Testing of AUD/NZD Automated Trading Strategy

I had completed coding within the Arb Trader automated trading software for a time based mean-reversion strategy on AUD/NZD.  After further backtesting of the strategy I had decided to extend it to EUR/CHF and Eurodollar futures as well.  The Arb Trader app is far from complete at this point, but it is far enough along that a minimum set of features are available to enable trading of this strategy.

Testing was conducted in Interactive Brokers (IB) “Paper Trading” account, which has live market data, but fills are simulated in a demo account.  I have heard complaints from the IB mailing lists that the Paper Trading account does not provide realistic fills on trades for limit and market orders, so I decided to only use this account for making sure that the trading application was functioning properly, and then to move on to trading in a live account with small position sizes to verify the results of the strategy.

The software ran for the past week without any issues in the paper trade account, and the results vs. historical backtest over the same week appear below. The results do NOT include commisions, which for IB is 0.4 ticks per round turn for the first $1,000,000,000 in trades for the month.


AUD/NZD results

Paper Trade Acct. Backtest Results
Trades 18 15
% Winning Trades 67% 67%
Avg. Trade P/L(Ticks) 0.8 3.0
Total P/L (Ticks) 14.0 45.1


EUR/CHF results

Paper Trade Acct. Backtest Results
Trades 12 14
% Winning Trades 83% 93%
Avg. Trade P/L (Ticks) 1.2 2.2
Total P/L (Ticks) 14.5 30.1


I enabled Eurodollar trading at the very end of the week so I will not include results for that contract.  As suspected, the backtests appear to be overly optimistic.  Beginning this past Sunday I have begun running the strategy in my live account with minimal position sizes, while also running in the Paper Account so I can compare how realistic the fills are in the Paper Account.

Below is a screenshot of the trading software running with IB’s Trader Workstation (TWS).

The automated trading software, is the white window, while TWS are the 2 dark windows.  You can see in TWS all the trades that the Arb Trader software has placed, as well as see one of the orders for 35,000 AUD/NZD at the top of the order book on the bid side in the small, dark window in the bottom right half of the image.


Aud-Nzd Screenshot


I’m planning on posting the results after this week closes out on actual trades vs. paper trades vs. backtests as I continue running the strategy in a test mode.


Twitter: @RobTerp
Twitter: @LimitUpTrading


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