Items Tagged With h-system

The H-system started me off well this week with a trade that almost wasn't.  I had an appointment with my lawyer at 10:30 am this morning and at 9:00 am, my orders were still sitting unfilled.  It didn't seem like they had a chance of getting triggered so I cancelled all of my orders.   When I was about to leave after 9:30 am, I noticed that my entry price was about to be hit.  A lot of things were going through my head like:

1. Just close your laptop and forget about the trade, you have an appointment anyway
2. The ISM report is coming out at 10:00 am, do you really want to enter a trade so close to the announcement
3. If I don't trade this signal, I'll regret it later if it turns out to be a winner
4. You're better off not trading it because if you do and it turns out to be a loser, you'll tell yourself "I told you so" later

Ultimately, I didn't want to ignore the signal to buy the GBP/USD that my trading system was giving me because I had done this a couple of weeks ago and the trade would have been a winner.  For consistency purposes too, I wanted to adhere to my trading rules no matter what. 

First, I went long 3 lots.  Second, I hung around a little bit to see if I could move my stop up if the pair went my way.... it did.  Third, I was able to leave 20 minutes after I entered because it was already up over 20 pips each lot and I moved my stop up to break even.  I got to my appointment on time, plugged in my Verizon wireless card, and managed my trade from my laptop.  I profited a total of 123 pips but it wasn't easy.  I have to wonder how long I can continue with my dedication to trading and not let it get in the way of the rest of my life.  We'll see but getting rid of the full-time job sure would help.

I had another good trade with my new system during the European session this morning capturing 60 pips even though I muffed the trade.  Instead of putting in a 3 lot trade, I only put in a 2 lot trade.

I'm happy with the way things are going right now.  Before I started trading this system, the results from the end of August and beginning of September showed that it produced 10 wins out of 11 trades with a profit of over 700 pips.  Since going production, I've produced 5 wins out of 6 trades and over the last 10 days, the system is up 388 pips or $3880.  

Even though I pretty much know my entry when I go to bed, I still need to manage the trades if initiated during the European session.  If a position opens, my phone lets me know so it wakes me up out of a dead sleep.  Over the last year of dedicating a lot of my time to learning this business, more times than not I'm a walking zombie.  I think that if you want to make it day trading the FOREX, this is necessary and the price you have to pay.  So if you like the movement that the European session has to offer and you have a full-time job in a US time zone, be prepared for sleep deprivation.  I'll try to catch up this weekend but I doubt I will.

After performing backtesting and limited forward testing, I've decided to expand the currency pairs that I trade the H-SYSTEM with.  I've been searching for months now to find additional currency pairs where this strategy might work.  I will always take the GBP/USD H-SYSTEM signals because this has proven to be profitable.  In addition, I'll also look at taking signals on the GBP/JPY and GBP/CHF.  From my studies, the GBP/JPY may have more conducive moves for this strategy than the GBP/USD.  I've also found that in backtesting, if I lose on a GBP/USD trade, the GBP/JPY would often give me a win.  This would not totally cancel out the loss since a pip is worth less with the GBP/JPY than the GBP/USD.  I have thought about the lack of diversification considering trading any of these three pairs are all betting on the British Pound to strengthen or weaken.  I've determined that this doesn't matter to me at this point.  If it works, it works.  Another drawdown of using these additional currency pairs are their increased spreads, typically 7 pips at Oanda.

I've wasted no time in incorporating this into my trading plan, maybe a bit hastily. I had three short signals this morning on all three pairs, GBP/USD, GBP/JPY, and GBP/CHF.   Two of the three positions were profitable for a total of 180 pips.  The GBP/CHF lost.  So if I had only traded the GBP/USD, the results would have basically been the same, +90 pips.

I'll have to see how this goes in the upcoming weeks.  The point of this isn't to stretch myself thin but to give myself more options when trading this strategy.  My ultimate goal is to have multiple strategies but my time has been consumed with just the H-SYSTEM for 6 months now.  Some of you had great comments in the Carry Trade post and developing or reusing some Carry Trade strategy may be a future goal.

I had a decent start to 2007 with two h-system trades this week.  The first generated a profit of 96 pips and the second, a profit of 120 pips.  So after the first week of trading this year, I'm up 216 pips.  These were the only two trades I stuck with this week.  What happened to the trades that I didn't stick with?  The first was the GBP/USD trade I mentioned earlier in the week that I just guessed on direction. http://www.forexproject.com/Blog/Investing_and_Trading/Forex_Is_No_Guessing_Game
After placing the trade, better judgment took hold and I closed it at break even.  This trade would have turned out to be unprofitable.  Another trade I placed was a short AUD/USD.  I closed this too after opening it at break even.  This trade would have been very, very profitable.  I'm still glad I closed it though because my focus was being taken away from my current strategy.  This trade was more experimental than anything and once again, better judgment took hold.

I didn't take any Lien Schlossberg trades this week.  The first trade call came in when I wasn't ready and by the time I was, the first target was hit.  The second trade call was profitable but for the currency pair NZD/JPY.  Oanda and FX Engines don't directly offer this pair so I would have had to do it in the legs.  This means if they were recommending a 1 lot NZD/JPY short trade, I would have had to short 1 lot of NZD/USD and .6982 lots of USD/JPY.  The entry would have been fine but exiting more difficult.  I couldn't use their recommended target or stop for the NZD/JPY so I would be forced to manually watch this pair's real-time price to know when to close out my "legs." This was just more trouble than it was worth so I passed on the trade.  Their service was profitable on paper; 39 pips.   This is just my opinion but they definitely seem like they are playing it ultra cautious to kick off their paid service.  Another issue is with their actual calls.  They never have a predetermined entry price, they always make the call at the market price.  This doesn't give you sufficient time sometimes to enter the trade.  First you have to receive and read the email or text message.  Then you have to open your trading platform.  Then you have to place the trade.  I'll continue to see how it goes but this week was a wash using their service.  I still have the opportunity to cancel at the end of the month at no cost to me if it doesn't work out.

NFP this morning created some nice moves as usual.  I just watched from the sidelines, hesitant to "guess" before the release.  The movement was so rapid after the release that I just wouldn't have felt comfortable entering a trade.  Maybe one day I'll be able to trade economic releases but it's definitely not in my plans right now.  

Smart trading....

All I can say is that I had quite a setback today.  I'm writing this as my positions just closed out so I'm really disappointed at my stupidity.   Quite simply, I was trying something new and I got bit.

I was short on a 3 position GBP/USD trade that was profitable most of the European session yet not enough to hit breakeven or profit targets.  Then came the US CPI economic announcement this morning.  I have never felt comfortable being in any position going into an important US announcement and this time was no different.  I took my stop losses off the positions with the thought that I would close manually 1 minute after the announcement if my positions were down.  My reasoning? I wanted to prevent from a false spike taking me out of the positions which had happened many times before only to find out I was right.   If anyone was watching the market, you know what happened.  The price did spike but got pegged GBP bullish, the complete opposite of my positions.  I didn't even have time to close out my positions in a timely manner.  I painfully closed all 3 positions at a 75 pip loss each which was 2 1/2 times greater than my normal stop.  

This trade hurts for many reasons:

1. I went from being profitable by 129 pips in December to -96 pips in December
2. Went against my own good judgment
3. I was very patient all week and lost it in a minute
4. Not only does this wipe out my profits for December but also for November and part of October

So you can see how damaging 1 trade can be and it's not even the money that affects me as much as the mental setback.  It's going to take some work to get back to where I was.  

The positives from all of this? I don't foresee ever taking my stop loss off the table again.  Never, ever.  In addition, sometimes I need a big punch in the face to remind me that things like this can happen. 

I looked into the past at the price action 12-24 hours prior to an FOMC release and as expected, consolidation appears more times than not.  What this means is that I could very well be sidelined until Thursday because I won't attempt to trade the FOMC tomorrow.   Of course, I could change my mind if the GBP/USD continues its ascent.  

I'm feeling good about sticking to the H-system even with the loss today.  The first thing I did when I got home from work today was open up my charts to look for a possible filters that I may be able to incorporate.  One such filter that looks promising is divergence between price and MACD.  I've heard that in general divergence fails more than it succeeds but my experiences with it have shown that as long as you don't use it as a standalone system, it could be useful.  

I had another nice profit today when I got a signal to go long during the European session early this morning.  I manually entered the trade at 2 am this morning right when I got home from a night out.  I profited 60 pips on the first two lots and my last lot was just stopped out with a 47 pip profit.  That's a total of 107 pips.  

Since going live last week, this system is up 328 pips.  

I'm actually looking into another system that depends on the h-system.  It entails reversing if the GBP/USD reaches certain levels.  This would be contingent on having a profitable trade.  Right now I like what I see.  It seems like when the GBP/USD reaches certain levels during the European session and the US session, the pair reverses after 10am EST possibly due to profit taking or lack of liquidity.    

It's nice to see this system working out so far but I've been in similar situations before so I remain cautiously optimistic.  I feel like I'm further along in this journey than I've been in the past but nowhere near where I have to be to become a full-time trader.  I have to say though that I've never had a system like this before that has well established rules with a limited level of discretion.  I would recommend that for those of you that haven't already, dedicate your time to developing a system that fits you and learn it well. 

Maybe Rob Booker has it right.  He gives you a system that he believes in and shows you how to trade it consistently.  Stick to the system everyday and use a limited amount of discretion.  It's really not the system that's important.  What's important is the discipline involved in trading this system.

I received good advice from some of you and after digesting it, I've decided to stick with my trading system.  

Craig 

"Needing tick data or not is really dependant on how the 'h-system' works, e.g. does it depend on ask/bid within the current candle, etc. Also, are you 110% sure there are no errors in your scripts? I have also gone down the roll your own path, but these programs are so hard to error check.
I developed a stratergy which performed amazingly in MT4 backtests and terribly in tick data backtest, but here is the kicker, it does good in forward testing. I think in the end forward testing is the best test, even better if you can automate.

You will know yourself Rich if market conditions in the last couple of weeks have been conducive to the h-system (or not)."

Brian  www.canadafx.blogspot.com

"I wouldn't discount your system based on backtesing. Past performance is not an indication of future gains. The problem with backtesting is that there is no emotion placed into it. It's just a mass of data. So that time that you rode the wave up a few pips more than your original limit order or got out before hitting stop becuase perhaps the indicators changed. Backtesting has no human element.

Also the FX market is still in it's infancy and it will evolve over time. The same things that affected the market 5 years ago may be different now. If your making money at it I would continue. "

Forex Rookie

"I think that if you are making consistent profit with the system now you should continue using it. As Brian said back testing is 100% automated hence you cant use desernment. And also the Market conditions are constantly changing, remember that your system is only 20% of your trading, So You as the individual have the ability to pick choose and refuse which trade you are willing to take. The bottom line is if it works stick with it."

Bill

"My view is that a whole-hearted focus on systems is dibilitating. Too much focus on the trees to see the forest, etc. I'm most comfortable trying to understand the fundamentals and then entering and exiting using technicals."