Exploring the FOZZI method - trading expert
In this issue we will look at a Forex trading method called FOZZI, proposed for consideration by a member of our forum Volotka. According to the author, the tactic is quite simple to perform, but quite interesting in terms of potential profit. The author also recommends to use the method on EURUSD, USDJPY, GBPUSD, USDCHF, working with intervals H4 and Daily, although he does not deny the possible success on the lower timeframes M30 and H1, suggesting that the result will only get worse because of the larger number of false signals. Let's see.
The rules of the strategy:
So, dear Volotka, how easy is the strategy to execute? Judging by the rules, it is based on three MA indicators, RSI и Bollinger envelope. The indicators are superimposed on the chart in such a way that the moving average is calculated by the RSI value data, and the Bollinger in turn is calculated by the MA. Indicator settings are as follows: RSI=8, MA=8, Bollinger Bands=20.
Basic rules
1. The deal opens on purchase when the RSI crosses the MA from the bottom up, with the MA being below the Bollinger midline.
2. The deal opens on sale when the RSI crosses the MA from top to bottom, with the MA above the Bollinger midline.
3. StopLoss is set on the local maximum for sale and minimum for purchase.
4. TakeProfit is not used in this tactic at all.
5. StopLoss is transferred to Breakeven at a floating profit of 45 pips.
6. TrailingStop используем довольно большой — 25 пунктов.
As we can see, the rules are really very simple and available for trading, the author did not deceive us. Now let's see if his assumptions about the profitability of the tactic are true.
Strategy Testing:
Testing will be conducted on one of the recommended EURUSD pairs. We are going to take H4 timeframe and run it for 8 years, from 2001 till December 14, 2009.
It's a shame, but the profits aren't as great as the simplicity. The trade doesn't even look stable enough to look like something worthy of attention. The net profit was in the negative, despite the fact that the initial deposit had to take a decently large - 100,000 virtual dollars. Although the deals were also quite a lot - 1,658, and the number of continuous wins was 2 times greater than the series of continuous losses, but still the average loss was 2 times greater. Of course, there were positive moments, but they were quickly followed by losses. At the same time we did not see any difference in the work of the Expert Advisor during the crisis and before the crisis, which indicates the inconsistency of strategies in its original form.
Let's see if optimization can do anything to help us in this situation.
Strategy Optimization:
Optimization will be performed with the same working parameters: EURUSD currency pair, timeframe - 4 hours, we will only change the range of the run to leave room for further testing - 2006-2008. Let's see what we have in Figure 3.
As we can see, the positive results of optimization were quite enough to find something decent. We tried quite a few options, but the first impression was obviously wrong. None of the sets of settings gave the result on forward testsYou can find proof of our words in Figure 4.
The parameters that gave a small percentage of profit for 2 years - 1.4 - were chosen as working ones. But even these conservative sets were not enough to shake up the trading. At the beginning everything was going well, but the market has changed, and all accumulated 2000 virtual dollars were safely lost.
It turns out that behind the apparent simplicity and this time we are not destined to find the pluses.
Conclusions:
No matter how the author complicates his strategy, it does not become profitable. Even the optimization of parameters has not produced stable results, as can be seen in the chart, the selected parameters have more or less worked during the year, after which the strategy results went in the negative. In my opinion, the reason for these failures is incorrect connection of indicators and, as a result, incorrect entries into the market and large losses. I would advise to better work on Money Management Maybe a competent construction of this component of the method will help him go into the black. So far we have not seen any potential.
Description of the parameters of the obtained EA:
— maper = 8 — период скользящей средней.
— Rsiperiod = 8 – период индикатора RSI.
— Bbperiod = 20 – период усреднения Боллинджера.
— Bbotcl = 2 — размер отклонений линий Боллинджера.
— SL= 5 – количество баров для расчета стоп-приказа (поиск минимума/максимума).
— Bbur = 45 — расстояние в пунктах до безубытка.
— Trailingenable = 1 — включение/отключение ТрейлингСтопа.
— Lots = 0.1 — объем сделки.
— Остальные параметры не используются.
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