A Review Of My Forex Trading

Sep 19, 07:30 PM

Forex Results Thru Sept 18I’m closing in on my 1 year anniversary of trading Forex my $100 Forex Experiment. I did really well ($ wise) in the beginning of the year only to get smacked hard between May and June. I got discouraged for a few months and then started dipping my toes back into the markets in August. Since then I started rebuilding my account and I’m back to profitability. My yearly trend is still up after a nasty drawdown. I’m not at my all time high but I’m happy with the new trading plan I’ve been implementing.


The reason why I got hammered between May and July was because of what I read in an ebook titled “Bird Watching in Lion’s Country.” Although it has some good points, its explanation of what drives the forex markets is really good, the biggest mistake I did was stop using stop losses based on trading method expounded by the author.


The reason why the book first appealed to me was because I was constantly getting stopped out! I had too tight stops or placed them “just out of reach” of key support or resistance levels. Even though I loosened my stop criteria slightly, I would get hit 8 times out of 10 and watch as the market reversed and shot higher. The no stop loss method might work for the author but it didn’t for me.


So I went back to what I feel was the right trading method for me.

  1. I started using a fixed percent of risk for my trading capital religiously;
  2. I forward forecasted currencies 1 week ahead using my neural nets;
  3. I placed trailing volatility stops using Monte Carlo simulations of currency volatility;
  4. Always sell half when you can (at 1R), let the other half ride. Close it out when you hit 2 or 3R.

Item 3, using Monte Carlo simulations of currency volatility, was nothing more than calculating the odds of various % moves on a day to day basis. Once I knew those odds, I would place my stops based on the % moves from the currency’s current trading levels.


Doing that protected me from the typical daily swings and let me stay in the game. I made sure that I knew how many pips I had on the line because it would clue me into as what levels I needed to sell. Item 4, always sell half, also helped my bottom line by taking back my initial trading capital and pushing profits.


There you have it, my lessons learned so far. Forex trading isn’t all that hard if you can grasp the concepts of global interest rate differentials and the global economy; the hard (and profit hurting) part is not getting whipsawed out of your position or being wrong in your trend analysis.


Bottom line: In May 2007 my expectancy dropped from +$0.17 to -$10.71, June 2007 = -$13.45, July 2007 = +$1.14, August = +$0.50, and through September = +$0.68. I read the book in May and threw in the trash in June but I take full responsibility for my stupidity!

— Thomas Ott

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Comments

  1. This is one of the only places I have ever read about anyone else doing monte carlo simulations for stop placements. It is quite a good method indeed. I wasn\'t clear from the post in regards to using a fixed percentage of your equity. If your not already, I would suggest adjusted your position size based on a fixed risk percentage per trade. For example, if you want to risk 1% per trade, then you adjust your position size based on stop loss level. In this way you control our capital at risk per trade.

    Keep up the good work!

    — Soren · Sep 20, 12:28 AM · #

  2. Soren,
    Yes, that\'s what I meant, its a fixed risk percentage per trade. I enjoy Forex trading and hope to do it in earnest next year!

    — Tom · Sep 20, 08:11 AM · #

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  5. So out of your original $100 what do you have left? What is your win/loss percentage?

    — Vivevtvivas · Nov 11, 07:20 PM · #

  6. My current balance is $113.88 and my win/loss ratio is roughly 1.493

    — Tom · Nov 11, 07:38 PM · #

  7. That is after a year of trading? What is your ultimate goal? Are you taking the $100 and planning on scaling up?


    Back in the day, I took $300 and bought 3COM stock and lost all $300 but it was totally worth the education in stock trading.

    Is this something similar?

    — Vivevtvivas · Nov 11, 07:43 PM · #

  8. Vivevtivias: I was learning the Forex markets, trying my hand at different methods, learning what worked and what didn\'t. It was a cheap education!

    — Tom · Nov 11, 11:22 PM · #

  9. I\'m not criticizing, I\'m just curious about your approach. I would say that for $100, it\'s an excellent bang for your buck!

    Good luck to you!

    — Vivevtvivas · Nov 12, 03:40 AM · #

  10. p.s. Everytime I post a comment, I get this followup error. The post appears to go through.

    Just thought you should know.

    Enclosed:




    WordPress database error: [Table \'neuralmarkettrends.wp_post2cat\' doesn\'t exist]
    SELECT cat_ID,cat_name FROM wp_posts p, wp_post2cat pc, wp_categories c where p.ID = pc.post_id and pc.category_id = c.cat_ID and post_status = \'publish\' GROUP BY cat_ID

    WordPress database error: [Table \'neuralmarkettrends.wp_post2cat\' doesn\'t exist]
    SELECT cat_ID AS ID, MAX(post_modified) AS last_mod FROM `wp_posts` p LEFT JOIN `wp_post2cat` pc ON p.ID = pc.post_id LEFT JOIN `wp_categories` c ON pc.category_id = c.cat_ID WHERE post_status = \'publish\' GROUP BY cat_ID

    — Vivevtvivas · Nov 12, 03:41 AM · #

  11. Vive: I recently upgraded Wordpress and I\'ve been getting that message too. I have to figure out what\'s going on. and try to fix it.

    — Tom · Nov 12, 08:55 AM · #

  12. At first blush it looks like your \"wp_post2cat\" table is missing? Check the database and see if it\'s there.

    — Vivevtvivas · Nov 13, 12:35 AM · #

  13. Thanks, I\'ll check into it later this weekend when I try to upgrade to the next version of WP.

    — Tom · Nov 13, 08:49 AM · #

  14. [...] you’ve been following my $100 Forex Experiment, you’d know that my Forex education has had its ups and downs. You know that I experimented [...]

    — Asleep While Trading Forex | Neural Market Trends · Nov 14, 09:19 AM · #

  15. If you are interested in Forex investing then I recommend also checking out http://chapter322.biz/forex-investing/

    -Denise

    — Denise · Nov 27, 07:03 PM · #

  16. Thanks Denise, I\'ll check it out. I hope its not one of those \"Forex is an ATM for you\" sites

    — Tom · Nov 28, 09:16 AM · #

  17. NAFG: I plan to maximize my gains in Forex by using my ATS in its second incarnation.

    — Tom · Apr 22, 07:50 AM · #

  18. I thoroughly recommend anything by joe ross. I spent a year pretty much losing constantly until i came across his stuff.

    — Total Pips · Jun 14, 10:56 PM · #

  19. TotalPips: Joe Ross? I\'ll have to check him out. Thanks for the tip!

    — Tom · Jun 15, 07:02 PM · #

  20. np, although I\'m always compelled to say, (as we\'ve all heard many times before,) what works for one won\'t neccessarily work for all.

    some of his titles are listed here; http://www.tradingeducators.com/books.htm although they are relatively expensive.

    I was lucky enough to buy mine off ebay for a fraction of the price and I\'ve even come across some \"free\" pdf versions online, although these were almost certainly illegal copies.

    Either way, best of luck and nice site!

    Paul

    — Total Pips · Jun 15, 07:53 PM · #

  21. Totalpips: I often wonder how many of those Forex Gurus make their money only off selling books. and stuff.

    — Tom · Jun 16, 07:43 AM · #

  22. Ironically I agree. It\'s an often used question put to those selling \'systems\' - \"if your method is so good, why are you selling it?\"

    Well the diplomatic answer might be - 1.its an added source of revenue to the seller/trader (and what\'s wrong with that) and 2. the more people that use a particular system, the more of a positive effect it has on the market (selffulfilling prophecy) although that latter point is unrealistic.

    I\'ve no idea of the true statistics but one could safely say that yes, a majority of those sellers probably don\'t trade, or rather make 99% of their money from non-trading related activities. Either because creating and marketing info products takes up most of your time or because they\'re \'scam\' artists without a clue how to trade, out to take money off those new to trading.

    They say a profitable trade(r) consists of 30% system and 70% discretion, so the best system in the world won\'t save a crap trader. I realised that after buying lots of different products and systems, all the while still losing. In the end I settled on a nice simple system (my 30%) and have traded it ever since (the other 70%.)

    What I learned from Joe Ross really helped me improve on both sides of that split.

    — Total Pips · Jun 17, 02:17 PM · #

  23. So is the system your selling on your website any good?

    — Tom · Jun 18, 10:02 AM · #

  24. In short no(!), but I\'m not really selling a system, that salesletter was just spare content i was using on the site to help get it indexed (none of the order links were live), in fact I replaced it a day ago with alternative unique content.

    (I\'m not sure what I\'ll do with the site yet, I just wanted to get it up there so Google would notice it.)

    — Total Pips · Jun 18, 11:35 AM · #

  25. How about just bloggin about your Forex trades?

    — Tom · Jun 18, 11:54 AM · #

  26. Yes that\'s a good idea, although I think I\'d find myself spending too much time on the site!

    Video reviews of trades (could be done live, whilst trading using something like camtasia) could be a way around that - although they lack in \'content\' meat.

    Thanks for the ideas Tom.

    Paul

    — Total Pips · Jun 18, 12:31 PM · #

  27. \"Bird Watching in Lion’s Country\"
    Yup I\'ve seen that one before. GOod, I did not purchase it.
    The software I trade in has a mandatory Stop loss, so no way I can escape that.

    What was the total you made to date from your $100? And how much more investment did you need to put in?

    Thanks !
    Ricky.

    — Forex download · Jul 11, 11:07 AM · #

  28. Ricky: I closed the year @ $153 without adding any more money. Not bad considering it was my first year trading forex. PS: no free advertising on my site. :)

    — Tom · Jul 11, 07:51 PM · #

  29. No free ads - Sure thing : )

    Nice you did a +ive return.
    Did you scale this higher or not yet?
    I mean talking neural I usually think big : )
    Hows the 9-10 months been after Sep last year?

    Wish you well ~

    — Forex download · Jul 12, 10:06 AM · #

  30. FD: I closed out the year (Dec) with a balance of $153 but then promptly gave some of that back in the first half of the year (down to $130) but I\'m back to building that up again now using the same trading methods as before. Still using Neural Nets.

    — Tom · Jul 14, 08:56 AM · #

  31. Was just wondering how was the 2nd half of 2008 for you? lots of big movements which could really have killed or rewarded you big time..?

    — Fog trader · Jan 28, 04:22 PM · #

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