Joe's Journal

[Joe T]

Hello...

I haven't really been maintianing my journal all that well, but I am continuing the strategy I outlined above. More specifically, I have focused solely on going long on Gold over the last few months. I still have some outstanding Gold shorts open and some long USDJPY positions from when I was taking the strategy a bit differently. But over the last few months it's been exclusively Gold buys. I continue to trade with no stop loss, but balance that risk by trading very small lot sizes (micro lots). I continue to take targeted profits whenever they hit, and carry negative positions until they turn around. That could be weeks, months, or even years.

Rather than recreate the wheel, though, I will link to where I have documented my trades, and laid out my strategy a bit more specifically:

http://digitaldiatribes.wordpress.com/2 ... ding-gold/
http://digitaldiatribes.wordpress.com/2 ... d-trading/

You can see here that as of 10/31/2009 my account equity balance was $1,360.46. By the end of November the account equity was $1,588.16. However, there was a $1000 cash infusion in there, so I lost over $700 in equity.

There will be swings in equity in this trading style as I hold positions as there is a downturn. That's why it's so important to carry enough capital, or be prepared to inject additional capital if needed, for the lot size you trade, and the amount of trades you can carry at those lot sizes.

http://digitaldiatribes.wordpress.com/2 ... atement-2/

As of January 21 the equity balance increased to $2,216.07. So, overall, close to breakeven from the 10/31 starting value, with some working positions open.


http://digitaldiatribes.wordpress.com/2 ... f-1312010/

As of January 31, equity balance was $2,096.28.


http://digitaldiatribes.wordpress.com/2 ... s-2162010/

As of February 16, the equity balance increased to $2,941.26. Had a nice string of trades settled, and then put pending orders back in if/when price dips again. I also present an assessment of my risk at the moment. Keeping in mind that I have additional funds that I could use to infuse cash if needed, my account at this point - if I traded according to current plan - could absorb a drop in price of gold to about $985. Considering that Gold was at that level not too long ago, I fully realize that my current plan is too aggressive for my given account balance, and I can only do this because I have additional funds I could use to cover it. However, as time moves along, I want to bring that target lower so that there is less and less chance of needing any sort of cash infusion. This naturally occurs as I take profits. Other ways to achieve this is to not buy at prices close to peak prices, to spread out how far between I buy, to wait longer before getting into 0.02 or 0.03 lot sizes, and even to consider stops at some point, but only at a critical stage.

http://digitaldiatribes.wordpress.com/2 ... 010-close/

As of February 28, the equity balance was $3,055.35. So, things continue to go well. Taking profits, and while we see some dips in the market, it has not been overly pronounced. Dips are good, as we buy in lower, but it sure helps when things rebound quickly. Variability is good for this strategy. As you can see in my note, my risk now was at $975 (meaning I can absorb a drop to that level under the current trading plan and current account equity). The plan is to knock that down $5-$10 a month. I just don't see a rapid decline in gold coming, and I am hoping I can absorb equity loss during dips to that level without needing to tap additional cash. However, that is my risk and I accept it.

That's the last update, but I can tell you that my current equity balance is at a little over $3,200.

If anyone has any questions on what is presented in any of those links, I'd be happy to respond. As of now, I'm just staying the course.


A little over a year ago I started with $4,000. I added $1000 more last fall. Using other strategies I lost about $2,600. So, I have about $2,400 that I've worked with using this approach so far, which means I've made about $800, about 33%, in 4 months. I'm not getting too excited, because the equity can swing quite a bit, and I can be negative before I know it. But the downswing (theoretically) will set up future profits. Also, as noted, I am trying to lower my risk slowly over time. Well, risk/return is very real, so the more I protect equity, the lower I can expect my percentage return to be. But that's OK. I'm looking at this as a long-term, slow build. So, considering what I can get elsewhere, as long as I can achieve double-digit returns over time by being patient and waiting for them to happen, it's all good.

Of course, I could lose everything. That would suck.

[Edward Revy]

Hi Joe,

That was quite a journey. Thank you for making this interesting summary for all of us. It is great to hear you're getting better at it despite the challenges in the beginning.
Keep it up! You're now owing one large baggage of experience, which gives you an advantage over other traders in this field, and should help you significantly advance in the upcoming years if you keep the same line.

Happy trading!

[Joe T]

Thanks, Edward. While i am not necessarily engaging the strategies and the indicators and such that you spend so much of your time and energy educating people about here, I have settled into my own comfort zone. I have no doubt that a very successful person who learns all those things can get rich in this market much quicker than my strategy will allow. However, I also know how quickly it can go in the other direction, as well, if one isn't careful.

I won't consider the current strategy a success until I achieve it over a much longer term, but the reason I have settled into this is because it literally takes minutes out of my day, and I don't even really have to watch any indicators or spend time learning about them. I really tried to go that route and realized that I simply didn't have the time available to be successful at it. I have eight kids now (just had a new one join the family a little over a week ago!) and my piority is to them.

One nice thing about thsi strategy is that I can even forget all about it for a day, and it won't have much of an impact at all. Much less stressful, much less time, and with luck, it will prove to be successful over the long run.

[Joe T]

One further note that I had meant to include: On October 31 when I started tracking this, as presented in the linked blog posts above, I had a number of other positions that were - to be honest - ill-conceived. And it is, in fact, these positions that necessitated the infusion of cash. I had bet ON the dollar against the Euro and the Swiss Franc. I also had (and still have) some shorts on gold. I was fortunate that they ended up working out eventually, and I closed the Euro and Francs at a small profit. Gold, I may close out of the shorts on the next major dip, even at a loss. Still haven't decided. The only remaining position other than gold are some old carryover positions where I bet on the yen against the dollar. Wouldn't you know it, but the one place I bet against the dollar is the place where the other currency is sucking wind even more. Still holding out on those to turn around.

I mention this because it may have looked somewhat confusing why I lost money during November last year, when gold prices were rising. It's because of these other positions. The actual gold-long strategy would not have required that.

I mentioned that I'm up about 33% since the start of November. On the gold strategy alone it would be even more, since the other $1000 wouldn't have come into play, but we'll call it 33%.

I thought it would be interesting to compare actual returns to change in gold prices during that time:

As of Nov 1: Price of gold = $1,045.45; Equity balance (including the $1000 infused later) = $2,360.46
As of Dec. 1: Price of gold = $1,179.30 (+12.8%); Equity balance = $1,588.16 (due to EUR and CHF - initial gold profits didn't offset these) = -32.7%
As of Jan 21: Price of gold = $1,093.75 (-7.3% from last; +4.6% from 10/31); Equity balance = $2,216.07 (+39.5% from last; -6.1% from 10/31)
As of Jan 31: Price of gold = $1,081.30 (-1.1% from last; +3.4% from 10/31); Equity balance = $2,096.28 (-5.4% from last; -11.2% from 10/31)
As of Feb 16: Price of Gold = $1,118.85 (+3.5% from last; +7.0% from 10/31); Equity balance = $2,941.26 (+40.3% from last; +24.6% from 10/31)
As of Feb 28: Price of Gold = $1,116.60 (-0.2% from last; +6.8% from 10/31); Equity balance = $3,055.35 (+3.9% from last; +29.4% from 10/31)
Right now: Price of Gold = $1,108.95 (-0.7% from last; +6.1% from 10/31); Equity Balance = $3,118.54 (+2.1% from last; +32.1% from 10/31)

So, in the last four months, strictly holding gold would have yielded a +6.1% return, while trading gold on my schedule yielded a 32.1% return. There were more distortions from other currencies in there before. Currently there is still some of that, but not as much as before.

[Joe T]

Updated account standing as of 3/15:

http://digitaldiatribes.wordpress.com/2 ... 010-close/

Price of Gold = $1,108.10 (-0.7% from 2/28; +6.0% from 10/31); Equity Balance = $3,132.18 (+2.5% from 2/28; +32.7% from 10/31)

[Joe T]

I've been considering how the potential change in regulation on leverage rules will change my system of trading. Currently, my equity has been somewhere between $3100 and $3400 depending on where the Gold price is. My Margin is only $142 on 10 net gold outstanding trades and 3 outstanding USDJPY trades (from last August, carryover from previous strategy). Lot sizes are either 0.01 or 0.02. So, current leverage is 100:1. If the leverage goes to 10:1 my margin requirement goes up to $1,420.

I am against this change, but if it happens, it shouldn't be a death knell for my trading. What it means is that I don't have as much room to move, though, and I need to be able to tap into additional funds $1200-$1300 earlier than originally planned.

Essentially, the leverage change would tie up more of my money into Forex, or at least force me to have more of a reserve on hand to be ready to move it if needed. This reduces my flexibility somewhat, but the trading scheme will go on. Overall, practically what it means is the the overall return on funds dedicated to the Forex account will be lower on a percentage basis.

I have sent a message to the secretary voicing my opposition to this change. I believe we have until March 22 to do so, so I encourage you all to express your opinion, as well.

[Joe T]

Rom, 100:1 is only too high if you trade irresponsibly. Admittedly, I'm sure many people do. But if you are careful with your trading, I see no reason why I need to concern myself that the leverage amount is too high.

Like I said, my actual trading scheme will not change at all. I will simply need to fund my margin account and tie up more funds, potentially. But I was already prepared to do this if needed, and the change just means I might have to do it sooner.

I guess I just feel it's another example of regulators determining that I can't take my own risks and make my own decisions. I don't need to be protected against myself.

Anyway, I've voiced my opinion on it, and the chips will fall where they may. In any case, I will continue trading and will adjust accordingly.


But this really will mess with some smaller traders.

[JCP]

Hi Joe,

Good to see you are back to your journal again. I too am back after a few months of soul searching. I like your approach and I look forward to tracking your progress.

Best,

JCP

[Joe T]

Well, 3/31/2010 is closed on my account, and here's my update:
http://digitaldiatribes.wordpress.com/2 ... 010-close/

As of 3/15/2010 the price of gold was $1,108.10. As of 3/31/2010 close the price was $1112.85 (+0.43%)
As of 3/15/2010 my account equity was $3,132.18. As of 3/31/2010 my account equity is $3,404.44 (+8.69%)

As of 10/31/2009, when I started this, gold price was $1,045.45, so that has increased in value by 6.45%
As of 10/31/2009, my account equity was $2,360.46, so that has increased by 44.23%.


I don't really have any notes on the strategy to add, I just continue to stay the course. Hoping to see the Dollar appreciate against the Yen a bit more so I can finally get rid of those positions and keep it all about gold. At some point I may close out my gold shorts at a loss just to "purify" the account.

[Joe T]

Will provide a full update on all transactions on the 15th or 16th of the month, but just wanted to post that I did execute a short at $1160 for just a "quick hit" and took profit at $1,157.50. Shorts are not really part of this strategy, and I'm not going to overdo these, but since we're pushing back up toward all-time highs I'm just playing probablilities that there's an additional opportunity to profit here. Even a bullish view allows for some "counter" trades.

I have targeted $1162 for a sell order with a tp of $1159. Every time I take profit, I will move the next sell threshold up $2, and move the take profit up $0.50.