$5000 to $23,700 in two months by ZDforex

[zdforex]

This was our last trade this week and the reason we took it.

At the beginning of the demo account we used to put 3 trades of 2X100k and 1X50k to trade say 250k, then we realized that we can just write it manually. This can be taken as a proof that its real trading with no window-dressing of results.

ZDforex

 

[Anonymous]

I think the first pdf file shows its a refco mini account (demo?).

From what the other threads say about Refco, there with a 1/2 Reward:Risk is possible, if anyone knows how banks operate with their quotes.

And, I have an idea what method he is talking about, and then again, maybe not.

 

[fxmarkets]

And the poster does state help and sharing with other people so assume some thinking behind the reason and logic to the trade idea will be delivered.

 

[TraderPattern]

Guys. My scepticism does not relate to his strategy. If he is telling the truth about his returns, his simplistic strategy has very little do do with his returns. Some of you seem to think that, somehow, his returns have a lot to do with his entries and exits: this is a beginner's mistake.

My scepticism relates to his money management approach, which is what has, for the most part, generated the returns. If he continues to use the Kelly formula he will, in all likelihood, blow up.

 

[Anonymous]

If his entry point has a certainty of say 0.9 probability of win, the Reward:Risk of 1/2 isn't strange at all.

 

[bracke]

Let me first state that I do not trade currencies and know very little about them so please be gently with me!

I was surprised to see the stoploss is twice the target. In share trading the advice is that the target should be at least twice the stoploss. Are the rules different for currency trading and if so why?

Regards

bracke

 

[zdforex]

Hi TraderPattern, Bracke,...

the kelly formula allows us to trade upto 80% risk per trade, however, we are only using 10% on real accounts and 15-20% on demo account. we are aware of the dangers, and only time will prove the worthiness of our approach..

Mr Bracke trading is a probability game, in using 20 pips stop and 10 pips profit in the Japanese session which is after 0500 pm EST we have had a very high profitable percentage 90%. This is logical for the following reason: During the day the euro has an average range of 100 pips and during the japanese session the range is 30-50 pips. so a range trading indicator can perform quite well during this time, especially if you have small targets.

ZDforex

 

[TraderPattern]

Hi TraderPattern, Bracke,...

the kelly formula allows us to trade upto 80% risk per trade, however, we are only using 10% on real accounts and 15-20% on demo account. we are aware of the dangers, and only time will prove the worthiness of our approach..

10% is way too high for sensible trading, with or without a Kelly formula.

As for 80%! Well...

 

[Spam Man]

the kelly formula allows us to trade upto 80% risk per trade

I don't know what "the kelly formula" is, but if it allows you to risk up to 80% of your capital per trade then it's clearly daft. Was it dreamt up by Henry Kelly?

 

[zdforex]

The Kelly Formula

The exact amount to risk on a trade is the big question in all money management systems. Risk too little will have your money won’t grow. Risk too much and the drawdown will put you out of business. In between too little and too much risk is an area where capital growth will grow to its maximum potential.

The original Kelly Formula was developed back in 1956 to solve a problem involving random interference on telephone lines. What Kelly discovered was a method of increasing data flow while reducing random information loss.

Before calculating the optimum percent to risk, you need your winning percentage (W%), the average size of your winning trades(W) and the average size of your losing trades(L).

The basic Kelly formula can be calculated as:

Optimum Risk Percent = W% – [(1-W%)/(W/L)]

Let’s have an example. Suppose you have a system that has a winning percentage of 0.6. Your system also has average winning trade of 8 and your average loss is 4. Thus, W% = 0.6 and W = 8 and L = 4.

Using these numbers results in the following:

Optimum Risk Percent = 0.6 – [(1 – 0.6)/(8/4]
= 0.6 – [0.4/2]
=0.6 – 0.2
=0.4

Thus, the percentage of equity that would provide a maximum rate of return is 40%.

The major problem with the Kelly formula is drawdown. If you have a system that is right 60% of the time, you could still be wrong 10 or even 15 times in a row sometime during your lifetime of trading. Risking too high a percentage would be disastrous. The Kelly formula implies (sorry, you have to read the original report) that unless your drawdown is less than 25%, never risk more than 25% of you equity.

The Kelly Formula is critical for traders wanting optimal rates of return. For practical application of the Kelly Formula, use 80% of the Kelly %. In the above example – we derived an optimum risk size of 40% of capital. This is too high for practical use. Instead, we would use 80% of 25% which is equal to 20%. Determine how many trades you are likely to have on at one time and then divide your 80%-Kelly value by that number of trades. For example, if you are likely to have as many as 8 trades at one time, then your optimal trading size, using the above example, would be [20%/8] or about 2.5% of your trading equity.

ZDforex

 

[zdforex]

Please find attached an excel sheet that would help you calculate the possible return based on risk per trade and to determine how many mini lots you need per trade on the FXCM mini account. You can change the risk per trade , the stops per trade , and the initial investment. The results are based on a 90% winning rate, 10 pips profit, and 20 pips stop.

ZDforex

 

[Spam Man]

The Kelly Formula

Thanks for the explanation but, like I said, any "formula" that suggests risking such high levels of capital can be dismissed for obvious reasons.

By the way, any position sizing method which demands you use a fixed % of capital per trade adds a negative expectancy to your P+L. If you're smart, you'll look at alternatives.

 

[zdforex]

Thanks For your concern Spam Man,

but " if it ain't broken don't fix it"

 

[Spam Man]

but " if it ain't broken don't fix it"

Trust me, it's broken.

 

[zdforex]

Mr Spam Man,

Thank you again for your concern, but the proof is in the numbers. $5000 to $23,700 in two months is a very good result measured by any standard.

ZDforex

 

[zupcon]

For those unfamiliar with Kelly & Optimal f position sizing there's a great explanation at Ed Seykota's website http://www.seykota.com/tribe/risk/index.htm

I'm not taking sides here, or even expressing an opinion as I don't know the details of ZDForex's system however its probably pertinent to point out that although traders such as Seykota advocate use of the Kelly formula, they do tend to have fairly diversified portfolios to spread risk, which is rather different to risking 20-30% on a single trade.

I provide the above link for educational purposes only

mick

 

[Bigbusiness]

I think the problem is that if you have a 90% winning rate, there has to be a good chance of a period where that drops. How do you know when that might happen? Probably just after it is too late.

 

[zdforex]

This is a note to all skeptic members,

We understand all your concerns, we have been trading stocks, forex and cfd's for the last 6 years. This game is about taking calculated risks to make consistent profits. There will be drawdowns and losses as in any system, however, 3 years backtests have showed that the worst was 3 consecutive losses totalling to 60 pips. Even after that the account managed to recover and profit very well in backtested results. Now in Real trading, the worst we've had was 2 losses in a row, and in 6-7 weeks July05-August16. The real account grew from $15,000 to $28,250.
So what will happen now, only time will tell and you are all welcome to watch and judge after we start trading monday after 05:00 pm EST.
To remind you we trade only Mon to Thu from 05:00pm to :08:00pm EST. We have only one trade per day, and some days we don't trade if the opportunity of capturing 10 pips is not crystal clear.

ZDforex

 

[Bigbusiness]

How do you backtest your trades when you are using S/R? Do you allow for spread and slippage?

 

[zdforex]

How do you backtest your trades when you are using S/R? Do you allow for spread and slippage?

The backtesting was done using Stochastics and RSI(Since we assumed that we will have a trading range environment) in the 3 years period, taking trades in the 05:00 to 08:00 pm EST timeframe. There are surely limitations to the backtested results, but it can only get better if you use S/R, in realtime.

ZDforex