January Forex Trading Contest

I’m starting up the Forex Trading Contests on Oanda again.  They were relatively successful in the past so I figured I’d try to organize them again to start in 2008.

Sorry, there won’t be a prize for the January contest.   Last time I offered $100 Amazon gift certificates to three winners.  I
wanted to see how this contest went and maybe offer prizes again in
February. 

Why should you join?  I don’t know, maybe because it gives you that little bit of competitive feeling you may be looking for to make that demo account feel "more real."

Contest starts January 1st at 00:00 EST so be sure to sign up before then. 

To read more about it or to join, go to the Forex Contest page.

I Just Closed Out a Position for a $10000 Profit

I’m serious, I just closed out a position for a $10,000 profit.  Unfortunately it was my FXGame account at Oanda.  I had not logged into it for months and when I did login today, I noticed that I still had a short USD/JPY position open.  This trade profited 865 pips with only an 86 pip risk.  That’s a 10:1 Reward/Risk Ratio.   Too bad this wasn’t my real account.  If it was, this trade would never have happened.  Maybe I should start trading longer-term charts, set, and forget!

Forex On Top Redesign

Forex On Top was redesigned over the last two weeks and is now live.  Major additions were improved historical ranking graphs with trendlines and 5-star AJAX rating system for each forex website.  More features are yet to come.  The new logo is also still in revision phase. Check it out.

 

Combo Profit System Review

I've decided to get back to some of the things I used to do which was reviewing trading systems and websites.  The first system I've decided to review comes from a website that has decent traffic rankings (#49 on forexontop.com).  I figured if there are a lot of visitors going there, there's a good chance he's selling his system.  Therefore it makes a good candidate for a review.  The system, called the Combo Profit System is provided by a trader named David Chia.  David was gracious enough to send me a free copy of everything he offers on his site.  This includes the following which would have cost $97:

• E-book detailing the Combo Profit System
• E-book Forex Online Manual
• Meta Expert Advisor of the Combo Profit System
• Free Membership to FX Nation
• Four Self-Help Books
• Three Trading Videos
• E-book detailing Penny Stock Trading System
• More bonus E-books

Some of the things David mentions on his site, http://www.profitguideforex.com are that the system doesn't require any trading experience, you can create your own trading signals, it will require very little time, it's easy to understand and easy to use, is step-by-step and can potentially make tens of thousands of dollars a month.  This offer is risk-free according to the website in which you can try the system with an 8-week 100% money-back guarantee.  Since I got it for free, I can't verify the fact that's it's risk-free.

As you can see above of what's included, there's a lot of reading material. I wasn't interested in any of the e-books except for the one detailing his system.  I did look over the other e-books and they contain general information on the forex market, fundamental analysis, technical analysis, risks, and fibonacci analysis.  This is all stuff I've seen everywhere on the internet for free.  That's fine, according to the website, this is all "bonus" material. 

David's E-book detailing his system was split into three sections, the first being an introduction.  In the introduction, he explains candlesticks, chart patterns, pivot points, and technical indicators.  It's a sufficient overview but nothing exclusive that you can't find elsewhere for free.  The second section mentions money management and trading psychology.  He explains stop losses, moving stops, and winning trader psychology.  Nothing exclusive here either.  There's also nothing explicit about position sizing in here and only six pages to explain the most important topic to beginner traders, how to control risk.  The last section details his combo trade system which uses a combination of moving averages, technical indicators, candlesticks, and fibonacci projection.  I was surprised at what I found.  This system is targeted at people who have no trading experience yet it requires discretionary trading based on determining trends from higher time frames, candlestick analysis, fibonacci projections, fibonacci retracements and chart patterns.  These are all subjects that someone off the street that's never traded forex before would have a hard time digesting.  As far as being a step-by-step system,  it includes:

1. Trade Setup
2. Trade Rules
3. Stop Loss

He satisfies this claim to a certain extent.  Is the system easy to understand and easy to use? Not really.  I didn't have a hard time understanding it but a beginner might.  There's also only two graphic examples and he just shows the absolute best case scenario for the trade.  This bothers me.  Why not show examples of outcomes that aren't expected.  Overall, there is nothing groundbreaking or new in this combo system.  I've seen this a thousand times on free websites and forums.   

David also offers a free Metatrader expert advisor that contains an EA and a bunch of technical indicators.  There are no real instructions or documentation that explain the indicators included or even how a beginner can use the EA.  I gave David the opportunity to provide any additional instructions but he questioned if I was who I said I was (Rich from Forex Project) and wondered how I didn't know how to use an EA.  I know how to use an EA but someone who buys the system sure won't. 

For $97 dollars, you get a whole lot of quantity, way over 1000 pages of reading material, but not a lot of quality.  I'm not going to label this a scam but it's not worth $97.  You can buy a forex book for less that gives you much, much, more.  In my opinion, there wasn't a lot put into this except a goal of making a quick buck.  This is merely a package of e-books and information that you can find on the internet for free. 

I appreciate David providing this to me for free.  He did so with nothing to hide.  I requested the same from the Forex Killer (http://www.forex-killer.com) authors twice and never even received an email back. 

Wall Street Is Killing Me

I haven't had any real time to trade due to the fact that a lot of my Wall Street peers lost their jobs over the last couple of weeks.  I feel like I've taken over at least five other people's work.  It's scary when you look around the room and it's about half as empty as it used to be; at least that's what it feels like.  I have to look on the bright side; at least I still have a job.  

I'm finding that the best time for me to trade is during the Japanese session but beginners beware, it's not a pretty time to trade in my opinion.  It may be the best time for me to trade but I still won't do it.  I feel like the price just seesaws around in a small range without ever going anywhere.  You really have to wait until the European session opens before you get some volatility.  My evolution as a trader has gone like this in order from past to present:

1. Trading around the clock.  Trade at 8 am, 11 am, 6 pm, 3 am, whenever!  Gave this up.
2. Trading the Japanese session because that's when I had time to sit down and concentrate on the market.  Gave this up.
3. Trading the European session because the GBP/USD has some nice moves between 2 am and 5 am EST.  I gave this up too because I   just couldn't get to bed early enough.  I also tried to wake myself up out of a dead sleep with alerts and alarm clocks but this only lasts so long before you just get tired of it.
4. Trading the US session between 7am and 10am.  This is what I'm left with but of course it's when I'm pressed the most for time.  If I'm not sitting in front of a chart at 7 am, I'm probably not going to be trading the rest of the day. 

Anyway, happy trading. 

Top 10 Investing and Trading Books of 2007

As determined by SFO Magazine, the Top Investing and Trading Books of 2007 are:

1. Adventures of a Currency Trader: A Fable about Trading, Courage, and Doing the Right Thing (Wiley Trading)

2. The Complete TurtleTrader: The Legend, the Lessons, the Results

3. Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders

4. A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation

5. Entries & Exits: Visits to 16 Trading Rooms (Wiley Trading)

6. The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing (Little Book Big Profits)

7. Microtrends; the Small Forces Behind Tomorrow's Big Changes

8. SFO Personal Investor Series: Psychology of Trading

9. Traders, Guns & Money: Knowns and unknowns in the dazzling world of derivatives

10. Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich

Never Use Stop Losses

I just wasted my time listening to the latest trader interview of Mike Parker on http://www.traderinterviews.com.  If you've read this blog for long enough, you'll know that I'm very suspicious and pessimistic about what I read from other people on the internet.  In my opinion, this interview just stinks and screams of suspicion.  He never uses stop losses.  I can understand using mental stop losses but Parker doesn't use any.  He also makes it sound like he never loses.  He's a trend trader and states, "if you are trading with trend, it is literally impossible to lose".  Well, I really must be doing something wrong because I've found ways to lose trading with the trend.  The interviewer presses him to find out what happens if the trend reverses.  When do you get out of the trade? Parker states that he's "rarely seen a trend change."  Again, I must be doing something wrong.  Maybe I should stop using stop losses.  Stop losses are, after all, the only reason I lose.  Anyway, Parker has to have some pretty big drawdowns and I personally wouldn't recommend not using stop losses.  I don't make consistent returns though so how would I know.

Experimenting With Probabilities

Ever since I listened to the Avery Horton interview, I've been looking more into probabilities.  Scouring the web brings up some interesting results, everything from advanced financial probability concepts to forex signal software.  I took statistics, probability, and advanced mathematical courses in college but some of the information was way over my head and I just don't have the desire or time to explore the advanced information.  

I started a simple experiment with historical GBP/USD data since January 1st, 2007.  I wanted to find out whether the price went up or down based on previous price action.   It's easiest to give an example of what I tried to do.

First, find out whether price action was BEARISH or BULLISH between 2:00 am and 8:00 am EST.  Then find out whether price was BEARISH or BULLISH after this period of time between 8:00 am EST and 5:00 pm EST.  So I'm splitting the day into 2 time periods.  The first period (between 2-8 am EST) is a non-tradable time period.  The second period is when an actual trade might take place. 

What direction will the price go after this first BULLISH or BEARISH period? 

This may be a total B.S. experiment but I wanted to start somewhere.  Based on initial testing, in 2007, here are the results:

BULLISH 2am-8am period resulted in the price closing UP from 8am-5pm 66% of the time.

BEARISH 2am-8am period resulted in the price closing DOWN from 8am-5pm 38% of the time.

Looking at the results don't show any correlation between past and future price action in this experiment because when the first period was BEARISH, the second period actually turned out BULLISH 62% of the time.  On the contrary, when the first period was BULLISH, the second period turned out BULLISH 66% of the time.  I guess this shows that the trend in the GBP/USD was BULLISH throughout 2007 and trading in this direction would have been most desirable.   

Big Changes in Forex Website Rankings

It looks like Alexa and Compete.com both made recent traffic updates because there are lots of big time changes in the top 100 and across the board.

1. Forex Profit System – Up 37 spots to #47
2. Marketiva – Up 15 spots to #21
3. Forex.ch Up 15 spots to #37
4. Forex Pro's – Up 14 spots to #34
5. Forex Project – Up 10 spots to #41 (there we go)

There's over 350 Forex websites currently being ranked.  Be sure to add your Forex-related website.

Weak Dollar Affecting Cocaine Sales?

The December issue of Currency Trader Magazine was released today.  Some of the highlights:

$ Greenback woes hit the black market

€ New guidelines could alter forex brokerage space (see Forex Brokers Will Be Affected)

£ Trading Strategies : Runs and pullbacks in the GBP/USD

$ The yuan and U.S. inflation

¥ Outlook 2008

$ The dollar's fate: Dustbin of history or cyclical recovery?

You can download the December issue at http://www.currencytradermag.com

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