No Wii For Me

I didn't get a Playstation 3 or a Nintendo Wii.  I didn't show enough dedication to getting either and just got caught up in the hype.   By the time I got to any store, I was already too late.  Here are a couple of pictures showing crowds at Target at 7 am as I was leaving.

 

 

 

 

 

 

 

 

 

 

Popularity: 3%

Forex Trading Hiatus?

I remember last year how painful it was trying to trade in market conditions where volume has been greatly reduced.  This week is Thanksgiving week and therefore falls into this category. 

There has not been a lot of movement in the GBP/USD this week; the price has tightly consolidated around the highs from Friday.  I have a hard time staying away from the market for any period of time and it would be difficult for me to close my charts and not reopen them until Monday but I am thinking about it.   December also tends to be a month where traders take a hiatus but I'm just not experienced enough to know what to expect the rest of 2006.  I've heard that sometimes during these times, the big players do get involved and push the market whichever way they want since it's probably much easier for them to do so.  

There are times when I've felt like I was in the flow but trying to stay in the flow during this time may be fruitless and a confidence killer.  I'll continue to monitor but this might be a great opportunity to take a break from trading until 2007.  Even if I take a break from trading, I won't be taking a break from learning, back testing, or website posts.  Forex has become such a part of my life for the last 17 months or so that I wouldn't know what to do with myself…

How Long Will Low Volatilities in FX Markets Last?

Where has all the volatility gone?  

Popularity: 1%

Forex Ratings and Reviews

I have added another new feature to the site called "Ratings and Reviews."  This will be a repository for all reviews by you and I for all things related to Forex.  I'm currently working on adding Forex Brokers to start.  I will add more categories of reviews in the coming days such as software, signal services, mentors or educators, managed accounts, and more.  It would be great if everyone could contribute.   The more contributors, the more useful the content becomes.  You can find the link always in the left menu under Forex Resources called Ratings and Reviews.

Popularity: 1%

Even the Experts Do Not Make a Killing

I wanted to show Kathy Lien's and Boris Schlossberg's trading results for the last 2 months so that everyone can see what reality is.  For those of you that don't know who they are, they both have written books on trading Forex, are both currency analysts at FXCM and they both regularly appear on CNBC.  The results below are for the trades that they made public.  What goes on behind the scenes is obviously unknown to me. 

Their results are good; they made 366 pips between September 29th and today.  I'm bringing it up because I think it's important to have realistic expectations when trading.  When I first started trading, I thought it would be easier to make a living doing this.  I quickly changed my thinking.  Also, when you see "experts" making 366 pips in 2 months, you wonder how it would ever be possible to do this full-time. 

If you average 400 pips every 2 months trading 2 100K lots, that's a total of 2400 pips over the year.  That's approximately $24,000 a year.  That's it!  That's not a lot of money.  I think the only way to do this for a living is to have plenty of capitalization so that you can trade more than 2 lots.  In order for you to make $96,000 a year, you would need to trade 8 100K lots each trade.  That would give you 4 times as many pips and therefore 9600 pips over the year. 

How much capital would you need to start if you wanted to trade 8 100K lots with only a 3% risk per trade to your account.  Let's use 30 pips as a stop loss for this example.  If you lost 30 pips trading 8 lots, you would lose a total of $2400.  Therefore, you need to have $80,000 in your account if you only wanted to risk 3%.  

If my calculations are off, let me know but the reality is, even if you can consistently make good trades each and every month, you need a lot of capital to start to make a living.  I'm assuming that you have to make $96,000 a year but some of you may require much less.   For those of you in the New York City area like me, $96,000 isn't rich and I'm sure it's the same for a lot of other people in California or other parts of the country or world. 

 

 

 

 

 

 

Popularity: 2%

Did Anyone Else Feel Good About This Week?

This week was certainly not my most profitable week; I managed to grab 66 pips from the market but it was the way that it was done that makes me feel like I'm making some real progress.  I can't fully explain what I mean because it is was just a feeling of:

1. Confidence to enter a trade based on my trading rules
2. Acceptance if I lost or if a particular trade didn't go my way
3. Calmness which may or not be caused by my zombie-ish state
4. Cognizance of the flow of the market

Turn this into an acronym, and I can say that I was feeling C.A.C.C.

I'm not close to being where I can confidently say, "I'm a trader" but I feel like I'm progressing.  After all, it's taken a lot of work this month to be down 9 pips and $245.00.  :) 

Yes, it's taken a lot of work to lose 9 pips but I'm content with this.  I still have another week and a half to try to get back in the black to make November the third consecutive winning month for me.  This really isn't important to me though.  I'll be willing to accept a losing month if was able to learn more or make more progress towards my goal.  

I'll have another money management post out a little later today but I'm done trading for the week.  I had a short H-system trade on the GBP/USD that sat dormant for about 6 hours without moving much so I closed it for a 2 pip loss.  I closed it for 2 reasons: 

1. I had this delusion that I might be able to get my hands on a PS3 if I got to Target 1 hour before it opened this morning.  No such luck.  Since I was PS3 hunting this morning, I didn't have access to a computer and couldn't manage my positions.
2. I usually get in and out of an H-system trade during the European session but this pair just wasn't moving this morning.

I've decided that each week I'll try to have a central theme like I had this week with money management.  I'm not sure what next week's will be but if anyone has any requests, let me know.  Take care.  Enjoy the time off this weekend.

Popularity: 1%

The Martingale Method

The Martingale Method is not a trading system, it is a money management method, moreover an interesting one.  Follow with me because the logic is simple.  You can read more about the Martingale Probability Theory here.

Martingale Method I

Assumptions:

• You are using a discretionary or mechanical trading system.
• You know your system well therefore you know how many consecutive losses your system has ever had.  For this example, we'll assume your system has had at most 10 consecutive losses.
• You trade 3 lots.

Scenario:

•  You have had 10 losses in a row trading 3 lots per trade.  

Conservative Martingale Method I Example:

1. On your very next trade after losing 10 in a row, increase the lot size to 4
2. If this 4 lot trade is a winner, go back to normalcy trading 3 lots.  Your done using Martingale for now
3. If this 4 lot trade is a loser, increase the lot size to 5
4. If this 5 lot trade is a winner, go back to normalcy trading 3 lots.  Your done using Martingale for now
5. If this 5 lot trade is a loser, increase the lot size to 6
6. etc, etc, etc

Keep increasing lot sizes by 1 until you win.  I think you get the point.

Martingale Method II

Assumptions:

• You are using a discretionary or mechanical trading system.
• You know your system well therefore you know the average number of losses your system has before turning a winner.  For example, we'll say that on average, your system has 3 losses before turning a winner.
• You trade 3 lots.

Conservative Martingale Method II Example:

1. You are currently not in a trade.  You will wait until your system has 3 consecutive losses before doing anything.  You WILL NOT trade.
2. Once your system has 3 losses in a row, start trading your system again.  Your first trade will be a 3 lot trade.
3. If you win, great.  If you lose, increase the number of lots to 4.
4. Increase the number of lots until you win.

Aggressive Martingale Method II Example:

    The only change here would be to enter your first trade with a larger lot size than normal after  your system has 3 losses in a row.  So instead of just trading 3 lots, trade 4.  

Popularity: 3%

Sony PS3 Missing at Walmart

I just got back from visiting Walmart store #3598 today at 2:00 pm EST on Wednesday, November 15th.   I pried information regarding the upcoming releases of the PS3 and Wii from the salesman that some of you may already be privy on.   The PS3 display is all set up and ready to go but with a day and a half left before it goes on sale, there are absolutely ZERO PS3's in the store.   He said they are having problems in Japan and the total number they were to receive was changed from 10 last week to only 2 today.  He said the Wii shipment is in already and sitting in the back stockroom.  He said there are exactly 40 of these ready to go on sale when the store opens on Sunday morning.  Who's going to wait outside all night to fight over 2 PS3's?

Popularity: 3%

Logical Stop Placement

Since I have deemed this week, "Money Management Week", I felt like I should mention a new Investopedia article titled, "A Logical Method of Stop Placement." I'm not overly impressed by the article but you might find it more useful than I did.   The author gives a brief overview of 5 different types of stop methods:

1. Hard stop - placing a stop a predefined number of pips away from the entry price
2. ATR % stop - stop calculated by taking a percentage of the current ATR
3. Multiple day high/low - placing stops at predetermined day's low or high
4. Closes above/below price levels - placing stops above or below specific price levels (ie: double zeros)
5. Indicator stop - stopping out a position based on the value of a certain indicator (RSI, ROC, CCI, etc)

You can read the article in its entirety.

Popularity: 2%

Mistake Costs Me

I wanted to give a quick trading update since I haven't talked about it in a while.  I've been quite the flip-flopper trading the H-system.  I was going to give it up, then I decided to stick with it, then it was depriving me of sleep so I stopped again, but now I'm trading it again.  One of the reasons I decided to start trading it again was because of the alerting capability that I discovered in Metatrader.  I'm sure a lot of you were well aware of this functionality but for some reason, I just never explored it.  Having the ability to set sound alerts will help immensely with this system.  Alerts will still wake me up from a dead sleep but not during unnecessary times. 

I set an entry last night that was triggered between 1:00 am EST and 1:30 am EST.  This time period falls outside of the allowable times that the H-system rules state so the entry really was a mistake.   From my observations, I just found that the GBP/USD is erratic during this time and therefore I don't trade during this time.  This morning, I lost 90 pips because of this mistake but I was able to make it back on a discretionary trade of the GBP/USD that netted 103 pips.  This brings me to money management.  I entered this trade with 2 profit targets.  The first profit target was hit without any intervention from me and the position closed.  My second profit target wasn't hit but I decided to close the position out at around 7:45 am because of 3 reasons:

1. Economic releases this morning and afternoon - I've always had a hard time trading longer term charts (this trade was generated from the daily chart) because I just am not patient enough to wait for my profit target to get hit.  I worry that an economic announcement can wipe out any gains from this position. 
2. Fear - Like I stated in #1, I was worried about an economic announcement wiping out my gains.
3. The previous trade - Since I lost 90 pips on my previous trade, I was content with taking profit because the gains make up for the loss.

I don't know if any of the 3 reasons above are valid reasons for exiting my position prematurely.  My reward/risk going into the trade was 2:1 but by exiting it early, I really only got a reward/risk of slightly over 1:1.  

Popularity: 1%

Anatomy of a Trade

I just finished this flowchart that summarizes the flow of a trade using money management techniques.  Of course, this is totally discretionary from the amount of lots traded, stop loss placement and target profit placement.   If it's useful to me or you, maybe I'll add hyperlinks to pictures of chart examples. 

 

 

 

 

 

Popularity: 1%

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