Horriday Trading

Had a great start to the week, with three consecutive profitable days, and considerbale to, playing very simple trend riding, predominantly the Euro against the USD and the JPY.

Had a couple of days off with the Easter Break (Friday, Monday and Tuesday off down here on Oystralia....with Anzac day being the reason for the Tuesday off).

This meant I had the luxury of trading at home all day long. I had been looking forward to it greatly.

And...this is when I learned that Holiday trading, with markets closed is, well very dangerous, spikes, lurches, shake-outs. Not a nice place for a noob trader like myself. And I got spanked....from pillar to post. This lead to some poor pyschological trading, where I want chasing returns....and I ended up blowing all my profiits for the week and a fair wack more.

Grrrrr.

Ah well, still alive....and more edumacated !!

Till next time Pip Pip

Friday follies

I had a great week this week, until Friday. I had hit my 100 units target a day, indeed exceeded it over Mon to Thursday and in that time I had really only exposed myself to any inappropriate risk once and fortune (rather than wisdom) dug me out of that.

Then on Friday I tried to play the Euro against the USD and the JPY with the big news released against both the Euro and the JPY being part of my strategy. In doing so I moved SL to wait for the market to do what I expected....however I ended up having to take large losses to protect my meager account. I compounded my mistake by then chasing a reversal only to see all my profits of the week wiped out by the close of trading.

Very dissapointed.

Over the whole week, bar 2 occassions I was very happy with my entry positions, and if anything, I have learned the unforgiving nature of the Forex. With a small account the temptation to slip a stop loss to protect profits is great, the cost of doing so is also nearly always great.

So I need to improve my exit strategy, both in profitable and negative scenario's. This week looks like being a very difficult week to pick with the majors all playing off contradictory news (see my weekly plan).

To that end I intend to stay out of the market on Monday until it confirms trends.

I was pretty annoyed at myself for blowing 4 days hard work with 1 days bazzokery !!

Till next time, pip pip

Entry - Checklist

Well my first profitable week, so hurrah. I felt much more equipped, knowledge wise this week and enjoyed the benefits. Now, no need to get carried away with one profirable week, but encouragement non the less. Indeed if it hadnt been for a really big mistake on Thursday (that I am still kicking myself for) I would have been in profit overall (for the past 6 weeks !).

Thursday saw me perfrom an uttelry brainless move. In a rush and wanting to jump on an opportunity I entered a trade, in doing so, I managed to actually buy the same order twice, dramatically increasing my risk and exposing far more of my precious money than I should. The position then began to go against me and angry (emotional) at my mistake I increased my stop loss to protect my money...I did this twice and ended up losing....and in doing so lost 8 times my normal risk....nice one !!!!

Later on Friday I took a loss which I was proud of however as I was strong in cutting the loss and moving on. I need this discipline more...its so hard....half way through a day you are up and on target, something goes against you, it so tempting to extend a stop and protect your gains, of course in reality you are risking more !! So bad me. Slaps wrist. Be strong. Take the loss, move on make more good moves.

To that end I have been looking at improving my entry strategies. Something I have improved in greatly but something I need to improve on much more. It is very important to remove emotion, revenge against a loss or desperation to turn a bad day around. Revenge and desperation are no friends of profit (unless you employ a swear jar !!)

So here is my Market Entry checklist

• Having no position in the market is better than taking any position (which will almost always become a bad position) !
• Produce a weekly assessment of the market, so you know at least in your own head you are expecting and which pairs you intend to play / news events you need to wathc
• Before Placing any Position
1. Check for forthcoming news that may cause a significant reaction
2. Look at the weekly chart, get a feeling for the trend over the last 2-3 days
3. Look for highs/lows being tested putting a buy order in at the top of resistance position is somehting you should be at least aware you are doing
4. Look at the 4hour and 2hour charts to check for current trend (perhaps against the daily)
5. Use the 10, 5 and 1 minute to pick your entry, dont jump on the top of a rapidly growing or falling bar unless you are sitting there ready to bail out real quick if it does the inevitable reversal
6. Trade what you see not what you imagine, if you are trading a reversal position, at least watch for confirmation before entering or be finger on the trigger should it play against you
7. If you dont know your target, if you havent agreed with yourself the HARD stop you will take a loss at DONT TRADE

So, that is my checklist, seems long, but most of it is something you absorb during a trading session. I am using pivot points and drawing my own resistance/support lines to assist me a little in being wary of buying peaks or catchting falling knives.

Every day you survive in Foreign Exchange is a day you learn and when played with discipline a day you EARN !!

Till next time pip, pip

Step by step, inch by inch, pip by pip

Well, I need a couple more weeks and a bit more discipline but I am beginning to sniff potential. I have a small target per day and then I try to be very conservative once I have achieved that. I am entering with a basic 3 to 1 risk reward model, quite small positions, which if I make 6-8 plays a day requires me to only have a 50% success rate.

I do keep breaking my own rules....and going for the big one....I need to stop this....its very annoying to spend good thought getting to a destination and then bad emotion to throw it all away....not just a truism for trading that methinks.

I stumbled up a great site with heaps of grea info and this fantastic top 10 rules for FX trading

The 10 Rules1. Never Let a Winner Turn Into a Loser
2. Logic Wins, Impulse Kills
3. Never Risk More Than 2% per Trade
4. Trigger Fundamentally, Enter and Exit Technically
5. Always Pair Strong With Weak
6. Being Right but Being Early Simply Means That You Are Wrong
7. Know the Difference Between Scaling In and Adding to a Loser
8. What is Mathematically Optimal Is Psychologically Impossible
9. Risk Can Be Predetermined, but Reward is Unpredictable
10. No Excuses, Ever
This is taken from : http://www.investopedia.com/university/forex-rules/

Until later, pip pip

Some light at the end of the tunnel

Well the downward trend of my sorry account continues. But there is hope. Overall I have traded more wins than losses, just my losses were BIG ones. I have been playing 1 or 2 weekly plays (eg EURUSD going for 100 pips down and 300 pips up over a 5 to 10 day period. And this looked really good....until some big news hit, in this case it was Spain and Portugal went bazooka's and may go into fiscal crisis. This caused a massive swing and stopped me out.....it always feels personal when this happens as the stopping out is often right at the tip of a trough. Its not personal, the market doth not know me.

However I have made about 7 or 8 shorter plays (3-4 hours using the 15 minute charts) where I have won 80% of them. This is predominantly due to a combination of factors. I am using both Fundamental and Technical principals for my orders, I have a money plan and an exit plan. I shall explain further :

I have been watching the AUD JPY pair closely over the last 2 weeks. There seem to be multiple powers aligning (remember I am an FX idiot, this is simply my learnings and thoughts, do not without your own research and belief take this as a hot tip)   :

1) The JPY is being actively supressed by the G7 (legal market manipulation....shakes fist)
2) Japan and Libya have settled down, well not really, but the 'theatrical' shock of it all has....and the market has priced this in (to some extent). AUD is a bit of a prospectors currency, thus in times of risk aversion (war, massive natural disaster etc) people flee from the AUD, this to some extent has diminished this week.
3) The AUD is a commodities play, when commidities do well....the Aussie does well

That being the case I have been doing the right thing and following a trend. I have with this used some very basic TA, looking for the reversal trends as a way in and a way out of the trend, taking short term profits, rather than leave my order running for 5 days with a 300 pip target and 100 pip stop loss (which has hurt me). The problem with the very long plays is I have to risk too much of my measily account. Whereas if I chase the short term wins, I risk less and of an evening I can make more than the gross swing by playing all the reversals.

So the entry point is on a typical buy signal after a retractment, the exit point is on simple sell signal at the end of a surge. In both cases I wait for confirmation (missing a bit of profit). I then run a 30 pip stop loss and a 75 pip take profit. Once I hit 30pips of profit I tighten my loss so I cant loose.

If I am actually watching the trade (as in not eating or looking after my pesky children, working etc etc) I look for signals of change and close the order). Otherwise I let it run.

So far 8 trades, 6 wins and about 200 pips of profit, almost making up for my 2 big losses. I will persevere with this approach over the next week and report back.

The graph below shows me following a trend and jumping in and out on signals (and in each case waiting for confirmation)

Till next time, pip pip

Stoploss or die !! and MT4 - MQL

I was trying some 'scalping' this week, this is where you try to make short term 5, 10 or 15 pip quick gains only grabbing small gains but frequently. It obviously requires you to be 'at your terminal' to do this.....all was going well until in a blink of an eye one of my trades crashed 100 points (on news...or indeed speculation by senior EU bods on the nature of the nuclear leaks in Japan). In a moment I was open to a $300 loss on a 3 point trade.....this thankfully came back mostly, but wiped out most of my small gains and added to my so far downtrending balance.

The lesson....even when scalping make sure you put in an emergency stop loss, even if its a good distance from your initial position.

In other news I managed to get my first expert advisor working, this is a programmed algorhythm where you automate your trades. I have got a few working where I actually make profit to....unfortunatly on too few trades to be practical.

Using the MT4 trading tool and the MQL language you create a small program that tests the market EVERY TICK (this is many times a minute). You can inspect standard metrics, like bollinger bands, moving adverages etc and even inspect previous bars on the chart. Then automatically place, modify and close orders.

Here's a clip of what the code looks like :-->

while (iLoop != 0)
{
dDelta = (Close[iLoop]-Close[iLoop+1]) * 10000;
   dDeltaAggregate += dDelta;
   if (dDelta > 0) iUpTrend++;
   if (dDelta < 0) iDownTrend++;
iLoop--;
}

This loop simply compares the closing value of one bar to another (the previous one) and counts the number of bars heading in either an up trend or a down trend. You can then test your advisor over months or years of previously recorded trade data. This generates you a report which you can use to see if your trades would be successful. A great resource for coding tips is here : http://docs.mql4.com/index (and also in my links).

Below is an example of the testing tools output, in this test result, my system made 20 trades over 3 months (on one currency pair over, so in theory this would be about 200 trades over 3 months). It retuned a small profit. This is enough to use a system (yet) and would also need an extended amount of forward testing, where I would run it for weeks or months on my demo account against live data.

Great fun doing this and also very edumacational, till next time, pip pip

                                                          Click on image to expand the report

MT4 - Indicators and Expert Advisors

My live trading activity has almost stopped as I try to learn more and more about the Foreign Currency Exchange and if I can make money from it.

I spent the weekend learning how to code in MQL4 the C++'esque language used by the popular trading platform MT4. MT4 is available as a trading platform through most leading brokers. It is a powerful charting tool with a heap of indicators. More excitingly (for me as a computer nobby person) is the fact you can program your own indicators and indeed program your own Expert Advisors.

An Indicator is something that you can use to see a general trend in the market. There are long established "industry standard indicators" that are based on averages, volume, mathematical algorithmic curves etc etc.

I decided to learn all about reversal patterns this weekend. These can be applied to any timeframe and are basically a set of identifiable patterns that indicate a current trend is about to reverse.

As such, I wrote myself an advisor that would :

• identify a trend (I could define a trend as x number of consecutively climbing or descending close prices), identify a signal (interrogate the current trading window and look for tell tale signs of a reversal).
• discern an entry point (as well as top and limit exit points)
• identify confirmation that the predicted trend was reversing

Not bad for 22 hours programming !! while my lovely daughter tortured me by playing non stop Justin Beiber, Glee and High School Musical in the background....not what I would consider 'thinking music'. I must at some point untie her and let her back out of the cupboard.

Now, I want to take this indicator and turn it into an advisor. An advisor will, based on a set of conditions, place an order for you, manage the order and report the outcomes.

Once you have developed an advisor you can "back test" it on historical data, this involves running your advisor from some start point in the past and seeing how it would have worked.

If you get a good result from this, you can then forward testing by letting your advisor automatically place trades on your demo account and see how it goes in 'real life'.

Im not even sure if I believe a system can be written, after all there are alot of smart cookies out there and I would imagine anything I have thought of has already been tried, however the process I am going through teaches me an awful lot and is great fun.

One issue of backtesting is you keep tweaking your system until you show profit, this then results in you creating a system that can "predict the past". Which is possible not much use :) Hence the need for forward testing.

Ill post up some screen shots of my indicator and some links to MQL4 programming guides later.

Till next time, Pip Pip.