(Click the picture to see a larger issue)
Today was frustrating. Our model was unable to capture the swift moves in price due to the built-in lagging momentum detector: once a sudden move in price occurred, our model registered the change in momentum at about the same time the move was exhausted. If this move was registered by our model outside of the signal levels, then no signal. Look at the GBP and AUD charts above as examples.
This reminds us that no single trading model will work under all market conditions. Our model relies on momentum and does not work well under conditions of high volatility. On average, it produces decent profits and keeps us out of the market in difficult conditions thus avoiding large losses. It never feels good to be involved in losing trades but they are a very real component of any trading model and must be expected. And they must be controlled.
Not a happy end to the week but we are seeing a net profit. Have a good weekend and let's trade new prices on Monday.
