Rob Booker Training Update

Well, the bottom line is that since my first winning trade, I have had all losers.  It is quite discouraging but part of trading and training.  Rob really recommends using a demo account or a mini-account but I'm going to continue to chug along here.  I am using a lot of Rob Booker's methods with a touch of emotion so my results are in no way related to his performance.  I'll be entering my trades later today so everyone can view my performance so far.  They will be listed to the left menu in, My Trading History or the My Goal & Performance links.

I'm going to put together a spreadsheet for this week to more closely analyze my losses.  Rob Booker's methods for trading the 15 minute chart really don't give more than a 1:1 risk/reward ratio and going forward I would like to keep track of maximum drawdown so that I can see if decreasing the stop/loss is possible.   

Trading Full-Time continued

Thanks to Forex2stay for the following comments.  Visit his blog at http://forex2stay.blogspot.com/

I do think it's possible, but I believe money mangement is the key.
This needs to be a marathon not a sprint. One thing I've realized is
that you can't use the same lot sizes for all of your trades. For
example on one trade you might be risking 30 pips and another 20 pips.
So if you trade 4 lots on both of them (standard account) you'd be
risking $1,200 on one trade and $800 on the other. That's not good
money management and it can get you a person in trouble.Here's what I do…..

When
I position trade (4hr and daily charts), I won't trade unless I have a
2:1 risk reward ratio. I figure out the proper stop loss for my trade,
based on TA. So for this example say that's 40 pips. I then make sure
based on TA that I'm comfortable getting at least 80 – 120 pips profit.
Once i'm comfortable I put my information into the following formula.

S=(E*R) / (P-X)

S = Size of Trade
E = Account size (Cash)
R = Maximum Risk percentage per trade
P = entry price on the trade
X = pre-determined stop loss or exit price

So let's put in some numbers…..

My account size $10, 000
Entry price on EUR/USD 1.2600
Currently I'll risk 3% of my account on a trade
My pre-determined SL is 1.2560

So how many shares of EUR can we buy with our money management rules??

S=($10,000 * 3%) / (1.2600 – 1.2560)
S = $300 / .40
S= 75,000

Anyway this is the way I do it. I hope it helps…

Forex2stay

Rob Booker Week 2

I'm counting this as a new week even though I didn't sign on with Rob Booker 1 on 1 training until late last week.  

I got up early this morning (4 a.m. EST) to look for setups specifically in the GBP/USD.  The real move happened earlier than this between 2:00 a.m. and 3:00 a.m. so I kind of missed it.  I really don't know what to do if there is a large move like this before I wake up.  It kind of makes me feel like there's no way I can just jump in and feel at flow with the market.  There may be a way of trading after this or this may be one of those times when you just sit on the sidelines.  There was a time when I jumped right in the market just to be in it but I didn't feel any urge to do so this morning.

I haven't heard much from Rob in the past couple of days.  I saw him online this morning but he was off before 11 a.m.  He has previously stated that he tries to stay out of the market on Monday and just concentrates on trading the rest of the week.   

It's tough for us full-timers to find enough time to trade during the more volatile times the market has to offer.  I will continue to try to get up early for the European session but I almost think that 4 a.m. may be a bit too late.  If I find out that this is the case, I'll try to do what I have to trade the US session at 7 a.m.  I have to be at work by 9 a.m. so I don't know if it is a viable alternative to trading the European session.   I can always look for setups between 7 a.m. – 8:30 a.m. and if I enter a trade, set the appropriate stop loss and limits before going to work.  I can then manage the trade if my position is still open from my Treo.  I can either do this or get a job working 2nd or 3rd shift.  This isn't something I would ever do but it may be an option for you.

Trading System signals

I still have two short GBP/USD and EUR/USD positions from last week that were opened due to signals that my Dooku trading system generated.  The market hasn’t been doing much since then yet I’m sitting on an unrealized profit of $500. 

Yesterday I stated that my trading system had a profit target of 225 pips and a stop loss of 75 pips.  Though these are the stops and limits I place on each trade, my trading system can generate reversal signals that prevent my profit target from ever being hit.   The most I can lose on any given trade is 75 pips.  Generally if the trade moves at least 50 pips in my direction, I’m usually guaranteed that I will profit from at least these 50 pips.  It’s when it moves above this when I have a chance of realizing the 225 pip profit target as long as my trading system doesn’t generate a reversal signal.  In backtesting, my maximum profit target was not hit as often as my maximum stop loss but forward testing should give me more insight on how this trading system will perform in the long run.

I’ve been busy trying to import 5 years worth of intraday data into Amibroker for backtesting.  I know I was talking up Amibroker like it was the greatest thing since sliced bread but 1 drawdown is the fact that they use flat files for historical data as opposed to an optimized database.  What this means is that as more and more data is added, the slower and slower it is to import.  I figured the import of 5 years of 1 minute data for 10 currency pairs will take about 2 days for a single cpu pc at 100% utilization.  Unfortunately I don’t have a dual-cpu or dual core system right now though I’m very tempted to buy one. 

Dooku Forex Trading System

I started to work on multiple trading systems over the last week or so and realized that I was falling into the same trap of trying to do too many things at once.  I decided this weekend to work on my first trading system more.  The first thing I did was give it a cheesy name so that I can distinguish it from all the others.  I have named it Dooku.  You can figure out on your own where I got this one from. 

This system was previously being tested on hourly charts with a risk reward of 1:1.  It tested well with a 50 pip stop loss and a 50 pip profit target.  The first thing I wanted to do was to get the risk reward to 3:1.  I successfully accomplished this and Dooku tests very well on the hourly charts with a stop loss of 75 pips and a profit target of 225 pips.  

I will forward test this system this week and going forward to see how it performs.  From my backtesting, it has never had a losing month.  I will forward test this with real money and 1 lot each trade.  I will use a 75 pip stop and a 225 pip profit target.  I will trade only the GBP and EUR.  From my calculations, this system will generate an average of 20 signals a month for each currency pair.

Week 14 Performance

As I mentioned a couple of days ago, this week was especially hard on me.  I lost $3000 to drop my 14 week earnings to +2500.  There are a couple of major adjustments I’m going to make going into week 15.

1.    Finish a preliminary test plan that at least details 1 trade setup

2.    Stop trading multiple currency pairs.  I’ve been trading and trying to study about 8 different currency pairs.  I feel like this is definately too much for me to handle and most would not recommend a beginner to do this.  I will try to study and trade the EUR/USD ONLY since it is considered to have the most volume.  I will slowly try to incorporate some more of the major pairs into my trading plan as I get more comfortable with the EUR/USD.

3.    Back test, back test, back test.  A couple of months ago I was really interested in back testing trading strategies but lost interest after several attempts proved to be very unprofitable.  I have since started using Metastock with esignal to backtest moving averages.  Metastock has an optimizer function that will go through all combinations of moving averages and return the most profitable combinations.  My goal will be to first to find the most profitable moving averages for the EUR/USD.  I will try to correlate the moving average pairs to produce the most profitable 3 moving averages. 

I’ve already started performing #3 and I currently have Metastock performing backtesting on over a years worth of 1 hour interval data.  It’s very CPU intensive and will take about 4 hours.  It’s currently half way done and so far the best EMA pair is the 7/75.  The 7/75 EMA’s actually have some impressive results over the last year on the 1 hour EUR/USD chart. 

Here is an exact description of the backtest:

Buys/sells when a moving average of 7 periods goes above/below a moving average of  75 periods. 

I also have it factoring in the broker fee and have set the results to buy/sell 1 lot.

Here are the results:

70 profitable trades with average profit of $355.86 per trade.
Highest profit was $1020 and the most consecutive profitable trades was 12 

15 unprofitable trades with average loss of $972.67 per trade.
Highest loss was $2180 and the most consecutive losing trades was only 2 

Over 1 year, if you followed this trading plan by buying or selling 1 lot each trade, you would have profited $10320.00. 

Developing Confidence for Traders

Here’s a posting by Troy Peterson (private trader) titled, "Do you have confidence as a trader?."

Your level of confidence as a trader will have a huge positive impact on your success. The more confident you are the less time you will spend on second guessing your decisions. The more confident you are the more positive energy you will focus toward your desired outcome.

Confidence is based on two things; what you do and who you are. When a trade stops for a loss your confidence becomes rattled. This is because confidence is based on what you do. When confidence is based on who you are and your ability as a trader, one who is prepared for all outcomes whether a loss or a profit, then you are consistent with yourself no matter what the result. You will feel confident because you took the loss as intended or because you closed with a profit. You will choose correctly in either scenario! This is because confidence is based on you.

Each time you correctly make a decision in trading whether it is for a loss or gain, the more confident you will become with your ability to act accordingly to the current market situation in a manner that is appropriate. Your confidence is now based on your awareness as a trader (you) not on failures, mistakes or missed opportunities. Let me say that again . . . Your confidence is now based on your awareness as a trader, one who will make the correct decisions.

Help build confidence by reviewing your trades diligently to discover when, why and how you chose to act during the time of the trade. It will help your understanding of the markets and yourself. The more you choose to learn from each trade failure and success the stronger and more confident you will become. This confidence will increase your flexibility in your decisions and your behavior. This flexibility will help create comfort in your trading. This comfort will feed your confidence and the cycle continues.

Begin working on your confidence today. Believe in yourself and have faith in your abilities. Please don’t fall prey to falling someone else’s calls in the market blindly. Stick to your edge and realize that trading the markets is about you.

Rob Booker Analysis Today

This information is already stale but good for those of you who want exposure to Rob Booker’s style. 

GBP/USD 1 Hour Chart 

Friday, the pair broke below the redline, and created a really nice short trade.  Here’s what I would consider now: a short trade on a break below the low of Friday, with a target of EITHER of the blue lines shown below.  The lowest blue line is the more aggressive target.  One way to handle this is to initiate the position immediately on a break below Friday’s low, then move the stop loss to break even when the pair hits the FIRST blue line below.  Then use the lowest blue line as the profit target.

 

 

 

Don’t Move Your Stops

Here is a quick lesson from Sam Shenker about moving stops which I’m sure we have all been guilty of.

As a trader one of the lessons I learned the hard way is to never move my stops against the position. One of the most common mistakes made by the novice traders is to move the stop against the position once the trade start going against him or her. As the trade keeps going against the trader and once again approaches the stop, what do most of traders do, they move the stop again, thus increasing an unrealized loss, but unrealized loss is still a loss and a real one at that. In order to become successful, a trader must learn that the initial stop most of the time is a correct stop, because if the stop is triggered it usually means that the trader is on the wrong side of the market and by moving the stop he or she only increases the loss. The reason why traders move stops is hope that the market turns around and goes in the direction of the trade, but hope has no place in the market, protective stops do. Remember:  NEVER MOVE THE STOP AGAINST THE POSITION, BECAUSE BY MOVING STOPS AGAINST YOUR POSITION YOU ONLY INCREASE THE SIZE OF YOUR LOSS.

Dollar Strength and EUR/USD Channel

I’ve been trading the EUR/USD since yesterday evening and caught the breakdown below 1.1855.  The USD has not been able to push below 1.1827 though and until then the price may remain in a 60 pip channel.  

 

 

 

 

 

 

 

I’m up a little more than $400 to start the week in realized gains but as of now am only in a short EUR/USD position that I entered on a pullback last night.   There haven’t been any major developments since the Asian trading session set most currency pairs in motion except for the USD/CAD which has broken down nearly 75 pips from yesterday evening.  I was actually long on a USD/CAD position yesterday and decided to get out after hearing that some favorable economic reports were expected from Canada this morning.  This demonstrates some good behavior on my part with an exit of the position with a $100 loss.  I didn’t see the pair doing what I would have expected from my technical analysis and wasn’t aware of the economic reports coming out of Canada when I entered the position.  What good would it have been to stay in the position?

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