Forex Strategies Forum

[Rom]

Quiz
How many Yes's and how many No's are you getting?


1. You can start forex trading with practically no capital if you are good

2. Your potensial profits will increase with high leverage

3. Timing the market is everything in forex

4. Make a wise selection of indicators to use

5. Stick with a simple profitable system

6. Turn around when market turns from bulish to bearish

7. Don't trade emotionally, don't think, just do it

8. Define your goals for each month

9. Don't mess up your trading with daily worries

10. Use the tools available on the net

11. Don't underestimate your potentials - everyone can be highly successful in trading

12. Make trading a scientifical challenge


-----------------------------------------------------------------------------



Rating

12-9 yes's = thinking the way losers do
12-9 no's = you have talent
.

[Rom]

Dirk Du Toit.GIF (11.06 KiB) Viewed 463 times

.

[Rom]

Why Leverage is Like a Drug

Code: Select all

Drug dealers often use an insidious strategy to obtain new customers. They provide free samples of their wares to children in the form of a lollipop or candy bar.  A few licks of the drug covered sweet and the kids are hooked, frequently for life. Speculative markets can operate much in the same manner except in finance the drug of choice is leverage.

How many times do we see advertisements on the web enticing traders with ridiculous leverage offers of 100:1, 200:1, 300:1 even 500:1? The lure is incredibly tempting - turn $1000 into $100,000 within weeks! Take $10,000 and ride it to a million! Just like a drug high, a leverage high promises you perpetual bliss but in reality delivers mostly agony and pain. The truth of the matter is that in highly levered speculative markets it is far more common to see $100,000 accounts shrivel down to $1000 rather than the other way around.

Leverage just like drugs takes control out of your hands. The more leverage you use the more vulnerable you become.  How many times have you been taken out of a trade that eventually recovered simply because you were over-leveraged? The margin call is the market's secret weapon. It is the easiest way for the market to take away your money because it forces you to liquidate your position at the  worst possible time, often at the absolute bottom if you are long or absolute top if you are short.

My trading improved astronomically when I drastically reduced my leverage. At present I trade FX the same way investors trade stocks with my positions never exceeding 50% margin or 2:1 leverage. For most FX traders that sounds laughably small, yet I am trading more than ever and enjoying my best month of performance in  terms of return versus drawdown.

Reduced leverage is not the reason I am killing it in the market this month. My flow analysis has simply been much sharper and more on target. However,  the fact that my analytics have been better this month has everything to do with my low leverage. By trading small I naturally execute my plan, taking stops quickly instead of letting losers run.  Small stops are psychologically easier to accept and also a lot easier to recoup. By trading on almost no leverage I tend to trade much more professionally managing my risk without emotion since I am not vulnerable to a highly levered loss.

Just like a junkie who has kicked his habit and enjoys clean living, I have weaned myself off leverage. The net result is that both my mind and my trading account are much better off.

Boris Schlossberg and Kathy Lien
BKForexAdvisors.com

[Rom]

How not to trade

Not having live news ( )
Not having any directional bias ( )
Not looking ahead in the market ( )
Relying on price action or technical indicators ( )
No trade plan ( )
Intrahour technical trading ( )
Daytrading a number of markets at the same time( )
Wrong account ( )
Undercapitalisation ( )
Trying to time entries exactly ( )
Big leverage on small trades ( )
Long entries when market is overbought ( )
Reducing risk by tightning stop loss ( )
Take profit levels are wishthinking ( )
Trades are not managed ( )

How to trade

Know the main news on the market ( )
Know the fundamentals and directional bias ( )
Trade plan ( )
Proper account and capitalisation
Proper leverage and risk
Proper entries and realistic take profit levels ( )
Proper trade management ( )

.

[Rom]

How to get -35% per month

Assumptions
1. A trending currency pair, 15 pips per day on average
2. We will supercharge our profits with leverage 10
3. We will control our risk by tight 50 pips stoploss
4. Average true range is like 100 pips daily
5. Some days SL will be taken out, some days not, 50-50%


Days SL are not taken out = 11 days
Profit will be on avarage 11 * 15 pips * 10 = 165 pips * 10 = 1650 pips
Profit % = 1650 / 10000 = 16.5%

Days SL are taken out = 11 days
Loss will be 11 * -50 pips * 10 = -550 pips * 10 = -5500 pips
Loss% = -5500 / 10000 = -55%

-------------------------------------------------------------------------------
Result with leverage 10 and 50 pips stoploss
P&L = 16.5% - 55% = -38.5%


Without leverage and no stoploss
P&L = 22 * 15 pips = 330 pips
330/10000 = 3.3%


With leverage 4 and no stoploss, roughly
P&L = 22 * 15 pips * 4 = 330 pips * 4 = 1320 pips
1320/10000 = 13.2%
.

[Rom]

A simplistic forex strategy that does not violate all rules

Assumptions

1. A solid bullish currency pair (fundamental analysis)
2. We will buy at daily pivot point S3 + 15 pips (entry when market is oversold)
2. We will use leverage 8 (large leverage on large trades)
3. We will use 200 pips takepofit and 400 pips stoploss (no tight SL here)
4. P(win) for trades will be 75% (solid edge from solid fundamentals)
5. Number of trades per month will be 4 (we don't care about profit for broker)

Trades where TP is reached = 3
Profit will be 3 * 200 pips * 8 = 600 * 8 = 4800 pips
Profit % = 4800 / 10000 = 48%

Trades where SL is taken out = 1
Loss will be 1 * 400 pips * 8 = 400 * 8 = 3200 pips
Loss % = 3200 / 10000 = 32%

-------------------------------------------------------------------------------
P&L per month = 48% - 32% = 16%
.

[Rom]

I checked out how many trades that will be on EURUSD 2011 and the combination of bullish trend and daily pivot S3 will seldom occur. Create more trades by substituting daily S3 + 15 pips with

1. Daily pivot S2 + 15 pips
2. Weekly pivot S1 + 15 pips

Either of these conditions happens some times during a month. If either occurs => an entry
.

[Rom]

Approximate backtesting of simplistic forex stategy

The EA has some added filtering that is basically a new high at M30 timeframe at the moment of entry. Using such filtering requires monitoring the market and will cause you a lot of work. Simple using a limit order at S2 + 15 pips should be good enough. What matters is that the trend is valid.

On USDJPY 2011, only short trades
2 trades won and one trade lost in a sideways market.
No profit on USDJPY

SimplisticForexStrategyUSDJPY2011.pdf

(49.23 KiB) Downloaded 72 times

On EURUSD 2011, only long trades
5 trades won.
Since each win was 200 pips (200/13350=1.47%) and leverage was 8,
result should be = 5 * 1.47% * 8 = 59% up on EURUSD

SimplisticForexStrategyEURUSD2011.pdf

(49.16 KiB) Downloaded 78 times

[Rom]

USOil - Using a grid - uploaded 2011-04-21

http://www.regnskapsprogrammer.com/xp/USOil%20-%20Using%20a%20grid.pdf
.

[Rom]

Price touched both 112.05 and 111.05 today.
.