Thursday, November 5, 2009

NewsTrader

I was looking through my blog posts (yeah, I know, I'm about the only one who does) and I noticed that back a while I had promised a longer description of my NewsTrader.  V2.3 has been forward testing for quite a while now (since 4th September), and has made the princely sum of $82.  This was on a ridiculously small (for a news trader) lot size of 0.1, so I've just bumped it up to a more reasonable 1.0.  With a stoploss of 10 pips this gives a nominal risk of $100 per trade, although I have seen absolutely massive slippage on news in the 30 pip range.  Many traders really get upset by things like that, but with my IT background I've no real problem with it.  Big news events would stress the forex trading network in such a fundamental way that it's not surprising that serious overloads occur.

Anyway, NewsTrader V2_3 reads the news events from the weekly XML list kindly supplied by ForexFactory, and issues a very tight straddle just before each medium or high impact event.  What's a straddle?  It's a BuyStop / SellStop pair that is able to profit from a clean move in either direction.  If you look at the forward test, you'll see a number of indications of how this trader works:-
  • Large numbers of deleted stop orders.  This is when the price didn't immediately react to the news at all.
  • Stopped out orders at -10 pips.  This is when a spike in one direction preceeds the real direction of the move.
  • Closed orders in loss.  I have a timestop which from memory closes the orders after about 2 minutes (yes these trades are short!)
  • And, wonder of wonders, a number of profitable orders which hit the TP of 10 pips

NewsTrader V2_4
When I first wrote NewsTrader I was trading from my laptop in Australia.  I've made other comments about the ping times between Australia and the US: suffice to say the theory of News Trading is greatly undermined by network latency across the Pacific.  With the use of my virtual host in New York, I've now reinstated my original code which worked so badly in practice, which was a very tight client-side trailing stoploss.  I'm running 4 pips at the moment.  You wouldn't believe how long it takes for a MetaTrader 4 terminal in Australia to deliver tick updates and do something trivial like close an order.

So that's it: NewsTrader V2_4 is NewsTrader V2_3 with a trailing stoploss of 4 pips and a takeprofit of 30 pips (which will not normally be hit).  It remains to be seen how much better it will work on the faster network.  Forward tested here.

When I get a moment I might add auto screendumps of the news events as they occur.

2 comments:

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  2. Hey man, good articles! Unfortunately, forward test link doesn't work anymore :D really wanted to see it :/

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