Best Way To Automate Forex Trading
I have never traded a forex strategy live using any advanced automated methods. At the most, I’ve placed a limit order. Most, if not all of my experience has been with expert advisors in Metatrader.
I realize more than ever that if I could automate my strategies, this may take me to the next level of trading and keep me more involved in the market. At this point, I need the motivation. The subject of automated trading has always interested me but my issue has always been with trusting a broker and the platform with a live account using an expert advisor. Therefore I’m calling on everyone who has experience with automated trading to share your experiences. If you’ve used Metatrader, have you found success with any particular brokers? I know there are other automated trading software available that mostly allow trading via an FXCM API but are they any good? I know Oanda also has an API but it costs about $600/mo. If you could, please send any experiences you have to my email address at rich@forexproject.com and based on what comes in, I’ll put the information together and post it here. Thanks.
Citi and Goldman Break Into Retail FX
Citi has been in the retail FX market for a couple of months now but it signals a continuing trend of big financial institutions trying to get a piece of our forex action. Deutsche Bank was the first big bank to get in a couple of years ago (from what I remember) but it’s interesting to note that all these big banks did was partner with the bigger forex firms. They blew up the sub-prime mortgage business, will they do the same to Forex?
Here are the notable partnerships between big banks and forex specific firms:
Deutsche Bank is partnered with FXCM.
ABN Amro and UBS are partnered with Oanda.
Citi is partnered with Saxo Bank.
Goldman is partnered with CMC Markets.
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
5 Reasons to Enter the Forex Trading Contest
17 traders have already joined. It would be great if you did too. What’s in it for you?
It’s a chance to _________.
- check out Oanda’s trading platform
- add a little more incentive to trade that demo account like it’s real
- compete for pride
- have your name mentioned on the front page of this blog (big deal, right)
- get back into demo trading to try that new strategy you’ve been meaning to forward test
Check out details on how to join at http://www.forexproject.com/Forex_Contests/
Join within the next couple of hours. I have to approve the contestants before midnight today but I won’t be around later tonight because it’s New Year’s Eve. Contest starts at midnight on January 1st. If I don’t talk to you before then, have a Happy New Year.
Click on the image on the top right to see the results from the last contest.
I Just Closed Out a Position for a $10000 Profit
I’m serious, I just closed out a position for a $10,000 profit. Unfortunately it was my FXGame account at Oanda. I had not logged into it for months and when I did login today, I noticed that I still had a short USD/JPY position open. This trade profited 865 pips with only an 86 pip risk. That’s a 10:1 Reward/Risk Ratio. Too bad this wasn’t my real account. If it was, this trade would never have happened. Maybe I should start trading longer-term charts, set, and forget!
Stopped Out Only At Oanda
This is nothing new and just part of trading but I was stopped out on my long GBP/USD trade apparently only at Oanda. Look at Oanda compared to 2 other brokers.
This seems like it's too much of a discrepancy compared to FXDD and FXCM.
May Trading Contest Prizes
** UPDATE **
We have 30 participants signed up so far for the May contest which starts this Tuesday.
Sign up ASAP. Detail follow.
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I'm satisfied with the way the April trading contest has gone so I am offering 3 prizes for the May contest. I'm going to have 3 different categories and the winner of each will receive a $50 Amazon gift certificate. I would like to thank the sponsor of this contest…. me. I didn't have the time to hit up any of my advertisers. Maybe if May goes well, I'll try to get bigger prizes for June. I know 50 bucks isn't much but hey, it's free money. You can buy yourself a book or something.
I don't know if this is the best way to do it but nevertheless, here it is:
1st category is Aggressive Trading
The trader with the highest portfolio return % in the month of May with a maximum drawdown greater than 10% but less than 20%.
2nd category is Conservative Trading
The trader with the highest portfolio return % in the month of May with a maximum drawdown greater than 5% but less than 10%.
3rd category is Money Manager
The trader with the highest portfolio return % in the month of May with a maximum drawdown less than 5%.
- Having these 3 categories will prevent a trader from winning more than 1 category.
- THE WINNER MUST HAVE A POSITIVE PORTFOLIO RETURN %. If you have the highest return in a particular category but it's negative, you don't win.
Currently there are 23 participants signed up for the May contest. You have until next Monday, April 30th to sign up. To sign up or to find any up-to-date details of the contest, go to http://www.forexproject.com/Forex_Contests/
Forex2Stay Abandons Oanda
Brent from over at Forex2Stay has decided to rid himself of Oanda. He decided to go with an STP/ECN broker, EFX Group or MB Trading.
The Mighty Have Fallen
The April trading contest is at the tail end with only 3 real trading days left and the mighty have fallen. QLaun who led most of last week and the first couple of days this week has fallen from the top.
The top 6 traders sorted by portfolio returns have maximum drawdowns between -4.20 and -17.99. I found details of some other contests and how they determined an acceptable maximum drawdown level.
Acceptable maximum drawdown level for aggressive trading should not exceed 15%.
Acceptable maximum drawdown level for conservative trading should not exceed 10%.
Acceptable maximum drawdown level for fund managers should not exceed 5%.
So if I were to use these figures, I would rank contestants as of today this way:
TOP THREE AGGRESSIVE TRADERS
- Dumb Luck +24.26%
- MartinFXUY +14.66%
- RotcaX +12.52%
TOP THREE CONSERVATIVE TRADERS
- Dumb Luck +24.26%
- MartinFXUY +14.66%
- RotcaX +12.52%
TOP THREE MONEY MANAGERS
- RotcaX +12.52%
- Milton +2.91%
- Netman +1.86%
Good job guys. I'm not doing too well. I'm at -3.05%. The only thing I have going for me is that my maximum drawdown is -1.17.
What Is Maximum Drawdown?
What is maximum drawdown? Why and how do I calculate it?
First, what is maximum drawdown? It is defined as the largest drop of a given asset within a certain time period.
Why calculate it? I've never made it a point to calculate maximum drawdown but I'm going to now. This is my attempt to start looking at more "advanced" money management concepts so I've decided to start with one of the easiest. The reason for calculating maximum drawdown is to measure the riskiness of your trading strategies. It will also give you an idea of how much money you could lose at some indeterminate point in time.
How do I calculate it? During the history of your trading strategy, I'm sure you'll be keeping track of your change in equity from one day to another, one week to another, one month to another, or whatever time period you choose. In the course of your trading, you will calculate drawdown which "represents the total percentage loss experienced by
a strategy before it starts winning again … and drives the
investment balance back up." (Source: http://www.confidentstrategies.com/maximum-drawdown.htm)
In this picture (Source: http://www.autumngold.com/Performance/DescriptionDD.htm), the drawdown is calculated with the following formula:
(Valley VAMI – Peak VAMI) / Peak VAMI
The Valley VAMI is the red arrow or approximately $1,100.
The Peak VAMI is the green arrow or approximately $1,425.
Therefore the drawdown is ($1100 – $1425)/$1425 or -22.8%.
Let's do 1 more example from the picture above. First let's find the Peak prior to the green arrow.
The Peak VAMI is approximately $1,250.
The Valley before the green arrow is at approximately $1,150.
Therefore the drawdown is ($1150-$1250)/$1250 or -8%.
So to find the maximum drawdown, select the drawdown that was greatest, in our example, -22.8%.
