1- Trading System Concept

Plus System is a mechanical trading system developed for the spot currency market (Forex).

It is intended to use in the six major currency pairs or in each pair individually.

The concept behind the system is to exploit the short term volatility break out.

It uses intraday forex data for the trade setup and place a limit order (either long or short) for the next trading hour.

When a position is open, a protective stop loss is placed based in the same volatility concept.

The position sizing is fixed and based on the desired leverage and drawdown target.

 

2- Backtesting and Optimization

Plus System was backtested in a portfolio composed by the six major currency pairs.

This diversification improve the overall system performance, minimize drawdown and assure the system robustness.

Due to the few parameters used, the optimization process was straightforward and intended for test the system reliability.

 

3- Performance

The following performance report was obtained backtesting the system in Wealth Lab Developer, using daily forex data in a 35 months periods from 01/01/2002 to 30/11/2004.

It assumes a starting capital of $10000 and trade one mini lot ($10k) per contract per currency, so the leverage may vary approximately from 1:1 to 6:1 according to the amount of open trades.

Plus System
2003	Result	Equity	YTD
Jan-03		$10.000,00
feb-03	-3,99%	$9.601,00	-3,99%
mar-03	8,63%	$10.429,57	4,30%
apr-03	-0,88%	$10.337,79	3,38%
may-03	2,11%	$10.555,91	5,56%
jun-03	10,55%	$11.669,56	16,70%
jul-03	-1,38%	$11.508,52	15,09%
ago-03	8,53%	$12.490,20	24,90%
sep-03	10,30%	$13.776,69	37,77%
oct-03	3,12%	$14.206,52	42,07%
nov-03	3,67%	$14.727,90	47,28%
dec-03	-1,90%	$14.448,07	44,48%
2004	Result	Equity	YTD
jan-04	24,93%	$18.049,98	24,93%
feb-04	9,70%	$19.800,82	37,05%
mar-04	11,06%	$21.990,79	52,21%
apr-04	15,51%	$25.401,57	75,81%
may-04	3,91%	$26.394,77	82,69%
jun-04	0,66%	$26.568,97	83,89%
jul-04	0,18%	$26.616,80	84,22%
ago-04	2,96%	$27.404,66	89,68%
sep-04	-6,85%	$25.527,44	76,68%
oct-04	-5,83%	$24.039,19	66,38%
nov-04	3,93%	$24.983,93	72,92%
dec-04	-4,11%	$23.957,09	65,82%
2005	Result	Equity	YTD
jan-05	4,48%	$25.030,36	4,48%
feb-05	-3,43%	$24.171,82	0,90%
mar-05	1,26%	$24.476,39	2,17%
apr-05	2,59%	$25.110,33	4,81%
may-05	7,42%	$26.973,51	12,59%
jun-05	3,55%	$27.931,07	16,59%
jul-05	7,29%	$29.967,25	25,09%
aug-05	0,10%	$29.997,22	25,21%
sep-05	-2,11%	$29.364,27	22,57%
oct-05	6,31%	$31.217,16	30,30%
nov-05	-1,04%	$30.894,06	28,96%
dec-05	-0,40%	$30.772,03	28,45%
2006	Result	Equity	YTD
jan-06	3,70%	$31.908,99	3,70%
feb-06	0,57%	$32.090,88	4,29%
mar-06	1,24%	$32.488,80	5,58%
abr-06	1,30%	$32.911,16	6,96%
may-06	-2,40%	$32.121,29	4,39%
jun-06	-2,28%	$31.388,92	2,01%
Total	Statistics
Total Return	213,89%
Anualized Return	39,76%
Std Dev	20,93%
Sharpe @ 3%	1,757

 

4-Monthly Returns Chart

 

5- Remarks

Plus System employs a simple trading concept to achieve an encouraging risk weighted overall performance.

This simplicity allow us to implement the system in the six major currency pairs without parameter optimization and providing some degree of diversification.

Further research and development will continue specially in areas such as risk management (risk per trade) and money management (position sizing).

The performance per currency pair and the detailed trade history is keep in another document.