Moving Averages and Trading For a Living

I wanted to pass on some reading material for everyone.

Five Quick Facts About Moving Averages – according to this article, longer moving averages are more significant than short and exponential moving averages are better for shorter time frames

So You Want To Trade For a Living – Be properly capitalized, have an edge, and have reserves 

How To Be An FX Scientist

The February 2007 Currency Trader Magazine was released this evening.  Some of the highlights are:

  • How to be an FX scientist
  • Swissie Trading Strategies
  • Forex Swing Catcher
  • Currency traders enjoy positive start in 2007 

Download Currency Trader Magazine

The Search for Forex Resources

In my endless quest for all relevant Forex information, I stumbled upon a site that provides an online edition of a magazine titled, Futures, Forex, & Stocks Magazine.  Similar to Currency Trader Magazine, they provide a free PDF download of their online magazine.  The requirement is that you have to supply them with an email address for them to send you the download link. 

The latest issue includes one forex specific article titled, "The MA of FX" which talks about taking a simple approach to Forex signals.  There are other articles that are more broad based such as "Secrets of the Floor Traders Pivot Points."  

I haven't explored the magazine enough to formulate a review.  See for yourself.  Go to and look for "Free eMagazine."

How Do I Calculate My Monthly Return?

I usually only calculate my profit / loss in pips without taking into consideration actual return.  As most of you know, a 1 pip profit in the GBP/USD gives you a larger profit than a 1 pip profit in the USD/CHF.  Therefore using pips as the sole indicator of success is not complete.  To make it complete, it might be best to start calculating monthly return based on balance.

To calculate your month end return, follow this example which applies to calculating profit for January 2007.  I am using fictional amounts that calculate to my true return for January 2007:

  1. What was your balance on January 1st before any trade/interest activity for the day?  Mine was $26231.04
  2. What was your balance on February 1st before any trade/interest activity for the day? Mine was $27317.07
  3. Calculate: ((February 1st balance – January 1st balance) / January 1st balance) * 100

          (($27317.07 – $26231.04) / $26231.04) * 100) = 4.14 % return for January '07

Any questions or comments, let me know. 

Forex Trading with Heikin Ashi

There's a new article on Investopedia titled, "Confirm Forex Momentum with Heikin Ashi."  Heikin Ashi is just another way of representing candlesticks.  For instance, instead of using the actual close for the candlestick close, the Heikin Ashi uses the (High+Low+Open+Close)/4 formula.  I read it and threw it on my charts to see if it may be useful to me.   I don't use candlesticks at all in my trading at this point and I don't really see the need to use the Heikin Ashi either at this time.   You can read the article at

Here are my USD/CHF daily charts with and without the Heikin Ashi.

With Heiken Ashi








Possible EUR/CHF Setup

I want to give everyone a little taste of the alerts I get from Lien/Schlossberg.  I've never used a signal service before and many of you may have not either.  It's quite evident here that they use a mixture of fundamental and technical analysis in their trading.  Also, from my own observations, the GBP/USD has been abnormally calm over the last two days.  I'm watching closely and looking for a big move soon.  In addition to a trade signal to go short on the USD/CAD, here is a setup they are watching:

A setup that
we are watching is EUR/CHF  – a pair that
has been bid to stratospheric highs on carry trade flows.  Most traders have bet that the ECB will be
raising rates at a faster pace than the SNB creating an ever widening interest
rate differential between the two. However, there may be signs that the
typically conservative SNB does not want to see the Swiss franc so weak against
the Euro, for fear of creating inflation to Switzerland. Yesterday several
analysts predicted that the SNB will become more aggressive and may raise rates
twice rather than once in the 1st half of 2007 in order to stabilize
the relationship between the Euro and the Swissie.  Meanwhile, tomorrow we have the ECB press
conference.  Almost everyone in the
market expects President Trichet to obliquely confirm that a rate hike is
coming in February. However, if he hems and haws and hesitates, the Euro may
suffer as a result and EUR/CHF in turn may finally take a tumble from its lofty

if 1.6110 gives, there is no major support until 1.6050 in EUR/CHF.

The Villains of Currency

There are many fraudsters using currency schemes to rip people off?  Surprised? Not a surprise to me.  The Wall Street Journal visits the subject in the Saturday edition.  

Get the article while you can.  I don't know how long this link will last because this article is meant for subscribers only but it works for everyone right now. 

The Villains of Currency

Free Copy of Reminiscences of a Stock Operator

Some say one of the best pieces of financial literature ever written is Reminiscences of a Stock Operator by Edwin Lefevre.  This is just a disguised biography for Jesse Livermore and was written over 70 years ago.  It is in public domain which means it no longer maintains the copyright protection it once had so you can download and distribute for free.  I have not read it yet but I intend on doing so when I have time.


pdf Reminiscences of a Stock Operator Jesse Livermore 04/01/2007,09:15 502.15 Kb

Soul Trader Gone?

I've talked to a couple of people today about Soul Trader suffering a 48% draw down in December.  This shows how humbling the market can be.  He has since shut down his site but if you haven't read his last post, here it is.  We can all learn something from this.  You can also read the entire article from Google site cache.


Bit of a double edged sword on this post.

Firstly to report results which are rather shitty, and second to suspend / close the blog, possibly forever. Reasons to follow.

First of all lets talk turkey about the results.

month was terrible – in fact the worst that we have experienced in the
14 months trading it, however not the worst on record from our tests.

suffered this month a 48% drawdown. we suffered this drawdown at a
point when i was supposed to be enjoying a holiday in New York – it was
30% when I left the UK and 45% when i got back. needless to say due to
things beyond my control, much of my holiday was totally spoilt.

month of December ended up at -45% on the account – from £100,502 down
to £55,000 The system still works and is within parameters but the
money management, which at the end of the day is the bit that creates
the severity of drawdown, was at fault and has since been rectified.

were running the account at 100% efficiency – which meant that at a max
drawdown there would just be enough in the account to sustain it. what
i didnt take into account was the psychological pressure of actually
getting close to reaching this level and seeing the account decimated.

after five years of trading the market can still humble you, and this
drawdown certainly has. so if you are reading this and you're a trader
– dont ever think you have this thing licked until you are sat in your
superyacht with the obligatory Russian hooker eating a mouthful of pork

Its also uncovered some other rather unsavory elements
of life that i wont discuss on here, those reading this know what i'm
referring to and i dont know wether to apologise profusely or call the
lawyers – one of those morals Vs money type events. Today i reckon the
lawyers, yesterday i thought forgive and forget – you know the kind of
pickle i mean? One thing is for sure it won't go away by pretending it
doesn't exist so fun fun fun the first week in Jan one way or the
other. The ball is in someone elses court at the moment so we will see
which way it lands by the 5th Jan.

to trading metaphors now … The new Rocky film has a great scene where
balboa is telling his son what makes a winner. Something along the
lines of "it aint how hard you can hit – it's how hard a hit you can
take and still remain moving forward" – well, never a truer word was

Ive took a large 'hit' on my account and i've rode
the punch. I'm bouncing back and still moving forward. I ain't saying
that i'm a Balboa but i'm sure as hell not through yet.

So, to this point i hope that youve enjoyed the journey and it's with sadness that I am to close this blog.

Grail goes on and will I am sure go from strength to strength with the lessons we have learned.

I am bringing this blog to an end. It may be temporary or it may end up
being permanent. The chances are that i will update the blog at
sometime in the future just to let you know that it's still ploughing
on, however it will not be regular and may never happen so just check
back every 3 months or so.

There are a few reasons for my
decision, some of which I cannot talk about at the moment, however the
main one is that because of the blog I am getting emotionally involved
when the system has a losing month. The fact that it's in a drawdown at
the end of a month shouldnt matter because it peaks and troughs no
matter what the date is – the fact it's at the end of the month is

Getting emotionally involved in the trading of a
mechanical system is not good – you start to analyse every facet of the
trades and it can drive you nuts – it almost did in New York and I
can't have that.

It is more important to me to make the project
a reality and produce the money for my and my teams future than it is
to tell you about it and massage my ego. So i'm afraid the blog has to
go. It's been fun and all that and thank's for the massage (Rub &

The soultrader diary blog will continue with various bits and bobs – might even post up some pictures from New York soon.

For now, please everyone enjoy the rest of the holiday break and here's to a prosperous 2007 🙂 Thanks for reading.

10 Reasons My Forex Trading Has Been Profitable

I asked myself the following question today, "what is the most valuable advice I can give to someone trying to become a consistently profitable trader?" 
Before I get into it, let me just say that I've only been consistently
profitable for 4 months.  I am by no means ready to say that I am a
totally competent Forex trader.  I am also not saying that I have
mastered the art and I don't need to learn anymore.  I feel like I've
made decent progress towards my goal of becoming a full-time trader but
I still have a long way to go before I quit my day job.  If I had to
state a percentage of my goal completed, I would say I'm at 40%.   I
may be able to accelerate this figure this year but unfortunately I
realistically see myself working for the man in 2007 and perhaps 2008.  

compiled the following list of 10 things by quickly brainstorming.  It
tries to answer the question, "What is the most valuable advice I can
give to someone trying to become a consistently profitable trader?"

  1. Develop a written trading plan.  This is an absolute
    must.  Don't attempt to just discretionary trade, this is for
    experienced traders.  If you are not yet profitable, you need limits
    and rules that will help you in developing discipline. 
  2. Search for the Holy Grail.   There may not be a holy grail
    but it doesn't mean that you can't look for it.  Continue to explore
    systems, indicators, and anything else you can get your hands on.  It
    will help you in developing as a trader.
  3. Read, Read, Read.   Keep reading anything you can get your hands on.
  4. Keep a detailed log of your progress.   I keep a record of
    all of my trades and I have monthly P/L graphs that are constantly kept
    up to date.  You need to know if you are making progress and this is
    the only way you'll know.
  5. Determine realistic stop loss and limits for the timeframe you're trading.  The key word here is realistic.  Don't use 25 pips stops if you are trading daily charts.  You have to be realistic.
  6. KISS.   Keep it Simple Stupid….  Keep your trading
    systems as simple as possible.  Remember that indicators are just
    derivatives of price.  The more indicators you have on your charts, the
    harder it can be to make a decision. 
  7. Don't randomly trade throughout the day.   Find the
    specific times of day that you can realistically expect your system to
    be successful.  Don't open trades at 3 pm EST, this is just setting
    yourself up for failure.  Pick a time frame and stick to it.
  8. Focus on 1 currency pair.   Don't concern yourself with
    all the different currency pairs.  Pick 1 and follow it closely. 
    You'll be surprised how easily you can get into the flow.
  9. Do back testing.  Back testing may use data from the past
    but it can help you learn more about the system you are testing and
    about trading in general. 
  10. Whatever you do, don't impulse trade.   This is easier
    said than done but it is an absolute must that you try to prevent
    yourself from impulse trading.  This 5 minutes of recklessness can hurt
    you enough to leave you on the sidelines forever.

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