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Thread: Basket System Ea please

  1. #1

    Default Basket System Ea please

    Dear Funyoo ,

    If you have time can you work for this, If you already have please refer me to that
    May be friends can added value when it reverse trend...........

    From other discussion

    The rules are more or less like this:
    You open demo account (I will refer to it as IA), and when each new week starts make following trades on it:
    3. GBPJPY 10. AUDUSD
    4. USDCHF 11. NZDJPY
    5. NZDUSD 12. GBPCHF
    6. AUDJPY 13. CHFJPY
    Trades 1-7 go short, trades 8-14 go long.
    Then you sort them by profit they bring. When all buys are at bottom (i.e. they are all at loss) and all sells are at top (i.e. they are on profit), this is potential setup, and you will enter real trades soon, after some trend reversal confirmation. We call it their position 'slots' so the top positions are in slots 1-7 and the lower ones are in slots 8-14. Topmost trade (the one with highest profit) is in slot 1, bottom most (with highest loss) is in slot 14, and these two are named 'anchors'.
    A confirmation might be, for example, when one of the buys starts to be positive enough to reach slot 1, or sell trade reach slot 14.
    When you want to enter, you enter 14 pairs at once, all in the same direction (unlikely on the IA). The direction depends on what trades are occupying the bottom slots, you trade in their direction. So, if bottom is full of buys, you send 14 buys, if bottom is full of sells, you send 14 sells.
    The exit is at your discretion, the proposed solution is to protect some profit. So, for example, once your total position reaches $100 in cumulative profit, you will close everything if the total cumulative profit falls back to $10 (so, you lock in $10 at $100). Then, you lock in more, as profit goes higher, so if you reach $200, you lock in $110, and so on. If you wont lock any profit, stop out at $-560 (assuming 0.1 lots, this gives 14 pairs * 40 pip loss).

    This is very short story, the original consists of like 4000 posts (both forums combined), and there are many other nuances. Anyway, these rules are the one I want to focus on. For more details of the original strategy, please refer to threads mentioned above.

    I am writing this thread, since I really miss the detailed explanation of the underlying math in this system. When I started reading about it, it looked nice, people were reporting huge profits, many indicators/eas/scripts/excel sheet/etc. were created, yet nobody digged why it work, how to make it better etc. A forum member named Slade had the most advanced analysis indicating that the system is very dependent on eur/jpy. This is correct conclusion, but still leaves many, many questions unanswered:

    * Why reset IA on each week? What will happen if you choose different method of resetting IA?
    * How this works? Why you buy or sell 14 pairs?
    * How the list of pairs was constructed? (This topic was explored already, I will recap it here, since I need it for further conclusions)
    * Is this some correlation/hedging strategy?
    * Why all trades on IA and on real are just 1 lot? This is imperfect. Will it help to make the IA hedge perfect?
    * The fluctuating profit on IA seems to be good indicator of setups. Why?
    * Why 14 pairs?
    * Why it makes a profit?
    * Why there is no stop loss or take profit?
    * .. and so on.

    I will try to analyze these topics here, and provide as much answers as I can.

    Lets start with the list of pairs, why there is 14 of them, and why in this configuration.

    The answer is: they hedge each other. If you enter trade like this, you buy as much USD as you sell. You buy as much EUR as you sell, and so on. So, after opening 14 of such trades, your exposure is close to zero. If the hedge would be perfect, your exposure would be equal to zero.
    Also, math is much easier if there is even number of pairs. It is possible to construct nicely hedged list e.g. of 11 pairs, but in such case original system will be biased toward sells or buys (though you can take it into consideration and adjust your trading).
    The another nuance is that the more the better - you can go with just 3-4 pairs on the list, but with 14 they tend to average each other and you are less depending on single pair.

    Here is a checkpoint - if you do not understand my text so far, the chances are that you wont understand remaining parts of this thread as well, as things will only get worse. And I'm not going to explain each and every detail, neither going down to 'i cant load this script' newbie questions. I consider this thread to use quite advanced math (well, there is nothing advanced here, but after reading 4000 posts from hundreds of posters and seeing almost nobody going so deep, I am starting to consider the basics covered here as advanced). Take it, or leave it, your choice. Intelligent questions are welcomed, of course.

    Now, how this works? Why looking at 7 longs + 7 shorts give good signals to do 14 buys or 14 sells?

    I have the answer, yet I need some examples to show it to you.

    If we start IA as described above, the cumulative profit will stay the same over time (I will neglect the hedge imperfection here, will take it into consideration later). Yet, if you sort the pairs by profit, they will be jumping up and down, as the corresponding prices will go up and down. Moreover, there will be cycles (at least for some time, until prices will go off far away from each other).

    Lets split the trades into two groups: group A consisting of 'top' trades (i.e. slots 1-7) and group B of bottom trades (slots 8-14). It doesnt matter if there are buys, sells, or mixed trades in the groups, just take a snapshot of their order on IA. This is moment t0 of time. Now, they will tend to shuffle between themselves, and sooner or later all (or almost all) trades from group A will be at loss, they will occupy slots 8-14. In the same time trades from group B, which were originally at loss, will occupy top slots (1-7), and be in profit. I'll call this moment of time t1.
    The movement will be cyclic for some time, though if we wait long enough, the prices will change so much, that the cycles will take more and more time.
    Please note, that we do not require any special order of trades within group. We only care if whole group is at bottom or at top.
    Since, cumulative profit from all 14 trades is 0 (minus spread, swap and hedge imperfection), and top trades are positive, bottom must be negative.

    Now, group B was negative at t0 and became positive at t1, right? All trades made at least few pips. This typically are hundreds of pips, not just 1. Of course between t0 and t1, large drawdown could appear, that is another story.

    Also, all trades from group A were positive at t0 and negative at t1, so all of them lost at least few pips.

    Now, what would happen if we would open 7 trades at t0, at pairs from group B, in direction from group B? All of them would move into profit!
    If whole loss of group B was, for example, 100 pips in t0 and whole profit was 200 pips in t1, all trades from group B made 300 pips total, between those points. And our trades, entered live on t0, would make the same 300 pips.

    Now, what if we would entered another 7 trades at t0, on pairs from group A, but in reversed direction? Since all trades from group A lost few pips, all our live trades would earn few pips! And we have 14 of them! If we catch 100 pip move on average, we could get 1400 pips from it!

    And this is how this system works.

    Please note, that my choice of group A and B could be just random snapshot of time. The original trader made simplification: waited until he will get buys and sells polarized - i.e. buys will all be at bottom or at all top. Then, he waited for some trend reversal confirmation, and made his t0 point. Surely, if whole group A consist of sells, and whole group B consist of buys, and our method need to open group B as is and group A reversed, we would end up with 14 buys or 14 sells! But this does not need to be the case.

    I hope you are still following me... as the conclusions are much more interesting.

    First of all, if you do the math correctly, the order of trades is not important. You can start your system at any second, and open trades immediately. They will just happen to not be all 14 in the same direction, thats all. But computer can track the direction easily. Of course, you want some trend reversal here, to match end of cycle - otherwise, you'll experience big drawdown before your trades get into profit.

    There is more into that. In the original method, if you buy all 14, you'll end up buying eur 4 times, selling jpy 6 times, buying gbp, nzd and aud 2 times, selling chf and usd 2 times (+ opening some hedges).

    But if you choose your group A/B split differently, this will also change! If you want until all jpy buy trades are in profit, then sell them, you'll end up just selling a lot of jpy against basket of currencies. Now, this is great for correlation trading, hedging and much more other strategies, isn't it?

    You can also open 2 strategies at once, one e.g. against eur and the other buying chf (though you may need to construct different pair list to make better effect). Then hedge them all going long with eur/chf... lots of possibilities.

    I just hit post length limit of this forum, so need to write rest of text in subsequent posts.

  2. #2


    if i am not wrong theres already an EA like this at call confirm14 ea. i tested it and it dosnt work, large DD and no profit

  3. #3


    May be Funyoo have a brilliance idea for the EA

  4. #4

  5. #5


    Quote Originally Posted by Trint View Post
    Hi trint, Thanks
    how's the EA running, I look article no 7. are still pending?? Hope fully Funyoo can work on it.

    Is it the current EA profitable to you trint

  6. #6


    on this thread Indicators development for T101's not very simple method @ Forex Factory
    you will have more profitable ea..

  7. #7
    Administrator funyoo's Avatar
    Join Date
    Sep 2008


    Hi zalinarashid,

    Trint is right, it is the same strategy than Simple Trading T101.

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