Interview with The Trade Signal Machine (DARWIN $WFJ)

25 March 2015
The Market Owl

Next in our series of trader interviews is the brain behind “The Trade Signal Machine”.  This trader has really done a lot get the most possible out of our platform and as a result has improved as a trader using our algos.  With a total of 13 strategies listed on our exchange, this trader is without doubt one to watch when the investment platform opens to the public.  Keep a close eye on our blog and your emails for further announcements.

Here’s the interview:

  1. So, tell us a little about yourself. How did you get started and how long have you been trading for?

The ability to make future predictions based on past data has always fascinated me. I remember that when I was just 12 I developed a system on my Commodore 64 (remember them?) to make predictions about football matches. I used all of the available data and manually typed it in from newspapers (it would be another 12 years before the internet was readily available for homes). Did it work? Actually it wasn’t too bad. What it did do, was fuel my appetite for predictive analysis, and was a major factor behind what I do now. In terms of the markets, I started out trading real shares about 15 years ago – remember when you used to get the share certificate through the post? For the last 5 years, I have concentrated on Forex and Indices.

  1. About your trading strategy: what pairs do you usually trade? Do you always trade the same timeframes?

I only trade eight of the major pairs. Trading is hard enough without fighting against the larger spreads of the lesser traded currencies.  I will trade any timeframe providing I can statistically prove I will be able to make money and manage risk well. Again when trading the shorter timeframes, spread and commission start to have a much bigger impact, and so there are only a few of my systems that work for the shorter timeframes.

  1. As a trader, what would you say is your greatest strength?

I’m an ideas person. I’m always thinking about what my next strategy will be. I think about it in the car, when I’m watching a film at the cinema, when I’m at the gym. Sometimes I wish I could shut it off, but I can’t – that’s just the way I am. I have an interest in psychology and how fear and greed drive the markets. It is usually thoughts around the nature of why people do what they do, that then sparks an idea about how I can capitalise on that fact. Usually 8 out of every 10 things I try, come to nothing when I back test them. But the 2 out of 10 that show initial promise, give me something to get my teeth stuck into and then look at developing into a viable system. I probably only end up trading just 1 in 10 on a live account.

  1. And your biggest weakness?

Without a doubt, my biggest weaknesses are patience and self-control. When I was born, someone else got my share of these. This is why I am a terrible ‘manual’ trader. When I started out manually trading, I was simply not able to wait until the optimal entry, and always pulled the trigger too soon. Likewise if I saw that I had already missed a good trade entry, I’d enter it anyway – too late. Because of this I inevitably lost money. However, I just knew intuitively that my strategies would work if only I could control my own emotions. Eventually I decided that enough was enough, and I made the decision to convert my strategies into completely automated algorithms. These days I NEVER press the Buy or Sell buttons myself. Every aspect of my systems are completely automated and run 24×5. I don’t trust black box EAs, and prefer to build everything from scratch.

  1. Our algos show that you are very good at Timing. Any ideas for other traders who need to improve on that attribute?

I think that I score well at the timing attribute because I break my strategies down into several layers. The higher timeframes are used for filters. The middle timeframes to produce the signal to trade. But only when the lower timeframe (what I call the ‘Trigger Timeframe’) gives the all clear, do I pull the trigger and execute the trade. I believe this entry and exit fine tuning is the reason behind my good scores for this Investible Attribute. But remember this is a two-way process – it was valuable insight I gained from the Timing IA that allowed me to then fine tune my system to improve it. Study the IA’s for your systems and glean every piece of useful information you can from them. This is a major benefit of the Darwinex platform.

  1. What is the most important lesson you have learnt in your trading career?

There are a lot of false beliefs and misconceptions around trading. You read them on every blog and trading newsletter. Some are talked about so often that almost everyone takes them for granted and believes they are true. What I have found is that this is often NOT the case. Very few of my systems originate from preconceived ideas that the majority of the trading community takes for granted. They all usually start with “I wonder what would happen if I do this…”

  1. Finally, any comment you’d like to share with the fellow traders who read this?

Firstly, try to ‘keep it simple’. I have spent months developing some of my more complex theories and they rarely work out. It is the really simple things that tend to achieve the best results. If you have a simple system, that back tests well on a large number of pairs, across the majority of timeframes, producing a high number of trades, there is much greater statistical probability that the system will also work on a live account at the hard right of the chart. If you develop a system that back tests well on say just GBPUSD, TF60, then in all likelihood you will lose money when you start to trade on your live account.
Secondly, use the valuable information from the Investible Attributes that are provided on the Darwinex platform. I have been able to use improve my trade entry and exit (from the information provided on the Timing IA). Likewise, I have code in development now that is based on what I have learnt from the Risk Management IA – something I really needed to work on. Often is it just a small piece of insight from the information provided in the IA data that triggers an idea of how a system can be improved.

I am very much looking forward to getting my live investor account and already have my eye on 5 or 6 DARWINs from other traders that I will be investing in. So if you have a good system don’t be surprised if you see me as one of your investors. I see this as an excellent way to smooth out my overall equity curve. That way, while I’m suffering a drawdown (like during the Fed Announcement on Wednesday – ouch!), your systems might be making a profit. Good trading.

tsm