Latest progress plus more...

It's good when you make profitable trades, I've made a few the last couple of days which is great for morale... of course when there is a big trend it's probably not that hard to take advantage of it...  One thing I have had a little bit of trouble with is coming in at the end of the big intraday moves, then sweating on it until the next big move which sends it profitable. I've also progressed from the EURGBP which is pretty predictable though the moves are much too slow and too far apart to the more volatile currency pairs, such as EUR/USD and GBP/USD, I'm also having some success with the USD/CAD.

I think that my money management system is probably overly safe, I'm using 20:1 leverage and never risking more than ~0.5% (I don't make it exactly that, though it's always about that or less) of my capital... Will I make massive short term profits? pretty unlikely, though as long as I don't do anything stupid (I probably will) I'm fairly certain that I'll survive and thus far my percentage gain (realised P/L, not including interest earned on the money in my trading account) is more than I would be making with the money in the bank.

In other news, I'm getting a couple of trading books for christmas, They are: The Encyclopedia of Trading Strategies and Professional Stock Trading: System Design and Automation... My wife won't let me open them (only the second one has arrived thus far) until christmas (to keep me thinking about this stuff I've been reading Pairs Trading: Quantitative Methods and Analysis (Wiley Finance), it's a heavy read, though not bad if you don't try to understand the algorithms on your first read through, the information in it is great for technically minded traders), though needless to say, I'll be busy reading and coding in the new year :)

I'm also looking for a good program (did I mention that I'm a cheap bastard?) with which I can test and develop my trading strategies before going live with them. I've posted before about Metatrader, well I'm no longer all that impressed by it. I really wish they had just added a decent scripting language (eg. something like Python) and not made so many assumptions/restrictions about how people can use the scripting language. I'd like to mention a trading program which has been developed in Python, it's called iTrade which looks quite good (for pre-alpha software), if I can't find a good dev/testing environment (read below), I may build one for iTrade.

The latest program that I'm trying to get a demo copy of is QuantDeveloper, it looks like it is a proper dev environment so I'm really looking forward to using it, only problem is they aren't giving downloads anylonger (apparently they're restructuring their business). Traders Studio is another piece of software that LOOKS good, though from the brief look that I had of their site it looks like they're just trying to profit through the creation of addins/trading systems... which indicates that it's not what I'm after, I'm looking for something that a programmer would want to use, and I want to test it out for FREE. If it does what I want then I've got no problem buying it, though what I want is something that is insanely flexible.

My Current Status

I've got some more cash in my forex trading account, still nothing huge, though at least if I do well I might make a little bit more money :)

My current status is that I'm not trading very often, my currency of choice is the EUR/GBP which is not really very volatile... meaning I need to wait a long time between trades. At present I'm waiting for the big upswing, which hopefully this time will go further than the last couple.

During the last few days I've made a few small preemptive buys, though they've been stopped out :( I had a limit buy which was filled at 0.67110, I was hoping that it was placed high enough for it to be on a breakout, though I just managed to catch the top of a spike.

More on Timing

A couple of posts back I wrote about timing, here's a good read on Investopedia about timing.

Progress

I thought I'd update on how my trading is going, since I made my last post, it did swing the way i was expecting which was good, as I made back all my losses and added about 1.5% to my starting capital :D I should mention that I'm using 1:20 leverage, so the 1.5% could be 7.5% if I was on 1:100 leverage, though losses hurt much more as well. My current money management plan is to keep the leverage low until I'm nailing every single move (including the timing).

One thing that I've found quite good for anticipating big moves is this tool from Oanda. It shows you when the major markets are going to be open and then you can anticipate the breakout/down.

Timing is Everything

OK, well maybe not EVERYTHING (you still need to make sure it's going the right way), though it is extremely important when you are highly leveraged.

Since I've started working with real money I've lost money :( Luckily it hasn't been a lot (I'm currently down by 1.44%). The main reason for my losses has been through bad timing and not having the balls to stick by my position when it is going the wrong way. In all cases where I've lost money I was right in my prediction, just out on the timing (I still have one small position I opened 8 days ago which is just starting to come good).

I'm Back

OK, been a damn long time since I last posted. I've been busy looking at other things (CFD's, commodities and sports arbitrage) and doing some reading.

After all that I've made the plunge (I made a SUPER SMALL plunge) and have opened a live FOREX trading account. I say it was a super small plunge because I think I might have set a record for the smallest FOREX investment ever.. I deposited USD$91!!!! (but they took $2.93 in processing fees) I'm well aware that it'll take me a couple of centuries to make my fortune with that large an investment... why $91? it's how much I had sitting in my Paypal account, I'm just going to try it out with live money and see how it goes, when I can prove to myself that my strategies are making me money and the broker isn't scamming me, then I'll work up the courage to shift some proper amounts of money over.

When I was looking for a broker to open a live forex trading account with I did a little bit of research and I found a website called Forex Bastards, they have some great reviews of the different FOREX brokers, I read some of the top rated ones there. Going with what I had already read previously about Oanda and not being concerned with the spreads widening during news I signed up with them. It was a little scary how much personal information they ask you for (an identity theifs wet dream), though I guess they need to do it in order to prevent money laundering etc.

I haven't yet opened any trades, I'm waiting for my setup to come along and then I'll open a trade.

I mentioned that I've been doing some reading as well. It's been in the areas of Statistical Arbitrage and also I've been looking at a method of evolving a computer program called Genetic Programming... my ultimate aim being to evolve a financial trading expert! (it's a long term aim)

Exploring other things

I've been giving my FOREX trading a rest and have been playing with mechanical trading systems which I've developed using languages that I'm happy with (I'm not 100% happy with MQL4). I've mostly been running my mechanical systems over stocks. The stocks that I've been using as my test pool are the ones that Alpari provides in metatrader demo as well as all the current stocks on the Australian Stock Exchange. Unfortunately I've only got access to the Yahoo historical data, so that's what I've been working with. It's very interesting working with the different indicators and candlesticks and testing them across a large range of stocks, it's also interesting how useless some of the indicators are when you run them across a large range of stocks.

I've also become quite interested in the way stocks work in cycles, one that I read about last night was the lunar cycle and how it relates to trading... I haven't yet figured out if this stuff is just a bit of a load of crap, though I'm planning to look into it a bit closer and possibly run some simulations.

What I've been doing

I thought I should make a post on the blog again... since it's been a quite a long time.

I've been paying more attention to trading stocks and GOLD, I made a beautiful trade on GOLD, I tripled my balance overnight! I started with $5k and went short 1 lot which I think is around $1.4k... The next day I woke up and found that my take profit had been triggered right at the bottom of that particular move which has been one of the biggest in this downtrend thus far. My resulting balance was $17k!!! wooohooooo

I've since made a few more trades, some winners, some losers, though nothing anywhere near the same level as my first Gold trade.

If you use metatrader and want to play with commodities, shares (CFD's) and FOREX, I've been using a place called Alpari.

Disciplined or Lazy?

With most things, if you sit around and do nothing it's considered lazy, though I think I'm being disciplined with my trading as I'm not making any trades until I see a high profit situation arise.

I've also been extremely busy with my work, which has kept me out of FOREX trading for the sake of trading trouble. 

Gold Massive Monthly Doji

I've been a bit slack with my FOREX trading ever since the USD started going sideways or gaining a little on the other currencies, I've been waiting for a good trend to establish itself before I take any new positions.

To keep myself occupied I've been really busy with work. I've also been doing a bit of looking at Heiken Ashi since there are a few people searching for it and finding my site, and well there isn't a whole lot of information about Heiken Ashi available online. I went looking for some good screengrabs that I can take for a Heiken Ashi article, and created a metatrader account with Alpari (the details for it are here) so that I can look at some stocks, futures and commodities (the demo doesn't show all, just a few select ones), I was looking at Gold and well it's been going up for the last several years and seems just recently it hit a top, when you switch to monthly candlesticks you can see a very very clear Doji, will be interesting to see the future price direction if that doji gains confirmation as a reversal signal.

Gold Monthly Chart

Gold Weekly Chart

Gold Daily Chart

Since it was Heiken Ashi that I was originally looking at here's the gold daily chart with Heiken Ashi candlesticks, it may not be the best example, though see how Heiken Ashi smooths out the trend so you get better indications of reversals?

Money Management

I've been getting stuck into the book that I recently borrowed and have to say that thus far the chapters that I've found most helpful/interesting have been "Using oscillators to predict trade opportunities" which is written by Tom DeMark andmore helpful from a basics point of view is the final chapter (I've been skipping chapters that sounded boring) titled "Controlling risk with money management techniques" which is written by Courtney Smith.

The chapter by Tom DeMark is interesting in that he introduces some new oscillators which he claims are more accurate than RSI and some of the other oscillators. I'm planning to write a meta trader indicator of some of his oscillators so that I can see if they actually are... On this note, I've been playing with some expert advisor coding in metatrader working with RSI and have to say that I'm running into troubles with RSI calling a low too quickly after a breakdown. The workaround to this is to set a lower stop loss which has problems in that losses are bigger than if the trade timing was just right. When I get around to implementing TDREI and some of his others then I can see if they do perform better.

The chapter which I've found most helpful thus far is the money management chapter. I've always thought about trading as trading in lots and once your lots are gone your finished. He writes about always working with percentages, if you're only ever betting 1% of your capital (at the time, not necessarily your starting capital) then it will take a very long time for you to be wiped out, however if you go in and bet 50% then you'll be wiped out very quickly. One of the issues here is that obviously your profits won't be as amazing as if you were calling it right and betting 100% of your capital.

In the expert advisors that I've been experimenting with I've switched to percentage based lot sizes, and instead of changing my lot sizes based on my recent performance (which most lot size methods I've seen use) I've just been trading 1% of my capital at the time, so as I lose money I bet less and less, until I end up having $10 in my account. I should also mention that a big part of this money management method is to also have your stop loss levels set at the risk level that you have defined in your strategy... I don't think I've done a very good job of explaining that last bit, probably because I need to understand it a little better myself and how to work this into my FOREX trading taking into account leverage etc.

Another Technical Analysis Book to Read

I've finally managed to get my hands on another technical analysis book. Again I borrowed it from the library, though as it was in some far off out of the way library I got them to transfer it to my local library which took ages (I was hoping to have it last week).

The book that I've borrowed is "New Thinking in Technical Analysis: Trading Models from the Masters", by Rick Bensignor. It looks like it should be a beauty, with some of the biggest names writing chapters. Some of the contributors include (in the order they are in the book): 

• Linda Bradford Raschke
• Tom DeMark
• Peter Eliades
• Lawrence McMillan
• Robin Mesch
• John Murphy
• Steve Nison
• Steven Poser
• Bernie Schaeffer
• Courtney Smith
• Kenneth G. Tower
• Larry Williams (after reading the intro about him I'm quite looking forward to reading his chapter)

Hopefully it is a good read, most (except one idiot) of the reviews on Amazon are very positive.

I will see if I can learn anything from these writers and if I do then I'll post it back here :) 

My Trading History #1

I thought it might be interesting for someone to see my trades so that they can see how much of a fool I am. I'll post some followups from time to time.

Easy Come, Easy Go... the story of my trading life

I was quite happy with the way I had been going since I started my "fresh start", and I had made a decent profit (I was up by 33% on my starting capital). The problem is that I think the EUR/USD might have reversed on it's uptren. Unfortunately I made the mistake of buying buying buying to try to decrease my losses on a rebound... The rebound never came and well I'm back where I started! I'm lucky, that my stop losses saved me from being even worse off.

Unfortunately I feel rather stupid as well, since I had my trailing stop for the original trade set to 50 pips though when I saw it coming close I didn't just leave it and get out of the rest of them that I had opened near the top, instead I cancelled the trailing stop and moved my stop losses down a bit! How stupid is that??? Oh well you learn something new everyday :)

I'm happy to say that on my Oanda account which I've had running a few trades which I've basically left and just gone in and moved the stops up a bit every day or two, the stops were triggered and I made a couple of grand on that one, so now I'm up by 8k on that account (it's a 100K account that I've been playing suicide with).

Chart of the EUR/USD reversal.

I'm not certain that it's a reversal (might just be a period of consolidation?), I've opened a short position, though I'm going to attempt to not be quite so stupid this time, the first sign of breakout and I'm (planning to be) outta there.

A new indicator I've found

I've been very bad when it comes to writing about the various technical analysis indicators. The main reason has been that I've been so happy with RSI (yes I do have repetitive strain injury as well, though I'm not that impressed with it), and to a lesser extent CCI (I haven't been looking at it very much lately).

There is a new indicator that I've found which seems to be pretty cool and I will do an analysis of it in the near future (I first need to use it a bit more). The indicator is ADX, it is basically the average of the difference between two DMI (Directional Movement) lines, by looking at the ADX line you can instantly see how much it is trending, and by looking at the DMI lines you can see which way it's trending. From my initial impressions I've found that the DMI lines are actually pretty good for getting signals right near the start of a trend.

Finished reading the candlestick book

I've finished reading the book that I mentioned in this post about candlestick charting. Overall I got a lot of inspiration from it and really looking forward to putting some of the techniques mentioned into practice.

I was a little disapointed with the multi line patterns, not because of how they were presented more simply because they really seem to be just candle addition to create a single candle. I was rather expecting some kind of magic from them.

One thing which I forgot to mention in my previous post was the need for confirmation. When you see a candlestick pattern you need to have confirmation from the following candle(s). Your trading strategy will dictate how much confirmation you require, though it is a VERY valid thing to remember when looking at candlestick patterns. I may at some point outline some of the patterns and give the details of the confirmation required, though until then there is most likely a lot of information you can find online.

She also reinforced some things such as needing to use candlestick charting as only one component of your overall trading strategy and that as traders we need to get rid of all emotion in order to be successful... that last point I think will be the hardest and most likely the thing that makes the majority of people fail as traders.

Amazing what a couple of good trades can do

It's really interesting analysing my emotions when I have good trades and bad trades, I think that ideally I shouldn't be allowing emotion to come into it at all, just get on with the job of finding and making profitable trades.

When I've been making profit then I'm all happy and really keen on trading, the fact that the weekend comes around annoys me, You can probably also tell because when I'm interested I post quite regularly here. However when I've been unsuccessful and have been losing money then I'm ready to give it up and lose all interest in trading FOREX.

I think I definately need to work on the emotional side of things, so that at all times my thinking is clear and isn't clouded by the fact that my balance is negative. 

Right on Cue

I mentioned yesterday that there is a spike when the US wakes up, well right on cue today I made over $900 within an hour :D That is not to say that I opened my position at the right time, I had my money tied up from about this time yesterday so it was really $900 in a day, though just so happens that the profit all came within an hour.

I find it ironic that the rest of the world is more or less undecided about the value of the USD, though the american's appear to be selling it like crazy! 

I've closed my positions and will open some new ones when this spike falls back down (assuming it does).

Good System to Profiting?

It's actually a strategy that I thought about back when I first started experimenting with FOREX, and lately I've been starting to wonder if it's a good method of profiting from timezone differences. It revolves around the Americans doing a LOT of trading, so if you have a fair idea of where the market is going to go, you open your positions just before the American markets open and then when they open you get a nice big rise (assuming you thought they'd send it up).

It appears to have worked a bit the last few days that I've been looking.

I will analyse it for a bit longer and see if I can use it to my advantage. 

I am a chicken

I know that I said I was going to hold my aussie dollar position long term, though well I'm a chicken and I got greedy, after it suffered for a day it has finally climbed again and well I was just too much of a chicken to not take the profit while it was there, so I cashed out for $300 or so. What makes me happy is that for once my balance is ABOVE where I started!!!

I was a little bit scared because of the book that I've been reading about candlestick charting, I saw a fairly good hanging man coming up and I didn't have the bank to wait for confirmation (which is probably rather stupid on my part), I think I'm also seeing some resistance just a little above where I went long before (at least on short term charts, see below).

I may open another small position on it to see if it actually does work medium term. 

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