Throwing Money Out the Window

This is going to be a real quick post.  I'll elaborate more when I have time later today.  This week, I feel like I'm driving 85 miles an hour down Route 80 in a convertible with 1000 $10 bills just thrown on the seats and on the floor.  You can imagine how quickly people would be slamming on the brakes to grab some money off the highway.

Out of total and utter frustration, I actually took the advice of 1 of you who stated that why not go Contrarian on yourself and if you are about to go long on a trade, go short instead.  Well, not having a good trading week and unable to get any upward pip profit movement, I decided this morning to do the opposite of what "conventional wisdom" from my brain was telling me.  WHAT DO YOU KNOW, a quick and easy 30 pip profit.  If I had done this over the last 2 weeks, I would have been very profitable.  I don't want to do this though and I don't even know if it could even be successful after a while.  I'm thinking that it would be hard for me to continue to study the charts looking for a setup and then at the moment of execution, go opposite of what I think.  Could doing this actually change the way I think about trading and mold my thinking to a profitable way?  Would I subconsciously look for setups that were contrarian and then go opposite of this which would really just be doing what I'm doing now?  Who knows.  

Talk to you later. 

 

Popularity: 2%

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. 

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Week 13 Losses

I’ve already gone into the reasons why I think this week was unprofitable.  The main reason was due to my exit of profitable positions before my limits were triggered.  I exited many positions this week just to take the quick profit however small it was.  I noticed afterwards that these positions would have moved more in my favor if I had not exited early. 

I made a total of 19 trades this week, winning 10 and losing 9.  My average trade profited by 32.1 pips which if you take into consideration I’m trading 3 lots, it’s really only about 10 pips per trade.  That is not good.  My average losing trade was 54 pips or 18 pips per lot.

I lost a total of $1827 this week bringing my 13 week total to +5519.  So I am still in the black but if you average my total profit over 13 weeks, it’s only about $425 a week.  

So I have work to do this weekend.  I need to develop a more systematic approach to entry and exits.  I don’t have a true trading plan and a lot of my setups are random and sometimes come from feeling.   This will be a work in progress.

Popularity: 1%

A Forex Trader Speaks His Mind

I’m posting an email I received from a fellow participant of Raghee Horner’s webinars today.  He has been utilizing Raghee’s methods for the last year and goes into the successes and failures he has had with them.  Keep in mind that he is a beaten down trader who started out with $30,000 and now has $3000 left.  I don’t necessarily agree with everything he says.  I don’t think because 1 person is unsuccessful at something that no one else has a shot.  One of his final sentences is "Do not think you’re going to realize your dreams by day trading."  I don’t believe this and won’t believe this.  I feel like his story will be beneficial:

I would say her setups happen quite a bit if you scan all the pairs. I am not good at position trading or sitting on trades, so I found it really hard to utilize the large time frames. I like to be in and out, a day trader. Her system is like any system, it gives you a method for entries and exits. Each entry has 50% chance of moving in your direction and her method gives you a slight edge or helps you gain a higher probability of being on the winning side. No trading system is consistently profitable, your either on the winning side or your not. The key is to get in when your system tells you to, act on your systems signals, utilize stops or get out as soon as the trade tells you it’s not going in your direction.

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My performance per Currency Pair

I decided to take a look at all of my trades since day one and find out which currency pair has been most profitable for me.  The results were interesting:

USD/JPY: +3720
EUR/JPY: +2400
GBP/JPY: +1370
USD/CAD: +890
NZD/USD: +470
USD/CHF: +420
EUR/GBP: -70
AUD/USD: -130
GBP/USD: -$410
CHF/JPY: -650
EUR/USD: -$1430

History says to stay away from the EUR/USD pair.  I had a feeling that the USD/JPY was my best friend.

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