OHLC in the 24h Forex Markets

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-w.
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OHLC in the 24h Forex Markets

Post by -w. » Wed Nov 24, 2004 7:40 am

As many trading systems use the Close of a market as a reference whether to enter at Open, I'm finding myself challenged to actually convert a back-tested trading strategy into live trading.

I don't have any other idea than to apply very high slippage assumptions for the time lag from the system generating the order to actually entering it to the broker. Obviously the time lag is negligible if you have a fully automated order entry system.

I would appreciate any other ideas, though.

-wojo

Forum Mgmnt
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Post by Forum Mgmnt » Wed Nov 24, 2004 7:20 pm

Wojo,

I'm not so sure you need to have huge slippage assumptions. It depends no how you test and how you place orders. If you are not using a system that is likely to create entries that many others will also have, you shouldn't encounter any more slippage than for normal "on open" orders.

You can also place orders based on signals considering the pit-traded markets when applicable but implementing them in the 24 hour market.

I suggest using an approach in testing that you can replicate in real life.

You need to understand the times that your days rollover, and the base timezone for your historical daily data. In some cases the rollover doesn't happen at midnight, but rather a few hours after the US. markets close. There is a larger lag between the US markets and the Asian Markets than between the Asian and European markets, or European and U.S. markets because of the vast width of the Pacific Ocean. So this probably makes sense as a time to roll to the next "day".

- Forum Mgmnt

-w.
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Post by -w. » Thu Nov 25, 2004 3:47 am

Forum Mgmnt wrote:I suggest using an approach in testing that you can replicate in real life.
Yes, that's exactly the point.

At this time, I'm testing a couple of strategies on VT 1.6 and - believe it or not - I actually identified a performing Bollinger CT L/S system. But so far my testing was based on the included historical data. I guess they roll over sometime during the night between 11pm and 2am GMT.

I do have some experience trading Forex systematically (not mechanically though). One of my observations is that you do not want to enter the market in Asia with tight stops on a regular basis (and CT systems do have tight stops). I'm not paranoid, really. But sometimes I think those guys don't really trade the markets as the rest of the world does. Liquidity is mediocre most of the time and at least to me it looks like the majority of the traders are just out to trigger the stops of overnight orders :wink:

Once Europe starts, the picture changes completely, though. You do have some erratic trading from 7 to 8am GMT til everyone is positioned for the day but from nine on there seems to be no order too big to really move the market. So probably a system that uses price data which roll over at 8am GMT should work best (=test most realistically) for European traders.

Anyway, I'm currently deciding on the purchase of historical data, and that's the rollover time I'll probably be settling on. I'll keep you posted on my further findings; and thanks c.f. for your fast reply.

-wojo

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