# Intelligent Dynamic Backlash Agent: A Trading Strategy Based on the Directional Change Framework
## 8 Experiments: Results and Discussion  
### Experiment 1: Evaluating the Performance of IDBA  
In this experiment, we applied IDBA to the six sets of rolling windows (previously composed in Section 6.2). For each currency pair, we start with 1,000,000 monetary units of the counter currency. For a given currency pair (e.g. EUR/NZD), the first listed currency (i.e., EUR) is called the base currency, and the second currency (i.e., NZD) is called the counter currency. For example, in the case of EUR/NZD, we started trading with 1,000,000 NZD as the initially invested capital. When IDBA triggers a buy order, it uses the counter currency to buy the base currency. The size of a buy order is computed based on the parameters \(PPV\) and \(FNR\) (Section 5.2.3). We considered the bid and ask prices in our experiments. When IDBA triggers a buy (or sell) signal, we used the ask (or bid) price as quoted by the market maker. Table 7 reports the general performance during the overall trading period of twelve months of both versions of IDBA in this experiment. The column \"Currency Pair\" denotes the considered currency pair. The column \"RR\" is the cumulative RR throughout the trading period of 12 months. The column \"Profit Factor\" is calculated by dividing the sum of all generated returns by the sum of incurred losses during the overall trading period of twelve months. The column \"Max Drawdown (%)\" refers to the worst scenario measured as the worst peak-to-trough decline in the capital during the trading period of twelve months. The column \"Win Ratio\" is the overall probability of having a winning trade. The values of Sharpe ratio shown in column \"Sharpe ratio\" are computed with a risk-free rate of 3% based on the 10-year US treasury bonds. These evaluation metrics are described in details in Section 3.1. The last row in Table 7 is interpreted as follows: applying IDBA to NZD/JPY generates a rate of return (\(RR\)) of 16.1% during the trading period of twelve months. In this case, IDBA executes 1079 trades with an overall win ratio of 0.73. The maximum drawdown in capital is 2.2%. The computation of the Sharpe considers a risk-free rate. In this thesis, we consider a risk-free rate of 3% based on the 10-year US treasury bonds. The details of monthly Rates of Return (\(RR\)) of applying IDBA to these currency pairs are shown in Table 8.  
Furthermore, Table 9 reports the number of times that the risk management module has interrupted the trading rules of IDBA and restart the training procedure (as explained in Section 5.3). Figure 10 provides an illustration of the size of each buy order of one chosen currency pair GBP/CAD in. Together, Table 9 and Figure 10 shed more light as to how IDBA functions, as we explain in next section. \begin{table}
\begin{tabular}{c c c c c c c} \hline \hline
**Currency Pair** & \(RR\) & **Profit Factor** & \
\begin{tabular}{c} **Total Number of** \\ **Trades** \\ \end{tabular} &
\begin{tabular}{c} **Max Drawdown** \\ **(\%)** \\ \end{tabular} & **Win Ratio** & **Sharpe Ratio** \\ \hline
**AUD/USD** & 23.5 & 1.86 & 1143 & 1.5 & 0.77 & 2.89 \\
**AUD/CAD** & 26.2 & 1.92 & 1182 & 1.7 & 0.76 & 4.55 \\
**GBP/CAD** & 4.3 & 1.09 & 986 & 2.6 & 0.64 & 0.83 \\
**GBP/NZD** & 29.8 & 2.35 & 1892 & 1.7 & 0.78 & 4.62 \\
**NZD/USD** & 18.8 & 1.42 & 1068 & 3.4 & 0.75 & 1.59 \\
**EUR/NZD** & 16.1 & 187 & 1079 & 2.2 & 0.73 & 1.29 \\ \hline \hline \end{tabular}
\end{table} 
Table 7: Trading performance of IDBA following the twelve months out-of-sample period (from 1 January 2017 to 31 December 2017) of the six currency pairs.