Optimizing the forex trading system parameters: AUD/JPY

This is the first Forex Automaton™ report on the optimization of the automated forex trading system performance. The general introduction to the trading system optimization (back-testing) and a brief description of parameters have been posted before. As before, the nature of the forecasting engine and the meaning of the related parameters are intentionally left beyond the scope of the discussion. You will see however that even though money management alone can not turn bad trades into winning trades, the converse is possible. The combined experience of 13,398 simulated trading histories testifies that a trader can systematically lose money and effectively take extra risk mainly due to the incorrect (too tight) stop-loss placement, despite having the quality of insight equal to that of the winner. It is demonstrated that significant improvement in performance can be achieved by parameter adjustments, guided by an analysis of the simulated trading histories, and an example of reasoning behind such a process is given.

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