It’s been a bumpy month by any definition. We made a ton of money in the aftermath of last month’s Fed announcement, only to give it all back the next week. QB Pro recovered most of the earlier gains, then last week’s drawdown took it all back again. It’s been painful.
The good news is that the new changes to QB Pro are rolled out. Several of you sent in emails asking about new currencies like GBPNZD and AUDCAD appearing in your account. Kudos to you for paying close attention to the trading.
The total currencies traded in the basket is up to 16 pairs. While the max leverage is unchanged at 36:1 (still very, very high), the leverage per pair is only 2.25:1. Future losses like the one from last week will still occur.
The difference is that the size of the positions is reduced by over 2/3. The impact of getting caught in losing trades that are all reflective of USD weakness decreases significantly. We’re now trading a mix of AUD, CAD, CHF, EUR, GBP, JPY, NZD, USD and XAG. No one currency should dominate the performance.
The system also does extremely well on emerging market currencies. I’m holding off on adding RUB, MXN and others until I determine the impact of the spreads on overall profitability. They’d do amazing if we could trade for free!
Short term performance expectations for QB Pro
We’re coming into the summer, which is when the forex market traditionally falls into the doldrums. That’s generally a good thing for QB Pro. The markets whipsaw up and down without really going anywhere.
The alternative is that the Fed hikes rates in June and sends the market into a USD buying frenzy. That’s also good news. Most of the money that QB Pro made over the past 8 months was driven by USD strength. A rate hike would unleash chaos in emerging markets and equities. That’s the kind of condition to push volatility into our new crosses, creating opportunities for us to trade.
QB Pro 2.0 isn’t happening
I’m extremely disappointed. After several thousand dollars in programming expenses, and not to mention the 100+ hours that I spent coding myself, the QB Pro 2.0 change is a wash.
I had a trusted developer audit my code to make sure I wasn’t doing something stupid like trading on future prices or anything. Neither him nor myself caught anything from December until March.
Towards the end of last month, a single line of code ruined it all. One of my key features was deciding when to bail on trades and go the opposite direction. Well, it turned out that I accidentally introduced data snooping into the backtesting platform. I pre-calculated when losing trades occurred to calculate probabilities.
In plain English, my goal was to calculate “If today was a big loser, then do the opposite tomorrow.”
What I accidentally coded was “If tomorrow is a big loser, then do the opposite.” If only that were possible!
I don’t want to muddle up the explanation with code examples. Suffice it to say that the idea didn’t work out when I took away the ability to look into the future.
There are some features of the 2.0 system that I wish to analyze in the coming months, but for now it’s going to have to take a back seat.
My plan is to sit tight for a few weeks to ensure that the new pairs are working as intended. Whenever I am personally satisfied with the system behavior, I intend to increase the amount of capital in my account.
Don’t hold my feet to the fire. This part is a subjective process, so I can’t put a precise time frame on it. If and when I am satisfied – and it’s going very well the first few days – then I will make a decision about increasing my capital at risk.
If and when I choose to increase my capital in the account, I will then re-open QB Pro to new traders.
PS: I hope that the drawdowns encourage some of you to withdraw profits the next time the opportunity presents itself. You don’t want to lose more than you are comfortable risking.