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QB Pro – May 2015

June 1, 2015 by Shaun Overton 7 Comments

April and May were a real swift kick in the teeth. There’s no hiding around the fact that the market wasn’t very nice to me or my trading accounts.

The vast majority of pairs in the portfolio blew out into major trends. That is bad news for a mean reversion strategy. When one currency trends, there are usually a handful bouncing around the mean. It gives us a chance to offset the losses. That didn’t happen recently, which is why my traders and I had a rough go of it.

I expect things to get better

Last month was bad enough that I completely ceased trading for two weeks. After turning the system back on in the second week of May, QB Pro continued to endure minor losses. That was thanks to one of the best trading decisions that I’ve made in the past year, which was to dramatically reduce the leverage.

The high risk account took a 6.2% loss. That would be very troublesome on a normal leverage account, but it’s a drop in the bucket by high risk standards. I look at it as more or less breaking even.

As a sign of my increased confidence, I increased my total deposits to $7,500 across the two accounts. As of today, the high risk account is back to trading on 20:1 leverage. It was at 5:1 for the past few weeks.

Changes to QB Pro

The signal to noise ratio contains enormous predictive power for my trades. I asked the question, “Does the signal to noise ratio at the time of entry predict the outcome of my QB Pro signals.

Judge for yourself.

Signal to noise ratio predicts returns of QB Pro

The signal to noise ratio predicts the returns of QB Pro

The first two dots to the left represent 82.62% of all the QB Pro signals. That’s the reason that the strategy makes money.

I use 1/2π as the barrier between a range and trend. When the SNR < 1/2π, the profit factor is 1.5 (very profitable). When the SNR > 1/2π, the profit factor drops to an atrocious 0.62.

Conclusion: only take trades if the SNR is in the good area. That’s exactly what the updated strategy is doing as of last Friday.

Based in part on experience and largely based on statistical analysis, I found a way to bend QB Pro into a historically profitable trending system on yen crosses. I’m sort of rushing this out the door because the market conditions are favorable. The accounts are trading USDJPY, EURJPY and GBPJPY on 1/3 of the overall portfolio. Perhaps I’m tapped out on the creativity front, but I’m calling this sub-strategy QB Yen.

Here’s a screenshot of the equity curve for USDJPY in MetaTrader. This was part of my quality control analysis to ensure that the signals generated at the proper times.

usdjpy-qbyen

I eventually want to analyze whether QB Yen can tolerate the spread costs of more exotic crosses like CADJPY. Until then, heavy weights will go on the most liquid yen crosses until it looks like they can handle the higher costs of the more exotic pairs.

QB Pro historically wins in 2 out of every 3 months. I don’t have enough data to judge whether consecutive losing months are dependent or independent, but it’s only happened twice historically where the system lost 3 months in a row. It’s never lost more than 3 consecutive months going all the way back to 2008.

QB Pro May 2015

Based on the new changes, the changing market conditions and the historical analysis of drawdowns, I feel much more comfortable putting more money into the account. For those of you that decided to take a break, I personally believe that the worst is over. The market will of course be the judge of that.

Filed Under: QB Pro Tagged With: digital signal processing, QB Pro, signal to noise ratio

Comments

  1. Michiel says

    June 2, 2015 at 17:14

    Hi Shaun, I would like to join in using the QB strategy. Im starting out with a micro account with 700$ in it (just to test the waters). My motto is “low risk, consistant gains” Whats the best way to participate in this?
    Regards,

    Reply
    • Shaun Overton says

      June 3, 2015 at 08:02

      Hi Michiel,

      QB Pro is not currently open to new traders. I’m hoping to open it up in a few months when we see some progress out of the drawdown.

      Reply
  2. Andrew says

    June 2, 2015 at 20:16

    Comforting to know that I was not the only one for whom April and May were horrors. I am running a different portfolio of 11 strategies which based on 40 months back tests should at least have broken even over these months, but instead went into drawdown. I too look forward to a more favourable June.

    Reply
    • Shaun Overton says

      June 3, 2015 at 08:03

      It was tough going! Glad to hear that you’re recovering, too.

      Reply
  3. BARRY APPS says

    June 3, 2015 at 05:19

    Hi Shaun, I notice that the myfxBook site with the performance of your QB pro has a trade credit[profit] of $50-29, closed out trade [EurJpy]@ 06-02-2015 @ 13:00 hrs.
    That trade is not shown as opened or credited to my account.
    If it is verified by that site , then are there trades not shown by pepperstone in my account.?

    Reply
    • Shaun Overton says

      June 3, 2015 at 08:08

      Hey Barry,

      The QB Pro MAM placed the same trade. The problem was that it was also the identical trade size (0.1 lots). I don’t know precisely how the MAM allocation works, but the trade is in there. The trade would be pennies or fractions of a penny for all but the biggest clients.

      That was a minor bug in the code that has now been fixed. I see the overnight trades calculated the correct position size.

      Reply
      • Barry Apps says

        June 4, 2015 at 06:22

        Thanks Shaun for the explanation, we appreciate your support.

        Reply

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