In my last post, I said I’d provide an update after the first of the year. Well it is now May, so I guess it qualifies as “after the first of the year.” In the earlier part of the year I did very little trading with my live account. I was running two strategies on my demo account. One of the strategies is a scalping strategy that is a re-tread of an older robots I call AC920. I’ll talk more about that another day. Today I want to talk about another trader’s strategy called the Honeymoon Finch which I am currently running. It had been doing pretty well on my demo account, so I just recently started running it on my live account on a slightly smaller scale.
The Honeymoon Finch is a strategy developed by Rob Booker. It uses a robot he developed called the Finch. In short, the Finch looks for potential reversals and takes a trade at that point. If the reversal doesn’t occur (and therefore the trade is in the hole), Finch looks for another indication of a reversal as well as some other criteria. If the criteria is met, it takes a second larger trade. This strategy works probably greater than 90% of the time. I’ll talk about the other 10% in a minute, but first I want to talk about the Honeymoon part of the Honeymoon Finch. Honeymoon refers to the strategy. What Rob teaches is that you run the finch robot on multiple currency pairs; as many as 20 depending on your account size. They are each run with small trade sizes (.01 lots for first Finch Trade and .03 lots for second Finch Trade). The 20 running robots will start making small gains, some will be losers. However, there is another robot running on the account called the “Close All” robot. This robot reminds me of Lord of The Rings because I think of it as the one robot to rule them all. It monitors your account equity and as soon as it rises by a pre-determined amount (usually just 1 to 5 USD), it closes all of the trades, winners and losers. It then starts over fresh and continues on. This lowers the probability of a big losing trade by cutting off all trades early. However, eventually there will be a trade that gets stuck or experiences significant drawdown. This is where the human interface really starts to matter and will determine whether this strategy is a winner or loser. There are two options and I think the first one is the best when the drawdown is not too significant. While the losing trade is stuck in drawdown, the other robots are continuing to accumulate small wins. Even though the Close All robot hasn’t triggered all trades to close, the Finch robots are making small gains on the other trades and even taking new trades. If this trend continues, the new trades will eventually offset the losing trade, equity will rise to the pre-determined amount and all trades will close for a win. The down side to this strategy is it doesn’t work on trades with big drawdown, and the second is that there is lost opportunity cost because it can be a significant amount of time before the account gets back to even. The advantage of this method is that is passive and does not require human interface. The alternative method is to take a third trade on the losing currency pair to try and recover. This comes with risk because you could end up putting yourself in a bigger hole but carries potential reward because it has the potential to get you out of your existing hole faster.
The Honeymoon Finch strategy was working quite well on my demo account and am now running it live on a smaller scale. My humble goal is to grow my account by 1% per month for a total of 12% per year. While 12% per year isn’t something to scream from the rooftops about, I feel it is a great starting point. As I continue to grow my account and get better at digging out of holes, I hope to grow the account at a more aggressive rate. Currently I am working on my own version of the Close All robot that I think will raise the average amount of each win.
If you are interested in learning more about the Honeymoon Finch, you can check it out at Rob’s website or . As for my progress, I will keep you posted and after I get a little more run time will post it on myfxbook.com.