Items Tagged With may 2007

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.    

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 

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.   

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.    

I decided to look over my posts from May 2006 to get an idea of what I was up to back then.  The last 2 years of trading forex has been an absolute roller coaster ride so I figured I could expect anything looking into the past.

Last May, I was about a month of so through Rob Booker's training and mentoring.  Therefore, I was using the channel trading system.  This trading system was very simple and most trading systems I've tried to create since then have been a derivative of it.  From what I remember, trading the GBP went like this:

1. Draw horizontal lines on 15-minute chart at the high and low that occurred during midnight EST and 7:00am EST.
2. Wait for a candle close below lower box line only during US session.  Go short.
3. Wait for a candle close above upper box line only during US session.  Go long. 
4. Set a 30 pip limit and a 30 pip stop or sometimes a 30 pip stop and a 20 pip profit target.

Due to the fact that this system was to be traded only during the US session, I became interested during this period of my trading life with news trading.  I started news trading through FXEngines shortly thereafter in June 2006.

Since last year, I've struggled to maintain a sense of loyalty towards a system.  Due to my nature, I've jumped around a lot between many different systems and styles.  I don't know if this has ultimately hurt my progress or if trying many different things has furthered me along in my journey.  Last year, I also felt like I was really cooking with my forex trading progression.  This year I've felt like I'm stuck in molasses.  

My goal this Memorial Day weekend is to write a plan to get back on track.  How I'm going to do that is unknown to me as I write this.  What does come to mind is something I've learned from working in the IT industry which is splitting tasks up into phases.  Currently, everything I do is lumped into 1 big pile of mess.  The three phases could be:

1. Development - development of trading system, backtesting
   
2. Integration - further development and tuning, further backtesting and forward testing
3. Production - live trading in small lot sizes

Obviously some things may not reach it past the development phase but nevertheless, failure of one method may sometimes lead to a similar method that proves successful.  My goal isn't only in developing trading systems.  I also want to further my knowledge in additional fundamental and technical aspects of trading. 

Just like during the April trading contest, trader QLaun has performed well through the first couple of weeks with a return of 30.29%.  This time though, his maximum drawdown is a respectable -6.49% making him the leader of the Conservative Trader category.   

Trader Got Gas Money2 performed well through the first week of May and continues to do so with a return of 19.07% and a maximum drawdown of only -.98%.  He leads the Money Manager category as of today.

Trader Alex led all traders through the first week of the contest and continues to do well with a return of 11.53%.  His maximum drawdown is slowly creeping towards disqualification though at -17.13%.  He currently leads the Aggressive Trader category.

13 traders currently have a positive return.  16 traders currently have a negative return and there's no surprise that I'm one of them with a return of -2.01 and a maximum drawdown of -1.00%.  Just like I mentioned last week, I'm not losing loads of money but I'm slowly bleeding to death.

Keep up the good work.  $50 Amazon gift certificates are still at stake here.

I was reading Simon's blog where he believes that trading multiple currency pairs is not diversification.  Like he states, going long the GBP/USD, long the EUR/USD, short the USD/CHF, and short the USD/JPY is betting against the U.S. dollar.  If you trade these 4 major pairs, is this diversifying your forex trades or would you be better off concentrating your efforts on only 1 of these pairs? Craig mentions in a comment that he believes that the best course of action is to trade 1 system on a handful of the least correlated pairs.  Simon says that another trader recommends trading multiple systems on 1 pair to diversify.   

I personally have been concentrating on trading the GBP/USD for over 6 months now, but on and off I feel compelled to look at the other pairs, mainly the USD/JPY, EUR/USD, EUR/JPY, USD/CAD, AUD/USD, GBP/JPY, and the USD/CHF.  My thinking was that I didn't want to rely on only the GBP/USD to generate trade signals for me but after reading Simon's post, I'm rethinking this a bit.   I think a combination of the 2 methods above may be my best course of action at this point.  Currently I really only have 1 system that I follow on a daily basis but I'm always on the prowl for more.  I have yet to attempt to regularly apply this to other currency pairs but maybe I should test it on other less correlated pairs.  It may be easiest to put the process in list form as follows:

1. Find a system that gives an "edge" trading the GBP/USD.
2. Find other currency pairs that are least correlated to the GBP/USD.
•  According to Oanda's heat map of currency correlations, the USD/JPY and EUR/GBP are the least correlated pairs to the GBP/USD.  (see heat map below)
3. Test the system on these least correlated pairs.

Is there a better way of diversifying your forex trading other than going outside the forex market to futures, equities, etc? Another thing to think about is whether going this route is neglecting the correlated pairs and the chance that this system may be more successful on them than the GBP/USD?