs Yesterday
S1: -1.20%
S2: -1.56%
S3: -3.32%

Day 16 Results

Today's results were excellent! S1 had HUGE gains, S3 had excellent gains, and S2 and decent gains. The market started down almost 0.5% and ended up about 0.5%. An interesting day.

Overall
S1: 7.49%
S2: 3.02%
S3: 2.87%

Today vs Yesterday
S1: 4.73%
S2: 0.58%
S3: 3.43%

Half Way Done!

I'm half way to the end. Not only is today my birthday but the results were great. It's been pretty interesting studying these systems.

I happened to start in the middle of a strong upwards trend in the market. This is a good chance to see how the systems work in a strong market. It would also be nice to test them out in a declining market.

I had hoped to have greater returns at this point but we'll see how it goes. I'm about 3/4 of a point below the market right now.

Week Recap

The Challenge had a rough start but it should be much smoother sailing from here. Problems with VSE and my own mistakes resulted in incorrect data and lost profits.

The market was quite volatile this week. One day it was up almost 1%, the next it dropped back down to almost 0%. Today it was up over 1%.

S3 was the clear winner this week. I made some order mistakes with S2. The results should have been at least 2% higher. Live and learn. Had this been a more normal week I think S1 would have faired better. It happened to work opposite of the market this week. I had a lot of long positions yesterday that hit stop losses due to the early market downturn. They then switched to shorts that hit stop losses today when the market reversed. Luckly the stops hit early today and opened a lot of long positions that had some nice gains (up 1.21% for the day).

I ended the week up 2.16%. Annualized that's over 110% per year! Not bad at all, especially when the results should have been higher.

Next week should be much smoother for me. I think the systems will show better overall gains too. We shall see...

Change In System

I've decided to change how I'm handling S1. I've given up on using VSE. It has given me nothing but trouble.

Instead, I'll be paper trading S1. I will factor in trade and margin interest costs. I'll be updating S1's previous day results this weekend so expect the graph to change a bit.

Since VSE works fine for long term trades I'm still going to use it for S2 and S3.

More VSE Faults Result In Lost Profits

If I were paying for VSE I'd demand my money back. I'm pretty much fed up with the site. For long term trades it works fine, but for trades where split second timing is important it fails miserably.

S1 would have had much higher gains today if the site had worked correctly. I found that the way it places orders is horrible. It checks "every few minutes" to see if a stop has been reached. That means that orders are almost always filled after the target has been passed by. Today I had one stock with $0.62/share slippage! And that's on a $10 stock! Yes, that's a loss of 6.2% of profit. Another stock had slippage of $0.29/share. That was less than 1%, but still a loss of profit.

I had orders in S2 that were filled incorrectly. I was left holding half the stocks I wanted to sell. One order left me with a single stock.

I'm going to keep going but this is rediculous. The results I'm getting are worse than worse case real life. I estimate that I should up 2.5-3% overall if it were not for this system.

London Attacks Force Markets Down

My heart goes out to those in the UK. The only thing that will come from this terrorist attack is an even greater encrochment on our personal freedom. I don't understand what the terrorists think they are accomplishing.

Today's attacks have driven the markets down. The overall impact on the American markets has been less than 1%. Many of my positions were down at open but they are now rebounding. I hope the world shows these terrorists that they can't hurt the economy.

More Errors Today

The market was down almost 1% today. I lost some gains but I am still up almost 2%.

There were more mistakes today. I placed an incorrect order in S1 that actually ended up making me some extra money. I misread some signals and placed some incorrect orders but fixed them before they went through.

Despite being down, S1 is picking up momentum. It currently has 8 positions open. The system sees frequent small losses such as these but then sees very large gains. Gains are typically 2-3 times the losses.

VSE back up!

VSE came back up around 10:30AM. Orders were filled correctly.

One of the things I strongly dislike about VSE is the lack of stop-limit orders. I have to put all my orders through as stops which creates slippage. One order just had $0.12 slippage!

If I use any terms that you don't understand look them up at Investopedia.