Joe's Journal

[Joe T]

9/1/2009
Daily yield: +1.262%
Avg Daily Yield: +1.098%
Return to date = +14.001% (since 8/17/2009)

[Joe T]

9/2/2009: Daily Yield = 0.819%
9/3/2009: Daily Yield = 1.079%
9/4/2009: Daily Yield = 0.956%
9/7/2009: Daily Yield = 0.111%
9/8/2009: Daily Yield = 1.942%

Average Daily Yield = 1.063%
Return to date = 19.695%
Annualized return = 1,406.645%


My current drawdown on outstanding positions is a bit aggressive, so I am going to slow down and limit new entries. Still looking for the right balance here.

[Joe T]

I have not posted any realized trades since 9/8 because I am letting some current trades run. Since I am using no stop loss with very samll lots, I need to keep an eye on my overall position and do the math and figure out at what point the risk is too great to engage in any more trades. So, for now, I'm just letting the trades go and if/when the appropriate rebound occurs, I'll engage. (I could take opposite positions as hedges, and will likely do that, but I'm playing a waiting game on a retracement).

[Joe T]

I have had a handful of realized trades over the last 10 days or so, but not pursuing as aggressively as before. I had a couple positions take me far enough into the unrealized negative category that I didn't want to increase positions. I could have chosen to scalp in the opposite direction, but I decided to instead wait for a pullback to get in a better position to increase chances of profits. That means I've decided to wait for the market to reach the place I want it to be rather than chasing it. It also means I'm currently waiting the positions out until we get there.

Once there, I should be able to get a few profits again.

As it is, since I started with the strategy, I've realized a total of 20.994% in just over a month.

As long as I keep my positions extremely small, this no stop limit is something I'm comfortable with. It's almost like a combination of long-term investing, with some day-trading as the urge hits. I've spent very little time in front of the screen and there's no real anxiety. I do need to tweak things to find the right point where I need to back off, but so far so good.

[Joe T]

An update on the other strategies: I actually received an e-mail from someone who was interested in working together on an EA for my trending/counter-trend strategy. I went through a lot of effort to type up the whole strategy in good detail. To date, I have not heard back. I may or may not hear back on this, but I am still looking for someone profiecient in MQL to work with on this.

The EA is does NOT "analyze" and make the buying/selling decisions. The user does this. The EA allows the user to define the strategy of choice, and the entry/exit targets, but then leave the robot to implement the strategy, including determination of lot size through money management, determination of trailing stops/profit based on volatility measures, and tracking opf price in order to maximize the potential for a good entry point.

I'm really excited to try this if and when it's ever developed. It incorporates a lot of the success that we saw earlier in this thread, and takes almost all the tedious work out of it. But it also allows for a changing in strategy when the market changes, allowing you to take advantage of that instead of lose consistently.

If you or someone you love is willing, send me an e-mail (geezep at yahoo dot com).

[Joe T]

Update on the "probability" strategy: no progress. Just been busy with other things. As progress is made, I'll keep you posted.

[Joe T]

To date, I have realized a yield of 24.628%. I am still carrying a larger deficit on outstanding positions than I'd like, but I now have hedging positions in play to limit further draw on that. Still working out this strategy, but sticking with it so far.

I have posed a question to a programmer I found via Forex Factory for a quote on what it would take to program my other strategy, which I believe could be more lucrative once completely worked out. But it's really a pretty time consuming in approach, so I'm counting on the EA for full testing. No response yet, but I'm still holding out hope that some kind soul steps forward and is willing to partner in that pursuit.

[Joe T]

I'm getting fairly comfortable with the approach I've been taking. In retrospect, I've made some unwise moves here, and with time hopefully those things get flushed out. But overall, the approach seems to be making progress. The yields at the start were higher, but I also saw my unrealized position grow too much for the size of my account. I seem to be - for the moment - settling into a stable unralized amount through a combination of better entry points and proper hedging, while realizing some profits on almost a daily basis.

However, this is not a big-hit approach. I liken it to scalping in that it yields continually small profits, which on any given day don't seem like a big deal. But over time, they add up.

For example, over the last four trading days I've yielded 0.738% on the first day, then 0.441% the next day, followed by 0.475% the next, followed by 1.281%. During those days, my unrealized balance stayed stable.

It's important for my to be honest, and for you to know that, to date, the unrealized balance more than offsets my realized balance, so my return is slightly negative. This is where I've learned a few things. Better hedging and entries would have probably cut the unrealized balance in half at this point. So, I will continue on. Due to not wishing to submit a strategy that is a loser, I am not divulging a lot of details. But if this proves to be successful in the long term, I'll explain the strategy.

To date, the realized balance overall is a +28.323% yield. I started with this strategy on 8/17/2009.

[Joe T]

OK, so I started a new Demo Account to try something else. It's based on my current strategy. One problem is that my lot sizes are going to be larger than I'd like because hte demo account minimum is a minilot, and I actually need a lower lot size to offset the risk of a no-stop-loss strategy. We'll see if taking opposing position can limit the risk, but this could go badly...

I'll limit my test here to EURUSD for the time being.

Starting balance is $5000. All lot sizes are 0.1 lots unless otherwise indicated. There are no stops.

Here are my initial position:
SELL eurusd @ 1.4588, tp = 1.4527

BUY LIMIT 1.4564, tp = 1.4606
SELL LIMIT 1.4641, tp = 1.4560
BUY LIMIT 1.4511, tp = 1.4677

[Joe T]

Hello, it's been a while since I've popped in...

I've been sidetracked by many things, and so I simply have chosen that other things have taken precedence with my time over the more complex trading methods I'd love to pursue. I've got a lot of ideas on methods that, unfortunately, require more time than I have to give a full effort towards given my other responsibilities. If I were younger and single, I suppose I could convince myself to spend more time on it, but alas, my time is not just my own...

So, I've been really focusing on ways to trade with very minimal time expended. I believe I have found my comfort zone. And, despite all warnings to the contrary, my comfort zone is trading very small lot sizes with no stop loss. I've discussed this before a bit, but let me explain the strategy I've backtested and have been trading with success. There are key elements that must be well understood by someone deciding to pursue it:

1) This is a long-term strategy. Long-term as in years. This is an investment account, a buy and hold, whatever you wish to term it as. The return will dwarf the return from other investment accounts, but you will not be able to do this and then buy a condo next year.
2) You need capital, and very strict money management as it relates to your capital. This will likely require a minimum of few thousand dollars - the amount depends on which currency pair you wish to trade, and how aggressive you wish to be with your lot size. As the account grows, you can very slowly start to increase lot sizes, but there are ramifications to this that I will discuss.
3) You will ALWAYS be in a loss position on your current trades. Psychologically, you have to deal with that and not panic. It's just the way it is, because you take your profits when you can, and you let your losses ride. This is why tiny lot sizes are so important. And when I say tiny, I mean microlots.
4) Your average daily return isn't singificant from a dollar standpoint, and it's easy to think it's not worth the effort. But if you actually calculate the return, you will realize that the annualized return is worth the effort.
5) Unlike Edward, who I believe has said he can double a typical account in a short period of time, you can't expect that here. While I envy Edward's success and ability, it is also clear that one must be extremely time-dedicated to this field to reach that point. Part of me wants to do that, and part of me realizes that it wouldn't work out so well given my wife and 7 kids probably prefer to just have me be a husband and father even if I'm not making millions. This strategy is the best compromise I've found for myself between positive returns and minimal time.


OK, so here's the approach. This truly can be used for any currency pair, but some will require a ton more capital than other pairs.

I have been backtesting the AUDNZD pair. The reason I used this was because it's maximum/minimum over the last few years is tighter than other pairs. This is important because the further apart the maximum and minimum are, the more at risk your capital is, and the more you need to manage your lot sizes and apacing between trades. Also, there doesn't appear to be a long-term, multi-year continuous trend in one direction or another. That's good, because we don't mind some good trending to load up on positions, as long as we can reasonably anticipate a future where this positions eventually turn a profit.


The AUDNZD pair has traded from 1.0428 to 1.2968. The current spread I have on my platform is 15 pips. The strategy - I'll try to explain it clearly:

1) SELL at all 1.XX50 levels
2) BUY at all 1.XX00 levels

When back-testing, I focused on all the xx65 and xx85 levels for my sell/buys to accommodate the spread.

Here's where it gets a little complicated to write down, but in practice it's not really that hard:

3) When you SELL, do so with the following schedule:

@1.0450, 0.01 lots, t/p = 1.0425 (25 pips)
@1.0550, 0.01 lots, t/p = 1.0500 (50 pips)
@1.0650, 0.01 lots, t/p = 1.0575 (75 pips)
@1.0750, 0.01 lots, t/p = 1.0650 (100 pips)
@1.0850, 0.01 lots, t/p = 1.0725 (125 pips)
@1.0950, 0.02 lots, t/p = 1.0800 (150 pips)
.
.
.
@1.2850, 0.05 lots, t/p = 1.2225 (625 pips)
@1.2950, 0.06 lots, t/p = 1.2300 (650 pips)

Summary: Given the historical trading range, we can trade on that schedule above. I have chosen to increase lot sizes every 500 pips. This requires more working capital, so the user of this strategy needs to determine whether or not to increase lot sizes on what increments. There is also nothing magical about skipping every 100 pips - it worked out economically that way and was easy. If trading a currency with a much higher spread between max/min values, you may want to space it out more and watch the lot sizes. DO THE MATH before diving in.

4) The strategy is two-pronged: I both buy and sell (there may be exceptions - I'll discuss) so that I load up on positions when going in one direction and realizing profits from the opposite trades. For BUYS, the first level is 1.2900 at 0.01 lots and a t/p = 1.2925 (25 pips) and the lowest level over the last few years is 1.0500 with a lot size of 0.05 and a t/p of 1.1125 (625 pips).

As the max/min changes (if either are broken) then the schedule readjusts accordingly. By this time, you should have realized plenty of profits so that capital isn't a problem, but if this happens early on, you may need more. In either case, always recalculate underlying capital needs. This is especially important if you plan on removing money. Never remove more than your required capital.


5) Required Capital to withstand a situation where you are short on ALL steps from 1.045 - 1.2950 is about 7500 units of NZD currency based on the above schedules. This, of course, changes if the max/min are broken. Theoretically, you don't need to start off with all of that in the account, but you need to have access to it if necessary. You can try and let your profits build up first, but then you need to keep a close eye on the balance in the event of a trend in one direction that loads up your positions and draws your account down.


There are two currency pairs I recommend this on for their current characteristics: AUDNZD and EURCHF. Any pair can be used, but I am uncomfortable trading this on a pair that can trend in the same direction for years on end. Now, we all need to realize that things can change at any time. Tomorrow could be the start of a 10-year trend on the AUDNZD, for example. History doesn't suggest this is likely, but it could happen. Even if it does, over the years, we can still take plenty of profits, but it also means that we're stuck with a large and perpetual drawdown.

The other strategy is to simply trade one of the schedules: only BUYs or only SELLs. In fact, I have been doing this with gold. I have my schedule to BUY at every $10 increment, scaling up in lots every $50, and increasing my t/p target (in pips) with each step. I've reset that schedule a lot lately as it continues to reach new highs, so I've actually expanded the number of steps before I scale up in lot size recently. One may wish to do this with any of the numerous currencies that show multi-year trends against the dollar. The reason, though, that I focus on gold is that gold has an intrinsic value against the dollar, whereas other currencies will have their own issues of weakness and strength that could reverse a long-term trend at any time. It's all relative. Gold is a commodity, so I just figure it will ultimately continue to increased in price (not true in all periods, of course, but ultimately).

The final note here is that the day will come where you want to cash out. Well, at that point you don't enter any new positions, or just enter in one direction as the trend moves that way, and eventually you'll be out. Or, eventually you just take your loss on the current trades. But it's a soft landing to unwind your positions. So if you start doing this, you are committing to the long haul

I think I covered most things, but I'd be happy to address any questions.