23 Jan The New Master Trend Stop-And-Reverse Robot (Forex)
The New Master Trend Stop-And-Reverse Robot (Forex)
Jan. 23, 2023
When I think really hard about it, it seems like stop-and-reverse (S&R) systems are the smartest way to trade.
After all, we don’t go to parties and then decide to leave at some arbitrary time.
Okay, this party is fun but I’m leaving in 1.4 hours.
And we don’t decide to leave something fun randomly.
If I see more than 12 people here, I’m out of here.
What do we do? We stay at the party as long as we’re having fun. And when the party changes and it’s no longer the same fun situation, we politely leave. We don’t put arbitrary limits on how long we’ll stay or how much reverie we’ll experience.
We ride the moment as long as it’s enjoyable and leave when the opposite is true.
Which, of course, is exactly what S&R systems do. They ride trends until the circumstances that started the trade have been flipped the other way.
How can that ever go wrong? How can we be more robust than that?
So, that’s why I developed this S&R version of the Master Trend robot. Currently, Master Trend takes a trade and exits only when a target or stop or time exit is hit.
This version does all that, but it also reverses the trade if the opposite conditions are true.
Does it work? Let’s take a look.
Here are the Annual Returns of the Master Trend S&R 4-Hour GBPJPY system. This enters Long on a breakout above a Bollinger Band™ or an Overbought reading on the RSI. It has a profit target, a stop, and a time exit. No break-even.
Only one small losing year since 2003. That appears to validate the idea that S&R systems are robust.
But are there problems with S&R?
The problem is that they stop-and-reverse.
In a whipsawing market, S&R is not where you want to be. Where a “normal” system might stay in through the twitches, an S&R system will take all of the trades.
While S&R might ride a trend much better than regular trading, it can be very vulnerable when the market can’t decide which way it wants to go.
So, how did this RSI-BB stop-and-reverse system do in the psychotic trading of 2022? As you can see above, it did very well.
I guess not all stereotypes are true all of the time.
But the question is: how did the same system do in 2022 without doing any stopping and reversing?
We’ll take a look at that in the next Newsletter.
Talk to you soon.
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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.