State of My Trading Address for May 2007

Well it has certainly been an interesting year so far, one in which
I've stated relentlessly that my time is in short supply probably not
unlike yourselves.  I've managed to continue towards my goal of
organizing my time better which has helped overall but the lack of
sleep has taken its toll and I can no longer ignore it. 

Trading
seems to have taken a backseat to everything else including maintaining
my websites and this may be a product of my struggles over the past
months with showing any bit of profitability.  I'm still totally
involved in sharing and learning but the actually buy and sells have
become fewer.  This also may be due to my struggles or optimistically
due to my maturity.  I don't know at this point.  

One thing that
I do know is that I need to be focused on creating more systems.  I
have concluded that I am not much of a discretionary trader because of
the uncertainty it creates in my mind.  It causes me to immediately
question myself and impairs my judgment.  It also impairs my ability to
make realistic stop loss and profit targets.  This is not to say that I
want to create a system where no human intervention is needed.  I
believe that I need a system that gives me a buy or sell but with exact
targets and stop losses.  From there, a discretionary element can be
introduced and these levels can be adjusted such as moving stops to
breakeven, taking partial profits, etc.  I think I've always known this
but it's become undeniable at this point.

Taking a phrase from my
last post regarding the New Yorker article, I too have been slowly
bleeding to death.  I take a predetermined risk and stick to it
unaffected by consecutive losses or any other event but the big win
doesn't seem to come very often if at all.  Have I become so scared to
lose that it affects my ability to make a gain? I try to protect myself
by setting stop losses to breakeven which more times than not get hit
and I also take profits too early.  How can I expect that bigger payday
if I don't let those winners run.

So after almost 2 years of
exploring the forex market, I can't say if I'm any closer to my goal of
trading full-time.  I am certainly more pessimistic than I had been in
the past but I still get waves of optimism which keep me going. My trading performance hasn't improved drastically over the last two
years but I feel like I haven't cashed in on these "invisible"
improvements and lessons learned quite yet.  

I
say that you only live once and nothing good is ever going to come easy
so if you want a better life, continue to bust yourself until you feel
like it's time to try something else.   Like I've said ad nauseam, I'm
not doing this so I can live in a mansion or own many expensive cars. 
I'm in this for freedom, freedom from my over-reliance on a corporation
to provide me with a living.  I can't introduce an urgency for this
need because this is going to take time.  If I fail, the urgency will
increase so I just have to be smart and wade my time.  3 more years. 

Blowing Up

I was turned on to an article in the New York titled "Blowing Up" by Rob Booker's blog.  According to him, it's the best article he's read in a long time and I have to absolutely agree with him.  

The article is about a money manager named Nassim Taleb who created an investment strategy "predicated entirely on the existence of black swans; on the possibility of some random, unexpected event sweeping the markets." Most traders dismiss this black swan as an unlikely event like Victor Niederhoffer who was one of the most successful money managers in the country at one time.  Niederhoffer blew up his entire account by selling a large number of options, betting that the market would be quiet.  The odds were totally in his favor he thought because the chances of the market going down so heavily were miniscule.  Unfortunately for him, the market plummeted 8% in October, 1997 due to the economic crisis in Asia.  Niederhoffer made the same mistake again and lost after two planes crashed into the World Trade Center.  The black swan reared its head again. 

Taleb takes an opposite approach and bets that the black swan will inevitable rear its head and when it does, he will have his payday.  In the meantime, he compares the waiting as bleeding a slow death and most days as other money managers are making large sums of money, he's losing small amounts of money. 

So as long as you have a definable risk which only threatens a small amount of your capital, you have a chance of riding a wave of profitability that outweighs these smaller losses.  I don't want to oversimplify this because it's not easy but it is possible.  Weigh your time and be patient.  That unexpected event that could wipe out a traders account is right around the corner.

This is definitely worth the read. My summary doesn't give it justice. http://www.gladwell.com/2002/2002_04_29_a_blowingup.htm  

Most Visited Forex Website Updated Today

Alexa rankings for 272 forex websites were processed and updated today at http://www.forexontop.com.  There were a bunch of new submissions over the last week but if you notice your site missing, feel free to add it at http://www.forexontop.com/add_forex_website.php. 

A Simple Bollinger Band Strategy

There's a new article on Investopedia titled, "Tales From The Trenches: A Simple Bollinger Band Strategy."  It's a simple strategy, one in which you buy when the daily candle closes below the lower band and sell when the daily candle closes above the upper band.  The strategy looks for the price to make it's way back to the middle line which is just a 20 period SMA.  There is nothing new about this strategy but it's simple and he does acknowledge its faults which every strategy has.  That is where money management comes in.

http://www.investopedia.com/articles/trading/07/bollinger.asp

Rob Booker Book Review

I had jury duty on Monday so I decided to bring lots of reading
material including a Kiplinger's magazine, the Economist, Men's Health,
and Rob Booker's book, Adventures of a Currency Trader.  I was
already halfway through Rob's book and just had not had the time to
complete it so I thought this would be a better time than any for doing
so.   

First, I appreciate the free book that Rob sent to me via
his publisher.  Even though it was free though doesn't mean that I'm
going to hold back on my opinion of it.  Saying that, I'm not much of a
book reviewer but I'll do my best.

This book is about a
fictional character named Harry Banes who works at a law firm in New
York City as a filing manager.  Harry wants to be a forex trader but
manages to blow up his account on his first few trades.   From there he
embarks on a journey to find the answers to being a successful trader
with the help of others.  

What were my positive opinions of the book? 

• The book was well written. 
• The book came across as a novel, unlike the countless forex books out there on the book shelf.  So I appreciate it's uniqueness.
• The book could be good reading material for a total beginner forex trader.   

What were my negative opinions of the book?

May Forex Trading Contest

With about 1 week through the May forex trading contest, Alex leads the money manager category with an impressive 18.20% return.  itineranttrader leads the conservative category with a return of 2.79% and currently there are no aggressive trading category leaders.  Equally as impressive is the fact that a majority of the 14 traders with a positive portfolio return also have impressive maximum drawdowns.  The contest is still early though and I'd expect this to change over the coming week(s).  

 

 

 

 

 

 

 

I had 1 profitable and 1 losing GBP reversal trade which balanced out.  My gains are mainly due to shorting the USD/CAD multiple times.  I am currently out of the market but have some longer term signals that will give me trading opportunities when the market open on Sunday.    

May 2007 Issue of Currency Trader Magazine

Personally, I think Currency Trader Magazine has had better days.  Nevertheless, it's free and available for download now.  Some of the highlights?

• How many g'days do Aussie, kiwi have left?
• Do stocks hold the key to currency levels?
• Aussie dollar trading characteristics
• Professional currency traders continue to produce sub-par returns
• So far, so good for FXMarketSpace

http://www.currencytradermag.com/index.htm 

FXCM Transitions to No Dealing Desk Business Model

I haven't heard much from traders regarding FXCM's no dealing desk but an email I received from them today surprised me.  FXCM states that they've already transitioned 95% of their clients to no dealing desk execution.  Here are additional highlights:

• Over 95% of FXCM direct clients now trade with No Dealing Desk (NDD) Execution.
• Clients trading with NDD have seen spreads significantly reduced in 13 currency pairs.
• NDD eliminates the potential conflict of interest between trader and broker; all trading orders are passed through FXCM to global banks and financial institutions competing to offer the best price. 

From what I've been reading on the forums, no one is very impressed with the no dealing desk option.  I'd like to hear from others experiences.   

Peter Bain Gets Knocked Down

Forex On Top, was updated with the most up-to-date visitor traffic rankings today.  Oanda is still #1 and there is no threat that they'll be knocked out of that slot anytime soon.  Forex Project moved up 1 spot to #22 which in turn knocked Peter Bain's site down to #23.  There's a bunch of new sites that were added this week that debuted in the top 200.   The biggest jump was a site called, ForexBasic which moved up 12 spots.  I'm not going to link to it from here because I wouldn't recommend it.  You can find it here at #133, http://www.forexontop.com/forex_trading_websites_page_3.html.    

New Search Feature

I added a new search feature to http://www.forexontop.com to make it easier for people to find either their website in the rankings or any other forex website in the rankings.  Also added this week was a form to submit your forex website.  I'm no longer relying on the DMOZ (Open Directory Project) to supply me with a listing of websites that belong in the forex category.   If you have a forex website and want to be included, you can submit your site for review at http://www.forexontop.com/add_forex_website.php. 

Like I previously said, this is a little side project of mine because I love statistics and rankings, I enjoy programming, and I think it's generally a useful repository for anyone to find quality forex websites.   

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