Trading Strategy Features & Strategy Description

Phibase has implemented a highly versatile entry logic for RayScalper. This makes this strategy handle low as well as high volatility price actions much better than the earlier versions.

Version 2 is an excellent scalping strategy. However, larger gains are isolated to certain winning phases during favorable price actions. It is highly impossible to predict when such winning phases will occur. Ray Scalper Version 3 has better gain distribution without compromising on the scalping nature of the EA. The Risk:Reward ratio (5:2) was one of the major weakness seen in earlier versions of Ray Scalper. The strategy and trade management has been completely revamped to address this issue. V3 now delivers a risk reward ratio of 3:2 while maintaining the success rate at over 68%. The new strategy will also be able to reduce the performance differences seen between some brokers.


Click here for the MyFxBook Strategy Report

Ray Scalper Version 3.0 vs 2.03 : Basic data analysis




The hard server side trailing stoploss is coupled with a dynamic hidden stoploss mechanism to lock in gains better. This will also reduce the broker related trading differences seen in V2


Ray Scalper v2.03 : Strategy discussion of earlier version

OverView

Forex traders and strategy developers have explored and exploited a wide variety of popular indicators starting from simple moving averages, MACD, Bands and a whole range of exotic indicators. It is wide accepted that single method be it price pattern, Fibonacci levels, pivot points or any other strategy will work in all market conditions. There is nothing like a set and forget method that can assure you of permanent success. At PhiBase, we have always been working towards bringing in concepts used in other advanced fields to develop strategies that may help in automated trading. We are always learning about concepts, advances and new implementations not only in Forex trading methods, but also in the fields of Digital Imaging, Voice Recognition and Artificial Intelligence. Ideas and implementations used in other fields enables us to think fresh and bring about radically new implementations which will have better edge to survive in live trading environments. Our first product, Synergy EA, implements a normalization method used in voice recognition - this enables the EA to trade based on price patterns very well. Ray Scalper is based on the concept of ray tracing. Ray Tracing is widely used in computer graphics and 3D rendering.

A ray tracing program calculates the illumination effects of a surface by tracking, or tracing, the path of a light ray as it bounces off or is refracted through the surface. There are two methods - forward and backward tracing. Forward tracing involves tracking light path to the eye starting from the light source. A more efficient technique is "backward raytracing". This method is based on the principle that the path of a light ray can be reversed, that is, two light rays along the same straight line but in opposite directions will follow the same path, even if many reflections or refractions are involved. Backward ray tracing follows a light ray in the reverse direction, from the eye to the light source. This ensures that the color obtained is in fact the colour observed.

Ray Scalper uses a simplified implementation of the "backward ray tracing" algorithm to bring in a profitable trading strategy - It just needs to trace a single ray from current price to TP - The only condition the ray should not cut through any other objects (support/resistance in our case). The EA was developed in August 2012 and was forward tested to prove itself. As per our policy, PhiBase members were provided with the pre-launch version at a discounted price. The EA has been running now on hundreds of user accounts since August and has been very successful. We have received several constructive feedback from our members, reviewers and third party testers. All suggestions and feedback received from the members have been taken into consideration to make the final product much better that the pre launch version.

Implementation of the Trading Strategy

A brief description about the strategy is given below: Ray Scalper Trading strategy is based on a forward flow model. The EA is partly based on technical levels, but the core logic is based on the concept of ray tracing. All analysis are based on M15 and H1 bars. Fib levels are calculated based on H1 bars. Hourly trading range, M15/H1 trading channels and bands provide the required support/resistance levels to complement the Fib levels. The support/resistance levels are treated as objects in the model. Support resistance levels are not treated as absolute values, but as a buffered (5 to 10 pip) layers (objects) - the S/R also have a time span (length), for example, Channel levels are drawn from current time to a breach of channel level only. The S/R obtained from H1 bars will have the time span equal to the duration of the high/low between which the fib level was drawn. Describing the strategy using a physical model makes it simpler. At the close of every M15 bar, the EA places the TP at a distance of 12 hours. The S/R objects are 'placed' at various levels accordingly. If a Ray is able to be drawn between the current M15 bar open to the TP without cutting any of the objects, the trade is entered. In case the ray is valid for both short and long, the H1 trend (The current price's relation to the price movement over the past 12 hours) will help the EA decide the trade direction. Ray Scalper does not use any long term indicators and confines its analysis based on only M15 and H1 time frames. Previous historical data of about 3 days is sufficient for the EA to function. The EA works on M15 time frame. All analysis are performed at the beginning of a new bar. But the trade entry may be made at the new bar open or the EA may wait for a better price and make the entry at any time during the M15 bar. Trade exit is controlled by the EA (if opposite signal is generated). The trade may also exit at any time on trigger of the target price/trailing stoploss/stoploss set on the broker side. By default, the EA will set all TP/SL and trailing SL on the broker server side. You can set the parameter "Use_Hidden_SL_TP=true" to enable the EA to use hidden TP/SL - in this case the EA will send out trade close execution request to the broker when price triggers the TP/SL or trailing SL level. The EA is not data feed or spread sensitive and has been performing reasonably similarly on most broker accounts.

Trade Management and Trailing SL Method

Ray Scalper has only one trade open at any point of time. The EA's strategy does not involve any multiple positions (addition/averaging) or hedging. The trade management module is designed to protect the account. The trade lot size increases as profits accrue and decreases as the equity drops during a drawdown. Position sizing methods that use this approach are known as anti-martingale methods. Anti-martingale methods take advantage of the positive expectancy of a winning trading system or method. Ray Scalper is designed to have an positive "edge" towards higher success rate and is an ideal candidate for the anti-martingale method.

The parameters for recommended setting (referred as 4411) for Ray Scalper is given below:

FinalTarget_x_H1_ATR=4
StopLoss_x_H1_ATR=4
Trail_StopLoss_x_H1_ATR=1
Trail_Trigger_x_H1_ATR=1

When the 4411 is used, the EA places the target price at 4 times the H1 ATR. The trailing SL is moved to Trail_StopLoss_x_H1_ATR (H1 ATR) after the price crosses (including spread) Trail_Trigger_x_H1_ATR (H1 ATR) + trailing Gap which is calculated based on volatility (between 5 to 10 pips). In case the price retraces back by the trailing gap or more the trade is closed off by the trailing SL. If the price continues moving strongly without triggering the trailing SL, the SL is moved again after the price moves up by multiple of H1 ATR. This enables the EA to lock in larger gains than the default setting.

The protective hard stoploss is placed just below/above the second level of support/resistance level (or at 4 times the value of H1 atr - which ever is lower). The trailing SL is not triggered unless and until the price moves above the first target level (H1 atr + trailing gap + spread). The EA indicates the trailing trigger level with a yellow dashed line on the chart.

You can choose to run Ray Scalper using the recommended (4411) settings when the broker spread is low (anything less than 2 pips is good) and the EA is being run on a reliable internet connection (like on a VPS).

The more conservative setting of (1411) is ideal for all users irrespective of broker spreads or for those running the EA on home computers/when internet connection is unreliable. In this mode, the exact TP is set on the broker side and it is not critical for the EA to be online at all times since it is not necessary for the trailing SL to be modified in order to lock in gains.

Ray Scalper Version 2.0 has many optional user controlled parameters which can be used to customize the trading strategy of the EA. These are optional parameters are meant for advanced users who have fully understood the EA's trading strategy and want to make changes to make it suit their style of trading.

The most important change/feature sought by some members has been the option to improve the risk reward ratio or to implement some kind of exit strategy instead of waiting for the SL to be hit. Ray Scalper strategy is based on trading between the gaps in support - resistance levels. If the price is closer to a support level and the EA sees a reversal, it enters long and vice versa - this makes it trade reversals. In case of a break-out from support/resistance level, the EA enters in direction of trade - this enables it to trade in direction of trend. The stoploss or fresh trade trigger in opposite direction is the exit for the EA.

Phibase has considered a large number of options and methods to develop an exit strategy without affecting the entry strategy. The exit staretgy implemented into V2.0 is based on moving the initial stoploss from second level support/resistance to first level support/resistance. This move is triggered as soon as the trade moves into positive by about 3/4 of H1 atr. This is usually about half the distance from the first target level at which the normal trailing SL is triggered. Trades which do not trigger even this initial level will go on to hit the full stoploss. To enable the EA to use this option you will need to set the user parameter Exit_Strategy=true.

A further trade entry filter which enables the EA to skip some entries with higher risk has also been made as an optional feature in V2. When the parameter Skip_Entry_With_High_Risk=true the EA skips trades with entry close to 50% fib levels - These trades have a good chance of hitting the first target levels, but have a higher risk since the first and second support/resistance levels equally far off.

Trades with Defaults (recommended) and 2411 Exit_Strategy=true (conservative)

Accounts running 4411 and 1411 (Even if Exit_Strategy is true/false) will have the exactly same trade triggers. However some trade management related variations noted below may be seen at times - For example, new/additional trades may be entered (same direction as open trades in accounts running 4411) on accounts with 1411 or when Exit_Strategy=true.

When 4411 is used the price must move between 5 to 10 pips above the entry target price for the trailing SL to trigger. While in most cases this is likely to happen, in some market conditions, the support/resistance calculated work to to be very accurate and the price may just touch the target price and reverse, in such cases accounts running 4411 may not book profit while accounts running 1411 would have closed out the trade.

Another possibility would be that the account running default may have closed the trade in profit at its TP, but may re-enter the trade again on fresh trade trigger - even in the same M15 bar in which it closed the previous position. Accounts running 4411 may/may not have closed out the previous position based on the price movement (triggering/not triggering the trailing SL). This account may close out with one trade instead of the two trades that would happen on the account running default (ofcourse the second trade may close for gain or a loss on this account).

Broker Friendly Trading

Typical scalper trades on M1/M5 and targets small gains of less than 5 pips. In most cases scalper use pending orders and have very narrow TP/SL ranges making them unsuitable to trade on most brokers. Such system also require very fast execution speeds.

In general brokers impose the following rules to Scalper trading.

(1) Stop Loss, Take Profit and Pending Orders 10 pips or more away from the current price

(2) Most of the trades must be open for more than 1 minute

Ray Scalper uses a minimum target price of 15 pips. The TP varies as per the H1 ATR, but the EA defaults to 15 pips in case the H1 ATR falls below that level. The average gains work out to about 25 pips (typical range is between 20 to 30 pips). Under normal trading conditions, the protective SL ranges between from 60 to 100 pips. The EA is considered broker friendly and will not violate any rules imposed on scalpers by the brokers.

The EA’s average trade holding duration is 12 hours. Typically most trades are open for between 1 to 6 hours – trades with floating drawdown may last up to 1-2 days till the trade recovers to hit the TP and triggers SL. Trades hitting TP/SL/Trailing Sl within a minute are extremely rare cases and may happen only during exceptionally high volatility periods.

Ray Scalper is NOT a typical scalper.

One of the reason we consider Ray Scalper under the category of scalper is because it uses trailing SL and broker side TP/SL to close out trades. The trade entry is also based on best price level within a M15 bar making the strategy similar to scalping but on a higher time frame. The EA can be considered as scalping time frames like M15 and H1.

All our strategy tests are conducted with a spread of 1.5 pips which is considered normal for EURUSD. Tighter spreads will obviously enhance the overall profitability of the system. As far as performance is concerned, the spread upto 2 pips will not effect the EA adversely. The profitability is affected when higher spread is used. It is highly recommended to use broker accounts with spreads of 2 pips or lower. Best performance is seen on brokers with minimum spread ( <0.5 pips ) + commission may be added by the broker.

It is advisable to run Ray Scalper on brokers with tighter spreads (Most brokers offer tight spreads less than 2 pips). We are using a spread of 1.5 pips for our backtest and analysis. This is aimed at presenting a close to realistic performance that an average trader can expect from the EA.

Can the Backtest be conducted using open price only?

The EA uses very specific TP , Trailing SL and SL trigger level. The trade entry is also triggered on best price within a M15 bar. This would require any backtest to be run with every tick available (M1/tick data). Trade entries may happen at bar open or at anytime within the M15 bar. Trades may be closed at any point in between the bar due to the price triggering trailing SL, SL or TP.

Trades Every Signal

Ray Scalper EA trades every signal that is generated. The following actions are taken by the EA under different circumstances during a signal trigger

No Open trades : long/short signal > New Trade Entry Executed

Long Open : short signal > Long Closed and New Short Trade Entry Executed

Long Open : Long signal > Long Signal Ignored

Short Open : Long signal > Short Closed and New Long Trade Entry Executed

Short Open : Short signal > Short Signal Ignored

Existing Trade Closed at Trailing SL/SL/TP during current M15 bar: long/short signal > New Trade Entry Executed

Trading News/High Impact Data Release

Ray Scalper is to be traded on all days. The EA being a scalper operates with accurate low targets of about 20-30 pips. This makes it especially good for trading news based price action. As part of the study, we did internal lab tests to study the EA's ability to trade news. Tests were conducted by allowing new trades entries only on Fridays and also only on first Friday of the month to simulate Non Farm Pay Roll data release days. The backtest were conducted with fixed of 0.1 lots.

13 year backtest with trade entries made on Friday's only - default settings: 4411 (No Exit Strategy)

13 year backtest with trade entries made on Friday's only - Conservative settings: 2411 (Exit Strategy enabled)

13 year backtest with trade entries made between Monday to Thursday - Conservative settings: 2411 (Exit Strategy enabled)

You can download the complete strategy reports of these internal lab test using the following links:

http://rayscalper.phibase.com/backtest/Ray_Scalper_12year_default_FL_Friday-Only.zip

http://rayscalper.phibase.com/backtest/Ray_V2_b01_2000-2013_Mon-Thurs-trades.zip

From the above results we can see that about 20% of the trades are made on Fridays and the EA has the same average success rate on Fridays. So we can confidently recommend to let the EA trade uninterrupted on all days.

The day wise gain/loss chart below derived from our standard backtest is given below:

Ray Scalper is designed to trade 24 hours when the Forex markets are open. Almost 80% of the trading happens during the European/American market hours. Many traders find trading the duration between American close and European open to be risky and difficult to trade. A detailed hourly trade breakup shows that the EA's success rate is consistent across all hours. There is no additional risk involved or any disadvantage in using the system 24 hours.

The hour wise gain/loss chart below derived from our standard backtest is given below:

Trading During Holiday Season/Low Volume Periods

Deciding to trade during the year end holiday season has been a tough decision for all traders. We receive queries seeking our advice/recommendation if it would be safe to run the right through the Christmas - New Year Holiday season.

It would be impossible to make this recommendation based on price action or expected price action. Ray Scalper is built on an innovative strategy and we are very confident that it can handle most price actions very well. Drawdowns are common and an unavoidable part of any trading strategy - It would not be possible to predict if the EA will do well or go through a DD phase.

We have conducted strategy tests for the period between 26th November to 31st January for the past 12 years. Based on the tests, the performance during these two months has been with in the equity curve has been within normal DD - Gain limits and all averages are in agreement with the long term (12 year) backtests. We do not see any reason to recommend switching off the Ray Scalper EA during the holiday period.

Members can study these tests in detail and include the results of these studies in their criteria on making a decision regarding running/stopping the EA during the December January Holiday season.

The live test results for the period between November 26th 2012 to 31st January, 2013 is also presented along with the backtest results.

The strategy results has been summarized in the table below:

Year Trades Net Profit MAD DD Win%
2012-2013 (Live Test) 33 9.20% 6.00% 82%
2012-2013 (Back Test) 33 9.20% 6.00% 82%
2011-2012 64 0.10% 8.57% 76%
2010-2011 48 0.12% 15.98% 79%
2009-2010 42 12.03% 7.94% 88%
2008-2009 68 0.31% 20.51% 73%
2007-2008 45 7.35% 6.25% 84%
2006-2007 26  2.28% 3.73% 80%
2005-2006 39 -5.18% 12.48% 74%
2004-2005 43  2.09% 7.26% 83%
2003-2004 49 3.73% 10.88% 77%
2002-2003 35  -4.69% 10.43% 77%
2001-2002 37  -9.29% 17.18% 67%
2000-2001 60 38.19% 6.03% 90%

The Drawdowns seen are within the Max DD of 30% seen on the 13 year test. The win percentage is also close the average of about 75%.

The average monthly gain on 12 year back test was about 2%. Ray Scalper tests show that the EA has the potential of making average to above average gains or atleast breakeven during Dec-Jan trading.

The EA has 3 losing Dec-Jan periods over the past 13 years. It also has 4 above average gaining period.

The detailed strategy reports for each year is given below: All Tests Conducted for the period between 26th November to 31st January.
Max Allocation : 8,   (Default - 4411 recommended Setting) Pair: EURUSD


Live Test Equity Curve December 2012 - January 2013

2011

2011 Equity Curve December 2011 - January 2012


2011

Equity Curve December 2010 - January 2011

2010

Equity Curve December 2009- January 2010


2009

Equity Curve December 2008 - January 2009

2008

Equity Curve December 2007 - January 2008

2007

Equity Curve December 2006 - January 2007

2006

Equity Curve December 2005 - January 2006

2005

Equity Curve December 2004 - January 2005

2004


Equity Curve December 2003 - January 2004

2003

Equity Curve December 2002 - January 2003

2002

Equity Curve December 2001 - January 2002

2001

Equity Curve December 2000 - January 2001

2000



Click Here to download the complete Strategy reports of all the above tests - Download Test Results

Recommendation based on above study

Based on the above historical performance and our confidence in the strategy, we would recommend letting Ray Scalper EA trade un-interrupted.

Members who wish to stop trading during the Holiday season can safely switch off the Ray Scalper EA or Close MT4 platform running Ray Scalper as per the trader's discretion. If there are any open trades, it would be advisable to disable live trades in the EA properties to enable the EA to close out existing positions - while preventing new trades prior to stopping the EA / MT4.


Forex trading can involve the risk of loss beyond your initial deposit. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary. Forex accounts typically offer various degrees of leverage and their elevated profit potential is counterbalanced by an equally high level of risk. You should never risk more than you are prepared to lose and you should carefully take into consideration your trading experience. Past performance and simulated results are not necessarily indicative of future performance. All the content on this site represents the sole opinion of the author and does not constitute an express recommendation to purchase any of the products described in its pages.


Disclaimer


U.S. Government Required Disclaimer – Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial adviser if you have any doubts. Clearly understand this: Information contained within this course is not an invitation to trade any specific investments. Trading requires risking money in pursuit of future gain. That is your decision. Do not risk any money you cannot afford to lose. This document does not take into account your own individual financial and personal circumstances. It is intended for educational purposes only and NOT as individual investment advice. Do not act on this without advice from your investment professional, who will verify what is suitable for your particular needs & circumstances. Failure to seek detailed professional personally tailored advice prior to acting could lead to you acting contrary to your own best interests & could lead to losses of capital.


*CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.


By using PhiBase SYNERGY, you acknowledge that you are familiar with these risks and that you are solely responsible for the outcomes of your decisions. We accept no liability whatsoever for any direct or consequential loss arising from the use of this product. It's to be noted carefully in this respect, that past results are not necessarily indicative of future performance.


2012 PhiBase Technologies. All rights reserved. Ray Scalper EA