When I first started coding trading robots, I focused mainly on trend following designs, because that's what I had learned about Forex. Follow the trend.
These robots were pretty miserable performers, because defining a trend in code was never something I managed to work out properly. Indicators such as moving averages, RSI and ADX helped, but they can never reveal as much information as a quick glance at a chart.
Eventually I decided to use fractals to try and buy pull-backs in trends, and met with some success, but only during trends - which of course I had trouble defining in code.
My robot designs then shifted from trend following to hedging - first hedging only when trend following failed, and then just desperately trying to capture any pips they could and hedge when they failed. Again, some success, until the market went crazy and then it was heavy draw-down and margin call time.
There was a brief flirtation with envelopes and standard deviations from channels, but still the price would seemingly jump around these levels and getting an entry was difficult.
It was then I came across break-outs, and from looking at the charts, indeed, prices more often start moving rapidly ("break-out") than orderly cross moving averages and channels. Even with my hedging robots, the problem was while I could maintain a profit for a while when prices were consolidating, eventually the price would make an enormous leap which the hedging robot would miss and would suddenly be heavily into draw-down.
Looking back, I can see how little I really knew about Forex, but I'm glad I have had these experiences, even if it took some time to learn their lessons, because having been through them, I'm not likely to forget them.
I keep a few trend-following robots on demo accounts just to see how they do, and sure enough, so far, they tend to fail most of the time, but occasionally go through periods of big wins (they catch a big trend). Just like all of my early robots.
So, break-outs it is. Generally I've been having more luck with these than any other system I've tried to date. I am running into a few problems, however, namely "false break-outs". I'm still trying to determine the best time-frame, and take-profit and stop-loss levels. Also, break-outs don't occur all the time, so a lot more patience is required, which means testing takes a lot longer.
I have a feeling that I'll never enjoy great success with break-out robots, but having gone through three types of robot designs now (trend following, hedging, and break-outs), I am now more aware of various movements in the Forex market, which will hopefully make my manual trading a little better.
