AIME and Backtest

Forex Traders Association

August 25, 2004
By
Byron Porter

We are not licensed Brokers/Dealers or Registered Investment

Advisors. We do not provide buy, sell, or hold recommendations. All
demonstrations and presentations are for educational purposes only.
No representation is made that any software, trading method, or
training guarantee profits. Unique experiences and past
performances do not guarantee future results. Your trading results
may vary. Trading software and systems and any related products
discussed during demonstrations or presentations are analytical tools
only and are not intended to replace individual research or licensed
investment advice. Trading and investing in the financial markets
involves substantial risk and there is always the potential for loss.
Because the risk factor is especially high in the foreign exchange
market trading, only genuine "risk" funds that you can afford to lose,
should be used in such trading. No "safe" trading system has ever
been devised, and no one can guarantee profits or freedom from
loss. We do not accept any liability for any loss or damage
whatsoever that may directly or indirectly result from any opinion,
information, representation or omission, whether negligent or
otherwise, whether written or spoken by any of its members,
presenters, or facilitators. We are not affiliated with 4XMadeEasy
(TM), GlobalTec Solutions (TM), LLP, PremiereFX (TM), LLC, or any
other organization.

AIME System

Seminar by C.W. Marafiote

AIME stands for

Assess
Identify
Move
Evaluate

Confluence of Tool Indications

TOOLS

Charts and Time Frames

Pivot Points and Fibonacci numbers
Trends Ranges and Trend lines
Oscillators and Divergence
Pattern Recognition
Candles

Charts and Time Frames

Setup Base Time Frames like 15 min

Entry Time Frame 5 min
Direction Time Frame 60 min
Difference between time frames should
be a multiple of 3 to 5

Pivot Points and Fibonacci

Numbers

Fib Sequence 1, 2, 3, 5, 8, 13, 21, 34,

55, 89, 144, 233, 377.
Ratio between any two is about 1.6
Pivots are price points used by market
makers

Trends Ranges and Tendlines

Lines are drawn on chart to identify

trends and ranges

Oscillators and Divergence

Oscillators are indicators such as MACD

Moving Average Convergence/Divergence
Divergence occurs when peaks or valleys in
oscillator are opposite of price
Divergence is an indication of change in price

Pattern Recognition

Patterns in charts have been noticed to

predictably progress
These patterns are probably related to
crowd psychology

Candles

Candles are a visual method of plotting

price information
A black candle indicates the price went
down and a white candle show a price
increase
Size and other characteristics indicate
the battle between the bulls and bears
over that period

The Confluence

Look at all the indicators and when

several confirm a potential event, it is
time to make a trade

Speed Paper Trading

Demonstration of Speed Paper Trading

Dont spend weeks checking your
method do it in a few hours
See Pivot Points in action

4XME Speed Paper Trading

History limited to one chart and hold a

piece of paper over the future
To get more history, must save screen
shots of charts

REFERENCES

CWs Yahoo forum - OpenFX

www.forexmentor.com Peter Bain
course on trading CW has join this
organization
www.amibroker.com charting package
Byrons email
bporter@starwaretrading.com

Backtesting Your Strategy

Speed Paper Trading allows you to

practice a method of trading
Backtesting gets the computer to do the
historical paper trading and give the
statistics on your idea.
Before investing real money, you should
have some idea on the outcome

Risk of Ruin - $500

C=

500 Total amount of money you are willing to loose = account size

A=

200 Amount of money you should invest in an individual trade

W=

50 Percent chance of winning a trade

R=

Ratio between amount of average win divided by the amount

1.2 of an average loss

P=

63.39% Percent chance of losing all of your money

Risk of Ruin - $5000

C=
A=

5000 Total amount of money you are willing to loose = account size
200 Amount of money you should invest in an individual trade

W=

50 Percent chance of winning a trade

R=

Ratio between amount of average win divided by the amount

1.2 of an average loss

P=

1.05% Percent chance of losing all of your money

Trading Expectations

If you dont have an idea of what your

trading should be doing, how do you
know if it is working
What are the groups expectations?

Two Backtesting Platforms

4xStar for 4xMadeEasy

Amibroker for other Technical Analysis
options
Demo of each program

4xStar

Uses a custom database

Allows the user to define entry and
exits using FAST
Specify daily trading times
Allows the use of stops and limits using
fixed pips or variable with ATR
Other Custom parameters

B/S Indicator
The Buy/Sell (B/S) indicator is a generic buy or sell signal and
relates to the green up arrow and red down arrow. The
following chart shows a graph and the corresponding B/S value.

If the B/S indicator = B then the green line is above the red line
and if the B/S indicator = S then the red line is above the green
line.

XCross Indicator
XCross identifies how many time intervals have occurred since the red
and green lines crossed. If the lines cross at the interval, then XCross is
zero. The intervals run from the middle of two vertical grid lines to the
middle of the next two vertical grid lines. Below is a chart that show the
XCross values on a chart

B Angle and S Angle Indicators

The Buy and Sell angles indicators describe the angle of the Buy and Sell
(Green and Red) lines on the chart. The angle is described in terms of the
clock face where 0(12 oclock) points straight up, 3(3 oclock) points
horizontally to the right and 6(6 oclock) points straight down. The angle is
determined from the middle of one grid to the middle of the next grid. All
the angles are corrected to a square grid. The standard and 20 interval
view have different grid sizes and to be consistent, all angles were
corrected to a square grid. Below is an example of some B and S angles.

Conv Indicator
The Convergence indicator or Conv describes four condictions about the
red and green lines. The lines are either Converging, Diverging, Parrallel
or crossing(X). Therefore the possible conditions are C, D, P or X. Below
is a chart that shows examples of these conditions.

4xStar Trade Definition

Risk of Ruin
C=
A=

5000 Total amount of money you are willing to loose = account size
500 Amount of money you should invest in an individual trade

W=

54 Percent chance of winning a trade

R=

Ratio between amount of average win divided by the amount

1.9 of an average loss

P=

0.03% Percent chance of losing all of your money

Observations

Trading one lot, this method averages

about 1 pip per trading hour
There was one drop of 50% of the
account

Backtesting using Amibroker