DiCo Watching

Filed Under (EA System) by Casey on 07-05-2012

This is not sexy, neither is it exotic. It is however different. Ok… probably different to me at least. I may not have covered all the EA’s in the world but at least I know of some of the main strategies which most EA developers have taken.

A few weeks ago, an EA developer approached me via email, and he approach in a very flattering sort of way. The email started off like this…

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Oh… Stop it you…

I don’t have a fan… I just your regular dude… trying to make some money from forex and blogging…

Well… however flattering it was, I was kind of floating for a while before I continue with his email.

After the flattery, this EA developer asked me if I was interested to showcase his EA.

I was like…

Yes, yes I will… I will showcase your EA…

They say flattery can get you everywhere. In this case, he got me at ‘long time fan’

Furthermore, how can I say no when he offered me a free copy…

Ok… back to business…

This EA is call DiCo WatchDog and the strategy is uses is MACD Divergence or Convergence. Now this is what I call different.

I learn the application of price divergence and convergence in stocks and futures market but this is the first time I am hearing it applied in forex EA.

MACD is basically an indicator that shows the changes in the strength, direction, momentum, and duration of a trend in a stock’s price. (http://en.wikipedia.org/wiki/MACD)

Yes, like wikipedia says on stock prices. While I do know that some traders do use MACD on their trading chart, I rarely see it on forex EA. Ok… maybe most of the commercial forex EA that I have come across do not actually uses MACD as part of their strategy.

One of the reason why, it’s that MACD works well with less market noises. And the smaller the time frame the larger the market noise. Most commercial EA works on a 15mins time frame.

So, the effectiveness of MACD as a signal confirmation or indication on a 15M time frame is not exactly ideal.

For MACD to work, one would probably need a larger time frame to catch the high high and the low low over a long period to see if there is a divergences or not. I guess that is one of the reason why the developer chooses a 1H time frame for this EA.

When you use an EA like this, you know that it is a trending EA which does not make it sexy.

From the developers myfxbook account, you can see that it does not trade every day and the performances seems to be see sawing from one month to the other.

(Developer’s account)

However, if you look at it’s risk to reward trade. It seems to hold a very sound traders strategy. TP is 230 pips while the SL is 140 pips.

Why do I said so? Because this is one of the few EA that trade base on most traders mantra. Trade with the trend and of course trade only if you reward to risk ratio is 2:1. And it seems like that can be seen on this account.

Now one of the thing that puts me on a skeptical side is the backtesting of this EA. (Due to some development I could not produce the 99% backtesting result, will write about that in a later time)

Anyway, I did a backtest on a 90% model and found the result to be a bit mixed.

It seems like the result started to be better after 2009 and that is the backtesting result verified in myfxbook. It only starts from 2009.

While the backtesting result does not look that impressive, I however still think that I need to give it a try. And to test if it does work on this simple strategy, I put it live and put the MACD indicator on it and see where it too the trade.

Interestingly enough, it does what it say it does.

Here it shows a bullish convergences, a trader would probably take that long entry and put the stop loss just at the low of the lowest bar. But because this is a robot, it takes a fixed SL at 140pips which seems to be the case here.

But as of this writing, after the NFP report, EURUSD took a tumble. So… I can only guess that it might hit of the SL when the market open next week. (Update: I was correct, EURUSD gaped down this morning which sucks especially it is on the first trade)

Oh well… let’s just see how it goes. Below is my live account with Alpari on this interesting EA that probably follows most of the trading strategy’s mantra.

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Now for a non-sexy, non-exotic EA like this, the price of this EA is what I believe to be reasonable.

Only $99 a year license for an unlimited account. Strategically speaking it is relatively simple but I think it can still be improved if there is another indicator to confirm the strength of this divergences or convergences formation.

Anyway, here is the link to their website: http://www.golden-boomerang-lab.com/ it’s a direct link.

If you are interested in this EA and want to support me, here is the buy now check out link (affiliate link).

 

 

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