Next in our series of trader interviews is OakLadder, the trader behind DARWIN ERQ, currently ranked 2nd in the DarwinIA Hall of Fame!
So, tell us a little about yourself. How did you get started and how long have you been trading for?
When I was doing my PhD studies, I met a new friend who mentioned that he was trading Gold and some other commodities. I asked him how to trade and make profits. He said that he analysed price curves and made trade decisions when proper patterns were emerging on the chart. Since my PhD research focused on digital image processing and pattern recognition, I then asked him whether I could apply my knowledge of pattern recognition to trading, and received a ‘give it a try’ answer. So I started demo trading in 2010. As it was very easy to get a demo account from Forex brokers, I became a Forex (demo) trader. I learned the basics of financial markets and read many trading books. I then developed an automatic trading algorithm which performed well on historical data and my demo account for some time. In 2011, I thought that I was ready for real trading. Unfortunately, my real account encountered big losses after three months. I am always determined to find out the reasons when something is wrong, and make sure that the same mistakes would not be repeated. So after the first big losses, I made detailed plans to improve on every aspect of trading. I think that I have been doing better year after year since then.
About your trading strategy: what pairs do you usually trade? Do you always trade the same timeframes?
I usually trade EUR/USD. I also trade other major pairs occasionally.
My current strategy (Darwin: ERQ) is a combination of algorithmic and discretionary trading. ERQ is an intraday trading strategy. It includes three different setups: entry at pullbacks in a trend on 5M/15M timeframes, breakout on 1H and reversal on 1H. Logistic regression and/or fuzzy systems are used to calculate the probability of success (POS) of a potential setup. Reward/Risk (RR) ratio of a setup is estimated manually. If the POS and RR ratio of a setup are above predefined thresholds, an order may be placed to trade the setup. However, if I think the market is too volatile, the setup will probably be ignored. Support/resistance levels, average daily range and time stop are used to determine the exit point for a trade.
I am developing a new strategy that catches medium and long term market movements.
As a trader, what would you say is your greatest strength?
Keeping calm during trading.
And your biggest weakness?
As some parts of my strategy are discretionary, doubt and second-guessing are inevitable in certain circumstances. I have been trying to reduce the effects of those behaviours.
Our algos tell you are very good when it comes to Consistency. Any ideas for other traders who need to improve on that attribute?
I often use time stop to exit a trade. If the price does not move in the direction of a trade after a predefined time, it means that this trade is likely not as good as I thought. I have to exit the trade because of increasing uncertainty.
What is the most important lesson you have learnt in your trading career?
Risk control is more important than the pursuit of superior returns. Traders should do their best to avoid huge drawdowns. Suppose a trader has 10000 USD in his trading account. If he makes 50% profits (15000 USD in the account) and then loses 33.3%, his account returns to the original point (10000 USD). If he first loses 50% (5000 USD in the account), he then needs to make 100% profits to get back to the original point. It is easier to lose money than to make profits in trading. If an account experiences a drawdown of 20%, it only needs to grow 25% to reach the previous high.
Finally, any comment you’d like to share with the fellow traders who read this?
Do research and develop a trading method that suits your personalities. Good traders spend every day trying to improve.
Since a part of your trading is discretionary, did getting capital allocated to your DARWIN affected your performance and/or your confidence ?
No, I always think over trading in percentage terms. If slippage constantly occurs due to large order size, my performance and confidence may be affected. Since I usually trade EUR/USD which is very liquid (I plan to trade less and less other major pairs), I think that DARWIN ERQ can manage several million USD without constant slippage.
Hi Oakladder! I’m a ERQ investor. It has been a while since there is no movement in this Darwin. I was wondering if maybe you took a little break or if you’re not going to work with ERQ anymore? So to know if I withdraw my ERQ funds as an investor, or on the contrary, invest more money in this darwin …
I took a short break in May. I have been trading since mid-May. I made some minor adjustments to the trading system of ERQ because of market behavior changes. There were several setup signals for ERQ in the past month but the entry prices of the limit orders were missed by a few pips. I will definitely continue to work with ERQ. Thank you!
Please, a question. At this time, your Darwin is open to investments. But for more than 8 months it has no drawdown, and statistically it should happen in a short time.
You would recommend investing now or waiting for an optimal moment with a “buy limit”, keeping in mind that the “buy limit” may not be executed because the darwin is closed to new investments.
Hi salvador! No one knows when a drawdown will happen. I am trying to increase the capacity of ERQ. I hope ERQ will be open to large investments early next year. Thanks!
I would like to invest in your darwin but you have reached your maximum investors capital.
Will you allow new investors soon?
Keep the good work!!!