Keep Your Eye On The Clock

I was reading Bain's blog and want to mention some of what he wrote because I have had similar observations.  This information, for those of you have been trading forex for a while may be more common knowledge at this point.  

Peter simply states that forex traders should be aware of the clock due to price swings associated with certain times of the day.   These swing points can be noticed most often during the following:

1. London open (3 am EST or 8:00 GMT)
2. London close (10:30 am EST – 12:00 Noon EST or 15:30 GMT – 17:00 GMT)
3. New York open (8:00 am EST or 13:00 GMT)

Swing points are most evident when London is opening, in session, or closing due to London's majority in Forex trading volume.  

I've always said if I were ever to trade forex full-time, it would most certainly be during the hours of 3am EST (London Open) and 12 Noon EST (London close).  Outside of these times, things can be pretty low a majority of the time. 

250+ Most Visited Forex Sites

I've updated the database of most visited Forex sites to include now over 250 sites, about 40 more than there were last week.  More functionality will be coming like Alexa ranking display, historical forexontop ranking graphs, and a search feature.  The other reasons behind the site is to keep my programming skills sharp and also because I love statistics and rankings.

Visit http://www.forexontop.com 

What Is Maximum Drawdown?

What is maximum drawdown? Why and how do I calculate it?

First, what is maximum drawdown?  It is defined as the largest drop of a given asset within a certain time period.

Why calculate it?  I've never made it a point to calculate maximum drawdown but I'm going to now.  This is my attempt to start looking at more "advanced" money management concepts so I've decided to start with one of the easiest.  The reason for calculating maximum drawdown is to measure the riskiness of your trading strategies.  It will also give you an idea of how much money you could lose at some indeterminate point in time.  

How do I calculate it? During the history of your trading strategy, I'm sure you'll be keeping track of your change in equity from one day to another, one week to another, one month to another, or whatever time period you choose.  In the course of your trading, you will calculate drawdown which "represents the total percentage loss experienced by
a strategy before it starts winning again … and drives the
investment balance back up." (Source: http://www.confidentstrategies.com/maximum-drawdown.htm)  

 

 

 

 

 

 

 

 

 

 

In this picture (Source: http://www.autumngold.com/Performance/DescriptionDD.htm), the drawdown is calculated with the following formula:

(Valley VAMI – Peak VAMI) / Peak VAMI

The Valley VAMI is the red arrow or approximately $1,100.  

The Peak VAMI is the green arrow or approximately $1,425.

Therefore the drawdown is ($1100 – $1425)/$1425 or -22.8%.

Let's do 1 more example from the picture above.  First let's find the Peak prior to the green arrow. 

The Peak VAMI is approximately $1,250.

The Valley before the green arrow is at approximately $1,150.

Therefore the drawdown is ($1150-$1250)/$1250 or -8%.

So to find the maximum drawdown, select the drawdown that was greatest, in our example, -22.8%. 

QLaun up 37% This Week

I've been laying low but following the 2 week contest that's been going on since last Sunday.  In front most of the time has been QLaun who currently is up 37.54%.  Impressive? I'm not so sure.  Though his return is the greatest, his maximum drawdown is -21.60.  I'm certainly not trying to take anything away from him but is this high of a drawdown healthy? I guess we'll just have to see what happens the second week.  MartinFXUY actually has a pretty impressive return of over 15% and a maximum drawdown a quarter of QLaun at -5.77.  I'll have more to say later but here are the top traders so far:

1. QLaun +37.54%
2. MartinFXUY +15.72
3. RotcaX +14.08% (MAXIMUM DRAWDOWN OF 0!)
4. Reno +11.05%
5. Dumb Luck +7.62% 

Props should go out to Nick, JCLsFX, and Milton who have a nice return and a low maximum drawdown.  

Where am I? There's 19/23 people actually participating and I'm at #10 with a -0.78% return and a -1.00 maximum drawdown.   

April Trading Contest

I know we aren't competing for anything "material" but nevertheless, good luck to the other 22 participants.  A demo account is what it is and you can't turn it into what it isn't but hopefully the competition will bring more "realness" into the contest.  

Anyone can check up on the progress of all 23 traders involved at https://fx2.oanda.com/mod_perl/fxcontest/fxcontest.pl?rm=contestDetails&contestId=150

You can view number of trades, volume of trades, maximum drawdown, sharpe ratio, and portfolio return.  

My 2 Live Trades Last Week Lost

[youtube:http://www.youtube.com/watch?v=BX_hgW76Obs]

Last Chance to Enter April Contest

I just wanted to throw it out there one last time that you have until 11:59 p.m. EST this evening to enter the 2 week April trading contest.   Since making a call out yesterday, we've added 6 more participants for a total of 20.  Very good turnout.  
Join now.  http://www.forexproject.com/Forex_Contests/

Forex Top 210+ Websites Updated

The first update of http://www.forexontop.com occurred this evening.   The forex website with the greatest positive ranking change was http://www.radaforex.com, an emerging market and exotic currency broker moved up 26 spots to #183.  Don't ask me why it had a gain in traffic, the site looks absolutely useless to me.

The forex website with the greatest negative ranking change was K.B. Advisory Ltd., a subscription based currency analysis and recommendation website.   The site lost 12 spots to #204.

Action Forex debuted at #90 probably because they were just approved by DMOZ.

Saxo Bank remains #1.  Forex Project remains at #22.

To see the top 210+ forex sites, go to http://www.forexontop. 

April 2 Week Trading Contest

There has been a good turnout for the April Trading Contest where currently there are 14 participants.  Anything traded in your Oanda FXGame account starting from this Sunday, April 15th until Monday, April 30th will be counted.   You still have until Saturday (1 day left) to join the April contest.  It's for fun but I'll be competing to win.  I hope you will too. 

Join now.  http://www.forexproject.com/Forex_Contests/ 

7 Reasons Why I Should Not Be Trading Forex

This seems like the same old drivel coming out of my mouth but I can't seem to get back on track with my forex "project."

These are reasons why you (or I) should not be trading forex right now:

1. You lack the motivation – Personally, I really need to get back to live trading because this alone is a motivator but it wouldn't be wise to do so if I have no plan.  It's sort of a catch-22, the need to trade live to continue my learning but the inevitable failure that will accompany this if I have no plan.  Is it as simple as developing a plan? Here lies the lack of motivation.
2. You lack the time – It's one thing if you lack motivation but if you lack time also, it's tough to get into sync to make real progress.  This is the same old story.  Don't we all need more hours in the day. 
3. You lack the money – After all, you can't just expect to do this full-time if you have $200 and a dream.  You need a nice comfortable base capital if you plan on doing this for a living.   With everything that has gone on with me in the past year, I need to build up my reserves, more than what they are now. 
4. You lack a strategy and plan - You can dive right in and start trading like a mad man but what hopes do you have for success.  I find myself sitting in front of charts forcing myself to find a strategy so that I can trade.  Putting this pressure on myself to find a strategy isn't working at this point.  I'm lost right now with no hopes of recovering.  I've been able to in the past but this time, it isn't happening so quickly.
5. You lack organization – Lacking organization could be the reason for #4.  I've been trying to organize my life so that I can better organize all aspects of my trading life.  Right now everything seems in disarray and this lack of organization makes it hard to develop a real plan. 
6. You lack the tools – The tools I'm talking about are charting platforms or books.  Books are important but there's enough free information out on the internet to make your brain spin so not having them shouldn't halt your progress.  I've found most of the information in books repetitive anyway.  A charting platform though is a necessity for trading.  If you're only interested in trading forex, you can use Metatrader for free.
7. You lack experience – Yet another catch-22, you need experience to trade successfully but you can't get experience to trade successfully if you don't trade.  My solution to you would be to trade in micro-lots or compete in some trading contests that add more meaning to your demo account.

Unfortunately most of these reasons apply to me at this point in my life but hopefully they won't always.  I think the #1 reason why personally I shouldn't trade is that I currently lack the motivation. Don't get me wrong, I think about forex everyday.  I think my lack of motivation is created from the lack of time, strategy, plan, and organization.  The harder I search for these, the less motivation I have.  This isn't a "poor me" post but it could be the last words from a failed trader.  There are so many failed traders out there that just decided to not fight through the difficulties and found it easier to give up either because they had to (they were dead broke) or because they no longer wanted it.  I still want it, which to me is financial freedom.  Is trading forex the way to get it? I don't know, that was the point of this whole website but I'm still trying to figure that out.  I've been here before, standing at the edge wondering if this is just destined to fail.  But as I've said before, I really need to give myself to this for 5 years and I'm only 2 years in.  

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