System Review: Next Stop System

Next Stop System

           Greetings mortals! I am here again to give you my final review of the mechanized version of digital pipsy's Next Stop system.

Before I reveal the results of my testing, let me just give you a short disclaimer. The system that I have back tested was MECHANIZED to eliminate subjectivity.

I tried to retain most of the original system's rules, but in the end, my results will still be different from the original system. You can check the rules of the mechanized Next Stop system in my previous post.

Now let's get down to business!

Profitability: 18/20

Wow, just wow. The percentage gain for the 8-month period that I backtested the system was solid at 20.73%. This translates to 31.09% on an annual basis, which is a respectable rate of return in my opinion. In fact, out of ALL the systems I have tested, Next Stop ranks the highest.

The win rate leaves something to be desired as it was at an abysmal 29.76%. Nevertheless, we all know that it is the percentage gain which is most important. Because of this, I'm giving it a high score.
Risk Tolerance: 13/20

I must give the mechanized Next Stop system what Big Pippin calls 'props' for its ability to cut losses early and minimize them. However, it didn't really impress me enough to cause my dual core processor to lag in awe. There are definitely a lot of improvements that can be made.

For one, a lot of its losing trades realized the full 40-pip loss. Only 21 out of the 48 losing trades closed early.

On top of that, I can also imagine some of you humans not being too happy about the system's drawdown. Over the span of 8 months, it incurred a maximum drawdown of 3.80% which translates to five straight losing trades.

And lastly, the Sharpe ratio is only at 0.66, much lower than my benchmark 1.0000.

But perhaps retaining the more subjective aspects of the system could've helped minimize its draw downs. I pointed out in my guidelines that looking at the daily time frame helps digital pipsy manage his risk but I opted not to include it in my analysis to make the system feasible to back test.
Newbie-friendliness: 7/10

You have to admit that at first glance, the system seems very intimidating. I expected that my processor would need debugging after back testing it as I had never reviewed a system that uses the Ichimoku  Kinko Hyo prior to this one. Moreover, the original system rules also say that the Relative Strength Index (RSI) has to be taken into consideration and three time frames have to be looked at.

However, I soon realized that there was no reason to worry about my processor crashing while backtesting digitalpipsy's system. I only had to pay attention to one indicator--the Kijun sen--and I only had to look at the 4-hour and 1-hour time frames.

Overall, Next Stop is a little more complicated than other systems but it is still generally easy.

Bonus points: +2

Just like the 3 Ducks System, it would only be fair for me to award Next Stop with a 2-point bonus for using multiple time frame analysis.
Total Score: 40/50

Taking all things into consideration, I'm pretty happy with the results of the mechanized Next Stop system. It's profitability is pretty impressive although a few tweaks to it can be done in order to improve its drawdown.

This officially concludes our system review. But before you go on your merry way, let me remind you that you can now start submitting your entries to the Best Forex Trading System contest for May.

If you don't have a system to call your own, don't worry. You can submit another person's creation just as long as you make sure that you give them due credit. If you fail to do so, one of my kind will abduct you in your sleep. Beeeeeep booop bop beep booooop pzzt! (That's my evil laugh, by the way.)

As for those of you who have previously tried but failed at getting the most votes, feel free to submit again! Think of it as a way to give back to the community.

Remember that http://forexworldfree.blogspot.in/ will donate $10 to this month's charity for every entry submitted and the winner will get to choose one among our Golden List to donate $50 to. Also, just imagine all the newbie traders out there that you'll get to help out by submitting your system.

So what are you waiting for? Join now!