Digitalized Stochastic Transform

- PART 1 - DST Forex AutoTrader DSTfx01

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Automatic trading with the Digitalized Stochastic Transform system.
Read the risk disclosure! Read the important message at the end of part 2!

NOTICE August 27 2011: Please note, because of the rather flat moving market for some time now, I am not running DSTFx01 in automatic mode. I am rather trading only on manual basis for now!

The DST system

The DST Digitalized Stochastic Transform is a trend following system designed to trade profitably the forex market using the EUR/USD currency pair. It is based on the idea that any market has to make regular larger moves for traders to stay interested in trading that market. DST uses a digitalized smoothed stochastic transform for the basic creation of buy and sell signals.

Once a trade established, it will be closed either by an inverse DST signal, by a stop loss setting or by a profit target setting. An important factor to make profitable trades is the time frame. A small time frame. like 1 minute and 5 minutes creates swings not large enough to be profitable for a trend following system. The DST system is therefore basically most profitable using a 15 minute time frame.

The final result is also dependent of the trading hours and the use of a profit and loss target. Using appropriate settings for all of these parameters creates a profitable DST system. The DST system does not use position sizing avoiding large single trade losses.

DST Back Test Results

Basic Test Parameters

Initial Deposit: $1000.
Currency pair: EUR/USD.
Time Frame: 15 Min.
Trading: Long and Short.
Fixed Lot Number: 0.1 (1$ per pip, mini account).
First Buy: 2010.09.21 20:30.
Last closed trade: 2011.05.20 22:59.

Test RESULT: 319% Profit (8 months)

Test Result on a month by month basis

   All monthly trades have a positive result.

Trading higher lot numbers

DST is a system with a low risk considering that you can run the same test with the same parameters, only changing the fixed lot number. With the same start and end dates we can go up to a lot number of 1.1 or $11 per pip (with only $1000 starting capital) before the system will crash. This setup is of course be too risky to play, because it will only work when started that good moment in time!

Test RESULT: $35,155 or 3515% Profit (8 months)

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Risk Disclosure

CFTC RULE 4.41 Hypothetical or simulated performance results have certain inherent limitations unlike actual performance record: simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or overcompensated of the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No presentation is being made that any account will or is likely to achieve profits or losses similar to those predicted or shown.

Read the important message at the end of part 2!

Go to Part2