misation result from above.

From these two figures you see that the

trading system has been profitable in a wide range of input parameter settings (
dark blue
areas) but has also produced losses or only small profits in other ranges of par
ameter
settings (yellow, green and light blue areas).
51Trading Systems
Figure 3.5: Three-dimensional area diagrams for all trades of the system LUXOR.
a) side view,
b) top view. Net profit in US dollars as a function of the two input parameters:
fast and slow
moving average. Tested on British pound/US dollar (FOREX), 30 minute bars, 21/10
/20024/7/2008, incl. $30 S+C per RT. Diagrams generated with RINA 3D Smart View.
A
B
52How to develop a trading system step-by-step
using the example of the British po
und/US dollar pair
Of course we are looking for input parameters which produced a high net profit i
n the
past. But as shown above in Figure 3.4 it is even more important for those syste
m
parameters that they have enough peer parameters in their near neighbourhood whi
ch
were nearly as profitable as the chosen best ones. In our trading system which we have
developed, so far the whole area in the lower right part (Figure 3.5B) seems at
a first
glance to fulfil this requirement. We ll now take this shorter area and have a close
r look
on it (Figures 3.6A-D). From these graphs you can see that the system stays very
stable
against parameter variation in the chosen area. Although the total net profit va
ries in a
relatively big range (between $20,000 and $100,000) it stays clearly positive fo
r all
selected input parameters. The best profits of nearly $100,000 are achieved in t
he region
when the fast moving average is very small (< 3) and the slow moving average is
between
30-50. This is also the area with the smallest maximum intraday drawdowns of abo
ut
$15,000. Over all parameters the maximum intraday drawdown does vary quite a lot
but
never becomes excessive
it always stays below about $35,000.
Like the total net profit and the maximum intraday drawdown you can plot further
important statistical figures as a function of the two i