Items Tagged With kathy lien

I was able to rebound today with a +90 pip h-system trade and a +21 pip Lien Schlossberg trade.  This brought my January 2007 total to +80 pips.  It isn't much but nevertheless, it is my fifth straight month trading forex profitably. 

I want to talk about the trading signal service that Kathy Lien and Boris Schlossberg offer.  I lost 97 pips using their service this month.  In their defense, I missed two of their most profitable trades because I just didn't have the ability to trade at the time.  Even if I would have caught these trades, I still would have been negative for the month.  If I had to estimate it, I might have been down about 30 pips if I could have taken these trades.  Their member area shows that with today's profitable trade, they were profitable by about 30 pips in the month of January.   This performance is under ideal conditions; where I was able to trade at their exact entry and exit points.  This was usually not the case since emails or text messages lagged or the price just slipped.  I didn't follow 3 of their signals, 2 because I wasn't available to trade at that time and another because by the time I received their email to enter the trade, their target was already hit.  Most of their signals require entering at market price so you don't have any prep time whatsoever.  In addition, their signals occur at random times throughout the day and night.  Strangely, they have no qualms opening a trade in the afternoon (US EST) which I would never do myself.  Realistically, although they show a profit on paper, it would have been very difficult for someone using their service this month to show a profit.  I would be surprised if I was wrong.   They rarely had that surefire trade that allowed one to get in, grab profits, and get out.  Their trades tended to take some time to develop, sometimes for better and sometimes for worse.  Although their initial call showed a 2:1 reward/risk ratio, it rarely showed this ratio in the end.  For instance, today's trade call went out with profit target of 55 pips and a stop loss of 30 pips, almost a 2:1 ratio.  Similar to many past trade calls, they sent out a message to close the trade immediately at market before the target was hit.  This particular trade was closed with a profit of 32 pips (under ideal conditions) for a reward/risk of 1:1.  Their risk/reward more times than not worked out to no better than 1:1. 

The point of all of this is not to bad mouth the service, just to make everyone aware of the caveats with forex signal services.   Kathy Lien and Boris Schlossberg are undoubtedly very informed about the Forex market and carry an almost implied trust.   This is a good thing but what I realize more and more is that just because they're well informed doesn't mean they can make money trading.  One month doesn't tell the whole story either but I don't think one should imply that well-known traders who command a certain level of forex celebrity make money trading forex.  I'm not saying that Boris and Kathy don't make money trading forex.  They really didn't this month but they very well might next month.  One thing for sure is that they aren't making a killing from trading forex.  They probably are making a killing selling their signals though.

I promised I would use the service through the end of February, so I will follow through on this.

I picked up a copy of "Millionaire Traders" by Kathy Lien and Boris Schlossberg a couple of weeks ago and just returned it to the bookstore.  I know I've been tough on Lien/Schlossberg in the past with their forex trading service but I just wanted to mention that my thoughts of this book were not influenced by their service.  What a snoozer this book was.  It was impossible to get through.  It's basically a "Market Wizards" style question and answer book but it comes nowhere near to the quality of the Schwager books.   I had never heard of any of the traders profiled in this book and I would have loved to know how Lien and Schlossberg verified that these traders were in fact successful.  Some of them just didn't sound successful and some of the answers to questions were questionable at best.   Sorry, but in this business, you need to show me PROOF and they just don't do it.  This is just my opinion.  Don't take my word for it, check out the book yourself.  If anything, it's a good substitute for a sleeping pill. 

I was browsing Kathy Lien's book, "Day Trading the Currency Market" today in the bookstore.  The book was just released on December 2nd, 2005 so it may very well be the newest book related to Forex out there.  I know Kathy from her articles on the market that are on dailyfx.com and tradingmarkets.com.  I believe her official title is Currency Strategist.

The book is a little over 225 pages and contains the standard chapters on fundamental analysis, historical events in Forex, and technical analysis.  It was refreshing to see some new content unrelated to other forex books such as the chapters on What Moves the Currency Market in the Long Term, What Moves the Currency Market in the Short Term, What are the best times to trade for individual currency pairs, trade parameters for different market conditions, and profiles of the major currency pairs.  She also includes her recommended trading systems, one of which I am about to mention:

Here are her strategy rules for entering a Long Position:

1.    Locate a currency pair trading well below its intraday 20 SMA on a 10- or 15-minute chart.

2.    Next, enter a long position several pips below the figure (no more than 10)

3.    Place an initial protective stop no more than 20 pips below the entry price

4.    When the position is profitable by double the amount that you risked, close half of the position, and move your stop on the remaining portion of the trade to breakeven.  Trail your stop as the price moves in your favor.

Reverse the strategy rules for a short position.

There are conditions for using this strategy, the most important being that no major economic numbers should be released during this setup.  

She states that this strategy should work best for pairs with tighter trading ranges, cross, and commodity currencies.  This strategy does work for the majors but under quieter market conditions. 

Kathy Lien and Boris Schlossberg, currency analysts at DailyFX have a new website that provides free trade ideas, economic analysis, and more.  I've read both of their books and find them both very knowledgeable in the Forex market.  There are people out there on the web that charge for this type of information whether it's good or not. 

I've signed up for their free newsletter and received the following welcome email which may provide more information on what this site is about:

Welcome to BKTraderFX! We are delighted to have you join our community of active FX traders. As leading analysts within the foreign exchange market, we are always looking for new ways to reach out to our audience. The benefit of working in a trading team has allowed us to filter out the best trade ideas. In this blog, each week we will be reviewing the current conditions in the currency market on both a fundamental and technical basis in a more free speaking format. We will bring the strategies in our 3 books to life and will also be posting any ideas that we may have, articles that we find interesting and our takes on key economic and geopolitical news. Look forward to many informative emails from us.

You can visit their site at http://bktraderfx.com

or just go directly to their blogspot blog at http://bktrader.blogspot.com

As I previously mentioned, I am currently only trading the GBP/USD on my own.  In order to diversify a bit, I've decided to start trading Kathy Lien's and Boris Schlossberg's signals.

Their trading philosophy is this:

"...every single one of our trades is a fusion of both fundamental and technical analysis. We also believe that money management is just as important as the entry, which is why we practice defensive trading. This means we try to bank profits as often as possible regardless of the size and reduce our risk in the market as early as possible. In order to achieve this, we usually trade lot sizes in multiples of two (2). There is always a first target (known as T1) and a second target (known as T2). It is our rule of thumb that whenever T1 is reached, we move our stop on the remaining position to breakeven (the entry price) so there is no longer any real risk and we have banked a portion of the profits. This allows us to NEVER TURN A WINNER INTO A LOSER."

You can find the performance trading with their signals at all times at http://www.forexproject.com/Kathy_Lien_Boris_Schlossberg_Trades or on the left menu under "Lien Schlossberg"

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. 

There's a newer article on Investopedia titled "Channel Breakouts with the CCI" by Schlossberg and Lien.  I read it and don't see why you would want to use this strategy when there's a much better alternative.  

You can read the article to get a more in depth explanation of the strategy but I'll try to give a quick synopsis.  The strategy looks to trade higher highs and lower lows of the commodity channel index.  For a long trade, you wait for a reading to exceed +100 and enter a trade on the close of the candle if the reading exceeds the previous peak reading.  For a short trade, you do the opposite.    I remember reading about this strategy a couple of years ago when I was an indicator junkie.  I found it appealing but that was then.  Now, I use indicators at an absolute minimum.  

If you want to trade momentum especially intraday, you have to get on quickly while it lasts.  I don't think a lagging indicator allows you to do this.  There's a simple alternative to this strategy, trade breakouts of previous day highs or lows.  There's other alternatives too if you just set your mind to finding them and doing testing.  For instance, you can follow all the rules of the strategy but not use the CCI, use price peaks instead.   Remember, every indicator is a derivative of price.  

Looking at charts, the CCI indicator is always late to the game and sometimes falsely identifies areas of momentum especially when the price is trading in between the previous days high and low range.  So while I can't say that this strategy won't make you money, I think that there are other ways of identifying momentum that give you a better chance.  

I think it's time for me to put this subject to bed.  I've been using Kathy Lien and Boris Schlossberg's Forex signal service since September 2006.  It was free in 2006 but if you continued using it into the new year, you had to pay.  I started using it as a way to diversify my trades and also to give me more insight into Forex signal services.   It didn't quite work out as I expected but I'm glad that I explored it.  Here are some of my observations which are my opinion only:

• Boris and Kathy are decent risk managers which I think is an important aspect of trading forex.  Though this is the case, I've lost more money than won by using their service.   I personally do not think they are profitable and if they are, it's not by much.
• They send out trade signals at weird times, many times after the action is over.  This is indicative of their lagging trading strategies. 
  
• It's hard to be dependent on someone else to provide you with trades.  You don't know when the signals are going to come in so it's difficult to be ready when one does.
• I'd much rather be responsible for my losing than having someone else be responsible for it.
• Boris and Kathy seemed to portray their performance as much better than it really was.  End of week reviews focused on winning trades, not losers and their performance stats were based on best case scenario.
• What happened to their 2 lot strategy? I may have missed something but one day they were using a 2 lot, 2 target strategy and the next day they were using a strict 1 lot, 1 target strategy.
• They had excuses for being stopped out.  I personally don't see how or why you could even have an excuse for being stopped out.  The bottom line is the price hit the point where you no longer wanted to accept more risk.
  
• I'm not sure how in one sentence I can say they are good risk managers and then the next say their particular trades aren't any better than 1:1 reward/risk but this is the case.  When they make a initial trade call, it has a better than 1:1 reward/risk, sometimes 2:1 but ultimately, they rarely gave a trade time to hit its target.  Most of the time, they closed early with a worse than 1:1 reward/risk.    

I am officially halting the use of their service mostly due to the fact that I don't see any benefit to using it.  The bottom line is that I had to be ready to trade at the sound of any new text message which isn't easy and on top of that, I didn't make a cent.  So there really is no point in continuing.  

I cancelled the trading signals provided by Kathy Lien's and Boris Schlossberg's sometime in March 2007.   The reasons why?

Read my post titled,  Done with Boris and Kathy Service

Their results since I canceled aren't much more impressive, in fact probably worse. 

Their website is located at http://www.bkforexadvisor.com

Their trading philosophy is this:

"...every single one of our trades is a fusion of both fundamental and technical analysis. We also believe that money management is just as important as the entry, which is why we practice defensive trading. This means we try to bank profits as often as possible regardless of the size and reduce our risk in the market as early as possible. In order to achieve this, we usually trade lot sizes in multiples of two (2). There is always a first target (known as T1) and a second target (known as T2). It is our rule of thumb that whenever T1 is reached, we move our stop on the remaining position to breakeven (the entry price) so there is no longer any real risk and we have banked a portion of the profits. This allows us to NEVER TURN A WINNER INTO A LOSER."

Below is the performance since I started tracking on December 20th, 2006. 

Month 10 Trades