Z-systems for beginners

Since I just started to work myself into Zorro and trading in general
I am asking 6 beginner’s questions which may also help other newcomers:
1.)
Reading the Z-strategies it seems that Z12 is more lucrative than Z1 or Z2 alone.
Am I right to calculate that it would make sense to get a Zorro S,
because with say 2000 investment, after about 6 months it made enough to pay itself of?
2.)
Why does a Strategy need days to get started and then trains itself up?
Could this not be done using back-data and continuing straight away?
3.)
In order to prevent to have to pay for the initial learning a strategy needs,
could it not be done to first virtually trade and in the run switch to real trading?
4.)
Why (apart from risk management) should one not invest more than the square root of the capital?
Does that mean that the strategy is dependant on the amount it trades?
5.)
Since the equity curves of strategies get better, does one have to trade a strategy for the rest of his life in order to get the most out of it and would be stupid to stop one?
6.) (previously called "bonus" question)
Can one trade (with the free or S Zorro) and meanwhile work on the software to develop new strategies and backtest them ?

To all participants: Thanks a lot for your help.

I can answer some of these:

1. Historical performance does not imply future performance, so don't spend/invest more than you can afford to lose. (But the algos can be lucrative if the conditions are right.)

5. You should expect many of your strategies to become useless after some period of time due to changes in the market. Prepare to be very flexible. Objectively analyze your algos and retire the poor performers.

Bonus: This is easy to do if you have a dedicated VPS and a separate development machine.

EDIT: Where did the bonus question go? Now this thread will be confusing to latecomers.

Thanks Andrew.
Your answer 1 did solve half of my question 4 also ;-)

I still am a bit confused about your answer 5:
The Zs are fixed black-box-strategies which are given to us since years, so shouldn't they all be obsolete by now?
It seems to me that it is just a matter of luck to find the right asset to trade with and then running it, until it seems not to be lucrative any longer.
However, this is exactly what was not told to us in the manual - we were told to stick with a strategy and not pull out when we are scared.

My two cents...

Z strategies are mostly generic type (mean reversion, trend trading, momentum) so in the long term the'd be profitable and "everlasting". But, this doesn't mean they can have long periods of unprofitability or that certain assets perform worse in certain periods.

That's why they autocalibrate their parametes after a period of time, for trying to best adapt to market conditions.

You are right, luck is always a factor, so that's why you must diversify your assets/strategies, invest prudently (money management) and remain always flexible and vigilant.

There aren't any more secrets.

Hope this shed some light to you.

In general, proper trading strategies exploit certain broad "inefficiencies" of a market (e.g. trends, mean-reversion, calendar, etc).

Such inefficiencies are "probabilistic", and so performance is significantly a function of market conditions. There will be periods when the strategy is MOSTLY in "sync" with the market and periods when it is not.

With smart position sizing and/or equity curve trading you can normally improve performance, but you still need to trade/track the strategy continuously.

And, importantly, also monitor the "inefficiency"/your algo itself. That's what "Cold Blood index" is for.

The Zs are "fixed" in terms of the inefficiencies they exploit.
But:
1) the algos themselves are occasionally improved (or retired), and
2) they are regularly "re-trained", i.e. parameters used are recalibrated to the current market conditions.

Thanks, Brax, so if I have only 2000 to invest you would advice me to rather spread it to 3 different strategies (running 3 Zorros) than to put all my eggs in the basket of only one strategy?

Thanks, Zheka,
now I ask myself: If the 1&2 mix-strategy 12 is of a higher return, does it not make sense to simply use that instead of strategy 1 & 2 ? After all, the risk seems to be the same.

It does.
You normally have to do such intelligent combination of uncorrelated strategies yourself; but with z12 that seems to have already been done for you.

Your question was asking about using an algorithm till death, so I was not talking about short term. Also, I was speaking in general, not necessarily about Z strategies.

oP group will keep a Z strategy alive so long as they deem it useful in today's market. Nonetheless, you should take it with a grain of salt and do your homework. Finally, the other comments about the cold blood index are useful.

Thanks a lot, Andrew.
Since I am on a tight budged and learing about trading I am in two minds about whether to start with one strategy or not.
On one hand it is a good solid start to get aquainted with trading,
on the other hand I might be too inexperienced to know which ones to trade and when to pull out my strategy.
My thinking was that whilst a strategy runs I could get to know all backs and fronts of trading and meanwhile learn to write my own strategy - and later use it as a "backup" to have one solid strategy running whilst my experimental new ones is on the way.

Safer seems obviously to first trade virtually for a while,
but I won't get the months of experience in life-trading without the additional issues of my strategies not working.

To me it seems like if I would run two instances of the free zorro running a Z1 and on the other one a Z2 on the same assets would do the trick to earn enough to get myself a Zorro S. Or is it not possible to run two Zorros at the same time ?

So do you think that the reason for the Z Strategies not running for several days is because they are trading virtually for a while to spare us the begining losses ?

From what I can tell, having Traded Z2 and Z12, they actually do start trading straight away. However in reality that means they sit there for a while watching the market waiting for their first move. Once the first entry condition is met, the first trade goes in. This can take a few hours or a few days. Then the next one follows and so on. As many trades will be losers and close early, there is a good chance your account goes backwards at first until enough trades are open and hopefully the winners have taken over. It can take a week or two for the strategy to be in full swing.

I would recommend to use a demo account and trade that one for a little while, that gives you the feel for things. You don't need Zorro S to trade a demo even with Z12. I use FXCM, you can set one up in a minute. Everything is the real deal, except for the money.

When it comes to risk management, I have been taking out half of the closed profits every week, as long as ther was some, and reinvested the other half. That is roughly in line with the square root rule, and boy, am I glad I did, because although Z12 has been very generous to me, it is just going through my first big drawdown for the last couple of weeks, but I know, should the CBI really hit the 0% mark, I will still be ahead. So yes, the square root rule is a good thing, it keeps you from becoming greedy, which is a very dangerous state to be in. Trust me, I learned the hard way, some years ago.

Enjoy, and hang in there for the ride. Oh, and never ever trade with money you can't afford to lose.

Absolutely. You should run a demo Z12 for a while, get the feel of things and prepare to study and learn a lot...

After a few months, you may be able to invest your money and start coding your own strategies. Again, consider this as a training fee and keep learning.

Keep for sure you will have drawdowns, some of them will be long and big, but it's part of the game, you must be commited to stay here for the long run, be patient.

Good luck!

Thanks Meini, your recommendation is quite helpful.
I nearly went straight to your recommended FXCM, but I was overwhelmed by the amount of brokers out there.

How did you distinguish between them all?
What I see so far is that I can search for reviews,
and I think (currently still residing in Germany) I also have to do some research into whether I have to pay different taxes if I trade with a forein broker.

If anyone could shed some light into how to find a good firm to trade with, I would highly aprrecciate it.

I wish I could vote comments up here, Brax - you would have gotten a few points from me already.

Now your answer was kind of unclear to me:
On one hand I asked whether I whould trade Z1 and Z2 separately,
and you said "yes, absolutely";
but then you added that I should run a Z12 for a while.

So do I understand you right, that I should run virtual demo trades with 3 separately installed Zorros (if that even is possible) :
Z1, Z2, and Z12 parallel, and then compare them after 3-4 months ?

I will try to install a second Zorro now and then try to find a good broker to go with (whilst I learn more about broking and coding of course).

http://www.forexpeacearmy.com/

FXCM and Oanda are top ones.

Sorry to have confused you, as i suppose you will demo trade with a free Zorro license, then you must use two instances. One with Z1 and the other with Z2.

Run them, learn the mechanics of Zorro and wait for the next step.

If you cannot afford to trade all Z1/Z2 assets, you can disable some of them and trade EURUSD and USDJPY for example.

This is explained here at the end:

http://www.zorro-trader.com/manual/en/zsystems.htm

Yea, Brax, the forexpeacarmy is great - I just found and instantly bookmarked it yesterday.
User Main also recommended FXCM, but I am a bit puzzled, because in the reviews there Oanda as well as FXCM turn out to get many bad reviews - Oanda even being worse.
I did read carefully the fpa reviews to make sure that I did not miss anything, but however I twisted the search, they are not really top ones as you say. Display 50 results as a list and you will see for yourself.
Oanda, by the reviews, seems not to be taken seriously, and FXCM is a case of its own: They recently were sued and accused for wrongdoings so they seem not to be ethical, but there seems to be a cheating element within their firm.
One reviewer put it like this:
"it almost seems as if some [FXCM] clients have no problem, while others experience a nightmare. so, since they are still in business, my suspicion is this: their IT team must have a randomizer (or should i call it a 'selector') running on the servers, hitting only some accounts and leaving other accounts untouched. that way, you keep 50% of the herd happy and can plausibly deny any wrong doing by attributing poor trading skills to the rest of the 50% losers"

So I am surprised that you two seem to be happy traders with them.
For setting up a demo account it doesn't matter, but I also am practicing in seeing clearly what is a good and bad trader.

Another aspect are the weired affilliate brokers, through which Zorro offers 3-12 months of free Zorro S usage:
* Oanda seems not to be taken serious,
* the moneypouch is probably their own robot site which only starts with a minimuim of 10,000 - a joke, because if I had that money I would longtime have bought a S-lifetime version.
* Now the by far best reviews go for their third Broker Global prime in the forexpeacearmy, but the joke is that their link goes to some really cryptic site whose SUBdomain only is globalprime, and which does not state anything, plus when I go to their main domain, nothing is displayed. This looks like a typical phishing or scam site, would I not know better that it is a serious link provided by Zorro.

Long story short: I might setup a demo account with FXCM, but would never trade real money with them and I would be happier to first find a real good one - like the real globalprime.com.au which comes up as the first 5 star rated broker when sorting by most reviews: http://www.forexpeacearmy.com/forex-reviews?c%5B0%5D=1&per-page=50&sort=-review_count&view-mode=list
(I have to ask Zorro if they also give 3 months of S for people who have signed up over their official site, or at least why they have such a strange affiliation site: https://globalprime.finly.com/?promocode=ZORRO

Hi Fuchs.

I understand your confussion, as brokers world is a complete jungle, you never know what you're going to find out there...

I can only speak about my own experience and other people i know, and the fact is that Interactive Brokers and Oanda are the brokers most people have been using over the last years.

It's true FXCM has been sued recently, i forgot that.

I didn't know about GlobalPrime, seems quite good. I'll take them into account for the future.

I hope you choose well and don't have any problems.

Bye.

People, I have a problem:
My Zorro suddenly can't connect to my mt4 bridge again and it is impossible to input any new server - the server field is simply dead.
Why does Zorro suddenly not allow me to enter anything into the Server field ?

(btw I did do everything - restart the router, the laptop, delete all zorro files in the mt4 library and experts folders and put them in again, opened a new demo account, etc...)