What are WFE Risk and Profit Targets ?

The Watukushay For Everyone Expert advisor is capable of profitable trading in the EUR/USD according to the simulations carried out. The EA was designed to give a backtest as accurate as possible so the EA will most likely be, within broker feed differences, consistent with backtesting (of course, see the tests section for the current live tests aiming to prove this). The EA also has a broad TP and SL of 50% of the daily ATR for a 1:1 risk to reward ratio, however the actual risk:reward ratio is higher due to the exit mechanism cutting loses short in an effective manner. The EA also uses only values of the RSI on previously closed bars to make sure no exploitation of backtesting errors takes place. The buy/sell criteria on the RSI is also symmetric (same distance from the 50 line for the buy and sell threshold lines) which implies that there is no preconditioned favoring of longs or shorts on the EA.

The system's profit and risk potential is controlled through the Risk variable which is related to the ATR adjusted money management which takes into account the account's balance and the market's volatility in order to select the lot size traded. With a Risk value of 5 you can expect a maximum draw down of 18% with an average yearly profit (as a percentage of initial equity) of about 36%. You also have to take into account that this EA can have periods of close to break even or small draw down which can last anywhere from 6 months to 1.5 years according to back testing results. This is similar to results achieved for other profitable systems, such as the 4 weekly breakout or turtle trading systems.

Again, this is a long term profitable system and periods in which draw down exists cannot be eliminated. However the EA is adapted to the market and always returns to much higher profitability given its adaptive logic. Below there is an image of an equity curve using Risk=1 and Risk=5 for the period Jan 01 2000 to Jan 01 2010 (10 year backtest). You can obtain profit/risk targets for other periods of time by backtesting. Please make sure you do so with 90% modeling quality and NO mismatch errors. Please note that the Risk=5 backtest has more "noise" on the last years due to the compounding effect (larger lot sizes being traded due to the larger account size which lead to larger oscillations when compared with the first years). (for backtesting statements please go to the testing section)
In order to help you better understand how the expert advisor performs I am also including a monthly draw down analysis using the Risk = 1 backtesting data from the chart shown above (note that access to the satements is available within the "testing Watukushay FE" section), you can click on the image to make it larger . You will see that in average Watukushay FE achieves profit during most months but draw down months usually lead to higher loses than the average profitable month. However the fact that profitable months are globally more frequent and the fact that highly profitable months appear every year, make Watukushay FE always reach new equity highs in simulations.

No hay comentarios:

Publicar un comentario