Zone Recovery Trading Algo, How to Turn ALL Your Losing Trades into Winners

• 09/20/2019 at 10:51 PM #108103
  Bard

  Is this feasable:

  https://www.youtube.com/watch?v=DJz4E7VyeSw @41 mins and 30 seconds Joseph Nemeth introduces his “Zone Recovery” Trading Algorithm. The idea is you never take a loss because the algo Martingales it’s trade size to always stay ahead in the number of positive ticks for the trade – pls see the image below. Nemeth states he backtested the system using a 200 pip Zone and on 10 Lots and with 20 moves back and forth through the Recovery Zone the most it cost him was 3,600 pips drawdown (from 124 mins), tha tsound like a lot…

  At around 125 mins he states that — in relation to how many times the algo has crossed up and down through the Zone Recovery area — “the market can stay there all it wants (ranging market) it won’t be there (long)… the most I’ve seen it was 6 (not sure if he means 3 longs and 3 shorts or 6 pairs of long/shorts through the Recovery Zone) in the last 36 months.”

  Zone Recovery Hedging:

  1st Long
  Enter £1.00/tick long at 1.2950 with profit target of 1.3100 (150 ticks).
  1st Short
  If market falls to 1.2900 enter short at £1.40 tick to target 1.2750.

  Zone Recovery between:
  1.2950 and 1.2900

  2nd Long
  Enter £1.00/tick long at 1.2950 with profit target of 1.3100 (150 ticks).
  2nd Short
  If market falls to 1.2900 enter short at £1.40/tick to target 1.2750.

  3rd Long
  If market fails to hit 1.2750 enter £1.90/tick long at 1.2950 with profit target of 1.3100 (150 ticks).
  3rd Short
  If market fails to hit 1.3100 and falls to 1.2900 enter short at £2.50/tick to target 1.2750.

  I was wondering what the code would look like for that and jotted out a outline here:

  Everything written in parentheses () is were I came unstuck in proreal language coding or am unsure if the outline is stated in the correct terms.

  What do you think? Too good to be true? Hit a long term ranging market and run out of margin!?

  Cheers
  Bard

  Zone Recovery

  // Definition of code parameters DEFPARAM CumulateOrders = TRUE // Cumulating positions deactivated // Conditions to enter non holidays days IF (Month = 5 AND Day = 1) OR (Month = 12 AND (Day = 24 OR Day = 25 OR Day = 26 OR Day = 30 OR Day = 31)) THEN TradingDay = 0 ELSE TradingDay = 1 ENDIF //——————————————————————————————————// // Conditions to enter FIRST LONG POSITION IF TradingDay =1 THEN BUY 1.00 PERPOINT AT MARKET ENDIF //set profit target of FIRST LONG POSITION at +150 points SET TARGET PROFIT 150 // Conditions to enter FIRST SHORT HEDGE If OnMarket and Tradeprice - Close = -50 ticks (not sure this is right way to express this but entry needs to be after market crosses under 50 ticks from the first long entry point) then SELLSHORT 1.40 PERPOINT AT MARKET ENDIF //set profit target of FIRST SHORT positions at 150 points SET TARGET PROFIT 150 (minus -150?) //——————————————————————————————————// // Conditions to enter SECOND LONG POSITION IF TradingDay =1 and OnMarket (and Tradeprice crosses over first long entry price) THEN BUY 1.00 PERPOINT AT MARKET ENDIF //set profit target of FIRST LONG POSITION at +150 points SET TARGET PROFIT +150 // Conditions to enter SECOND SHORT HEDGE If OnMarket and Tradeprice - Close = -50 (see comment on first short entry) then SELLSHORT 1.40 PERPOINT AT MARKET ENDIF //set profit target of SECOND SHORT positions at 150 points SET TARGET PROFIT 150 //——————————————————————————————————// // Conditions to enter THIRD LONG POSITION IF TradingDay =1 and OnMarket (and Tradeprice crosses over first long entry price) THEN BUY 1.90 PERPOINT AT MARKET ENDIF //set profit target of THIRD LONG POSITION at +150 points SET TARGET PROFIT 150 // Conditions to enter THIRD SHORT HEDGE If Tradeprice - Close = -50 (see comment on first short entry) then SELLSHORT 2.50 PERPOINT AT MARKET ENDIF //set profit target of THIRD SHORT positions at 150 points SET TARGET PROFIT 150

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  // Definition of code parameters DEFPARAM CumulateOrders = TRUE // Cumulating positions deactivated   // Conditions to enter non holidays days IF (Month = 5 AND Day = 1) OR (Month = 12 AND (Day = 24 OR Day = 25 OR Day = 26 OR Day = 30 OR Day = 31)) THEN TradingDay = 0 ELSE TradingDay = 1 ENDIF   //——————————————————————————————————//   // Conditions to enter FIRST LONG POSITION IF TradingDay =1 THEN BUY 1.00 PERPOINT AT MARKET ENDIF   //set profit target of FIRST LONG POSITION at +150 points SET TARGET PROFIT 150   // Conditions to enter FIRST SHORT HEDGE If OnMarket and Tradeprice - Close = -50 ticks (not sure this is right way to express this but entry needs to be after market crosses under 50 ticks from the first long entry point) then SELLSHORT 1.40 PERPOINT AT MARKET ENDIF   //set profit target of FIRST SHORT positions at 150 points SET TARGET PROFIT 150 (minus -150?)   //——————————————————————————————————//   // Conditions to enter SECOND LONG POSITION IF TradingDay =1 and OnMarket  (and Tradeprice crosses over first long entry price) THEN BUY 1.00 PERPOINT AT MARKET ENDIF   //set profit target of FIRST LONG POSITION at +150 points SET TARGET PROFIT +150   // Conditions to enter SECOND SHORT HEDGE If OnMarket and Tradeprice - Close = -50 (see comment on first short entry) then SELLSHORT 1.40 PERPOINT AT MARKET ENDIF   //set profit target of SECOND SHORT positions at 150 points SET TARGET PROFIT 150   //——————————————————————————————————//   // Conditions to enter THIRD LONG POSITION IF TradingDay =1 and OnMarket  (and Tradeprice crosses over first long entry price) THEN BUY 1.90 PERPOINT AT MARKET ENDIF   //set profit target of THIRD LONG POSITION at +150 points SET TARGET PROFIT 150   // Conditions to enter THIRD SHORT HEDGE If Tradeprice - Close = -50 (see comment on first short entry) then SELLSHORT 2.50 PERPOINT AT MARKET ENDIF   //set profit target of THIRD SHORT positions at 150 points SET TARGET PROFIT 150

   

   

  

  Bard

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  09/21/2019 at 8:59 AM #108107
  Nicolas

  Coded that many times before. It’s also called sure fire hedging. It works ok,  like any other martingale if you have infinite money and time 😉

  

  Nicolas

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  09/21/2019 at 9:13 AM #108108
  Vonasi

  Nicolas wrote:

  Coded that many times before.

  Not in ProRealCode I’m guessing unless you coded separate long and short strategies as it is not possible to be long and short at the same time in a strategy?

  

  Vonasi

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  09/21/2019 at 11:40 AM #108110
  Nicolas

  Right,  as the strategy needs to control both buy and sell orders at the same time. This technique was very popular back in 2010 and before.

  I came across a lot of articles recently that deal with it…

  

  Nicolas

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  09/24/2019 at 8:50 PM #108389
  Bard

  Hi @Nicolas,

  If you had a wide Zone Recovery Area (200 or 300 ticks for example) then you could be tied up in position hedges for possibly weeks until a break out occurred. My intention though was to a use R Squared strength in an attempt to avoid those flat periods and take no more than 3 longs and 3 shorts as per the code above – as you say time is finite and tying up capital for weeks wasn’t my goal! 

  I understand that there would need to be two systems but am not sure how to code it. I  have put together the basics below of what I thought it might look like (but it would need separating).
  My question is how to code the two systems so that it knows how many trades are active at any one time and therefore it knows when to take the individual 3 long trades and 3 shorts. It will also need to know if a long trade or a short trade has been taken first because of the different position sizes needed depending on whether the first trade is long or short trade. 

  I’m using a variation of count of positions, although I never got that idea executed with this code below, despite spending hours on it: https://www.prorealcode.com/topic/increase-number-of-position-based-on-30-tic-moves/

  I’ve see lots of different examples on PRC and attempted to incorporate those code ideas into this code. The bulk of the idea was written by Maz here: https://www.prorealcode.com/topic/hedging-strategy/

  I’m trying to figure out how the two systems would be coded: A long system with a first long trade size of 1 perpoint and last short trade of 2.5 perpoint and code to monitor the long entries and short entries and then another system that is the short system who’s first trade will be 1 perpoint short (instead of 1.4) and who’s last trade will be a long trade at 2.5 perpoint.  I was curious to see if this could be an effective strategy?

  Cheers
  Bard

  Zone Recovery Hedging

  // Definition of code parameters DEFPARAM CumulateOrders = TRUE // Cumulating positions deactivated // Conditions to enter on non holidays days IF (Month = 5 AND Day = 1) OR (Month = 12 AND (Day = 24 OR Day = 25 OR Day = 26 OR Day = 30 OR Day = 31)) THEN TradingDay = 0 ELSE TradingDay = 1 ENDIF period=3 stdev=STD[period](close) //Profit Objective LongTradeTarget = open + 150 ShortTradeTarget = open + 150 // Position Sizing when Long is First Trade FirstLongPositionSize = 1.0 SecondLongPositionSize = 1.0 ThirdLongPositionSize = 1.9 FirstShortPositionSize = 1.4 SecondShortPositionSize = 1.4 ThirdShortPositionSize = 2.5 // Position Sizing when Short is First Trade for Second System //FirstShortPositionSize = 1.0 //SecondShortPositionSize = 1.0 //ThirdShortPositionSize = 1.9 //FirstLongPositionSize = 1.4 //SecondLongPositionSize = 1.4 //ThirdLongPositionSize = 2.5 // Zone Recovery Area Depth ZRA = 50 if (stdev[0]+stdev[1]+stdev[2]+stdev[3]+stdev[4]) < (stdev[1]+stdev[2]+stdev[3]+stdev[4]+stdev[5]) then ZRABUY=1 ENDIF // Conditions to enter long and short positions RSqr = R2[30](close) c1 = (RSqr >= 0.3) if (stdev[0]+stdev[1]+stdev[2]+stdev[3]+stdev[4]) > (stdev[1]+stdev[2]+stdev[3]+stdev[4]+stdev[5]) then ZRASELL=1 ENDIF Long1 = TradingDay = 1 and not onMarket Long1 = Long1 and TradesPlaced = 0 Long1 = Long1 and ZRABUY=1 and c1 Short1 = TradingDay = 1 and not onMarket Short1 = Short1 and TradesPlaced = 0 Short1 = Short1 and ZRASELL=1 and c1 Long2 = longOnMarket and shortOnMarket and TradingDay = 1 and TradesPlaced = 2 // Not sure how to express the fact that a long and a short trade are active in the market Long2 = Long2 and not Long1 and abs(countOfPosition) = SecondLongPositionSize Short2 = shortOnMarket and longOnMarket and TradingDay = 1 and TradesPlaced = 3 Short2 = Short2 and not Short1 and abs(countOfPosition) = SecondShortPositionSize Long3 = longOnMarket and shortOnMarket and TradingDay = 1 and TradesPlaced = 4 Long3 = Long3 and not Long1 and not Long2 and abs(countOfPosition) = ThirdLongPositionSize Short3 = shortOnMarket and longOnMarket and TradingDay = 1 and TradesPlaced = 5 Short3 = Short3 and not Short1 and not Short2 and abs(countOfPosition) = ThirdShortPositionSize if Long1 then OrderSize = FirstLongPositionSize BuyOrderLevel = Open // Or is it Tradeprice(1)-ZRA? I wasn't sure how to express this level after the StDev and R Squared have triggered a trade. StopTarget = LongTradeTarget endif if Short1 then OrderSize = FirstShortPositionSize // Currently 1.4 but the "FirstShortPositionSize" has to be 1 perpoint if it's the first trade. SellOrderLevel = Open-ZRA StopTarget = ShortTradeTarget endif if Long2 then OrderSize = SecondLongPositionSize StopTarget = LongTradeTarget BuyOrderLevel = Open endif if Short2 then OrderSize = SecondShortPositionSize StopTarget = ShortTradeTarget SellOrderLevel = Open-ZRA endif if Long3 then OrderSize = ThirdLongPositionSize StopTarget = LongTradeTarget BuyOrderLevel = Open endif if Short3 then OrderSize = ThirdShortPositionSize StopTarget = ShortTradeTarget SellOrderLevel = Open-ZRA endif // Order Placing if Long1 or Long2 or Long3 then buy orderSize perpoint at BuyOrderLevel stop endif if Short1 or Short2 or Short2 then sellShort orderSize perpoint at SellOrderLevel stop endif if Long1 or Short1 or Long2 or Short2 or Long3 or Short3 then set Target pProfit StopTarget endif // Keep Track of Open Trades if onMarket then if not onMarket[1] then TradesPlaced = 1 elsif countOfPosition = FirstShortPositionSize then TradesPlaced = 2 elsif countOfPosition = SecondLongPositionSize then TradesPlaced = 3 elsif countOfPosition = SecondShortPositionSize then TradesPlaced = 4 elsif countOfPosition = ThirdLongPositionSize then TradesPlaced = 5 elsif countOfPosition = ThirdLongPositionSize then TradesPlaced = 6 endif endif

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  // Definition of code parameters DEFPARAM CumulateOrders = TRUE // Cumulating positions deactivated   // Conditions to enter on non holidays days IF (Month = 5 AND Day = 1) OR (Month = 12 AND (Day = 24 OR Day = 25 OR Day = 26 OR Day = 30 OR Day = 31)) THEN TradingDay = 0 ELSE TradingDay = 1 ENDIF   period=3 stdev=STD[period](close)   //Profit Objective LongTradeTarget = open + 150 ShortTradeTarget = open + 150   // Position Sizing when Long is First Trade FirstLongPositionSize = 1.0 SecondLongPositionSize = 1.0 ThirdLongPositionSize = 1.9   FirstShortPositionSize = 1.4 SecondShortPositionSize = 1.4 ThirdShortPositionSize = 2.5   // Position Sizing when Short is First Trade for Second System //FirstShortPositionSize = 1.0 //SecondShortPositionSize = 1.0 //ThirdShortPositionSize = 1.9   //FirstLongPositionSize = 1.4 //SecondLongPositionSize = 1.4 //ThirdLongPositionSize = 2.5     // Zone Recovery Area Depth ZRA = 50   if (stdev[0]+stdev[1]+stdev[2]+stdev[3]+stdev[4]) < (stdev[1]+stdev[2]+stdev[3]+stdev[4]+stdev[5]) then ZRABUY=1 ENDIF   // Conditions to enter long and short positions RSqr = R2[30](close) c1 = (RSqr  >= 0.3)   if (stdev[0]+stdev[1]+stdev[2]+stdev[3]+stdev[4]) > (stdev[1]+stdev[2]+stdev[3]+stdev[4]+stdev[5]) then ZRASELL=1 ENDIF   Long1 = TradingDay = 1 and not onMarket Long1 = Long1 and TradesPlaced = 0 Long1 = Long1 and ZRABUY=1 and c1   Short1 = TradingDay = 1 and not onMarket Short1 = Short1 and TradesPlaced = 0 Short1 = Short1 and ZRASELL=1 and c1   Long2 = longOnMarket and shortOnMarket and TradingDay = 1 and TradesPlaced = 2 // Not sure how to express the fact that a long and a short trade are active in the market Long2 = Long2 and not Long1 and abs(countOfPosition) = SecondLongPositionSize   Short2 = shortOnMarket and longOnMarket and TradingDay = 1 and TradesPlaced = 3 Short2 = Short2 and not Short1 and abs(countOfPosition) = SecondShortPositionSize   Long3 = longOnMarket and shortOnMarket and TradingDay = 1 and TradesPlaced = 4 Long3 = Long3 and not Long1 and not Long2 and abs(countOfPosition) = ThirdLongPositionSize   Short3 = shortOnMarket and longOnMarket and TradingDay = 1 and TradesPlaced = 5 Short3 = Short3 and not Short1 and not Short2 and abs(countOfPosition) = ThirdShortPositionSize     if Long1 then OrderSize = FirstLongPositionSize BuyOrderLevel = Open // Or is it Tradeprice(1)-ZRA? I wasn't sure how to express this level after the StDev and R Squared have triggered a trade. StopTarget = LongTradeTarget endif if Short1 then OrderSize = FirstShortPositionSize // Currently 1.4 but the "FirstShortPositionSize" has to be 1 perpoint if it's the first trade. SellOrderLevel = Open-ZRA StopTarget = ShortTradeTarget endif   if Long2 then OrderSize  = SecondLongPositionSize StopTarget = LongTradeTarget BuyOrderLevel = Open endif if Short2 then OrderSize  = SecondShortPositionSize StopTarget = ShortTradeTarget SellOrderLevel = Open-ZRA endif   if Long3 then OrderSize  = ThirdLongPositionSize StopTarget = LongTradeTarget BuyOrderLevel = Open endif if Short3 then OrderSize  = ThirdShortPositionSize StopTarget = ShortTradeTarget SellOrderLevel = Open-ZRA endif     // Order Placing if Long1 or Long2 or Long3 then buy orderSize perpoint at BuyOrderLevel stop endif   if Short1 or Short2 or Short2 then sellShort orderSize perpoint at SellOrderLevel stop endif   if Long1 or Short1 or Long2 or Short2 or Long3 or Short3 then set Target pProfit StopTarget endif   // Keep Track of Open Trades if onMarket then if not onMarket[1] then TradesPlaced = 1 elsif countOfPosition = FirstShortPositionSize then TradesPlaced = 2 elsif countOfPosition = SecondLongPositionSize then TradesPlaced = 3 elsif countOfPosition = SecondShortPositionSize then TradesPlaced = 4 elsif countOfPosition = ThirdLongPositionSize then TradesPlaced = 5 elsif countOfPosition = ThirdLongPositionSize then TradesPlaced = 6 endif endif

  When I tried a different entry using Heiken Ashi is red flagged the code: IF XClose >= XOpen THEN ZRABUY=1 endif   and also   IF XClose <= XOpen THEN ZRASELL=1 endif, although it’s no different code layout wise style to using stdev[0] > stdev[1] etc as an entry?

  Heiken Ashi Entry

  // Zone Recovery Area Depth ZRA = 50 IF XClose >= XOpen THEN ZRABUY=1 IF PreviousStatus <> 1 THEN PreviousStatus = 1 ENDIF ELSE IF PreviousStatus <> -1 THEN PreviousStatus = -1 ENDIF ENDIF IF XClose >= XOpen THEN ZRABUY=1 endif IF XClose <= XOpen THEN ZRASELL=1 endif // Conditions to enter long and short positions RSqr = R2[30](close) c1 = (RSqr >= 0.3)

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  // Zone Recovery Area Depth ZRA = 50   IF XClose >= XOpen THEN ZRABUY=1 IF PreviousStatus <> 1 THEN PreviousStatus = 1 ENDIF ELSE IF PreviousStatus <> -1 THEN PreviousStatus = -1 ENDIF ENDIF   IF XClose >= XOpen THEN ZRABUY=1 endif IF XClose <= XOpen THEN ZRASELL=1 endif   // Conditions to enter long and short positions RSqr = R2[30](close) c1 = (RSqr  >= 0.3)

   

  

  Bard

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  09/25/2019 at 8:11 AM #108406
  Nicolas

  I don’t recommenced to use 2 strategies to simulate hedging as a desync might happen between the 2 systems and the result could be catastrophic. The main problem is that even if we simulate fake opposite order in both strategy, it doesn’t give you the information that the order was validated by the broker or not and effectively been put on market.

  

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  09/25/2019 at 9:42 AM #108414
  Bard

  Right, thanks Nicolas. Curious to know, why does IG allow Force Open (hedging) but PRT doesn’t?

  

  Bard

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  09/25/2019 at 11:41 AM #108420
  Nicolas

  ProBacktest was not designed in the first place to do that. Hedging is not a “normal” or “logic” situation in trading/investment, not a natural way, that’s why I think it was not considered, back at the beginning of the 2000’s when ProBacktest was created.

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  Bard

  

  Nicolas

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