Am I lucky?

[futures_man]

Hi All.

I wanted to hear your feed back on my trading style and performance.

My Background:

I work as a senior executive for a trading software firm for more then 5 years (develops software for Futures & FX)
Over the course of my work I have been exposed to both computerized and discretionary trading styles and systems (with all kinds of frequency)
I have paper traded for the last 3 years FX and Futures and played around with all kind strategies (short term swing and longer term).
For the last year I have been consistent trading the method that I will describe below (not sure if it classifies as day trading or swing).
With a staring balance of $40K virtual money have I have grown my DEMO account to over $800K in one year using 33X leverage and risking 2.5% of capital per open position.
I trade 12 pairs.
I hold a position for 24 hours (or until my Stop loss or profit target are hit, and then revaluate my position.

I opened a LIVE account with FXCM 1 month and half ago with $40K.
Until today trading the same style I do for paper I am up $24K on this account (using 33X leverage).

My strategy is simple price action, using some SMA and EMA (but relaying on price action)

I start looking at a 4H chart looking for key support and resistance levels of the last 2-3 weeks.
Then I move to a 1H Chart to place my Stop and Limits. In general I look for 40-50 stop and 80+ profit objectives.
I don’t use the "classic" 1 to 3 ratio …
In general I get "hit " with the stops on a third (4) of the pairs (loss) and manage to make at least 40 pips on another 4 and hit homeruns on the remaining (90+ pips)

Let me know what are your feed backs

 

[shadowninja]

It should be 2.5% of capital in total. If the market has bad news, it could hit all your positions. That's 12 x 2.5% potentially at risk = 30% of your account gone in the blink of an eye.

Otherwise, sounds good. I like simple systems. They're like me.

 

[futures_man]

because i trade 12 pairs , even if bad news hits it NEVER hits all positions ... and i get stopped out on some pairs and hit home runs on the others

 

[futures_man]

because i trade 12 pairs , even if bad news hits it NEVER hits all positions ... and i get stopped out on some pairs and hit home runs on the others

My main point is ... that i found trading easy, and simple (so far....) with a simple system i am able (again .. so far..) to produce large profits and my only concern is that i am just on a streak. I see so many traders using sophisticated models and indicators , and all i need is to look at a chart and draw some support and resistance lines ... I know everyone is different , but at this rate i look to make a few hundred grand this year.... . should i expect a slap from the FX gods at some point ?

 

[Mathemagician]

Our opinions will not change your outcome.

jj

 

[tea42]

Futures_man#

Presumably you now have some likelihood estimates for profit/loss for the types of trade you undertake (allowing for spreads), and I would expect you to say that you have been agreeably surprised that your results have been exceeding the profit levels you had been expecting.
It is a simple matter to set up a spreadsheet with simulated results for say 10,000 plays where the outcome of each play is determined by allocated random numbers fitting the expected distribution of results.
Check the cumulated results for each of, say ,subsections of 100 plays, presumably in your case equivalent to a few days action, and you may be surprised at the variability of profit/ loss results.
The same simulation exercise can be used to show what proportions of traders using strategies of given equivalent theoretical profit potential might fall into different profit loss ranges in a set of 100 plays. This is a sobering exercise for most system followers as it shows that for what might seem reasonable and modest theoretical gain objectives, there can be a surprising number of cases where these sets of 100 show painful losses, with some going on to yet further 100 set losses, while the lucky ones with exactly the same theoretical expectations go from strength to strength.
If you can carry out the Monte Carlo simulations suggested, do let us know what the outcomes imply for your continued success.
I speak from nearly 40 years experience of using monte carlo simulations for decision support, and enjoyed a brief heyday turning 2k into 16k, using a variety of contrarian and momentum strategies based on investor psychology over 2-3 years trading a few years ago. Volatility was generally lower, and spreads were wider then and the 16k might have been closer to 30k with todays spreads.
The keys to survival must always be money management, avoidance of greed, and a degree of humility when fortune shines. Remember the adage "Into each life some rain must fall".

 

[r.w.]

Luck? I don't think so. Keep it up!

One thing that stands out to me, though, is that 2-3 weeks seems a bit short for identifying S/R areas. I would suggest looking at daily charts over a year or so.

As an example of what I have in mind, look at EURUSD in January 2007. The monthly pivot support level at 1.2891 coincided with an area of strong resistance for most of 2006. It was broken in November and it was then tested as support in Jan 07 resulting in a number of high probability opportunities in Jan-Feb.

 

[futures_man]

Luck? I don't think so. Keep it up!

One thing that stands out to me, though, is that 2-3 weeks seems a bit short for identifying S/R areas. I would suggest looking at daily charts over a year or so.

As an example of what I have in mind, look at EURUSD in January 2007. The monthly pivot support level at 1.2891 coincided with an area of strong resistance for most of 2006. It was broken in November and it was then tested as support in Jan 07 resulting in a number of high probability opportunities in Jan-Feb.

Thanks for your reply.. In general I look for 80-100 pip move, I think that 4H and 1H charts give me good S/R levels for the last 3-4 weeks of trading . from what I have seen (only for my trading) Daily charts are to large of a time frame for S/R in the frequency I trade

 

[r.w.]

Thanks for your reply.. In general I look for 80-100 pip move, I think that 4H and 1H charts give me good S/R levels for the last 3-4 weeks of trading . from what I have seen (only for my trading) Daily charts are to large of a time frame for S/R in the frequency I trade

OK, so for your daily trading less than a month works, which is fine. My point was that the longer term levels are higher-probability opportunities. Such as, for example, the bounce off 1.5400 in EURUSD Friday afternoon. Did your method identify that freebie?

 

[shadowninja]

because i trade 12 pairs , even if bad news hits it NEVER hits all positions ... and i get stopped out on some pairs and hit home runs on the others

I would be happy to bet that one day it would hit the lot. I might not be alive when it happens but I wouldn't bet it would never happen. If you leave yourself that exposed, there is a chance you could lose 30% of your account in one go.

 

[futures_man]

OK, so for your daily trading less than a month works, which is fine. My point was that the longer term levels are higher-probability opportunities. Such as, for example, the bounce off 1.5400 in EURUSD Friday afternoon. Did your method identify that freebie?

Hi r.w,

I am sure that there are infinite trading opportunities in both longer term and shorter term trading and frequencies, my method just happens to work for me (so far..)
from my experience in the market (not just trading, but working with traders and trading firms ) there is no right or wrong or "freebies" as one's freebie can be the others pitfall

and to answer your question.. NO I didn't use the 1.5400 mark as support line as it didn't fit into my trading strategy for that day.. (looking at it now, it seems like a great trade), but I assume a scalper (successful one that is ) would say that we both missed out on many more trades all together , and he also will be right (to his method)

 

[r.w.]

Hi r.w,

I am sure that there are infinite trading opportunities in both longer term and shorter term trading and frequencies, my method just happens to work for me (so far..)
from my experience in the market (not just trading, but working with traders and trading firms ) there is no right or wrong or "freebies" as one's freebie can be the others pitfall

and to answer your question.. NO I didn't use the 1.5400 mark as support line as it didn't fit into my trading strategy for that day.. (looking at it now, it seems like a great trade), but I assume a scalper (successful one that is ) would say that we both missed out on many more trades all together , and he also will be right (to his method)

Can't argue with that! And I didn't mean to challenge you. Apologies if it came across like that.

 

[ozzymandius]

Futures Man,

Thank you for sharing. Looks like quite an interesting system.

Do you mind also sharing which pairs you trade and why you chose the particular pairs?

Thanks.