March Profits
I've managed to pick myself up from last month's disaster and gained a little confidence today after both my h-system and reversal trades profited 60 pips total. I was able to jump on and off for the downward momentum in the European session and then jump back on and off for the upward momentum during the US session. I'm currently up 36 pips or a return of investment (ROI) of 5.4% for the month of March. I've decided to take Ed Mamula's advice on calculating profits for reporting my progress here. If you want to check out Ed's post titled, "Pips vs. Percentages Part 2" you can do so by browsing to http://edmamula.com/2007/03/09/pips-vs-percentages-part-2/
I've started my trading reorganization plan by rewriting the rules for the two GBP/USD trading systems I use. I've also redone the trade tracking spreadsheets I use to store more detail. I realize that I need to keep more detailed records regarding my trading systems so that they can continually be optimized.
As for all of the other technical analysis I wanted to learn more about specifically fibonacci, chart patterns, and carry trades, I'm not going to pressure myself to look into learning these any further at this point in time. I received a comment from Motu of Auckland, New Zealand who got my mind back on keeping it simple:
I think we're all guilty of thinking if we knew more it would make us
better traders. But IMO that is a dead end road. Some really successful
traders use very simple stuff. Have a read of "The Logical
Trader" by Mark Fisher…his ACD system is a nice blend of statistics
and discretion…plus he still uses it (see thelogicaltrader.net for a
book excerpt) – and it is very simple to use. Alternatively, Phil McGrew's stuff really works….and I'm certain Phil is the real deal in terms of trading himself.You
mention "it's strange that I spend so much time optimizing and
organizing this website but I don't translate this over to my forex
trading and studies."The reason for this IMHO is that site
maintenance it is not as stressful as trading! On the other hand,
trading profitably is incredibly boring…or should be. I think many of
us would be better off leaving our money in a portfolio of carefully
chosen CTA's…
Thanks Motu.
I am going to continue reading Nicole Elliot's book on Ichimoku which I could possibly use for position trading the USD/JPY in the future.
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Calculated Pips Continued
It seems like the subject of how best to quantify a winning or losing trade is a hot topic. There were a couple of differing opinions.
Two people agreed on the following example
If you buy 2 lots at the same time and you sold the first lot for a 10 pip profit and the second lot for a 5 pip profit, you could report a profit of 7.5 pips. Pip Heaven believes this way works because we are interested in trading performance, not the exact amount of money you made.
Chad thinks that the best way to standardize performance regardless of account type is to report a profit to loss ratio. His example explains why. If a trader with a mini-account (10K) profits 30 pips on 10 lots, he can say he is +300 pips. If a trader trading with the same risk but 1 standard lot (100K) profits 30 pips, he can only say he is +30 pips. Both the mini-trader and the standard account trader profited the same amount of money, $300.
Chad's example makes a lot of sense and clearly points to the faults in my pip calculation. Though this is the case, I had standardized this way of calculating my performance therefore on a month to month basis, it still worked in telling me whether I did better or worse than other months. So regardless of whether your method is believed to be right or wrong, if you are consistent in how you calculate performance, the results from any method should still tell you what you want to know.
Overall, most people agreed that using percentages are the best solution including Simon, Ed Mamula, Hermann, and molbio1.
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Why Even Calculate Pips
Here is a comment that was received yesterday about the pip calculation issue:
"If you buy 2 lots at the same time and you sell one lot for a 10 pips
profit and the second lot for 5 pips profit, in my book that would be
15 pips profit. From what I'm hearing in other people is that the
profit on this trade would be 7.5 pips…that doesn't sound right to
me. What do you think?"
So there are traders in two camps on how to perform pip calculation. One camp says that the number of lots should not affect your pip calculation and the other says it should. I truly don't know the answer to this but I think it's a moot point. After all, most of us aren't reporting pips as a way to get people to sign up for a signal service, at least I'm not.
I think the answer to this is brought up by Ed Mamula in which he thinks forex traders "have an odd habit of reporting how many PIPS they have gained or lost." He says that what's important aren't PIPS but dollars and percentages. Good point Ed. Read Ed's thought's on this.
I bring up Chaffcombe the trader sometimes because I personally believe he is for real. If you browse around his performance charts and discussions, he doesn't mention pips at all. He's really concerned about the percentages. http://www.futurestech.com.au/MonthlyReport_Jan2007.htm
So it will be my goal to start speaking in percentages more in the futures and not pips so much. I still have to re-work my performance reporting to reflect this.
Mark commented on this post and answers the question. "Pips are a good way to discuss trading profits because they are independent of your risk profile."
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My Pip Calculations Are Wrong
I received the following comment this evening regarding my pip calculation method. He says:
"Most traders don't count multiple lots in with their pip total. You use it to calculate profits, but not to calculate pips. If that was the case, I would have had over 40,000 pips last month."
I have to claim ignorance here. I don't know how most traders calculate pip total. I've seen it done both ways especially if they use multiple targets with multiple lots. Nevertheless, I do agree with this poster and I don't want to be misleading in my calculations. Therefore I am changing the language of my posts and also my trade history and performance statistics.
This is an example of how I was calculating in the past:
If I went long the GBP/USD 3 lots at 1.9400 and closed the entire trade at 1.9430, I would have said that I gained 90 pips.
This is an example of how I will calculate going forward:
If I went long the GBP/USD 3 lots at 1.9400 and closed the entire trade at 1.9430, I will now say that I gained 30 pips.
So I will now how to talk more about the amount of money I gained or lost instead of stressing how many pips I gained or lost. I'm going to work in the next couple of weeks on adding more performance graphs to the site like equity curve, monthly profit/loss %, rolling monthly profit/loss %, and daily profit/loss %. This is what chaffcombe does on his site.
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This week PROFIT GOAL REACHED!
I carefully reached my profit goal in Week 4:
| Week # | Pip P/L | Gross P/L | Total # of Trades | Total Winning Trades | Total Losing Trades | Total Even Trades | Avg. Winning pips | Avg. Losing pips |
| 4 | 61 | $506.8 | 18 | 9 | 7 | 2 | 19.8889 | -16.8571 |
This week, I profited 61 p. If anyone remembers, my goal when I started Rob Booker training was to make a total of 60 p each week. Trading 1 lot at a time isn't going to allow me to do this for a living but increasing this to 3 or 4 lots will. I personally feel that a lot of people go into trading forex (myself included) with the thought that they need to profit many many pips each week. When I say many pips, I'm thinking over 200 or so pips a week. I hear how many traders not unlike myself profiting over 400 p for a given week which is absolutely possible but you also have to be honest with yourself. Can you consistently make 400 p a week? I don't think it is possible! Imagine the additional pressure you're putting on yourself when you're expecting even 200 p a week. I find that keeping a pip target low and then raising your lot count is a more realistic expectation.
The above trades were all day trades. I do not have any position trades open and really haven't in a long time. My goal is to continue day trading and then find position trades on longer term charts.
Making 61 p isn't easy. I made 18 trades, profiting on exactly half. I was very careful today and hesitated to make a short AUD trade which would have hit my target (30 p had I made the trade) because I was at +51 p and was satisfied with ending the week here. I did see another trade this morning though and took the chance of going long on the USD/CAD. I was still very careful placing a tight stop and only looking to stay in the trade if it went a little my way I got out of the trade quickly for a 10 pip profit bringing my total for the week at +61.
To be totally up front, I really haven't sent Rob Booker email in weeks nor have I been following his "Chart School" all that closely. I've been discretionary trading all week just like last and I don't know if it is a coincidence or not that I have been profitable both weeks. I'm not trying to apply any new techniques but just trying to become more intimate with the techniques and indicators that I already have. I haven't stopped learning or exploring new techniques or indicators but it really is just for exposure and because I feel the need to learn new things regularly.
I'm away until Sunday and will be back then to get ready for next week. I hope everyone caught some good trades this week. Take care.
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Channel Trading Failed Today
I put in 3 trades today during the US session after the Housing Report release that were Anti-dollar but all of them failed to push towards my target. I managed to recoup some of the losses with another trade placed when the price fell back into the channel so I'm not too disappointed. It could have been much worst but I wound up losing about 45 pips today. I'm even for the week.
On another note, I was reading about fibonacci and stumbled upon a site that includes some fibonacci tricks. Some of these tricks really only apply to stocks because they relate to gap trading but I found the parabola hunt interesting.
http://www.tradingday.com/c/tatuto/fivefibonaccitricks.html
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TIC Report and my CAD position
TIC data was released at 9 this morning and it was less than
forecasted. Net foreign purchases of long-term securities were
$69.8 billion. The forecast was for 80.2B. I thought that
this would have been bearish for the dollar but the dollar took off
after the release. I scratch my head sometimes and wonder why
what I thought would happen didn't. Either way, I don't care
which direction the price goes because I was waiting for a channel
break either up or down.
The dollar did well overnight and my
long USD/CAD position was up about 70 pips during European session
trading. Ahead of the NY session and the TIC report release,
some of the dollar gains were given back this morning. I had
moved up my stop this morning to 1.1143. I entered at
1.098. The USD/CAD actually hit the .250 fibonacci at 1.1175 and
then bounced off. This is where having multiple lots would have
helped. I was watching 3 fibonacci levels:
.250 = 1.1175 .382=1.1280 .500=1.1374
If
I had entered with 3 lots, I would have placed a stop order at the .250
for the 1st lot and held on to the other 2. This is all in
hindsight but something I thought about when entering this
position. Either way, when the prices started consolidating a bit
this morning, I was stopped out at 1.1143 for a profit of 45
pips. Should I have held on to the position longer? I don't
know. I didn't want to give back all the gains if the dollar
started to get pounded again. I figure I can go long again on a
break above the
.250 fib.
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Top Market Moving Indicators
Like many Mondays, tomorrow probably won't be moved by the very latest economic release because there really aren't with 1 exception. At 9 a.m. tomorrow, the TIC report is released. This report measures demand for US assets and could be yet another nail in the dollar but I'll be watching just to see if this is a report that would move the market in the future. See Kathy Lien's study that puts TIC report at market mover #9 for first 20 minutes after release and #3 for the entire day.
I'm going to be releasing my Economic Release PDF again this week with comments. It looks like Wednesday (US CPI) and Thursday (Bernanke Speaks) are possible US session movers and there are a couple of other important non-US releases like the BOJ Interest Rate Statement on Friday (1 am EST.)
In much of my reading, I stumble upon useful bits of information. There was a study by Kathy Lien, an FXCM strategist, of the top market-moving economic indicators for the Dollar during the first 20 minutes following a release and for the rest of the day. These are ranked from highest average pip range and are only for the EUR/USD. Considering other pairs like the GBP/USD react more to these economic releases, the average pip range would be much higher.
First 20 minutes
- Unemployment (nonfarm payrolls) 124 p
- Interest rates(FOMC) 74 p
- Trade balance 64 p
- CPI 44 p
- Retail sales 43 p
- GDP 43 p
- Current account 43 p
- Durable Goods 39 p
- TIC data 33 p
Daily
- Unemployment 193 p
- Interest rates (FOMC) 140 p
- TIC data 132 p
- Trade balance 129 p
- Current account 127 p
- Durable goods 126 p
- Retail sales 125 p
- CPI 123 p
- GDP 110 p
It is interesting to note how the importance of economic reports actually changes over time. For instance, here is FX Dealer importance of Economic Data as of 1997 and as of 1992.
As of 1997
- Unemployment
- Interest rates
- Inflation
- Trade balance
- GDP
As of 1992
- Trade balance
- Interest rates
- Unemployment
- Inflation
- GDP
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Week 4 Performance
I'm done for the week. The channels were too wide in the GBP and Yen going into the US Session this morning and the CAD swung wildly up and down. I made no trades today. I'd also rather end the day and be up for the week. It's good for my psyche.
In my 4th post Booker week of trading, I managed to pull off a small profit of 14 pips or $111. Here are some more statistics from this week:
TOTAL # of TRADES
18
TOTAL Winning Trades
10
TOTAL Losing Trades
6
TOTAL Scratches
2
I feel like I went back to my "roots" this week. I'm trading like I did months ago when things were going more my way. The thing is, other than channel trading rules, a majority of my trades don't have any hard rules. Most were based on discretion only. Since I'm moving back towards this style of trading, maybe this is just what is needed. I was sending comments back and forth with a visitor to the site, Wim and Wim states that in 5 years of trading FX:
"I can tell you that a combination of a mechanical simple system and your own judgement will give you the best results…. Make your own judgement on trades!!!"
I've done a lot of reading over the past 12 months and a lot of it is repetitive. I've also been trying hard to go by what I've been told over and over again but maybe I've been wrong. Yes, some of the preachings are absolutely true like the recommendation to PLACE STOP LOSSES. But no one knows what your or my personality is. Just because a certain way of trading whether mechanical or discretionary works for 1 person doesn't mean it will work for you or I.
I look back at the first 11 weeks I was trading and I don't think it was beginners luck:
| Week # | Pip P/L | Gross P/L | Total # of Trades | Total Winning Trades | Total Losing Trades | Total Even Trades | Avg. Winning pips | Avg. Losing pips |
| 1 | 73 | $650.8 | 11 | 6 | 5 | 0 | 29.0000 | -20.2000 |
| 2 | 80 | $748.4 | 21 | 8 | 13 | 0 | 41.8750 | -19.6154 |
| 3 | -15 | $-55.1 | 9 | 4 | 2 | 3 | 25.0000 | -57.5000 |
| 4 | -15 | $-242.2 | 10 | 4 | 6 | 0 | 31.2500 | -23.3333 |
| 5 | 289 | $2453.4 | 20 | 12 | 8 | 0 | 39.5833 | -23.2500 |
| 6 | -41 | $-619.5 | 14 | 8 | 6 | 0 | 24.8750 | -40.0000 |
| 7 | 189 | $1727.1 | 13 | 11 | 2 | 0 | 23.6364 | -35.5000 |
| 8 | -214 | $-1782.6 | 7 | 2 | 5 | 0 | 44.0000 | -60.4000 |
| 9 | 169 | $1425 | 3 | 3 | 0 | 0 | 56.3333 | |
| 10 | 304 | $2598 | 3 | 3 | 0 | 0 | 101.3333 | |
| 11 | 71 | $742.2 | 8 | 5 | 3 | 0 | 41.4000 | -45.3333 |
Yes, I made some mistakes but overall, I was doing something right. I was up $7700 after these first 11 weeks and this was mostly trading 1 LOT. I don't know what the future holds but we will definately see if my discretionary way of trading is what works for me.
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Trading the News
Trading the news is something I've been trying to learn since I started Rob Booker "1 on 1" training. I'm finding that the potential to be profitable doing so is there. It does take time to learn though and the only way is to gain the actual experience of trading during volatile macroeconomic news reports.
Today, I traded the news and made 30 pips on 1 trade and lost 30 pips on another. Unfortunately during these times more than others, the price can swing wildly back and forth so the chances of your stop getting taken out quickly is a strong possibility. The key is obviously in the entry. You don't want to jump the gun and enter too quickly but you also don't want to enter too slow. I entered both positions today at the same time after the close of a 15 minute candle. These were both valid entries and both swung against me by more than 20 pips. The Yen swung too far against me and I was stopped out as mentioned previously. The Sterling swung about 25 pips against me (I had a 30 pip stop) initially and tried for an hour to move back in my direction. There was a point when my position was even and I could have gotten out of the trade unscathed. I decided to stay in because I've made the mistake of exiting right before the trade goes my way. The pair went 20 pips in my favor and I thought again that I should exit. I waited and waited. My limit was 30 pips. The pair was up 28 pips and I still waited. My target was hit and even though I'm even for the morning, it felt good to have shown a bit of restraint and confidence in my initial entry.
With that said, I wanted to mention a new article by Boris Sclhossberg that talks about exactly what I'm trying to learn; trading the macroeconomic news. It's a quick read and worth it if your interested in learning how to trade the news.
http://www.investopedia.com/printable.asp?a=/articles/forex/06/ScalpFundamentally.asp
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