The Frustration of a Winning Strategy

Oct. 26, 2022

I spent so much time on the Heron.

Not the 2,500 hours I spent on the Hornet, but similar.

And it worked.

And, according to the testing, it’s still working.

But I’m not trading it in the United States anymore. Why?

Because the spreads are too untrustworthy.

The Heron trades a certain, less volatile time of the day. But sometimes the trades carry over into the 5 pm Eastern time. This, as you know, is when the Fx market “closes” for the day. Forex time runs from 5 pm to 5 pm Eastern.

And when it hits the 5 pm mark, my American broker’s spreads explode all over the place. The GBPUSD normally has a 2-pip spread. At that witching hour, it can get to 20 pips or more.

So, if my Heron strategy goes for a small 10-pip target, you can see the problem. The robot will show a 10-pip win.

While the Live account will show a 10-pip loss.

Fun!

Granted, this is only for a handful of trades, but it makes the testing unreliable. If I happen to get two 5 pm ET trades a month, the results could be thrown off.

Oh, and it also happens on Sunday evenings. If I’m in a trade over the weekend and it wants to close on Sunday, I could be victim of the same crime: A winner could be turned into a loser simply because of psychopathic spreads.

Neato!

Are there any solutions? I tried. My programmer put in spread filters and things of that nature (i.e. don’t exit the trade when spreads get wide), but they didn’t mitigate the damage enough for my taste. The testing just couldn’t match real results as long as I got rogue wild spreads.

So, I had to let my baby go.

Here’s an interesting turn in the story, though. Several months ago, I tried a new prop firm and used the Heron. I’m not a big fan of prop firm trading, but I get a lot of emails about it.

The interesting part is that the prop brokers are outside the U.S. And when I tried the Heron on their broker accounts, it seemed to work like it was supposed to. Do European brokers have better spreads?

It seems that way.

So, anyway, back to the original question, “How’s the Heron doing?”

In testing, it’s doing just fine. Here’s 2019-now:

And outside the U.S., the original Heron on the GBPUSD seems to not have problems.

In the next Newsletter, we’ll discuss another option for the Heron.

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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.