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Friday, December 14, 2012

LT Trend Sniper - A forex strategy that works

For more detailed information feel free to download the LT Trend Sniper free documentation guide.

The LT Trend Sniper system is a Forex strategy that I designed and automated in 2012. It went through a live forward testing phase of two years (2013 & 2014) and it currently trades on a real money account.

The LT Trend Sniper is a simple system that operates based on one entry rule only and two exit rules. It is entirely based on price action and uses exactly zero indicators for its trading decisions. Its simplicity is what makes it robust and likely to keep delivering profits in the future as it exploits a very basic characteristic present in any market where trends are developed. It has successfully been tested in pairs such as: EURUSD, GBPUSD, AUDUSD and also GOLD (XAUUSD). Although the best results by far are obtained from the EURUSD.

As the name suggests, the strategy attempts to catch trends. Very long term trends in fact on the daily time-frame. Once a trend is identified the system will attempt to ride it for as long as possible, sometimes for even 2 or 3 months, in order to maximize gains. No target profit is ever defined. Instead, the system will try to exploit the trend to its limit, until the trend is as close to its end as possible.

EAs out there cost a fortune and most of them can't survive even a few weeks of live trading.
No Scalping
It's not a short term trading system with many small winners and one single bad trade making you lose entire weeks of profits. When the Sniper wins, it wins big.
Healthy Reward:Risk
Losses are on average way smaller than winners. Some trades in the past have delivered Reward:Risk ratios between 5 and 8. You are never risking a fortune to make a little.
No Martingale
This method does not add to losing trades or hedge or try to win 100% of the time.
No Grid Trading
No attempt to outsmart the market by opening multiple positions in all directions carrying large floating losses. The Sniper simply exploits a market inefficiency. When it shows up, it makes a single bet.
No Black Box
The strategy is explained to the last minutiae. You always know what is going to happen next and why.

The strategy was designed with the following principles in mind:

1- Reliable back-testing that doesn't exploit Metatrader's interpolation errors.
2- A mathematical expectancy analysis to calculate, demonstrate and quantify a positive edge.
3- A wide parameter space of profitable combinations of different parameters.
4- Optimization made through Parameter Ranking selection.
5- Dynamic position sizing to keep a consistent risk per trade.
6- Dynamic calculation of Stop Loss distance according to current volatility of the currency pair, in order to adjust to the ever changing nature of the markets.
7- Winning trades are typically much larger than losing trades, and Trailing Stop Loss mechanisms exist to protect profits and reduce draw-downs. 

Different Configurations and Returns

The Sniper can be configured in 5 different risk modes: Very Conservative, Conservative, Moderate, Aggressive and Very Aggressive. At the same time the trader can choose different Stop Loss settings to target greater returns (at the expense of smaller, more frequent losing trades), all of which is detailed in the documentation.

Aggressive Position Sizing - Conservative Stop Loss 
Back-test + Out of sample testing period: 2000 - 2012

The Sniper can also be played as a portfolio of multiple instruments. Consider the following portfolio.

January 1, 2000 – December 31, 2012 (13 years)
Stop Loss Distance: Conservative 
Risk Level: Moderate (EURUSD, GOLD), Conservative (GBPUSD, AUDUSD)
Average Annual Return: +20.33%
Maximum Draw-down: 15.64%

With this portfolio the system delivered and Average Annual Return (AAR) of +20.33% over 13 years with a Maximum Draw-down (MDD) on the equity curve of 15.64% for a solid AAR/MDD ratio of 1.30. This performance easily beats the returns of audited professional Forex traders reported on the Barclay Currency Traders Index. In thirteen years, the capital ended up multiplied 10 times, for a 912% aggregated return. What is best: It has continued delivering positive results since then.

For more details about the design of the strategy, the evaluation of its edge, performance, live forward results, different configurations, capital requirements and much more, download the LT Trend Sniper free documentation guide.

The LT Trend Sniper is the culmination of 3 years of work and dedication. Hundreds if not thousands of hours have been dedicated to the research, design and testing of this Forex trading strategy with the goal of creating a robust system that has a great likelihood of survival in the future, hopefully for as many years as I actively trade. Now I'm sharing it with the world and giving everyone a chance to make it their own.

If you think this trading system can be a good addition to your trading arsenal, consider the purchase of the system for only $95. Much less than what is typically charged for unprofitable, over curve-fitted unprofessional EAs out there that can't survive a month of live trading. As part of the purchase you get the Strategy description, an Installation and Configuration guide, plus my personal support setting it all up if needed.
LT Trend Sniper System $95
Expert Advisor for Metatrader
Strategy Description and Configuration Guide

Buy Now

I feel that in order to truly exploit the Sniper, traders need to have not only an EA but also a complete guide at their disposal detailing everything about the strategy: Entry logic, Exit rules, Stop Losses, Position sizes, Portfolio approach, different configurations and more. I was always an enemy of black-box Expert Advisors where you never know what is really going on and very quickly you just stop trusting the robot. Trading a long term profitable system takes a high degree of confidence which only comes from a deep understanding of all the details of what you are trading. That's why the entire strategy is disclosed to the last detail, so that you achieve the necessary level of understanding required to stick with the system for the long run.

Thanks for reading folks!

Results - 2014
Results - 2015

The results of the system are tracked on the Results page

Special Offer: If you own the LT Trend Sniper, you can get the Impatient Sniper at a 50% discount. Read about it here.

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LT Trend Sniper - Characteristics and Results
Happy Birthday Sniper! - one year with real money
Impatient Sniper - A Profitable Gold Trading Strategy
The Turtles Trading system automated (Expert Advisor for download)
Design of a EURUSD Donchian breakout strategy with proven statistical edge
A simple strategy that beats most traders
Covered Call vs Buy and Hold. Performance comparison  

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  1. Hi Henrik,

    According to the MyFxBook stats and considering that it trades very little often, have you considered putting it in more non-correlated currency pairs at the same time? Maybe that way you could increase trade-frequency and hence profits, with the same or little more DD (in proportion to the returns).


    1. I indeed have tested several currency pairs including for example all the Japanese Yen pairs and those seem to not create smooth trends. Of course they trend in the long term but they are more "noisy trends" not easily exploitable, at least not with the principles of the Sniper strategy.

      Other than that I have received information from a trader who has obtained interesting results optimizing the strategy for futures such as Brent Oil, Natural Gas, Sugar, Corn, Copper, DAX futures. But I haven't studied deep enough to make sure there is a strong universe of profitable parameters or that over optimization and curve fitting have not taken place.


    2. Thanks for your response! It will surely be interesting to study those other tests =D

      What do you think about merging both the "LT Trend Sniper" and "Turtle Trading 2" systems into 1 single Expert Advisor?... In fact (and if I'm not wrong), you would just need to add the two following options to the LT Trend Sniper EA:

      1] Once inside the trade, if price moves in your favor by half the ATR, then add another long trade. And you do this until you have a maximum of 4 open trades in the same direction.

      2] Every time a trade is entered, move up the Stop Loss of the existing trades, to the same price of the Stop Loss calculated for the new trade just entered.

      I would really LOVE to see that happening, as adding winning positions to a trade while keeping its potential loss the same (talking about longer term trend/swing trading), is without a doubt one of the BEST trading edges that I know.


    3. But then it wouldn't be a Sniper it would just be the Turtle Trading system.
      One of the ideas behind the sniper that make it so different is to not add to the positions as later positions have a higher probability of bringing losses as the trend is more likely close to reverse the more it develops. This is the reason why the AAR/MDD ratio is better on the Sniper.

    4. Very well, I understand... And what about implementing your Trend Sniper exit strategy as an alternative option to the Turtle Trading EA?...It would make it even superior; but of course you could say the same again ("it would just be the Turtle Trading system with a little extra, or the Sniper, for the same purpose"), hehe... But I truly believe that merging both systems could be great in order to do further testing with more variables into the equation... Haven't you considered it at all?

    5. I did implement the Snipers "lack of progress" exit rule to the Turtles on a separate experiment. The AAR/MDD didn't improve significantly so I just stopped investigating it.

  2. Another question to this system: "Japanese Yen pairs seem to not create smooth trends"... What about USDCAD, NZDUSD (although somewhat correlated to AU) and XAUUSD (Gold)?... All of them have been producing nice trends since last year till now.

    1. Nop. Not very successful with those either. Again it doesn't mean that those symbols don't trend, it means that they don't tend to do it as smoothly as the Euro does. I did find positive returns in 10 year backtests but the returns were too erratic and there were plenty of negative years. So, I personally just prefer to not use them.

    2. Ok, very well... What concerns me, is the possibility of current working pairs to start changing to a more erratic behavior, as the inevitable losses would occur and it would be to late to notice, and once noticed, it will take a lot of time to recover after fine-tuning the system to new conditions.

    3. But that's a very complex issue. You don't know if the "new market conditions" will be permanent to justify a "fine-tuning". You may fine tune just to get bad results and see the old configuration work again. We never know. That's why, in spite of the fact that other parameters give greater returns, I prefer to focus on the most stable ones, meaning lower standard deviations of returns and draw-downs year after year, and strong and wide neighborhood of profitable parameters. Over 15 years of data, we have a big sample size that includes A LOT of different market conditions, termoils, calamities, wars, debt crisis, earthquakes, universal financial crisis threatening the backbone of the capitalist system itself. I guess what I'm trying to say is that every strategy will have losing periods, and eventually , given enough time they will fail. Be it in a hundred years or a thousand or infinite, no matter which parameters you use. I'm not totally against fine tuning periodically, I have just noticed that in my experience it tends to be a futile exercise. I prefer to rest on the simplicity of a system which due to its simplicity and small number of parameters it is almost impossible to curve-fit, coupled to a strong profitability in the parameters space, with dozens of profitable combinations of parameters.

      Once thing you can do, in order to not be tied to one single configuration is to have 3 instances of the EA playing. Each one of them with a small risk setting and each one of them with different parameters that are strong in an extended backtest. This way you are exposed to several combinations and not tied to a particular one only.


    4. Hello Henrik,

      I think you are right with that! Thank you again for taking your time to reply to my doubts in such manner. You are a true gentleman ;-)