I Got Hacked
My site was hacked sometime between yesterday and today. I noticed the site was down Sunday late afternoon. Hacker bastards…. Everything is back to normal now. Continuing to fight the forces of evil…
One Step Closer To His Goal
I recently received an email from a trader, Craig who I've chatted with via email or comments over the last couple of years. I'm glad to see he's still going too.
"Hi Rich, you probably remember that I started about the same time as you. Like you, I now bleed at a snails pace. However, I do feel I'm getting closer. I went though a long period of trying to be personally disciplined, trading the London open etc, but I just can't do it as I am already tired and stressed from my job and life in general. However what I can do is discipline myself to write code on the weekend and back test. I think it's important to realize when something is not working and not to be worried about moving on. I flogged myself trying to trade many systems (linuxtroll simple scalping, Point and figure, CCI etc.) Nothing really worked. Now I only trade automated and only if I can mathematically prove that I have some sort of positive expectation on unseen data. I can see how trading is anything more than that. Am I making a killing? Not yet… but I do feel that each time a system fails, I learn something new which brings me one step closer to my goal, which is the same as yourself and Simon's.
Thanks for the email Craig. Of course I remember you.
Forex Rankings Updated Today
Forexontop.com was updated today with the latest traffic rankings. The site was redesigned last week pretty much from the ground up including the new logo. Newest links include:
What’s with forexpros.com? I never heard of this site but it’s moving up rather fast. Seems like most of the content is unoriginal and just aggregated from other sites. If I’m going to go to a forex portal, I’ll usually go to FXStreet which is much better.
Closer To Trading For a Living
I haven't been able to put a lot of time into actual trading. I woke up late twice this week and didn't have any time to look at the charts before heading to work. It's never a good idea to try to trade when you're in a rush. This is a recipe for disaster. I've done it in the past and won't do it again. On top of that, Wall Street hit me hard this week when bonus numbers were released. It just figures that the hit was hard yet the work load has increased at a fast and furious pace.
I remember a post that Simon had a couple of weeks ago about not putting pressure on yourself to trade for financial freedom. Instead, he said trade towards material things like a plasma television or something else. If anyone has worked long enough in the corporate world, you've seen someone get layed off after 20 years of service or your compensation decrease. Therefore, guess who owns you. Time will tell if trading is my route to financial freedom but there's no doubt that my goal everyday is to strive towards the goal of trading full-time so I'm in control. I love gadgets and big screen televisions but the thought of owning them do not motivate me. It's up to you to find that motivating factor.
That brings me to my end of year question, "Do I feel any closer to becoming a full-time trader?" The answer is no. I've made a lot of progress over the last 2+ years but no where near where I have to be. Where do I have to be? I don't know, a lot further along than where I am now. I've made leaps with managing my money so that now when I bleed money, it's at a snails pace but I have to be honest with myself. If I'm not showing a consistent profit, I'm no closer to trading for a living. I'm not discouraged, I have a renewed sense of motivation since I started trading again in November. Trust me, I'm not going down without a fight and will continue the struggle in 2008.
Money Management Checklist
UPDATE (January 2008) I’ve created an AJAX forex position size calculator that performs the calculations for you. You can find it at http://www.forexcalc.com
Here is a complete checklist to determine the most important aspect of money management, position sizing.
1. What is my account balance? $4234.58
2. What percentage of my account balance will I be risking? 1.0%
3. What is my stop loss on this particular trade? 50 pips
4. What currency pair am I trading? GBP/USD
5. How much is a pip worth on a 10K (mini) account? $1
6. CALCULATION What is my dollar risk amount? (Account Balance x Percentage Risk) $42.35
7. CALCULATION What is my position size (Dollar Risk Amount x 10000) ÷ (Stop Loss x Pip Worth)
NOTES
- None.
- It’s up to you to determine what percentage of your account balance that you want to risk. I’ve heard traders risking from 1.0%-5.0% per trade. I risk no more than 1.0%.
- It’s important to determine what your stop loss will be before continuing with the checklist.
- None.
- This is the hardest to determine by hand with the exception of currency pairs with the USD in the quote currency such as the GBP/USD, EUR/USD, and AUD/USD. These currency pairs always have a pip worth of $1 on a 10K (mini) account. For other currencies, it’s easiest to use a pip value calculator. Make sure you use the pip value from the "Lot 10,000" column.
- This is easy. Take the account balance and multiply it by .01 (1.0%), .02 (2.0%), etc. to obtain your dollar risk amount.
- This is the most important calculation. Do it right.
EXAMPLE #1 (Answer questions 1 – 7)
- $4234.58
- 1.0%
- 50 pips
- EUR/USD
- $1
- USING A CALCULATOR-> ($4234 x .01) = $42.35
- USING A CALCULATOR-> ($42.35 x 10000) ÷ (50 x $1) = (423500) ÷ (50) = 8470 units
What you might be thinking… I can only trade a mini-lot which is 10,000 units. This is more than my calculated position size. This means that you are under-capitalized. You need more capital to trade mini-lots. Another option is to use a variable-lot size broker like Oanda where you can specify 8470 units. Another option is to risk a smaller percentage per trade (use 0.5%.)
EXAMPLE #2 (Answer questions 1 – 7)
- $10582.26
- 2.0%
- 75 pips
- USD/JPY
- $0.8829
- USING A CALCULATOR-> ($10582.26 x .02) = $211.65
- USING A CALCULATOR-> ($211.65 x 10000) ÷ (75 x $0.8829) = (2116500) ÷ (66.22) = 31962 units
In this example, you could enter a trade in the USD/JPY with 3 mini-lots or 30,000 units. If you have a variable-lot size broker like Oanda, you can enter a trade with 31,962 units.
There may be a better or quicker formula for calculating position size. This method works but if you know of a more efficient way, let me know.
January Forex Trading Contest
I’m starting up the Forex Trading Contests on Oanda again. They were relatively successful in the past so I figured I’d try to organize them again to start in 2008.
Sorry, there won’t be a prize for the January contest. Last time I offered $100 Amazon gift certificates to three winners. I
wanted to see how this contest went and maybe offer prizes again in
February.
Why should you join? I don’t know, maybe because it gives you that little bit of competitive feeling you may be looking for to make that demo account feel "more real."
Contest starts January 1st at 00:00 EST so be sure to sign up before then.
To read more about it or to join, go to the Forex Contest page.
Combo Profit System Review
I've decided to get back to some of the things I used to do which was reviewing trading systems and websites. The first system I've decided to review comes from a website that has decent traffic rankings (#49 on forexontop.com). I figured if there are a lot of visitors going there, there's a good chance he's selling his system. Therefore it makes a good candidate for a review. The system, called the Combo Profit System is provided by a trader named David Chia. David was gracious enough to send me a free copy of everything he offers on his site. This includes the following which would have cost $97:
- E-book detailing the Combo Profit System
- E-book Forex Online Manual
- Meta Expert Advisor of the Combo Profit System
- Free Membership to FX Nation
- Four Self-Help Books
- Three Trading Videos
- E-book detailing Penny Stock Trading System
- More bonus E-books
Some of the things David mentions on his site, http://www.profitguideforex.com are that the system doesn't require any trading experience, you can create your own trading signals, it will require very little time, it's easy to understand and easy to use, is step-by-step and can potentially make tens of thousands of dollars a month. This offer is risk-free according to the website in which you can try the system with an 8-week 100% money-back guarantee. Since I got it for free, I can't verify the fact that's it's risk-free.
As you can see above of what's included, there's a lot of reading material. I wasn't interested in any of the e-books except for the one detailing his system. I did look over the other e-books and they contain general information on the forex market, fundamental analysis, technical analysis, risks, and fibonacci analysis. This is all stuff I've seen everywhere on the internet for free. That's fine, according to the website, this is all "bonus" material.
David's E-book detailing his system was split into three sections, the first being an introduction. In the introduction, he explains candlesticks, chart patterns, pivot points, and technical indicators. It's a sufficient overview but nothing exclusive that you can't find elsewhere for free. The second section mentions money management and trading psychology. He explains stop losses, moving stops, and winning trader psychology. Nothing exclusive here either. There's also nothing explicit about position sizing in here and only six pages to explain the most important topic to beginner traders, how to control risk. The last section details his combo trade system which uses a combination of moving averages, technical indicators, candlesticks, and fibonacci projection. I was surprised at what I found. This system is targeted at people who have no trading experience yet it requires discretionary trading based on determining trends from higher time frames, candlestick analysis, fibonacci projections, fibonacci retracements and chart patterns. These are all subjects that someone off the street that's never traded forex before would have a hard time digesting. As far as being a step-by-step system, it includes:
- Trade Setup
- Trade Rules
- Stop Loss
He satisfies this claim to a certain extent. Is the system easy to understand and easy to use? Not really. I didn't have a hard time understanding it but a beginner might. There's also only two graphic examples and he just shows the absolute best case scenario for the trade. This bothers me. Why not show examples of outcomes that aren't expected. Overall, there is nothing groundbreaking or new in this combo system. I've seen this a thousand times on free websites and forums.
David also offers a free Metatrader expert advisor that contains an EA and a bunch of technical indicators. There are no real instructions or documentation that explain the indicators included or even how a beginner can use the EA. I gave David the opportunity to provide any additional instructions but he questioned if I was who I said I was (Rich from Forex Project) and wondered how I didn't know how to use an EA. I know how to use an EA but someone who buys the system sure won't.
For $97 dollars, you get a whole lot of quantity, way over 1000 pages of reading material, but not a lot of quality. I'm not going to label this a scam but it's not worth $97. You can buy a forex book for less that gives you much, much, more. In my opinion, there wasn't a lot put into this except a goal of making a quick buck. This is merely a package of e-books and information that you can find on the internet for free.
I appreciate David providing this to me for free. He did so with nothing to hide. I requested the same from the Forex Killer (http://www.forex-killer.com) authors twice and never even received an email back.
Time Magazine Article On The Forex
There's a Time Magazine article today titled, "Should You Bet Against The Dollar?" The article talks about why it may not be a good idea to jump into the retail Forex market; mainly for 3 reasons.
- There's no certainty that the dollar will keep falling. So if you were thinking of getting in to hop on the Diving Dollar Train, think again.
- Investing in "The Forex" is extremely risking especially if you use all of the available leverage given to you by your broker.
- Because it's complicated and right now might be the worst time to experiment with currency trading.
http://www.time.com/time/business/article/0,8599,1690111,00.html?xid=rss-business
By The Numbers – Why I Lost In November
There's a simple explanation as to why I lost 2% in November. If my
winning percentage is 44%, my reward has to be greater than my risk,
which it was not.
Number of Winning Trades in November -> 11
Number of Losing Trades in November -> 14
Winning Percentage in November -> 44%
Total Pips Gained (Winning Trades) in November -> 489 pips
Total Pips Lost (Losing Trades) in November -> -779 pips
Average Pips Gained Per Winning Trade in November -> 44.5 pips
Average Pips Lost Per Losing Trade in November -> -55.6 pips
Expectancy -> -.21
Losing Streak Dooms November Trade Results
After an almost six month hiatus from day to day trading, I got back into trading forex at the end of October. Since then, I've tried to follow the economic news more consistently, tried to post more regularly to this blog, and tried to get back into the flow with between 1-3 currency pairs. Though I've "tried", I'm not quite where I want to be and never quite sure I ever have been. This may just be the best that I can do considering I have a full-time job and other responsibilities (similar to a lot of you.) One thing that I think I can do to improve my trading is to get in the flow with the market during the European/US session overlap. As of yet I haven't been able to but I think all this requires is changing up my schedule a bit so that I'm in front of my computer at around 7 am EST.
November could have been an up month for me had I not lost my last four trades. Losing streaks are all part of trading though, so I don't feel too bad that I'm down 2%.
What did I do wrong in November? I jumped the gun on a couple of trades this month before my systems showed buy/sell signals. This wasn't due to impatience but more because I felt my signals would generate while I was sleeping. I lost a couple of trades because of this and will try not to make this mistake again.
What did I do right in November? I feel like my position sizing strategy controlled my risk very efficiently. There would have been another time in my trading career when I'd be down a lot more than 2% when being down 290 pips during a particular month.
I'm not going to change much going into December because I think I have a good base to build on.
