Minimize loss with linear regression for algo forex trading

(Last Updated On: January 5, 2018)

True range forex trading market random performance video

I refer to linear regression below and in the long video below  There are 2 videos here on 3 trading sessions from this algo trading system I am working on. First is the long video of 1hr 50 minutes which explains each order text file my system generates. Do remember I am using Dukascopy JForex 3 which is the current version. I can also report that my system had recent problems where it hung after 5:15 earlier this morning. My local time is Eastern Daylight Time which is same as New York.

When you watch the videos, the key is to minimize the number of losing trades when you can take on new trades. It is imperative to measure the trend of bars before taking on the trade. I am using linear regression with my other 3 indicators in parallel for entry. Now there is a 4th but it seems checking for linear regression on each bar on 40 plus subscribed instruments will make your system hang like mine did. Just also remember I am using 14 gb system on Windows 10. I know but don’t ask. I plan to fix that with a new Linux based (eg. Ubuntu)  server with hopefully 64 gb system. I am looking at Dell t3610 tower which has good rating.

Anyhow, it is imperative to reduce or even eliminate those losing trades. I figure the linear regression (or same as trend line for technical analysis traders) helps here. Also, for the Jan 5 testing I was measuring 20 bars (each is 1 minute) but it maybe should be reduced to 5. I have certain flatline conditions which can mess this up with 20 bars. This is all theoretical of course but will try this Monday on the next trading day. I also highlight ways to improve the efficiency on the programming side in the 1hr 50 minute video below.

When you watch the video on the losing strategies, it needs to be understood the Dukascopy report does not distinguish between long and short trades. I also messed up in the videos of thinking short going negative would be profitable. This does not appear to be the case in the final demo reports. Who knows? We need to find ways to improve our trading profit potential.

More to come but I will expect to reduce the number of bad trades with improved linear regression checking for 5 bars instead of 20.

I do highlight in the long video that typical human greed can kick in as the positions/order life cycle can hit peaks before it closes/exits. It is very tough to build a systematic approach to the many trading conditions which are very random. Among my groups are the chatter about technical indicators like Bollinger Bands will help. I have found instances watching 1 minute price lines move way to fast before the Bollinger Bands catch it. I found once instance a currency pair lost 0.50 USD in just 6 bars. This could be virtually in seconds so these type of indicators may not be useful as one would think. I think it is quite hard for a human to track not just 40+ forex pair instruments at once , but it is very difficult to track every minute data bar. Just remember, my order text log file does track this as demonstrated in my long video.

There are way too many factors to consider when finding exit conditions because everything is so random or it just moves way to fast. It seems to best approach is to use the positions profit & loss (P&L) in US dollars is the best indicator out there. The hard part is to set targets on when to close but use stats to set that. I may have enough data but you want to ensure that you can let the profit potential run. As some examples clearly show they can do real well as in $7 on minimal amount traded is quite spectacular if you ask me.




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