Immediately as we saw historical test results of RED king MT4 Expert advisor, we knew that this one is worth running some more tests. We have created more version, trying to break the system, trying to find its weak spots.After it survived all the rough treatment, we started to create version after version, with a simple goal: minimize risk maximize profit.
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50+ Versions and over 500 000 independent tests later,lets talk about What is RED king and how does it operate.
What we like to call this system is a liquidation, or closing model. The goal is to turn losers to winners without excessive risk and without using risky methods such as grid or martingale.
RED king therefore reminds old crafty fighter with many tricks in his sleeve. The system will fight for each position, using scalping, limited averaging and hedging. It will fight hard to try to turn it to winner, but at the same time, it will not die in the ring. The system is able to humbly accept defeat, but only after using every trick in the book to win.
Trend identification:
First versions of RED king MT4 Expert advisor had complex trend identification method consisting of 8 indicators. About 50 versions later (current RED king) has only a simple trend identification model reacting to sudden changes more promptly . This simplification made system more robust, scalable and lowered the draw down.
Position entry:
Most of the systems we have created are using candle close + signal to enter the trade. This makes the testing more accurate. It also makes entry more robust and less dependent on spread, slippage and some feeble price signal. Entry in RED king is quite crude. We decided not to sacrifice frequency to accuracy. Considering that system is able to close most of the trades in profit, we just want the entry that is frequent and accurate just enough.
Closing/liquidation module:
This is the beating heart of red king. It is also the part when it starts twisting and turning like a master boxer.
Scalping: The scalping will be the go to method for this system. It will be looking for anywhere from 10 to 20 pips equivalent of profit. Closing ASAP and looking to reenter ASAP.
Averaging:
Once the scalping position fails, RED king system will look to be averaging in a very controlled manner opening 2 – 10 trades max (in our tests). Exponenital mathematical function is used to lower the risk and increase the opening distance for each consecutive trade.
Last step: Hedge + compensate:
In cases when averaging position fails and trend reverses, system will switch sides and enter in opposite trend direction with adequate but increased aggression. It will be looking to close averaging trades that are now in loss in profit. To do so, system will increase lot size and increase maximum number of trades (1 -4x in tests).
System will closely monitor more aggressive hedging position and it is ready to accept loss at this point. However, hedging position also uses adding to the winner and averaging principle and it is able to steadily close all existing trades in overall profit.
Tools and indicators used by forex strategy
EMA filter (500, 100 in test): Faster EMA trending above slow for uptrend confirmation and vice versa. All trades must follow the trend.
Price confirmation: Price must close above the EMA tandem for long entry. Price must close below Ema tandem for short entry.
First level trades:
No trade exists in opposite direction.
Averaging module: If trade exists (in same direction), new trade can only be opened if overall account profit is less than: -(negative)Avg interval*LOTSIZE*(EXPONENTIAL FUNCTION*NUMBER OF OPENED TRADES PER THAT SIDE). Avg module in automated in RED king MT4 expert advisor.
Averaging interval input (-20): Distance between consecutive averaging trades that will be calculated by averaging module. Each trade will opened on new candle open. If one candle covers distance equivalent to two or more averaging steps, more than one trade can be opened on same price level (but only on new candle open).
MAX number of trades (5 in test):
MAX loss input: Available in expert advisor red king. Not applied in this forex strategy.
Closing module (1 USD on 0,01 lotsize used in test): We close all existing trades at once as soon as the overall account profit reaches target profit/max loss.
Second level trades (hedge and overcompensate):
First level trade exists in opposite side. Primary trades remain open as the trend reverses. We will now enter second level trades in opposite direction with increased lotsize and number of trades. Averaging conditions are omitted. The goal is to overcompensate for existing loss and close all trades in overall profit. Once the second level trade fails, we accept loss (trend reverses back to primary trade direction on EMA crossover).
Level 2 multiply: We multiply the lotsize for second level trades. Hedge and overcompensate for losing trades existing on opposite side.
Number of trades multiply: We multiply the number of max allowed first level trades. This step allows adding to the winner and averaging for hedging trades with increased but controlled aggression.
Closing module for second level (hedging) trades: All existing trades are closed either in overall account profit or loss (max loss) according to first level closing module, or at the new trend failure. If new trend fails all existing hedging trades will be closed once we receive valid signal to enter the trade in previous market direction.
Rules of the forex strategy
First level trades:
SELL:
No long trade exists.
EMA fast trending below EMA slow. Downtrend is present in the market. Enter short only.
Price closing below both EMA lines. We enter the trade on candle close (new open).
If trade exists, new trade can only be opened according to the averaging rules. No more trades than max number of trades defined in inputs.
We close all existing trade in overall account profit. If trend reverses expert will start to open the second level buy trades.
BUY
No short trade exists.
EMA fast trending above EMA slow. Uptrend is present in the market. Enter long only.
Price closing above both EMA lines. We enter the trade on candle close (new open).
If trade exists, new trade can only be opened according to the averaging rules. No more trades than max number of trades defined in inputs.
We close all existing trade in overall account profit. If trend reverses expert will start to open the second level sell trades.
Second level trades (hedge and overcompensate)
SELL:
Long trade exists.
EMA fast trending below EMA slow. Downtrend is present in the market. Enter short only.
Price closing below both EMA lines. We enter the trade on candle close (new open).
We multiply the lotsize used in first level trades (level 2 multiply).
We multiply the max number of opened trades (number of trades multiply).
We close all existing trades in overall profit. If trend reverses expert will close all existing hedging trades. Closing of hedge trade can also be defined by Max loss input (add minus (-) before the value in EA).
BUY:
Short trade exists.
EMA fast trending above EMA slow. Uptrend is present in the market. Enter long only.
Price closing above both EMA lines. We enter the trade on candle close (new open).
We multiply the lotsize used in first level trades (level 2 multiply).
We multiply the max number of opened trades (number of trades multiply).
We close all existing trades in overall profit. If trend reverses expert will close all existing hedging trades. Closing of hedge trades can also be defined by Max loss input (add minus (-) before the value in EA).
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