Potential Pairs for Grid Strategies?

[Surrealistik]

Was wondering if FRPEA would be interested in pursuing the development of a grid strategy for certain low-volatility pairs.

Though I understand that grid is generally regarded as a dirty word and taboo, such strategies are profitable so long as volatility and price ranges are low, and no stoplosses are triggered. To this end, several prospective pairs have come to my attention per MyFXBook's volatility stats:

http://www.myfxbook.com/forex-market/volatility

EURGBP, EURCHF, USDCAD, USDHKD and XAGUSD all stand out for low volatility.

Further, USDCAD is negatively correlated with XAGUSD, EURGBP and EURCHF per the monthly, weekly and daily timeframes:

http://www.myfxbook.com/forex-market/correlation

I of course would recommend hard DD limits for any grid based strategy, and 6+ year tickdata backtests that verify its profitability and survival over a long term period.

[Support_AdrianS]

Dear Surrealistik,

We are interested only on strategies that could work on long term (for more than 10 years).

We never took grid trading as an option.

Sooner or later, such a trading system will end up in total loss of the account, no matter how well it works on short term.

It can be profitable, but there are some issues to consider:
- the money should be withdrawn from time to time, before everything goes down;
- some brokers (if not all of them) don't allow withdrawals if there are open trades on that account. This involves closing all the trades left open in loss before the withdrawal.

Grid trading (and martingale also) works very well for scam vendors.
They promote a system that never loses, using hidden open trades, until everything is lost. And after that, rename it and sell it again, using a new account.
They have great interest to promote such strategies.

Grid trading can be profitable, but this is not a trading system for everyone to buy or use.

Kind regards,
Adrian.
ForexRealProfitEA Team

[Surrealistik]

Oh definitely. Making periodic withdrawals is absolutely required, even on those currency pairs most conducive to grid strategies. I was simply wondering at the possibility/viability of integrating a grid sub-strategy on low volatility pairs that don't have a great deal of variance/spread between their highs and lows. Such grid sub-strategies would surely feature hard stops/max floating DDs permissible before they close out and are disabled for a time (a month?). They should also close out when they've achieved a certain level of net profit (default 100%), remaining disabled until the user manually restarts them, or that profit is withdrawn.

That said, if grid systems are not to be used at all, there are plenty of low volatility pairs with good scalping potential that are untapped.


I've put together a table of data displaying short, medium and long term volatility of all pairs MyFXBook has data for:

https://docs.google.com/spreadsheet/ccc ... Eb0E#gid=0

Green entries have lower volatility than the Average and Median for that particular category/timeframe. Red entries have greater volatility than the Average OR Median.

They are grouped by monthly volatility in order from least to most volatile. Many of the least volatile pairs have yet to be tapped by scalping strategies; though some may have spreads that are potentially too high to make them viable or other disqualifying elements, in balance most appear to be attractive candidates for them.

Conversely the high volatility pairs display breakout and trending potential, though spread and other considerations must of course be kept in mind.

[Support_AdrianS]

Dear Surrealistik,

Thank you for your interesting analysis.

We never stopped searching to improve our current strategies, including the scalping and we will use your finds in our next tests.

Even if it's seems easy, finding a good strategy on long term it's a very big challenge.

Kind regards,
Adrian.
ForexRealProfitEA Team

[Surrealistik]

Definitely not implying that strategy creation is easy with respect to robust, long term profitability; I know all too well that it's a long and work intensive process that requires considerable investigation, testing and quality assurance. I was only trying to provide some useful data and point out the existence of potential pairs for grid (if such a direction were to prove tenable), ranging scalping and breakout/trending strategies.

Hopefully my table will come in handy with respect to the conception and compilation of such strategies in the future.

[Surrealistik]

Per this new data, including a volatility by % tab: https://docs.google.com/spreadsheet/ccc ... sp=sharing

10 Lowest Volatility by Pips: (ordered lowest to highest by Monthly volatility; bolded are in both top 10s)

#1: EURDKK
#2: USDHKD
#3: EURCHF
#4: USDCAD
#5: XAGUSD
#6: NZDCAD
#7: EURGBP
#8: NZDUSD
#9: USDSGD
#10: NZDCHF

10 Lowest Volatility by %: (ordered lowest to highest by Monthly volatility; bolded are in both top 10s)

#1: EURDKK
#2: USDHKD
#3: EURCHF
#4: EURCZK
#5: USDCAD
#6: USDSGD
#7: EURPLN
#8: GBPUSD
#9: GBPSEK
#10: NZDCAD

10 Highest Volatility by Pips: (ordered highest to lowest by Monthly volatility; bolded are in both top 10s)

#1: EURCZK
#2: EURSEK
#3: EURNOK
#4: EURTRY
#5: GBPSEK
#6: USDSEK
#7: USDTRY
#8: USDNOK
#9: USDDKK
#10: USDPLN

10 Highest Volatility by %: (ordered highest to lowest by Monthly volatility; bolded are in both top 10s)

#1: EURTRY
#2: XAGUSD
#3: USDTRY
#4: XAUUSD
#5: AUDCHF
#6: CHFJPY
#7: EURAUD
#8: USDHUF
#9: EURJPY
#10: GBPJPY

[Support_AdrianS]

Dear Surrealistik,

It's interesting; some of the lowest volatility pairs had poor performance on scalping strategies while other pairs with highest volatility performed much better than average.

On top of that, some of the lowest volatility pairs (gbpusd in particular) performed well on breakout strategy.

Higher volatility brings higher profits while lower volatility works less well.
Low volatility it's not necessary a good condition for scalping; how each currency pair react to market conditions is more important. Each pair has its own way to react to different market conditions.

We will use your analysis in our tests for sure, but it is possible the results to be worse than expected, due to the peculiarities mentioned above and because of the spreads also.

All my appreciation for your work.
Kind regards,
Adrian.
ForexRealProfitEA Team

[Surrealistik]

Not a problem!

Yes, volatility isn't the end all/be all, just a metric which in the long term is probably conducive to minimizing losses from scalping strategies hitting SL by making that less probable outside of moving news; that's the theory anyways. Contemporary news/fundamentals and spread definitely remain exceedingly important factors to consider.

That all said, I'm definitely open to the falsification of my hypothesis; I'd rather be rich than 'right' through accurate analysis and the conclusions and strategies derived thereof, haha. In a conflict between 'common sense'/intuition and empirical evidence, the latter always wins.


I would however be interested to see how existing strategies do on EURDKK and USDHKD.