Diversifying my Forex Trades
December 23, 2006 by Trader Rich
This past week, I decided to start diversifying my forex trades. Let me explain.
I think a true turnaround in my trading occurred when I started following one and only one currency pair. Since it is my strong belief to follow only the GBP/USD, I don't want to change at this stage of my trading career. If you are still following 8 different currency pairs and 5 different time frames, stop now. This is the best advice I can give to beginner and even intermediate traders.
Since I can only follow one currency pair at this time, I have decided to rely on someone else to provide me with trades for other currency pairs. I will be using a service that I believe I can trust the most at this time.
I started relying on the service this week for some of my trades. All in all, I had a very productive week, one which turned December around for me. The last three days of the week produced 314 pips for me. The breakdown in profits are the following:
H-system trades: 90 pips
My other GBP/USD trades: 120 pips
Service trades: 104 pips
I now stand at +246 pips for December. I feel it is important because after I blew up a trade last week by removing my stops and losing 2 1/2 times more than I planned, I've been able to put it behind me to have a successful week.
I've been following the service I'll use for my non GBP/USD trades for the past 3 months or so. It is Kathy Lien's and Boris Schlossberg's service which has had modest success. The service has actually been free since it launched a couple of months ago but this all changes in the new year. The service now costs either $295/quarterly or $995/year. If you're interested, you can read more about it and even get a free month at http://www.bkforexadvisor.com. Why have a decided to use this service?
- Out of any other service out there, I trust them the most. Yes, it may be because I've read their books or because they are known currency analysts at FXCM (some may say this is a reason not to trust them) but you ultimately have to feel some trust if you're going to use a service. Neither of these reasons may be good ones but that's just how I feel.
- The previous 3 months, they've been mildly profitable.
- They are realistic in their expectations which are stated on their site. Their goal is to average a 200 pip gain per month.
I'm going to be tracking all of their trades on this site so that you and I will know how profitable or non-profitable they are. I'll announce when the link is up.
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Great idea. Thanks. That will be very helpful to see how profitable thy are really. (remember I posted a comment about whether or not Lien was actually trading .)
Things that are important and they do not publish in their very short track record in their web site, are things like how much risk are they taking, how much drawdown do you have to suffer for any of their typical trades, what is the holding period of their typical trade (1-week, a month).
It makes a difference to have 2 trades and end up with 200 pips gain, and have 50 trades and end up withe the same 200 pips.
The former is very close to luck. The lower the number of trades you are making the less trustworthy the strategy you are pursing is. Or the longer the testing period should be: if you only trade once a month, I will need to see at least 5 years of trading record, to start having an idea of how good your strategy is. This is how professional CTA are working… and I am working for one.