This robot is an optimized version of a now decommissioned algo trading strategy. It has now become more risk averse and is a good choice if you want to build up your portfolio in a steady manner.
The Trend Spotter robot uses a combination of two technical indicators; the Parabolic SAR and the Exponential Moving Average. The two indicators are trend indicators and work in collaboration to generate signals for the strategy to open and close positions.
The Parabolic SAR is a well-known trend following indicator. It is best for predicting the short term market trends and thus perfect for short term trading strategies like trend spotter. It performs very well when the market has a steady trend compared to when the market is in consolidation.
Exponential Moving Average, on the other hand, is also a trend following indicator and the most common indicator in Forex trading. This is a moving average indicator which puts more emphasis on the most recent market data, thus making the market predictions more accurate. It is one of the most used indicators in predicting a market trend.The combination of these two indicators ensures that false signals are reduced.
Considering the effectiveness of the indicators used to develop the Trend Spotter robot, it is more successful when the market is in a strong bullish or bearish trend. Otherwise, when the market is in consolidation, the strategy is not expected to be profitable.
There are two conditions for opening long and short positions. If either of the two conditions is met, then a position is opened. Buy signals are generated using either of two conditions.
The first one is when a previous H1 bar is greater than previous parabolic SAR bar value and also less than or equal to the Moving Average period 34 bar of 2 days ago and greater or equal to the previous bar of the Moving Average period 34.
The second condition for generating a buy signal is when a previous H1 bar is greater than previous Moving Average bar value and also less than or equal to the parabolic SAR bar of 2 days ago and greater or equal to the previous bar of the parabolic SAR.
Similarly, sell orders are also generated using either of two conditions. The first one is when a previous H1 bar is less than the previous parabolic SAR bar value and also greater than or equal to the Moving Average period 34 bar of 2 days ago and less than or equal to the previous bar of the Moving Average period 34.
The second condition for generating a sell signal is when a previous H1 bar is less than the previous Moving Average bar value and is also greater than or equal to the parabolic SAR bar of 2 days ago
and less than or equal to the previous bar of the parabolic SAR.
In an effort to try and manage the risk involved in trading Forex, Trend Spotter employs some risk management strategies, which include the use of a stop loss, a take profit and a set amount of time for a position to remain open.
Every position that is opened has a take profit of 75 pips and a stop loss of 53 pips. Furthermore, if neither take profit nor stop loss is hit when a sell is open, after 2120 minutes, then the position automatically closes. For buy orders, the order s closed after 1720 minutes.
The strategy is also set to have a maximum exposure of only 5% margin on the equity. With this margin, you have a lot of free margin for your trades to run and your account can’t be wiped out
The backtesting results show that after around 552 trades the strategy could have returned more than 100 % profit.