My journal - Spread-betting 7 FX pairs

hamham

Newbie
4 0
Hi
Just started looking at you journal looks good.
Im new to FX and need all the help i can get
regards
 

awe

Active member
120 7
Hi
Just started looking at you journal looks good.
Im new to FX and need all the help i can get
regards

Hi hamham!

Welcome to the board and thanks for posting. I hope my journal can be of use to you and if you have any questions feel free to ask.

My immediate suggestions for a new FX trader would be; if you haven't already done so, open a demo account with a broker and get used to their trading platform, I use MetaTrader 4 and can highly recommend that.

Then read read read! Get all you can out of services like investopedia.com and from the brokers online literature resources. IG Index and Alpari both have some good online texts you can read.

And thirdly, join a forum like this one and ask questions!

Happy trading!
 

awe

Active member
120 7
2 potential new trades

Hi guys,

Here is a video documenting my reasons and thinking behind two trades that I've entered (but have not yet been filled/executed).

I've gone for a short on cable (GBPUSD) and a short on fibre (EURUSD).

Give me seven minutes, and I'll bore you to tears...
http://www.youtube.com/watch?v=3CLlVhnnnfQ

UPDATE - Neither trade has been filled yet. I've adjusted the stop and limit on cable to move the entry point down slightly in the hope it will get filled today.

UPDATE - OK so my short order on EURUSD got filled. Here's an update video...
http://www.youtube.com/watch?v=3N1wnwUiYpU
I stopped recording too early, I hadn't gone over the news...
http://www.youtube.com/watch?v=q4DoK4E_hsg

I forgot to mention how the news at 13:30 might affect my cable trade. If I get filled on the order prior, then it will hopefully have the same beneficial effect I'm hoping it'll have on EURUSD. If I'm not filled on cable and the price moves away I'll probably pull the trade.

Best,
awe
 
Last edited:

awe

Active member
120 7
Not trying to thread bump at all, honest!

Just forgot to add my Skype ID in a previous post. It's mitchell.mann1
 

LiamH

Well-known member
425 40
Hi awe,

Interesting and informative journal you've got here, will be adding this one to my favourites.
 

Sang Froid

Well-known member
344 60
Another aspect you need to consider is profit to max. drawdown as a ratio. Let's say you're targeting 50 pct return in a year. 50 pct in a year is a bloody good return, and most mechanical systems will have a ratio of 1, i.e. you're going to get a drawdown of 50 pct if you target annual returns of 50 pct.

Really? I'm not sure if I'm doing something very very wrong then. I must be over-leveraging my account, or maybe risking far too much per trade. I thought 50% per year is a tiny return. The strategy that I'm taking live next week that I've been testing for a while now yeilds returns of around 24% per month. Maybe this is just a lucky streak then perhaps :cry:
 

LiamH

Well-known member
425 40
Really? I'm not sure if I'm doing something very very wrong then. I must be over-leveraging my account, or maybe risking far too much per trade. I thought 50% per year is a tiny return. The strategy that I'm taking live next week that I've been testing for a while now yeilds returns of around 24% per month. Maybe this is just a lucky streak then perhaps :cry:

I was thinking this as well. I mean I don't have any results to prove high returns are possible but surely a profitable strategy with a bit of leverage can easily cover 50% per year?
 

awe

Active member
120 7
I was thinking this as well. I mean I don't have any results to prove high returns are possible but surely a profitable strategy with a bit of leverage can easily cover 50% per year?

I think that's the lure for many. I disagree with it totally although at first it was that same lure that pulled me in years ago.

I would guess that if you are pulling in 25% returns in a month that you are highly leveraged and your account wouldn't suffer a losing streak very well. Just be careful. There are plenty of experienced people on here happy to give you their opinion if you post up your trading details etc.
 

meanreversion

Senior member
3,398 537
Really? I'm not sure if I'm doing something very very wrong then. I must be over-leveraging my account, or maybe risking far too much per trade. I thought 50% per year is a tiny return. The strategy that I'm taking live next week that I've been testing for a while now yeilds returns of around 24% per month. Maybe this is just a lucky streak then perhaps :cry:

First of all, remember that 85 pct of retail traders lose money. Thus, if you simply breakeven, you are in the top 15th percentile.

Secondly, compare your returns to other types of investment, e.g. stockmarket, bonds, bank accounts, hedge funds, and you will see that anything north of 20 pct is considered good.

Third, just do a little arithmetic to see where 24 pct a month will get you. If you start with £10,000, after three years you will have £23mio (1.24^36 * 10,000). Does this sound realistic?

A better way to look at this, rather than just focusing on an expected monthly return, is your expected return divided by likely drawdown. So if you're trying to make 100 pct a year, what kind of drawdown do you think you'll encounter along the way? (With a mechanical system you can backtest to get the answer, but with a discretionary system you have no idea..)

For those kind of returns, you'll probably get a 50-60 pct drawdown at some stage.. people invariably overestimate their capacity for drawdown (above 20 pct it starts to get uncomfortable).

I think it helps to be realistic in a trading endeavour, much the same as it would for any start up business.
 

LiamH

Well-known member
425 40
I think that's the lure for many. I disagree with it totally although at first it was that same lure that pulled me in years ago.

I would guess that if you are pulling in 25% returns in a month that you are highly leveraged and your account wouldn't suffer a losing streak very well. Just be careful. There are plenty of experienced people on here happy to give you their opinion if you post up your trading details etc.

awe, I don't want to derail your journal because it's a nice read. There are some things I'd like to ask though - To you and meanreversion...

I'm well aware of variance both positive and negative when you are aiming for a certain mathematical expectancy and I understand the implications of a drawdown very well from my 20 table poker exploits - I was a profitable player at the lower limits but even with a massive edge 10-15 game downswings were common due to nothing more than mathematical variance.

Meanreversion mentions that a 20% per annum gain is highly respectable and I agree provided that the account is either unleveraged or only leveraged to a maximum of 2x.

In the real forex trading world I personally would be using at least 100x leverage because this fits with my 3% risk per trade with 20% of my account for margain. Of course, the leverage would differ slightly from trade to trade being governed by the size of my stop loss.

So, surely, if my strategy has an expectancy of 5% gains per year without leverage then with 100x leverage this would be 500% per year?
 

LiamH

Well-known member
425 40
To maybe put it another way as well...

Lets say a strategy gives 5 trades per week and over a 2 week period you break even over 9 trades and get a 4:1 R\R ratio on the other. You risk 3% per trade meaning over those 2 weeks you've just made 12% on your capital.

Compound that 12% over a year and surely that equates to a healthy percentage gain?

Or is this kind of strategy unrealistic?
 

meanreversion

Senior member
3,398 537
Leverage is a double edged sword. If you use leverage of 100:1 on your account and the market moves 1 pct away from you, you've lost everything.

Read "When Genius Failed", excellent book about LTCM. I think at one point their leverage was up to 100:1 and sure enough they blew up.

I wouldn't recommend using more than 5:1. I think there is the danger here of focusing purely on unearned profits, and losing sight of the potential drawdown.

Remember, 85 pct of retail traders do NOT make money, so even if you break even, you're doing pretty well. Start off small and increase size when the equity grows through profits.
 

meanreversion

Senior member
3,398 537
To maybe put it another way as well...

Lets say a strategy gives 5 trades per week and over a 2 week period you break even over 9 trades and get a 4:1 R\R ratio on the other. You risk 3% per trade meaning over those 2 weeks you've just made 12% on your capital.

Compound that 12% over a year and surely that equates to a healthy percentage gain?

Or is this kind of strategy unrealistic?

Hmmm, this is putting the cart before the horse.

Firstly, what is this strategy? You need to design it or work it out.

Second, there is nothing wrong with your arithmetic, BUT how often is this likely to occur?

Try approaching it from a different angle. Start with the premise that most people lose money at trading (which they do). Therefore making money from trading is not straightforward. Thus, what is your edge? When you put your money at risk in the markets, you are competing with thousands of other traders. What enables you to take money from them? For some people, edge is statistical, e.g. they have designed mechanical systems which make money over time. For others it's speed of reaction, or just a knack for it, which comes from experience. You need to work out your edge before putting money at risk.
 

LiamH

Well-known member
425 40
Thanks for your replies meanreversion, I'll not discuss my plans here but you have made me think of things a little differently.

awe, sorry for interrupting your journal.
 

meanreversion

Senior member
3,398 537
Please get a copy of "Trade your way to Financial Freedom" by Van Tharp. I recommended it to awe as well, I hope he liked it!
 
 
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