We are happy to introduce CabEX Version 4.0 - This new version not only brings about changes in strategy to improve performance but also sets new standards for our strategy development. We have also implemented the simulated price action testing to predict the efficacy of the strategy and EA's functioning under various possible conditions that may be seen in future.
CabEX V2.0/V3.7 had a look back of between 2 to 3 weeks. We had been trying to improve upon the strategy with the limited lookback period and making the EA adapt tp current price action faster. CabEX strategy is seen to be very robust, but the weakest part has always been its ability to deal with flag patterns (both long term and short term flags – of certain ranges) – Losses seen during short term flags are common but easily overcome when breakout/fall outs occur. The long term flag had given deep and long drawdowns in past but was accepted as part of the strategy since it was within the strategy range of 25%. Even though this level of drawdown is considered as part the strategy, in practical trading, drawdowns of 25% is seen to be very difficult to handle and continue trading. While Monte Carlo analysis gives enough confidence that the strategy will be able to survive with maximum losses of between 35% to 40%, these are of little use in real world trading.
CabEX v3.7 is currently at the Max historical drawdown seen since 2007. The strategy loss is seen at -1000 pips with price action trapped inside the upward trending flag - The duration of the flag pattern is 14 months now almost reaching its historical max duration. Phibase team has been working towards making CabEX stronger and better - the most obvious weakness of the strategy was its inability to deal with the flag pattern.
We are happy to inform you that CabEX V4.0 eliminates the weakness which was present in the original strategy. There has not been any major changes in the strategy or trade management - trades are still based on price action near moving averages - trading potential trends and reversals moves. Major changes are listed below:
- Longer look back periods of between 3 weeks to 16 weeks
- Ability to identify flag, wedges and triangle patterns (both long and short term)
- Trade entries based on price action near moving averages and butterfly/bat patterns
- Improved Risk: Reward ratio of 0.58 (previously 0.74)
- Faster trade (& reversal) if expected move direction is not seen
- Improved profit factor and expected payoff
Phibase has set very stringent standards for strategy development by setting Max drawdown to less than -900 pips (< 20%). Further all our EA's will be tested on simulated price action models for testing the EA's ability to handle unknown price action - this will be used as a true test for checking the robustness of the EA. We will no longer use the Monte Carlo method as it is only presenting the absolute worst case to be expected which is impractical for most traders to apply practically.