Forex Strategy Reset

As with all my other 'resets', the strategy I have been using is getting a work over. To give you a quick background, the last couple months I have been reading the Trading Journal on ForexFactory of Strats (http://www.forexfactory.com/showthread.php?t=155459).

The strategy has hit a cord with me and makes a lot of sense. It goes in line with a lot of other research I have done about going to a more long-term strategy. When I say long-term, it is probably in the 2 day to 2 week time frame for most trades. I'm guessing that most trades would last 3-5 days.

Next post will go into my trading plan.

The Big Reset

The blog is getting another reset. The previous strategy started off well, don't they all seem to start of well, and ended not well. Nothing major because after 4 months I ended up at almost break-even. I expected 1 or 2 bigger losses and it turned out to be more, especially in a consolidating market. The strategy was not behaving the way that I would like to trade. So after 4 months I killed it and took off the rest of the time from trading.

Now I'm back, ready to trading the currency markets again!

February Review

Another great month! February is the 3rd straight profitable month using my current strategy. So to review the last 3 months...

Dec 2008: 3.90%
Jan 2009: 4.15%
Feb 2009: 3.11%

Last month I was contemplating reducing my trading size. Although currently trading very very small, I ran some analysis with the smaller trading size and decided against changing anything. So it was business as usual and have not made any changes.

Here are some thoughts so far about the strategy that I'm using:

• Very consistent results. Kind of surprising to see the 3 months of returns to be so close to each other.
• In a consolidating market it is difficult to create profits. I can see in a consolidating market that I would be hard pressed to get over 2%+ in a month. In fact the end of Feb the EUR\USD was in a tight range and I have no trades after the 17th.
• The ONE limitation that this strategy has is the occasional big loss. I think it is realistic to expect a one-time loss of 10%-15%. I don't think it will happen often. In fact I would be surprised to see this happen more than 1-2 times a year.

At this point my plan is to continue on with the same thing that I have been doing for the last 3 months. The key is to start adding more funds so this works out to be worth my time.

So far I'm 2 days into March and I'm already up 1.2% with more unrealized profit in the que. So it is a good start to month #4.

FXCM now has an ECN

I just found out that FXCM now has an ECN dealing platform option. Here are some details:

• $25,000 account balance or 10M per month volume
• Market level depth
• Commission from $3.5 - $5 per 100k lot. Commission depends on volume
• Seems like very good spreads

I know a lot of people have had issues with FXCM; however, I think those issues have resulted from scalping. With this platform you could scalp away without issues. I would consider this option down the road.

The State of My Trading

I have never felt more confident with my trading. I have been in the zone. I'm in the middle of my 3rd month since my fundamental shift in philosophy. I sit on a profit of around 2%. I'm hoping I get another 1-2% before the month is out. Although, I would be fine to finish the month with a 2% profit. The confidence comes because of my trading style. It is a style that I feel can traverse the test of time. It can be traded across different pairs. It is a style that limits risk.

Right now I feel I have created a successful business that can be duplicated. Like a regular production business that makes widgets, I have found a business that can create a widget for $1.00 and sell it for $1.25. Doesn't sound too significant until you scale it out. If you can produce 4 million widgets and then turn them around for a .25 cent profit you have just made yourself 1 million dollars.

The currency market is a unique business and can scale extremely well. You can scale small and gradually gain ground as your strategy is proven. With the goal to scale to the point of putting hundreds of thousands of dollars at work. In my case I have a measly $500 at risk. I am at a point where I am looking at how to safely manage my risk and scale up to where I can make some real money. At this point, I'm looking to different scenarios. For example...do I just start adding $1000 dollars a month. Do I jump in with $10,000 to start and add smaller amounts monthly.

At this point, I have been trading long enough to know that 3 months of success does not mean you will have absolute success. So, I will continue to assess and analyze what to do. I will kick-up the scale of my trading within the next 30-45 days.

Good times and I hope it keeps going.

Az Cards, soooo close

Well they didn't win but they were in the money, ha!

Arizona Cardinals Superbowl Champs

You all know that the Arizona Cardinals are going to win the Superbowl this year, right! Well they are and I think it would be a good bet. Right now the Cards are +6.5...I would take that bet + the extra .5 point. We will find out in 2 days.

January Review

January was great month! The strategy is going very well. At this point it has nothing to do with the dollars and everything to do with the goal of getting a proven strategy that can make 2-3% per month, month after month after month. And I'm not talking a strategy that works when 5 or 10 technical indicators line up. A strategy that can stand the test of time.

If I can make 2-3% per month in a consistent basis I will become financially rich! I think a lot of traders think they need to make 20%, 30%, 50% or more a month to make it big. Well I'm here to tell you that you won't make 30% a month, consistently. You have to risk too much to make it work. Yes, I think it can be done for a 1-2 years but then it will collapse. Besides, you don't need to make those returns and have that level of risk to make it big.

Back to the monthly review...I finished up January with a profit of +4.15%. So, last month was +3.9% for this strategy, and this month at 4.15%. A good trend has been started. On January 5th I did sustain my biggest draw-down and loss to date. I closed all my trades on the 5th that resulted in a 6+ % loss. This is one reason that my trade size will be cut in half from the last two months. It will be interesting to see how that will effect the returns. My guess going into next month is that it will be closer to the 2-3% and might be difficult to see those 4,5,6% gains.

Strategy Update

I have a couple minor changes to the strategy in the previous post. First of all the biggest issue with my current strategy is the size of my losses. They are few and far between but they can be very big. As a result of limiting my risk, after all my blog is named Keel Risk, I have eliminated the last position size in my geometric sizing. Now my sizing is 1 unit, 1 unit, and 2 units. Again, my unit size is 40% of my account balance. Although, I think my unit size for February will be reduced to 20% of my account size. Again, to reduce risk.

I just finished up trading for January. This wraps up the best 2 months I have had trading ever. I have a strategy that is performing phenomenally. It has held up against some big changes in the EUR/USD and taken some losses and still performed well.

The one concern in the strategy is how it performs when the pair is trading in an extended trading range. I tend to think it will do ok but only time will tell. At this point, the key to this strategy are as follows:

• Trade with the daily trend
• Trade against the 5 minute trend...in other words when it is going UP, sell
• Trade with small gearing, and then go smaller, and then smaller again!
• No Stops
• Know when to get out of a trade
• Average in your trades, yes average your losers

At this point, I'm thinking of the best approach to increase my account balance. Do I start adding a $1000 a month, or just drop in $10,000 and then add $1000 a month. Bottom line I need to get my balance up in order to make this effort worth the time. I realize it might take a couple years before that happens.

Forex Strategy

Hi all...As I stated in my previous post, I will detail my latest strategy. At this point it is hard to detail it exactly because a lot of the strategy is discretionary. Besides this strategy goes against all trading rules that you will read in books. With that here are the details of the strategy so far:

1. Scale-in: I scale into my trades. I put on as many as 4 trades with the following geometric sizing...1, 1, 2, 4 units. One unit equals 40% of my trading account. For example, if I have a $10,000 trading account 1 unit equals $4000 trade size. I'm seriously thinking of reducing my unit size in half. I will probably finish this month out and then decide if I reduce my units. I mostly add units when the trade goes against me. Yes, I know it defies all logical thought.


2. No stops: Yes, it is true. Reckless, I don't think so. The reason it is not reckless is because I'm trading very small units, even when you add all units. Secondly, I do exit trades when it goes significantly against me, but not by placing a hard stop. I'm thinking of modifying this logic slightly by only placing a stop on my last and largest trade. Or when I'm loaded up with all lots then I might put in a stop on all units, I'm just not sure yet. I need more data to figure out what is best.


3. Trade with the trend: This means put on the daily candlestick bars and trade in that direction. I'm thinking of adding in the weakly chart for decision making.


4. Trade against the 5 minute trend, preferably at the top of the 5 minute bars


5. Profit taking: I have not figured out what is best. Sometimes I have taken quick profits and other times I have tried to let them run. Not sure what is best at this point.


6. Naked charts: I'm not trading with anything on my charts. I make my decisions based on pure price action.
7. Focus Trading: I'm am only trading the EUR/USD.

The one big issue with this strategy is the occasional big hit. Anytime you trade without stops and double down on your losses a time will come when you get nailed. I have a couple good sized loses so far and it seems to be performing well. So, I'm trying to work through some of the deficiencies of this strategy. Only time will tell how it all goes.