7th day, huge profit

After almost recovering the losses from previous days, I had a lot of energy and I wanted to switch on the system as soon as possible. To be honest, this doesn’t matter. When I was designing the system, I decided to set up a time window to be able to control the algo and make sure that the positions were closed before the end of the day.

6E 06/20 breaking moment

I was expecting that the Fed approval of its new loan program and I knew that it will have a big impact in the markets that the algo trades.

Early in the morning, the USD was stronger than the Euro and the British Pound. The algo was triggered in both crosses almost at the same time while the futures were retracing.  Let see how these currency futures behaved during the day:

Euro FX

As I said before, the algo was triggered just after 11:30 London Time. I was a bit surprised but all of the conditions were met and the algo sent the market order. After that, I was monitoring the pile of red candles until 12:45. At that point, the market started recovering. Considering the news, I hoped that the market would break the highs of the day.

6E 06/20 trade chart

At the beginning of the US trading session, the news started coming up.  The FED approved the new loan to help to bolster local governments and small and mid-sized businesses. Obviously, all central banks and governments are trying to help their economies as much as they can. I believe that some of the measures will be highly effective while other ones will only help to increase the debts of the countries. At the same time, the initial jobless claims data was released. It was far worse than expected. The Euro rocketed from 1.0900 to 1.0960. After this moment, the market stayed ranging between 1.0940 and 1.0960 for four hours.

British Pound

6B 06/20 trade chart

The case of the British Pound was exactly the same but the daily range was lower than in the Euro. As you can see the retracement was bigger in the GBP/USD at least until 17:30 where it rebounded aggressively.

Trades and Account

It was a great day in terms of profit. The algo generated $3220 in the Euro and $688.75 in the British Pound.

Realized profit by the algo applied to EuroFx and British Pound Futures

It was the first day with a positive P/L and it was a boost to my confidence.

Account

Summary

When you have an algorithmic or even a simple trading strategy is difficult to deal with the news and the macroeconomic data releases. In the example shown, the market when in the direction of the algo but you should be aware that sometimes it will go against you. I would like to recommend to always use stop losses.

The algo, day 1, 2, 3 and 4

Hi, I would like to start this post introducing the idea behind the algo. Also, I would like to highlight that this is not financial advice because the purpose of this algo is to participate in a simulated algo trading competition.

Current situation

One of the first questions that came to my mind was about the current situation with the Covid-19 and how it would evolve during the competition. At that point, was very tricky because it’s very difficult to forecast the future and to be honest, I don’t know how the markets will react to the help provided by the central banks. I see some similarities with the financial crisis, but I believe that there are more unknowns and the lockdowns extensions can trigger some bankruptcies for small and medium businesses. This will result in a decrease in consumption and the gross domestic products will reflect this as well. The financial situation of some companies and individuals will deteriorate and this will affect the banking sector. This issue can have a domino effect. Luckily, the central banks and the national governments are taking measures to try to avoid the spread of the disease and try to go back to normality (even if it’s done gradually)

The algo

I was considering different types of algos before the competition. As you know, some of the most important algo types are:

• trend following 
• mean reversion
• volatility breakout
• range algos

As I explained in the previous paragraph, the situation was one of my biggest concerns and I was expecting the volatility to continue at least for 3 months. Considering that the central banks were approving measures, I thought that the markets could have some rebounds. This is why I decided to design an algo that is able to catch the trend after a retracement. The main indicators used are two Exponential Moving Averages and a Stochastic.

I chose the Euro FX (6E on CME) future and the British Pound future (6B on CME) and every time that the algo is triggered, it sends a 5 lots order.

Day 1, 2 and 4

The algo was triggered only in the British Pound futures during the first 4 days. I lost $655 in the first trade, as you can see it wasn’t the best day. Its maximum adverse excursion was $875 and the maximum favorable excursion was $500 (this explains that the position was showing $500 profit at a certain time during the position was open) 

The second day was far worse because it hit the stop loss. The similarity with the first trade is the maximum favorable excursion that reached $562.5 at some point during the session.

I didn’t have any entry on the third day.

Finally, I had a small profit on the 6^{th of} April. It was the most volatile day.

Summary

I have introduced a brief opinion of the current situation and I have explained how it was one of the most important facts to choose the algo for the competition. I have shared the idea of the algo and I have reviewed the first 4 days. I will keep posting how the algo is performing and interesting facts that can explain some movements in the Euro and the British Pound futures.