FOREX QUANT

March 5, 2007

STS Profile

Filed under: Uncategorized — by TraderMade @ 1:32 pm
Tags: , , ,

Overview

STS is Stealth Trader System. STS is a mechanical trading system that employs statistics and mathematical formulas to determine every aspect of trade decisions, which includes:
– Entry points
– Volatility filter
– Predetermined stop loss level
– Pre calculated position sizing
– Adaptability feature

How STS Works

Entry points
The STS internal engine uses statistical formula to determine market’s natural median to be used as an anchor point for further calculation.
From this median, a standard deviation and average true range then added and/or subtracted to determine potential buy/sell area.
A counter-move philosophy is used to take market position.

Volatility filter
Using volatility cyclic detection algorithm, the system determines the proper time to get active. It doesn’t use a rigid time-filtration, but it gauges the cyclic nature of intraday market volatility. It will trade during optimum volatility session of the forex market.

Predetermined Stop Loss level
The system has a strict risk management rules. It will never enter any position without any pre-determined stop loss level. This will ensure the safety of the equity being traded. Any sudden adverse market movement will be anticipated.

Pre-calculated position sizing
The system has an internal ability to determine its position sizing.
The system will take care of how many contracts to trades, when to add more contracts, and when to reduce exposure to manage risk on the occurrence of consecutive losing trades.

Adaptability
Many mechanical systems fail to adapt to the change of behavior of the market, thus making the common disastrous experience where a system that performs extremely well in back testing, then perform very poorly in live trading environment.
This STS system is not a rigid system. It has a built in capability to gauge market’s volatility. This ability thus enhances the durability of the system towards the continuous changes in market behavior.

Risk and Performance Profile

Risk
Using a single standard contract on a $10,000 initial capital, the maximum consecutive losing trades were 3 trades, thus making a roughly 20% risk of relative Draw Downs.
A draw down exceeding 40% of the capital, which brought by a more than 6 consecutive losing trades per currency pairs will trigger a fail-safe decision to stop running the system.

Performance
Using a single standard contract on a $10,000 initial capital, the profit factor is 1.5. 80% of the positions hit its Take Profit levels, indicating that this system has been able to determine a high probability entry point.

Robustness
The system has performed a consistent positive expectancy on a high-resolution historical data (1999-2007), on all tested currency pairs:
– EURUSD
– GBPUSD
– USDJPY
– USDCHF
– AUDUSD
– USDCAD
Forward testing on live price feed environment has performed a behavior consistent to the back test profile.

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