SCOTT WELSH TRADING BLOG

Is Weekly Pivot my “Best” Robot?

Is Weekly Pivot my “Best” Robot?

Jan. 27, 2021

On Monday, we answer the reader question, “What is your best robot?”

The answer, as you recall, was The Weekly Pivot Robot.

Is it the most profitable robot? No.

Is it the most robust robot? Yes. So far, at least.

It’s the most robust because I’ve traded it live or watched it trade unchanged since 2015. I can’t say that about any other robot I trade.

So, why is it robust?

The answer lies in its methodology. If we use timeless principles, systems can last a long time. What are timeless principles? One is trend following.

Another is reversion to the mean. And the Weekly Pivot is a reversion to the mean system.

Everything in life reverts to the mean. It always has and always will.

In trading, everything reverts to its Weekly Pivot level. It always has (thus far) and always will (probably).

Betting on an instrument coming back to its “fair value” is something that will never go out of style. Here’s how the original Weekly Pivot robot does it:

Weekly Pivot Original System (on the EURUSD):
-It waits for price to move 127 pips away from its current Weekly Pivot.
-It makes sure the Weekly Pivot has not been touched.
-It then goes for a profit target of 86 pips back toward the Weekly Pivot.
-It has a stoploss of 103 pips.
-It has a move to break-even at 70 pips.
-It does not trade on Tuesdays.

Those numbers might seem weird. Why 86 pips and not, say, 82 pips? Why enter at 127 pips away and not, say, 121? It looks like this system has been optimized.

Which means it’s probably over-optimized, right?

Well, this system hasn’t been changed in about 6 years now. And here is the Performance Report since 2015 (trading 0.75 lots each time with no compounding):

No losing years.

So, is this system over-optimized? Or is it robust?

It uses a timeless fundamental, hasn’t been changed since it was made, and has no hypothetical losing years since 2015.

Is it perfect? No. Does testing show losing years? Yes. Will a reversion-to-the-mean strategy ever produce as much profit as a trend following strategy? Almost certainly not.

But it’s hard to argue against a fundamentally-sound system that’s produced hypothetical performance like that.

In our next Newsletter, we’ll go even further. We’ll see if we can create more profit.

Talk to you soon.

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.