13 Oct The Allure of Trading the Heron
The Allure of Trading the Heron
Oct. 13, 2021
There are a lot of good things about the Heron robot.
The biggest is the win percentage.
Over the past twenty years, the Heron wins over 65% of the time.
And that feels good.
Yes, we know that win percentage is the “hard serve” of the trading world. In tennis, having a hard serve is the least important metric if you want to be the best. In trading, it’s the same thing. Win percentage is not nearly the most important thing when it comes to long-term success.
But it’s fun to hit 135 mph aces and it’s fun to win trades.
Question: when you start a trend following system, what can you expect?
A good trend following system will maybe win 50% of the time. Most win about 40%. What does that mean?
It means you get all pumped up to start your life-altering trading journey and you’re promptly greeted with…stopouts.
If the win percentage is only 40%, the odds are high the next trade’s a loser.
If you start a “negative” reward to risk strategy, though, what will you probably get?
Winners. Because the win percentage is high.
And that feels good, no matter who you are.
So, last week I decided to take a look at the Heron. This, time, however, I didn’t use the usual GBPUSD. I used the GBPJPY. And I used much bigger profit targets with a better reward to risk (and a good win percentage).
How do you think it went?
Three winners in three trades. (Compare that to a trend following strategy I started about a month ago. That account immediately went down 7%).
But the big question is: were the three winning trades as big as they were supposed to be?
The problem with the Heron isn’t getting wins. It’s getting wins that aren’t sabotaged by trading costs.
Trade #1: Live win = 0.56%/Testing win = 0.57%
Trade #2: Live win = 0.23%/Testing win = 0.22%
Trade #3: Live win = 0.40%/Testing win = 0.41%
(NOTE: These % wins are adjustable. A bigger trade size would be a bigger win, obviously. I’m using a very small trade size for this live experiment.)
In total, I should have made 1.20% (according to my testing). In live trading, I made 1.19%.
That is perfectly acceptable, and, actually, quite promising.
Could it be that the Heron might be viable in the U.S. after all? Could the problem have been the GBPUSD (which is what the Heron was originally tested on)?
Obviously, I need to take some more live trades to have a definite answer.
But, as I said, it’s promising.
In our next Newsletter, we’ll take a closer look at this version of the Heron and compare it to trend following.
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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.