On our last update on August 09, we indicated that the market had been for a month or more choppy and range bound, with the EUR/USD moving from 1.3600 to 1.3850. The middle two weeks of August changed this dynamic when the EUR/USD fell through the support of 1.3600 and went on to touch a low of 1.3359, an expectedly steep fall for this market. We suffered greater than normal draw down from this fall because we had many EUR/USD positions that had entered on this market’s upward movement the first week of August, some of which were stopped out from the fall. We did make some profit with our counter-balanced USD/CHF positions, and also our newly implemented EUR/CHF positions (profit in the fourth week), but the damage done to our long EUR/USD positions brought us into an unfortunate second month draw down.

Draw downs for August were: -19.64% for USD pamm, and -10.90% for EUR pamm 

The forex market is an incredible challenge for any trader or system, but we have always seen each problem period as an opportunity to discover an unforeseen trading idea which could serve to enhance the system as a whole going into the future. The biggest lesson (or trading concept) learned from this unexpected fall of the EUR/USD during this seemingly choppy period was in the nature of exits: why couldn’t we get out of our EUR/USD positions near the top of the channel, or at least much sooner, before they retraced back to their stop losses? When we asked this question, and revisited our library of trading strategies for the answer, we discovered a series of exits that made all the difference in the world.

We had been experimenting with volatility/channel breakout short entry systems that could take advantage of sudden downturns of the market (which we will be implementing in the near future), and when we happened to reverse them, i.e., turn the short breakout entry into a long reverse breakout exit, we found the missing element: three powerful reverse breakout (volatility / channel) exits. These exits are very adapt at getting out with profit at channel highs and lows, as well as bailing out when the market is moving in the adverse direction at a faster than normal speed. The result of having these exits in place is that we would be locking in our profit at channel highs on some trades, and on other trades we would be significantly minimizing our damage on a reversal by getting out of the trade at channel lows or when the corrective volatility is significant enough to warrant a bail out from the trade.  All three exits have been tested on 21 years of data to measurably improve each individual strategy, making each one stronger and more resilient than before, more adaptive to the changing markets, more able to capture profit when made and control downside risk. If we had these exits in place during the last two months, we could have avoided the draw down that we had seen. We currently have these new exits implemented on 25% of our strategies, to be finished on all strategies in two weeks time.

We are confident that with the new EUR/CHF strategies in place, and the new reverse breakout exits being implemented, that the Cannon25 system will soar again, to bring us out of the recent drawdown period and on to fresh equity highs.

[Note : August Results  -19.64% for USD pamm, and -10.90% for EUR pamm
The difference in return between the USD Pamm and the Euro pamm reflects a technical problem of a delay in de-leveraging during the worst two weeks of the drawdown: the US pamm equity was falling faster than Euro pamm because more funds were being withdrawn by clients from that account (at the same time the account was declining because of trade losses), and as a result, some of the trade losses sustained were at a higher than normal leverage.]