Scalper EA

countertrend forex robot

This is a review of one of my private EAs I’m using in my portfolio. I usually don’t like scalpers but they are very useful under certain conditions. This forex robot is a scalper as the title itself suggests, it trades at pullbacks like most scalpers do but I unlike other scalpers this one is more robust and trustworthy because it works even at higher spreads. It runs on EURUSD, M30 timeframe. Most scalpers fail because the stop loss is very large while the take profit is very small. It takes 10-15 wins just to cover a single loss, well, here is not the case, the smallest take profit is 15 pips and the larger allowed stop loss is 51 pips. It takes just 3 wins to cover one loss and  this forex robot wins much more trades that is loses. Accuracy. Efficiency. Broker side TP and SL. Much more wins than losses. Higher than 1.3 pips spreads allowed. This is what I call an efficient scalper.

The strategy

It trades pullbacks under high volatility conditions. If the price falls slowly (low volatility) after a sustained move up then suddenly comebacks a long is triggered. If the price goes up after a  previous trend down, then falls again (high volatility) then a short is triggered.

Take Profit and Stop Loss levels

It opens positions at the end of the current candle, but it closes them whenever necessary, it doesn’t wait for the current candle to close in order to exit the trade. Take profit and stop loss are also broker side thus protecting the account if the VPS shuts down or if the internet connection is lost.

Take profit:  between 15 and 40 pips
Stop loss: between 30 and 50  pips

Unlike other scalpers, stop loss and take profit have almost the same values, so it needs only 2-3 wins to recover a loss.

Backtests and statistics

13 years backtests:

Scalper EA backtests

Scalper EA backtests

Total number of trades: 1111
Won pips: 5458
Maximum drawdown: 246 pips
Maximum drawdown length: 379 days (more than 1 year)
Average pips per year: 419
Won trades: 75%
Lost trades: 25%
Maximum consecutive wins: 28
Maximum consecutive losses: 5
Average consecutive wins: 5
Average consecutive losses: 1
Average profit trade: 20 pips
Average loss trade: 42 pips

Backtests show that all years are profitable, except 2007:

Scalper EA yearly profits

Scalper EA yearly profits

Robustness analysis

1. 1111 trades during 13 years is enough for the backtests to be considered valid from this point of view although it doesn’t trade very often.

2. Backtest shows 572 long trades and 539 short trades, the distribution is almost equal which is great!

3. The profits are almost equally distributed over the years and this is a great thing too.

4. It passes my personal robustness criteria:

Real Profit Ratio (RPR) = ((WFER * Total profit in pips) / number of years to backtest) / MCWCS

Where

WFER = Walk Forward Efficiency Ratio

MCWCS = Monte Carlo Worst Case Scenario (MC analysis is performed having the best selected parameters as a starting base)

If RPR<0.5, the EA should be discarded.
If RPR>0.5 AND RPR<0.6 – modest performance
if RPR>0.6 AND RPR<0.8 – good performance
if RPR>0.8 – an excellent EA!

In this case, RPR is 0.9 – an excellent EA.

You may wonder why am I using this weird formula. I’m using it because it respects the following:

– money is made in the future, not in the past, so in order to see how this EA should behave in the future, I’m performing a WFR analysis first. Total profit of pips made in the backtests are multiplied with Walk Forward Efficiency Ratio which is usually less than 1 because in real life we expect less pips than in backtests.

– MCWCS (Monte Carlo Worst Case Scenario) shows us the worst case scenario we can expect.

– My formula is nothing more than the number of pips we can expect in real life / maximum drawdown in pips shown by MCWCS.

My scalper EA definitely passes this.

5. It survives on a correlated pair like USDCHF without any adjustments.

Disadvantages

The drawdown length is quite high, backtests show a maximum drawdown length of more than one year and nobody has the patience to wait that much. But the drawdown length is a common expert adviser problem. More than 95% of them have a prolonged drawdown period and the answer is very simple: market changes, it can’t trend all the time. So during the swing periods the EA merely survives.

How to use it

I can’t just discard an excellent EA just because sometimes the market doesn’t trend. The proper choice is to build a multiple strategy portfolio. My portfolio (this trend follower is a part of it shown only 3 months of drawdown, the maximum drawdown length is 3 months only!