Short-term Forex Trading With Micro Price Action
The March Issue of Currency Trader Magazine was released. There’s an article on short-term forex trading with micro price action that I found interesting and unique. Other features in my order of interest include:
- Foreign currency mortgages may help borrowers survive
- Why is the yen trading higher?
- USD/GBP on the down slope
- A new phase might be unfolding for the USD/CAD
- What’s down with the Australian dollar?
You can download your free issue at http://www.currencytradermag.com.
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.
- 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.
- 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.
- Forex Trading Profit Up 9.6% In February
- How Many Times Have You Exited a Position Early?
- Forex Trading in the Black
- The True Test
- 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:
- Quantcast Ranking Added to Forex Most Visited Websites
- Oanda is #1 in Traffic
- New Search Feature
- Most Visited Forex Websites
- Forex Top 100 Sites Explanation
Free Forex Tick Data
The only place I know where you can get free forex tick data is at Gain Capital’s site, http://ratedata.gaincapital.com but from my experience and from other traders I’ve spoken too, the data is spotty at best. There are gaps, format differences, and data overlaps. What can you expect though, the data free. I tried for a long time to fill gaps and clean up the data but I gave up. There was just too much data and it was going to be impossible to verify.
A trader sent me an email a couple of days ago about Oanda providing tick data. It’s free but with a condition. You have to have at least a $1000 account with Oanda. You then can request tick data for one currency pair (GBP/USD, EUR/USD, USD/JPY, USD/CAD, or USD/CHF) that goes as far back as January 1st, 2004. Oanda’s states that it may take up to two weeks for them to send the data to you and you can only have one request open at a time. So if you want tick data for all five currency pairs, it will take about ten weeks.
If you’re an academic faculty member, you don’t need an account open with Oanda. You can get an exemption and obtain the data for free.
More details are available at https://fxtrade.oanda.com/cgi/fxticks/order.cgi
For more forex related posts from the Forex Project, check out:
- Forex Historical Data
- Where Do I Get Forex Historical Data?
- Building Up Historical Forex Data
- Lots and Lots of Forex Data
- Forex Real Time and Historical Data
Forex Trading Profit Up 9.6% In February
I ended the month of February up 9.6%. This betters the previous month of January where I was up 6.8%. I consider it an achievement to be up 17% so far in 2008 but I’m not getting ahead of myself to think that the rest of the year will go like this.
What did I do right this month?
- I never risked more than 2% on any trade.
- I knew my stop loss before entering a trade, sized my position, and never moved my stop on a losing trade.
- My reward to risk was typically around 2:1.
- I traded one of my systems pretty consistently (missing some opportunities) and stopped trading two others when I found I was being too inconsistent with following my rules.
I think it was a good idea for me to stop trading two of my systems this month. I may have put them into the mix too quickly without fully trusting them. As I mention in #4 above, I was being inconsistent with my rules and found myself breaking them more times than not. Instead of sticking with them using real money, I moved them back into development and continued trading them in a demo account. I think that if you have any doubt in your trading method or system, it’s best to discontinue using it until you trust it.
What did I do wrong this month?
- I exited some positions before they hit their target. This was due to fear and fear only. There is a simple cure for this. I should just close my trading platform and open it again only once the position has closed.
- I’ll say it again but I started trading a couple of systems before I was ready. It could have turned out bad but it actually did not this time. They systems were profitable but I was still not comfortable with the methods I used in obtaining the results.
- I sometimes got lazy or forgetful this month with one of my trading systems. I failed to place an order when I should have, costing me profit.
If you had success or failure this month, I think it’s important for you to find out what you did right and what you did wrong. It’s imperative to evaluate your performance so that it can be improved upon.
Explore these other Forex related posts:
