Trading Strategies/Risk Management/Mercado de Divisas

[fxmarkets]

hmm well I would of thought that the more calls come through then a catalouge will be visible for a long while so it might be worth sustaining calls on here for a few months if its worth your resource.

As for 40 % DD I would assume thats a question of ensuring or making it plain that people need to be aware of their OWN risk profile. obviously not suited to all but theres a market that will tolerate that.

 

[fxmarkets]

Do you do a managed fund? whereby you could perhaps offer to assume any client loss for the first 12 months, 20% take out management fee on client profits made.

All the money you could want would flow, so you'd be wise to cap it swiftly initially (clients/money)

I mean are we confident with this to that level ?

 

[Grey1]

Even our strategies without money management, is pure gambling.
T2

T squared

May i welcome you to the site, I would like to say that firstly I like your nick name . Secondly you approach to trading including the importance of risk management is refreshing . I am risk freak and my Trading engine in Corp orates a risk based model without which i I would not win in long run ,

Just one note. The statement above is not correct. If your trading algorithm is nothing more than a gamble then your risk based model wont save you .

How ever i feel you probably meant some thing else.

I stand to be corrected.

grey1

 

[T Squared Trading]

hmm well I would of thought that the more calls come through then a catalouge will be visible for a long while so it might be worth sustaining calls on here for a few months if its worth your resource.

As for 40 % DD I would assume thats a question of ensuring or making it plain that people need to be aware of their OWN risk profile. obviously not suited to all but theres a market that will tolerate that.

Hey fxmarket (Dr. FxSpock)

Thanks for the post.
We are in the process of having our results audited by a CPA. We plan on having the audit prepared on a quarterly basis. We will have the firms name and contact information, so you'll be able to verify the results, as well as viewing them on our site.

Yes, the amount of drawdown is one of the factors taken into account in the risk management. This is the reason we have differing recommended minimum account sizes. Incidentally, this is also the reason we offer a suite of non-correlated strategies (to minimize the overall risk) Yes you may be risking maximum return by doing this, but at the same time, like you said, the clients toleration for drawdowns differs as well.

Peace,
T2

 

[T Squared Trading]

Do you do a managed fund? whereby you could perhaps offer to assume any client loss for the first 12 months, 20% take out management fee on client profits made.

All the money you could want would flow, so you'd be wise to cap it swiftly initially (clients/money)

I mean are we confident with this to that level ?

Do we offer a managed fund?

Good question. No, we currently do not. We are currently in the initial stages of registering with the NFA, (paperwork, tests, etc.) The other “small” issue is that we feel to appropriately run a managed fund, we need approximately $400 million under management….we’re a little short of that right now (sarcasm.) In the meantime, we lease our strategies on a monthly basis with a money back guarantee on the lease fee. Interesting thought you brought up with regards to assuming the risk, though, and it’s something we may explore in the future.

“I mean are we confident with this to that level.” I think you know I will say we are extremely confident in our strategies…what company worth their proverbial salt, would not say that? We have a pretty extensive marketing campaign planned, through various avenues. We would not invest the time and capital necessary if we weren’t confident with our strategies.

Thanks,
T2

 

[T Squared Trading]

T squared

May i welcome you to the site, I would like to say that firstly I like your nick name . Secondly you approach to trading including the importance of risk management is refreshing . I am risk freak and my Trading engine in Corp orates a risk based model without which i I would not win in long run ,

Just one note. The statement above is not correct. If your trading algorithm is nothing more than a gamble then your risk based model wont save you .

How ever i feel you probably meant some thing else.

I stand to be corrected.

grey1

Hello Grey,

I appreciate the warm welcome. I see you’re one of the moderators, you should be commended…..you run a very courteous and informed forum.

I’m glad to see you appreciate our constant stress on risk management.

Please allow me to explain my comment: “Even our strategies without money management, is pure gambling.”

I’m sure you’ve heard of “The Turtles,” from the 1970’s. They basically threw darts at a dartboard, exited the losing trades, and let the good trades “run.” Of course this is their “strategy,” simplified, but it essentially formed the framework utilized by the billionaire traders of today.

With that said, say you have a strategy that has a pretty high success rate, 67% of the trades are profitable, and the annual rate of return is around 50%. You start out the account with $10,000. You decide to risk 10%, or $1,000 per trade. The first 5 trades you have are losers (well within the boundaries of a 67% success rate), and immediately your account is down 50%. Then the system generated 2 winning trades, followed by another 4 losing trades. As you can plainly see, you’re account would almost be decimated to nothing. Simply stated this strategy, even though it is very productive in terms of returns, is useless without the proper position sizing and risk management. Grey, this is why it is so difficult to not only design a system, but to trade it correctly. There are so many factors to consider.

A successful trading strategy takes either hundreds of trades, or a long period of time to be able to quantify whether it is efficient or not. Take for example, American baseball. Let’s say you bring your son or daughter to a baseball game to see Barry Bonds for the first time. He strikes out twice, and grounds out to the pitcher the other two at bats. As you’re leaving the stadium, your child says that Barry Bonds stinks. When in reality, you know this is not the case. I realize this is a corny analogy, but I think it may illustrate my point.

Final Note: Statistics show that 5-10% of the trades generated in a system make up 90% of the profit in a given year. Keep that in mind while you view the results of not only our systems, but any other system you are analyzing.

I apologize for being long-winded, Grey, but I hope I was able to answer your question and provide some of the viewers with a bit of insight.

T2

 

[trendie]

....
I’m sure you’ve heard of “The Turtles,” from the 1970’s. They basically threw darts at a dartboard, exited the losing trades, and let the good trades “run.” Of course this is their “strategy,” simplified, but it essentially formed the framework utilized by the billionaire traders of today.
....

they traded Donchian Channels.
breakout fo the 20-day High/Low range, and system 2, breakout of the 55-day High/Low range.

they used a form of ATR to determine position sizing, and did not place all their position in one go. they placed a position, then added further amounts as the trade went with them.

clearly, they got banjaxed in rangey markets.

I only post this to short-circuit anyone going away thinking they had no defined entry and exit strategy.
nor am I saying theirs is the only and best method.
but it is important we ensure we dont undermine/misrepresent a methodology that has made billionaires out of it.

apart from that, T2, welcome, and we I look forward to learning good things about you and your systems.

good trading.

 

[T Squared Trading]

Hello Trendie,

Great posting. I in no way intended to down-play their "strategy." Thank you for your additional analysis of their techniques.

T2

BTW. I see that trade2win.com is based "across the pond." I have noticed the majority of the members reside there as well. It's great to be able to discuss these issues with everyone.

 

[T Squared Trading]

Good Morning Everyone,
I'm enclosing a sample of our market commentary and strategy analysis. This was prepared for the upcoming trading session for June 1, 2006. In this specific report, we keep it pretty simple and to the point. We feel there is really no reason to clutter up commentary with technical "mumbo-jumbo," which you can find on almost any news service. Anyhow, enjoy, and look forward to continued dialogue.
_________________________________________________________________________________________

Good Morning.

Further dollar strength was evident yesterday in the majors. While we do not really follow technical indicators, and the such, we (along with most traders with eyes) see a “head and shoulders” formation in the weekly Eur/Usd chart. Since technical indicators have a rather large following, this could be signal of further dollar advances in the days and weeks to come. The Eur/Usd daily chart is showing signs of consolidation. We’ve seen a nice run-up in the Euro over the past few weeks from around 2200 to its current 2800 range. Is this run-up sustainable? We shall soon see, with the impending payroll report on Friday. So sit down with some Earl Grey tea, a blueberry scone, and watch the potential fireworks.

As for what our strategies are telling us: We are still net short the dollar in over ¾ of our Eur/Usd strategies, and net long the dollar in our Yen and Swiss strategies. The only strategy we don’t currently have a position in, is our sensitive Euro Speed in which we just closed out a winning short position a few hours ago. Some of our Eur/Usd positions are nearing an overall dollar long bias, so we’ll just follow our signals, use proper risk management and position sizing, and watch.

Peace Out,
T2

 

[fxmarkets]

The only strategy we don’t currently have a position in, is our sensitive Euro Speed in which we just closed out a winning short position a few hours ago. T2

Morning, hmm I follow the EUR/USD and assume the trade above is an Intra 24 hr session trade? interested to know as you mention euro speed, on your trade holding do you factor in a time trend element or does it ignore time and only concern price?

Finally what was the entry and exit levels of that trade, initial stop level and as the trade is in progress does the mechanics add or liquidate partial holdings adjust stop etc, I mean can you describe on that one trade how it was managed by the system(totally please) and was there any human discretion at any point involved.

I would like to put these points on my chart and look at the thinking of this method in action.

exact timing of executions would be great,

Appreciate if this is not doable or is too much work, but would love to follow one through at some point.

cheers

fx.

 

[T Squared Trading]

Euro Speed Explanation

Morning, hmm I follow the EUR/USD and assume the trade above is an Intra 24 hr session trade? interested to know as you mention euro speed, on your trade holding do you factor in a time trend element or does it ignore time and only concern price?

Finally what was the entry and exit levels of that trade, initial stop level and as the trade is in progress does the mechanics add or liquidate partial holdings adjust stop etc, I mean can you describe on that one trade how it was managed by the system(totally please) and was there any human discretion at any point involved.

I would like to put these points on my chart and look at the thinking of this method in action.

exact timing of executions would be great,

Appreciate if this is not doable or is too much work, but would love to follow one through at some point.

cheers

fx.

Fxmarket,

Thanks for the question, I’m going to give you an answer in a way to hopefully provide some insight, but at the same time not give away our proprietary type information.

As you may already know, we have approximately 8 strategies that we make available to the public on our website. They vary greatly in the way they were designed, and what they are “looking for.” Some look at certain time frames, while other’s generate trades based on price inefficiencies within the market. Each individual system has a way of deciding if the client should get net long or net short.

The Euro Speed, which I referred to in my market commentary for June 1st, is a very sensitive strategy that looks at price instead of time. Sensitive systems such as the Euro Speed, usually work as leading indicators for our less sensitive systems, and so on and so forth.

In looking at the price action in the last 24 hours in the Euro, you will see volatility that would have made you a winner both long and short. As I explained in my commentary, the Euro Speed was short, while a majority of our other systems were long. It wound up acting as a precursor to the downward thrust in the market late last evening (depending where you live) from around .2800 to around the .2720 range.

No human discretion (other than fixed stop losses/profit targets) is ever involved in our strategies.

We have 2 layers of risk management 1) goes in current market directions, 2) sets profit targets and stop losses. The combination of having market bias/pt&sl is an effective way to be right more often than not, with a 30% differential of profit target to stop loss.

We would be more than happy to provide market commentary as requested, and the such, but we have decided out of respect to our paying customers, we will not give out specific entries and exits, we hope you understand.

All the best,
T2

 

[fxmarkets]

Thank you T2. appreciate your time in replying to my request and very much appreciate what detail you have given and of course understand re entries exits, I wasnt looking for real time just a historical so as I said, i could eyeball where your system was buying and selling the into market.

Thank you again and hope you managed to get a fill long circa 1.2730 this, Am.

Fx.

 

[T Squared Trading]

Hello fellow traders. Here is a sample of our market commentary for the upcoming trading session. Feel free to question or comment.

________________________________________________________________________________
Daily Market Commentary for June 2, 2006

Good Morning,

The dollar appeared to be heading higher in the wee hours of the morning. This was, until, a buzz kill presented itself in the form of disappointing manufacturing data. The dollar quickly reversed course and headed lower. As you may know based on our previous commentary, we do not use technical indicators in our mechanical trading strategies, but need to point out to fellow “techies,” that the “head and shoulders” formation in the Eur/Usd still exists. It will be interesting to see what happens with the payroll number tomorrow morning. There’s been a good deal of consolidation in all of the major’s, and as I’m sure you’re aware of, this may be a precursor to a major move either way. I don’t know if you all share the same excitement, but the anticipation the night before the non-farm payroll number, is similar to when I was a little kid waiting for Christmas morning. You’re either going to be disappointed after unwrapping tube socks, or elated after unwrapping that Red Ryder Bee-Bee Gun, Santa brought you.

As for the ever increasing popular, what our strategies are telling us part of the commentary: We are still net short the dollar against the Euro, Swiss, and Yen. We currently have positions in all 8 of the strategies we lease to the public. Interestingly enough we had 2 losing trades today in the sensitive Euro Speed. It’s interesting in that we lost on both the short side and on the long side. This just goes to show the indecisiveness apparent in the market.

As always, risk management and position sizing rule.

Good luck tomorrow and Peace Out,
T2

 

[YachtFund]

Four pages in and nothing interesting. Maybe if you answered T-Walkers question on page 2 this thread might begin its promised purpose.

YF

 

[T Squared Trading]

Good morning/afternoon fellow traders,

I wanted to touch on this topic briefly, please read:

If I’m not mistaken, the protocol for “signal providers,” is to revisit forums after making correct market calls and predictions and gloat, brag, and in general make a mockery of themselves and the firms they represent.

You’ll be surprised, and hopefully refreshed to see that we do not engage in this sort of activity. It’s not in our nature, and more importantly what the hell does it accomplish?
Like I posted previously in my “Barry Bonds” analysis, this is just one “at bat.” What I mean by this is; yes, as we posted last evening, our strategies were net short the dollar going into the US non-farm’s this morning. We were (the strategies) were correct, and our clients made money. If your opinion of our services was based on the success today, you would be jaded, and be supremely disappointed if the strategies produced 5 consecutive losing days next week. It’s important to look at the bigger picture when evaluating signal providers, and to keep everything in perspective. And as always, if proper risk management and position is utilized in conjunction with an efficient system, you will be in an optimal position to succeed.

BTW-Thank you for your post YachtFund. I sincerely apologize if you feel I have not done an adequate job in responding not only to TWalkers post, but everyone else who has participated in this forum. Short of divulging our proprietary algorithms in which our strategies are formulated, I’ve done my very best to address all inquiries.

I’ll be online for another 2 hours, if anyone has any additional questions, comments.

As always, thanks for your time,
Peace,
T2

 

[YachtFund]

The End

 

[T Squared Trading]

Good Weekend Fellow Traders,

Just wanted to stop by and say hello. We'll be posting some commentary for the upcoming week on Sunday evening. We also updated the Strategy Performance Page on our website to include trading activity in our Strategy Suite 1, using real money. We feel this helps us do a few things:

1. This hopefully satisfies many of our potential clients who are undecided in terms of utlilizing our strategies and commentary.

2. Yes, it covers a very short time span, but it should display somewhat how our strategies work. The profitable trades occur in clusters. As a trader you can't predict, but data shows that they occur in an efficient trading system over time. You can also see this exhibited in our equity curve charts on our site, as well.

3. Finally, it shows how proper position sizing and correct risk management allow you to "stay in the ballgame," during a negative streak of trades and stay in position to capitalize during the positive streaks.

Thank you and look for our commentary on Sunday evening,
T2

 

[T Squared Trading]

Here is a sample from our weekly commentary. Have a nice week everyone.

_________________________________________________________________________________________
Weekly Commentary for June 4, 2006

Good Morning,

We hope everyone had a nice weekend, and are well rested for the upcoming week of trading.

Well, hopefully the majority of you were able to cash in on the dollar’s move across the board on Friday after the NFP. As in most cases on the day of major news releases, if you’re not in the market prior to the “number,” it makes trading very tough. We feel Friday was just a trading opportunity, as the price movement really didn’t do much in terms of affecting the charts. It appears that “black gold” and Fed comments will be the major news this week. Your humble correspondent (me) resides in sunny southern Florida, and this area is starting to get a bit apprehensive as hurricane season begins. Although the Gulf Coast refineries handled the unprecedented hurricane season of last year remarkably well, you have to wonder if they will be able to do the same again.

The large majority of our strategies are still short the dollar. We were able to hit the profit target on one of the components of Strategy Suite 1, the Euro Mega late Sunday evening. The Euro Speed is flat as of 11pm ET.

That is all for tonight. As always, keep an eye on your position sizing, and learn from your mistakes.

Peace Out,
The Notorious T2

 

[TWI]

What I am saying is that our money management and risk management techniques are calculated just like the “big boys.”

"the 'big boys'" use many different techniques to solve these issues. I am aware of a number of these methods and they are not identical. The above is not a good indication of how YOU approach the problem of position sizing. I am not enquiring about specifics that would put your proprietary knowledge at risk, just a general overview.
Thing I think is, why would anybody get involved in something unless they are completely aware of the risk being taken. That would surely not be something you could expect a prudent trader to do.

 

[T Squared Trading]

"the 'big boys'" use many different techniques to solve these issues. I am aware of a number of these methods and they are not identical. The above is not a good indication of how YOU approach the problem of position sizing. I am not enquiring about specifics that would put your proprietary knowledge at risk, just a general overview.
Thing I think is, why would anybody get involved in something unless they are completely aware of the risk being taken. That would surely not be something you could expect a prudent trader to do.

Hello TWalker and fellow traders,

Thank you for giving me the opportunity to answer your question and appreciate your emphasis on the risk management/position sizing issue. Hopefully I will do an adequate job of doing it this time.

There are two aspects of risks. a) the amount of risk assumed and b) how the risk is managed. The amount of risk assumed is specific to the specific strategy or the combination of strategies (similar to our Strategy Suite 1) used. How it is managed refers to position sizing.

When we refer to the "big boys", what you will notice is that most of them increase risk when the system tells them to and decrease risk at the appropriate time. Whether it is Steve Cohen, or John Henry, they win big because of this and prevent blowouts because of the same reason. If you look at John Henrys trading systems you will find that some of them have over a 40% drawdown. How he is able to trade these systems over time and end up doing well is because of how he allocates.

It is because of the paragraph above that we are astounded when we see signal providers a) include no guidelines as to risk management/position sizing, and b) throw out a random, “only risk 2-3% of your portfolio on each trade.” I would wager 99% of the time this is just an arbitrary number, and has no bearing on the respective strategy(s) the client is trading.

Also, I would like to send out a big Thank You to those that have sent us emails requesting additional information. We will continue on our quest to be the leading provider of mechanical trading strategies and market commentary through unparalleled customer service and performance.

Sincerely,
T2