This Range Trading Robot has been specifically developed to trade the cross pair AUD/CAD. AUD/CAD cross pair is going strong this year. The interest rate being offered for AUD (Australian Dollar also called Aussie) is 4.75% whereas that offered on CAD (Canadian Dollar also called Loonie) is 1%. So if you buy AUD and sell CAD, you can profit from this interest rate differential of 3.75% over time. Another thing that this positive interest rate differential tells is that overtime AUD will appreciate as compared to CAD so you profit again from this appreciation of AUD if you are long.
In its simplest form, Range Trading means buying at the support and selling at the resistance. But you can take range trading to the next level by trading range breakouts when you go long in case of a breakout on the upside and go short in case the breakout takes place on the downside. AUD/CAD pair has been moving back and forth between a range for the last 7-8 months. Since January 2011, AUD/CAD cross pair has been trading between the low of 0.9610 and the high of 1.0590 in a wide range of around 1000 pips. AUD/CAD is going strong this year with less volatility. But you must keep in mind the correlation of these two currencies to the commodities like gold and oil.
So, this Range Trading Robot will be trading the AUD/CAD pair with the core strategy of range trading meaning it will buy near the support and sell near the resistance. It started trading live on 27th April 2011 with a deposit of $10K and to date has made a profit of $12.792K in a matter of 6 months. You can take a detailed look at the live trading account posted on the Range Trading Robot site. The monthly gain comes out to be 13.79% and the total gain in these 6 months of live trading was 127.92%.
Testing This Range Trading Robot
First you need to do a backtest. Read one of our earlier posts on how to do a back test with 99% modelling quality. You will need tick data for the AUD/CAD cross pair for this backtest. Do the backtest with different parameter settings to see how the performance of this robot changes. Try to find the best settings that give the max return with min risk. This 99% modelling quality backtest will reveal a lot about the expected performance of this Range Trading Robot. If you get good results on the backtest like a low drawdown and a high return, do a forward test on a demo account. And if you get good results on the demo account, you can think about trading live with this Range Trading Robot.