Salve a tutti,
I hope you’re enjoying the weekend.
I want to go more in depth to the different strategies I coded to improve the safeness of version 1.3. Now we have 3 strategies:
- Trend Filter Magnitude
- Close On Counter Trend Filter Magnitude
- Max DD (the same as for the previous versions)
Trend Filter Magnitude
The first should be very clear by now. We have 3 levels of “scoring” the trend (1 – weak, 3 – medium, 5 – strong) and filter entries based on that score. By default we’ll enter only on trends with magnitude 3 (so only long when trend score is +3 or more, and enter short only when trend score is -3 or less).
It is important to stress the fact that by filtering we lower the number of trades, so don’t expect Crescendo to open immediately orders, but check for trend score to see if is strong enough based on your setting.
This first level is important as it lowers the AVERAGE draw down as we’ll trade IN the trend, so it’ll be easier to reach the target_profit and with much lower number of orders. But it’ll still may happen that after our first entry the trend strongly reverses. And that’s where the second strategy comes in.
Close On Counter Trend Filter Magnitude
The second strategy tells Crescendo to close all the open trades and open a new one in the opposite direction if it spots that the trend has changed, meaning that the trend score is above the set value but in the opposite direction of the entry trend.
So for example if you set the “close on counter trend” magnitude to 5, if you entered long with a +3 trend, it’ll close all the open long orders and will open a new short order if if spots a -5 trend. Vice Versa, if you entered short with a -3 trend, it’ll close all the open short orders and will open a new long order if if spots a +5 trend.
In this case it is important to stress that is made WHEN CRESCENDO CHECKS FOR OPENING NEW ORDERS (so not in real time but only on market check, so depending on the “frequency” setting, by default every 12 hours). So in case of a huge drop due to some big event this strategy won’t work unless that happens close to the 12 hours check. What can we do in that dramatic situations? We still have our Max_DD, that is the third safety strategy.
With that second strategy well cut possible loss, avoiding having larger draw downs, so avoiding to have the currency locked into a position waiting for days or weeks for the positions to be closed. If it’s evident that the trend has changed, maybe better to take the loss and have the EA restart trading in the new trend direction.
The third level is the “Max_DD”. It is still set by default at 30% but you can decide to set to lower values now, like 20% for example. The above strategy should prevent the maximum DD to increase to worrying levels, but it won’t work in real time. The MaxDD monitors for the DD level in real time and it stops all the orders and the EA from trading, if the set % value is reached. A real safety net.
So, with version 1.3 we passed from one level of safeness to 3. That will reduce the average draw down, reduce the level of the maximum draw down that we may suffer and keep the “black swan” protection.
But there’s another strategy that somehow relates to safeness and it’s something that some of you are already doing “manually” somehow: the draw down level based frequency.
Draw Down Level Based Frequency
With this strategy the “frequency” setting is AUTOMATIC. So Crescendo will adapt it based on level of draw down of the SINGLE currency pair. So we’ll have two pairs trading with different frequencies. It works based on a “dd_step”. This is the percentage step that will be used to calculate the frequency.
The pair will start with a frequency 0 (so real time). So it’ll open a new trade immediately when the conditions are met. Remember that if you set a trend magnitude filter the trend should be of that magnitude or more to open the trend. As soon as the first trade is open the frequency switch to 1 (1 hour) and it’ll automatically adapt based on the “dd_step”. So if for example we set a dd_step of 2 (%) the frequency will be 1 for a total orders draw down between 0%-2%, frequency 2 for a draw down between 2%-4%, frequency 3 for a draw down between 4%-6%, frequency 4 for a draw down between 6%-8%, frequency 5 for a draw down higher than 8%.
This option won’t be enabled by default as it can lead to open more trades at the beginning and less later making more difficult to close “large” sets of orders.
That’s all for the safety side. Enjoy.