||Mixture of EA & Manual
||9th Jul 2017
Learn more about CROSSALGO by FN
CROSSALGO is another strategy by FN, a veteran City proprietary trader with 30 years experience in the top investment banks.
It is a fully automated system, managed 24/7 with manual interventions in times of stress. It trades a basket of 9 cross currency pairs ( = pairs without any USD involvement), simultaneously.
The edge of CROSSALGO is that it is entirely based on a technique / an algo, which shows tendencies of a very conservative martingale which is based on time, not on price levels.
CROSSALGO is a part-constituent of a larger portfolio of 5 strategies, created and managed by FN, 2 of which are present here on the Simpletrader network.
The 2 FN strategies which are present on Simpletrader are low to medium risk, as the drawdown percentages show. They are institutional grade professional strategies, with realistic returns, long term survivorship in mind.
You can increase the leverage to your own likings and risk tolerance levels.
IMPORTANT: Please note that we keep the account or equity balance around GBP 5,000, so there are regular withdrawals of profits.
The system is always showing a drawdown (see the red line on chart)
Yes it does, and that is perfectly normal for a medium term mean-reverting strategy.
The average drawdown which is carried forward is about 2.5%.
Please read first the other FAQ's to understand the system and its risks.
Positions are constantly built and expanded over time untill the price of the underlying pair returns to the mean and profit is taken for the overall position in that particular pair. This process can sometimes take weeks, except when there is a mega strong trend against us in which case losses can be more permanent and to prevent this hurting us, you will see us take hedging trades or cut out losing positions.
By using 9 currency pairs, we increase opportunity and spread risk: some pairs will not show any 'pulse' , i.e. trade sideways and other pairs will show more volatility but eventually return to the mean. Pairs with sideways activity will provide us with many smaller daily profits as we job in and out of positions for small amounts. The pairs with trending tendencies create the drawdown that you see but will often also be the largest contributors of bottom line profits.
To put it in a different or simple way: the permanent drawdown is an investment for using and creating opportunity. If we would not be willing to take the small drawdown, we would not be able to make the money this system is giving us.
Trading is all about understanding and managing the inherent risk of every particular system and then choose what kind of capital to allocate to each strategy.
What is the underlying Strategy and Style?
Strategy: Crossalgo is a sophisticated 100% mean-reverting strategy.
Currency pairs: It trades 9 cross pairs (no USD-pairs) simultaneously.
Style: Fully automated with manual intervention.
Technique: very conservative, time based SOFT martingale.
Update: From 1 January 2019, the system will trade only 5 currency pairs (instead of the original 9).
Is martingale not dangerous?
Yes and no. Martingale is a technique that is mostly abused by inexperienced retail traders because they use too small an account size with too much leverage, too high a multiplicator, too many multiplicator steps, too short a time frame and poor risk management. Mosty, their martingale set-up is too basic.
Whilst one can never completely eliminate the inherent risks of a martingale, we have built in several safety valves to make it a very conservative martingale, also called a 'soft' martingale:
- the multiplicator is kept very low, and the first 3 steps are traded without multiplicator,
- our martingale is based on time intervals, not on price intervals,
- the maximum number of steps is limited to 8, and we have - so far - never reached that number yet,
- we use a trend detector, and in case a trend is detected, as a safety valve, all conditional entry criteria of the martinagle are increased before entry.
- in times of financial stress, we intervene manually.
What is the recommended minimum account size?
You can trade this system with any size you like, bearing in mind the following:
The feeder/master account keeps a target 5,000 GBP account balance at all times, that is why the drawdown is low, as the minimum lot size per trade is 0.01 lot. Current drawdown after 18 months: 15%. Average monthly returns are 2.00% for this account.
You can trade with - for example- a 2,500 GBP account size, and in that case the monthly results would be double of the feeder/master account, as would be the drawdown. In this example, the monthly average returns would be 4.00 % and drawdown 30%.
At times, the combined simultaneous exposure can reach 0.6 lots, or 15-20 positions. This translates in a relatively low leverage of maximum 10X.
Positions last from anywhere between hours to multiple weeks.
What currency pairs are traded?
Non-USD pairs, pure crosses.
GBPCAD, GBPJPY, EURGBP, GBPAUD, AUDCAD, AUDNZD, EURAUD, EURCAD, NZDCAD.
Update December 2018: From January 2019 on, we will only trade this strategy in EURGBP, AUDCAD, AUDNZD, EURAUD, EURCAD, NZDCAD and GBPJPY