Items Tagged With reward

I've been emulating my real account trades with my demo account for the January forex trading contest.  I'm currently in first place with a return of 11.16%.  After today though, my return will drop 2 percentage points to about 9% since I lost 2% on a trade.  I don't know if this will be enough to hold on to the lead.  

This is an overview of how I've been trading so far in January 2008: 

1. I have been risking exactly 2% on every trade.  No more, no less.  
2. I've been using my forex position size calculator everyday when figuring out my trade size and find it very handy.  Some of you have commented the same.  
3. My R-multiple on every trade has been 2R.  For those of you that haven't heard of R-multiple, it's really just an abbreviation for reward-to-risk.  2R means my reward-to-risk is 2:1.  
4. I'm not watching my positions so there isn't any fancy money management going on.  I haven't once set my stops to breakeven. I'm just letting them ride.  If they hit my target, they hit it.  If they don't and stop out, so be it.  This is quite different from what I've done in the past.  In the past, I've been quick to set my stops to breakeven when they move a little in my favor.  The consequence of doing this was typically a gain/loss of zero.  I can't tell you how many times I've moved my stop to breakeven only to see it get stopped out.  Then I have to watch as the price goes back in the direction I was trading where it hits my initial target price.  This to me was more frustrating than losing.  I'd rather stick to my guns on a trade instead of playing it scared. 

Phil McGrew sent me a note to announce his release of a Forex calculator.  This calculator is pretty handy, particularly the position size tab which will calculate position size based on input variables such as equity, currency pair, risk in %, and risk in pips.  The following are the rest of the features:

• Interest rollover calculations based on currency pair
• Currency pair correlation for three different durations, 5 day, 20 day, and 100 day
• Currency quote
• Margin calculation

I know there are probably other calculators out there that perform the same but he and his programmer(s) took their own time to develop this and offer it for free so I figured I would mention it.  It is a windows application (not web-based).  If you're interested, you can download here:

http://currensys.com/forums/viewtopic.php?t=447  

Does anyone channel trade the US Session? I've been doing so here and there but have been keeping track of any and all channel breaks during the past 3 weeks in the following currency pairs:

• GBP/USD
• USD/CAD
• AUD/USD
• USD/JPY

I think that I can say that from my limited observations over 3 weeks, these pairs definately move more consistently in the morning US session than others.

Another observation I've made is that the AUD/USD seems to be a great pair to trade.  I never would have thought this was the case but I've found it to be very steady once the price breaks a channel line.  If anyone has traded the GBP, you know the wild swings that occur frequently but it doesn't happen in the AUD/USD.  Once the channel breaks, it takes its time to reach a bit of profit but it eventually does.  Over the last 3 weeks, this pair has 7 wins and 1 loss.  Run-ups have ranged from 30 pips to 90 pips with the average around 30-40 pips.  The drawdowns have been very good with a maximum of -18 pips.  This is assuming that your using a 20-30 pip stop.   This pair actually was good for 30 pips today for me and helped me bring my losses down to around -50 pips.

Let's assume that your risk/reward is 1:1 for simplicity.  If you have a 30 pip stop and a 30 pip limit, here was the performance of these 4 pairs over the last 3 weeks.  I should note that the runups on some of these trades were substantial so if you rode it out for longer, the risk/reward would have been much greater.

GBP/USD - 4 Wins, 3 Losses (+30 p)

USD/JPY -  6 Wins, 3 Losses (+90 p)

AUD/USD - 7 Wins, 1 Loss (+180 p)

USD/CAD - 8 Wins, 4 Losses (+120 p)

I pick and choose my channel break trades and therefore it is discretionary.  I find that I don't pick the right one though but if I was to take every channel trade over the last 3 weeks, I would be up 420 pips and this is with a 1:1 Risk to Reward. 

After weeks of development, the first beta release of the Forex Risk Calculator has been released.  The calculator on the surface doesn't look too involved but believe me, there are a lot of calculations, logic, and validation that had to be taken into consideration.  This calculator has all the functionality of the Excel FX Risk Calculator released from Alex Douglas.  In it's simplest form, the risk calculator helps you manage risk.  Ideally before each trade, you should know exactly what your entry price, stop loss price, and target prices are.  After inputting these values, your account balance, and intended position size, the calculator will "calculate" your available leverage, pip profit, pip loss, profit at target, and loss at stop.  In addition it calculates the most important values, the percentage of your account at risk and the percentage reward.

The calculator is programmed using AJAX (Asynchronous Javascript and XML) so it's responsive and fast.  There is also no need to hit any submit button.  

Just be aware that this is a beta release so it's not perfect.  This will come in time and I use it more and more.

http://www.forexcalc.com

I also added a link to the left Forex Resources menu.