2MA w/ ADX and disappointing realization

Another day, another strategy. For the past couple of days, I've been working on the 2MA cross with ADX confirmation strategy for ER2H08 1200 sh/bar. Basically, an HMA(Low, 8) crossing over EMA(Low, 24) as the trigger. Condition2 is that the current high is highest of past 3 bars. Condition3 is current ADX is also highest of the past 3 bars. Condition4 is that it is during day time so fewer slippage.

Exit is simply HMA(Low, 23) crossing under EMA(Low, 33) or it is nearing the close of the day session. Stop is \$350; Floor is \$500 and 63% retracement.

Upon loose optimization on Oct 1, 2007 to Nov 30, 2007 data, the Long strategy achieved 3.37 profit factor, 57% profitable, and a steadily rising performance graph. Very good indeed. I was estatic yesterday.

I continued to work on the strategy for the whole day today and developed a Short version using the same concept. The result were very good too (PF > 3, etc).

From the back-testing data, the Long and Short together has PF over 2 and steady rising performance too. From the calculation, I would make over \$7000 for the 2 months on 1 contract alone.

Feeling pretty confident, I felt the system was somewhat complete, so I tested it using the lastest 30 days of data. Unfortunately, it failed miserably. PF was way under 1.0 and the gross profit were a mere couple of thousand dollars. The net profit were estimated to be just a few hundred dollars.

So I tested the system on another set of data. August 2007. The result was even worse!

Long story short, I found out that ADX isn't that reliable to confirm with major swings.