ChattiFX
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Hi,
I just wanted to share a few things I have learnt over the past month or so that have changed my trading for the better. The point of my post really is to highlight a few realisations and changes I have made that I'm sure other people experience.
I've been playing with Forex & Shares for about 10 years now, starting with CFD's and then moved to spread betting due to the lower capital required. Very much boom and bust. Making some nice wins and some not so nice loses, but never actually banking profit. I think it would be fair to say that the wins had more to do with luck than judgement as I have never managed to be consistent. I've forgotten how many times I have fallen in to the trap of thinking I had cracked it one day to reversing everything the following day.
My biggest problems along the way were discipline and not being methodical enough with how I developed and followed my varies failed strategies.
So about a month ago I started from scratch. So here is what I did and why I did it:
1. Automated trading - As I said my biggest problem was not being disciplined or methodical enough. It was difficult as I obviously have to fit round my job, and I need to sleep occasionally. I'd often miss a winning move, but then that would lead me to a false sense that my system worked because actually I would also be missing losing moves too. By switching to automated trading there is no where to hide. I also find it easier to go though every trade and see why it worked or didn't work and therefore adjust strategy accordingly. So I switched broker and now use Metatrader 4. I found a website offering to write code for EA's and 4 weeks, 7 iterations and £60-70 later I had an EA that seems to be working how I want. A further two weeks of tinkering with the various settings and I'm now in the process of forward testing on a very conservatively funded account.
2. Capital & Risk - Another problem I had was that I was blowing my capital too quick, mostly because my strategies didn't actually work but I wouldn't know because a few bad trades would take me out. I was trading EUR/USD and GBP/JPY and risking ~3-5% per trade. So first I found a broker that I could reduce my £/pip to a lower level, second I have money management settings in the EA that stop me from getting to adventurous/risky and finally I trade a basket of 6 pairs instead of just two. I'll probably get shoot down for this but I think for spread betting you really don't need a big starting capital. I started with £250, trade 6 pairs, risk 0.5% each trade, minimum with my broker is £0.1/pip. Roughly speaking my win/loss target is 1/3 and winning trades 10-15 times bigger than my losing trades.
3. Indicators - I've tried so many its ridiculous!! Both Standard indicators and my own custom indicators. So again I started from scratch. I like trend based systems and although I had never used it I like the simple sentiment of the 3 ducks strategy. So to get an understanding of how the price moved over different time frames I printed off 4 charts for each pair. 1 Day, 4 hour, 30 minute & 5 minute bar charts with Heinken Ashi underlayed. Then I got a felt tip pen and a ruler and marked lines under and above all the major trends. Then I fitted moving averages to best fit the lines , multiplied them up from each chart to get 4 moving averages on a 5 minute chart... and with some adjustment to the MA periods that has basically become my strategy, I have a Fast MA and 3 Slower MA's, when the fast MA crosses all of the the slower MA's my EA opens a position and it closes when it crosses back. Very simple, but it means I am always in the big moves. From there it is just a case of minimizing the false signals with a stop loss (which I use 2 x ATR) and a trailing break-even stop. I also use Keltner Channels as a visual aid to see when pair is moving sideways rather than up or down as that is when the majority of my losses are. By using 6 pairs I find it speeds up the process of identifying when the strategy losses money.
And that is it really. I just leave the EA's running on a netbook at home and remotely access through my tablet or Phone to keep a tab on things but I don't physically have to trade. I'm still tweaking MA's, stop loss and breakeven values as the strategy runs, but I'm averaging about 35 trades and ~10% return a day which I am more than happy with.
So to summaries what has become a much bigger post than I though it would be... here is what I wish I had known 10 years ago:
1. Remove the human element. I wish I had either learnt or paid someone to code an EA sooner. It shows up all the flaws in a strategy mercilessly and once you see them you can do something about it!
2. Money mangement. Its hardly a secret but its too easy to get carried away and then blow your capital in a day. Keeping the losses small is what makes the money for me.
3. Indicators. Focus on the price movement not the indicator. Sounds simple but I've definitely been guilty of seeing the price fit the indicator that I want to use rather than finding an indicator that fits the price... does that make sense?!? :-/
Anyway, I hope some of what I have said is of help to someone. I don't even know if this latest strategy of mine will workout long term but I am hoping that by following what I have learnt I wont bust my account and I will see where things are going wrong and be able to put them right and hopefully I end up with a strategy that works.
Cheers
I just wanted to share a few things I have learnt over the past month or so that have changed my trading for the better. The point of my post really is to highlight a few realisations and changes I have made that I'm sure other people experience.
I've been playing with Forex & Shares for about 10 years now, starting with CFD's and then moved to spread betting due to the lower capital required. Very much boom and bust. Making some nice wins and some not so nice loses, but never actually banking profit. I think it would be fair to say that the wins had more to do with luck than judgement as I have never managed to be consistent. I've forgotten how many times I have fallen in to the trap of thinking I had cracked it one day to reversing everything the following day.
My biggest problems along the way were discipline and not being methodical enough with how I developed and followed my varies failed strategies.
So about a month ago I started from scratch. So here is what I did and why I did it:
1. Automated trading - As I said my biggest problem was not being disciplined or methodical enough. It was difficult as I obviously have to fit round my job, and I need to sleep occasionally. I'd often miss a winning move, but then that would lead me to a false sense that my system worked because actually I would also be missing losing moves too. By switching to automated trading there is no where to hide. I also find it easier to go though every trade and see why it worked or didn't work and therefore adjust strategy accordingly. So I switched broker and now use Metatrader 4. I found a website offering to write code for EA's and 4 weeks, 7 iterations and £60-70 later I had an EA that seems to be working how I want. A further two weeks of tinkering with the various settings and I'm now in the process of forward testing on a very conservatively funded account.
2. Capital & Risk - Another problem I had was that I was blowing my capital too quick, mostly because my strategies didn't actually work but I wouldn't know because a few bad trades would take me out. I was trading EUR/USD and GBP/JPY and risking ~3-5% per trade. So first I found a broker that I could reduce my £/pip to a lower level, second I have money management settings in the EA that stop me from getting to adventurous/risky and finally I trade a basket of 6 pairs instead of just two. I'll probably get shoot down for this but I think for spread betting you really don't need a big starting capital. I started with £250, trade 6 pairs, risk 0.5% each trade, minimum with my broker is £0.1/pip. Roughly speaking my win/loss target is 1/3 and winning trades 10-15 times bigger than my losing trades.
3. Indicators - I've tried so many its ridiculous!! Both Standard indicators and my own custom indicators. So again I started from scratch. I like trend based systems and although I had never used it I like the simple sentiment of the 3 ducks strategy. So to get an understanding of how the price moved over different time frames I printed off 4 charts for each pair. 1 Day, 4 hour, 30 minute & 5 minute bar charts with Heinken Ashi underlayed. Then I got a felt tip pen and a ruler and marked lines under and above all the major trends. Then I fitted moving averages to best fit the lines , multiplied them up from each chart to get 4 moving averages on a 5 minute chart... and with some adjustment to the MA periods that has basically become my strategy, I have a Fast MA and 3 Slower MA's, when the fast MA crosses all of the the slower MA's my EA opens a position and it closes when it crosses back. Very simple, but it means I am always in the big moves. From there it is just a case of minimizing the false signals with a stop loss (which I use 2 x ATR) and a trailing break-even stop. I also use Keltner Channels as a visual aid to see when pair is moving sideways rather than up or down as that is when the majority of my losses are. By using 6 pairs I find it speeds up the process of identifying when the strategy losses money.
And that is it really. I just leave the EA's running on a netbook at home and remotely access through my tablet or Phone to keep a tab on things but I don't physically have to trade. I'm still tweaking MA's, stop loss and breakeven values as the strategy runs, but I'm averaging about 35 trades and ~10% return a day which I am more than happy with.
So to summaries what has become a much bigger post than I though it would be... here is what I wish I had known 10 years ago:
1. Remove the human element. I wish I had either learnt or paid someone to code an EA sooner. It shows up all the flaws in a strategy mercilessly and once you see them you can do something about it!
2. Money mangement. Its hardly a secret but its too easy to get carried away and then blow your capital in a day. Keeping the losses small is what makes the money for me.
3. Indicators. Focus on the price movement not the indicator. Sounds simple but I've definitely been guilty of seeing the price fit the indicator that I want to use rather than finding an indicator that fits the price... does that make sense?!? :-/
Anyway, I hope some of what I have said is of help to someone. I don't even know if this latest strategy of mine will workout long term but I am hoping that by following what I have learnt I wont bust my account and I will see where things are going wrong and be able to put them right and hopefully I end up with a strategy that works.
Cheers
