Rich is Trading Forex Again

So after yet another hiatus from trading forex, I just recently had my first trade in months. It was a successful one also. But the question I want to answer is, “Is this blog dead?” The answer is no. I’ve made a living over the past 3 years ducking in and out of here depending on what’s going on in my life. Sometimes I’m just too swamped at my real job, other times I just don’t feel like writing, but I always come back. The great thing is I’ve built up a lot of content over the years so a lot of it applies to the type of forex trader you’re trying to become.

So where do I go from here? I’m in the mood to start trading forex again so that’s what I’m going to do. I’m also going to talk a little about stocks. I’ve had a lot of success, believe it or not, trading the stock market in the last couple of months and I think I’ve learned some things that I could apply to trading forex. So you’ll hear me talk about some of these things also.

Stay tuned….

My Trade History

My trade history is being migrated for the new site redesign. It will be back shortly.

One Good Reason To Exit a Forex Position Early

Ask my subconscious self why I exited my position "early" today and he might tell you that it was due to fear.  Ask me why and I’ll tell you that it was not fear but a necessity to boost my psyche.  Let me explain why.  

I measure my performance month to month.  I may have gained 7% in January and 10% in February but to me, March is a whole new month.  So when March 1st came, in my mind, I was at 0%.  I like measuring this way for two reasons.

1. If you had a bad month, it gives you a chance to reset and start over from 0.  Why carry over the loss and put that additional pressure on yourself to "get it back."  Technically, you are still down compared to the previous month but I think it just puts you in a better state of mind.  On the flip side, if you had a profitable month, why risk the chance of instilling overconfidence or invincibility.  Reset.
2. A month typically gives you enough time to come to that average win/loss percentage.  Measuring week to week is too short. What if you had only one trade.  This wouldn’t accurately reflect your overall trading performance.  Measuring longer than month to month and you might miss the chance to assess your trading before it’s too late.  End of month performance assessment can lead to important changes that may improve your trading.   

So why did I exit my position early this morning? I entered a long AUD/USD position yesterday with the intention of holding until I obtained at least a 200 pip target but the pair shot up nicely this morning and I was quickly up 100 pips.  I exited here for one reason, to kick the month off on a positive note.  This was important for my confidence going forward this month.  Exiting a forex position is also a good idea if you’re stuck in a losing streak.  Why risk the chance of losing the profit and losing even more confidence? Take the profit and put an end to the losing streak. 

Check out these other forex blog posts.

1. Forex Trading Profit Up 9.6% In February
2. How Many Times Have You Exited a Position Early?
3. Forex Trading in the Black
4. The True Test
5. Six Percent Loss This Week

Fundamental Analysis + Technical Analysis = Success

There is a research paper that was brough to my attention by one of the authors which finds that combining two types of information (fundamental and technical analysis) improves risk-adjusted performance of an investment strategy.  This paper specifically addresses the success in 23 emerging  markets. 

I asked one of the author some questions.  Here are their answers.

How long and how much research was put into the paper?

The four of us have spent in total about one man-year of work into creating this research paper. We will present it at the emerging markets conference at Cass Business School in London in May ’08.

Do you or the other researchers have experience as professional traders?

Two coauthors of mine are purely academic, but one is at ING Investment Management and I myself am at the Quant Strategies dpt of Robeco Asset Management. I would like to tell you about our quantititave strategies and how we apply our insights in real live portfolios, but our compliance departments do not allow this. So you could mention our affiliation with
professional investment teams, but nothing about the practical application.

What is the main attraction of the paper? 

I think the main attractor of the paper is the (slightly changed) abstract: The authors measure the profitability from fundamental and technical trading rules for emerging markets currency investments. Using a sample of 23 emerging markets with a floating exchange rate regime over the period 1995-2007, they document that both types of information can be exploited to implement profitable alpha trading strategies. In line with evidence from surveys of foreign exchange professionals concerning the use of fundamental and technical analysis, the authors find that combining the two types of information improves the risk-adjusted performance of the investment strategies, with Sharpe ratios above 1.4 for emerging currency markets and above 0.5 for developed currency markets. These results indicate that active currency traders may wish to expand their strategies to emerging currency markets, where alpha opportunities seem to be larger.

You can download the paper from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1088222

Rob Booker Is a Top 20 Mover

I announced last week that Forex Most Visited Websites, http://www.forexontop now has another level of criteria to rank forex websites.  Last year, sites were ranked using only Alexa rankings.  Then Compete rankings were incorporated.  Now Quantcast rankings have been added to the mix.  Rankings changed a lot last week when Quantcast was added but this week, the rankings have stabilized.  

The largest gain this week was Rob Booker’s site which moved 12 places to #74.   Another top mover was Ckowyong Blog which I found sort of interesting.  I didn’t go into depth on the site but the site is dedicated to finding the best forex expert advisor.  He posts real-time results of all EA’s that he’s currently testing.  

I also want to mention something unrelated.  You may have noticed that I’ve been adding additional text to the bottom of a post with a link back to Forex Project or links to other related articles.  Firstly, I think some of the related posts are definitely useful.  Secondly, I’m doing it because of all the scammers stealing my content.  Instead of putting any effort into their own blog or website, they just go out and scrape data, posing it as their own.  So what I’m trying to do is to at least make it known whose content it really is.      

Explore these other Forex Blog posts:

1. Quantcast Ranking Added to Forex Most Visited Websites
2. Oanda is #1 in Traffic
3. New Search Feature
4. Most Visited Forex Websites
5. Forex Top 100 Sites Explanation

8 Practices For Long-Term Forex Trading Success

1. Trade for the right reason.  Do you trade due to boredom or for excitement? These are bad reasons.  Why else would you trade except to make money.  
2. Match broker to your needs.  This one could take some time and experimentation.  Even after finding the broker that meets your needs, the job is not over.  I’m always revisiting brokers I’ve rejected in the past to see if they now meet my requirements. 
3. Understand the risks of a position.  This is very important.  I keep the understanding of my risk simple.  I know that most of my positions will risk 2% of my total account balance.
4. Select entries carefully.  I have predetermined entry rules because I want to keep the entry as unambiguous as possible.
5. Mechanics trump everything.  Know the market you’re trading.  Become an expert.  This will come with experience.
6. Have a plan.  I don’t think I need to elaborate on this one.  This is a must.
7. Have a well-defined exit strategy.  After all, if you don’t have an exit strategy, how will you ever make money.
8. Don’t put all your equity in one trade.   As I mentioned in #3, I risk at most, 2% on one trade.

You can read a more in-depth discussion about these 8 practives in the March 2008 issue of Futures Magazine.

To read more forex articles, head over to The Forex Project. 

Write a Guest Post For Forex Project

I’m looking for guest posts from you, the forex trader.  I find that comments and emails submitted to this site are often very helpful so I think it’s a great way to share your experiences to the large audience that visits here daily.

This is what I’m looking for:

• Practical trading tips, experiences, opinions, or anything related to forex trading.
• Posts can be of any length.
• Posts shouldn’t contain a lot of self-promotion.  I certainly welcome you to mention what you do and I will have a byline link.
• Posts should contain original content not found anywhere else on the web.  I don’t want to be penalized by search engines for having duplicate content. 

You can submit your guest post directly to rich@forexproject.com in any format you wish (text, Word, html, pdf, etc.)

Forex Most Visited Updated

Forex On Top was updated today and is quickly approaching 400 sites.  There weren’t any rank changes in the top 20 but there were elsewhere.

Top 20 Movers

Top 20 Losers

Six Steps To Blow Up Your Forex Account

There are a lot of traders out there that have totally blown up their accounts.  I'm one of them.  Unfortunately, I never really knew how quickly this could happen until I actually did it.  Here's a brief synopsis of the events:

1. I'm trading normally, with what I think is sound money management, slowly trying to build on my capital.
2. Win 1, loss 1; win 1, lose 2; win 3 lose 1; win 1 lose 3; this can go on for quite some time.
3. Then a consecutive losing streak happens, 3 in a row, 5 in a row, 10 in a row, who's counting.
4. Emotion get the best of me, I start over-leveraging to try to get back what I've lost.
5. Things get worse and my balance is low.  Let me ride the rest on this 1 trade.  I can make it back. 
6. Kaboom! Margin call.

The last 4 steps can happen so quickly that before you know it, you've totally blown up your account.  Fortunately, I've come back from this smarter.  Instead of a blood gusher, I'm a slow bleeder.  Colin over at Forex Spirit had a rough December.  His 2007 equity graph alone shows how rough.  Check it out, you may learn something.  I think it was an important step for him to actually throw it all out in the open and write about it. 

What to read more about REALLY blowing up your account?

New Forex Position Size Calculator

The blog’s been silent since Sunday which usually means I’m busy doing other things or concentrating on trading.  That has definitely been the case this week.  I’ve been participating in the forex trading contest, getting Metatrader primed and ready for backtesting expert advisors again, finishing the development of a new AJAX forex position size calculator, trading for real, and working my real job.  Being busy is probably common for a lot of you out there too who are trading forex but have real jobs and responsibilities.  

I’ve searched around for a forex position size calculator but what I mostly found were pip value calculators, excel calculators, or calculators that were part of some proprietary trading platform (like Oanda’s.)  I didn’t find what I was really looking for which was a simple calculator that gave me a recommended position size in units and where I just had to enter my account balance, the percentage I want to risk on a trade and my stop loss.  So this is exactly what I developed.  It’s completed and in beta at http://www.forexcalc.com.  It currently only works with accounts in USD but I’ll expand on that later.  You have a choice of determining the position size for 110 currency pairs, way more than you’ll ever need.  It also works no matter what your account size is.  It can be $1 or $10,000,000 though I doubt anyone with an account this big would utilize it.  

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