2011...The Year of Action!

A new year. A new dream. A new direction. A renewed hope for the future. Actually a bunch of crap because it is all the same, other than the new year. I have the same dreams, nothing has changed. The difference is 2011 is the year of action. I'm 40 years old and I must get things moving. Paralysis by analysis has been my mode of operation, I must change. I have a dream to have a successful currency trading firm. I have a dream to be a successful business guy, outside of trading. I will move forward with both those goals in 2011.

As alluded to in a previous post, 2011 is the year my success materializes in currency trading. Following I will outline the basics.

Starting Balance: $9500
Yearly Goal: 30% +
Trade Size: 4000
Avg Trade Length: 5 minutes to 2 years
Strategy: long-term trend trading using price action

The strategy can best be defined as a long-term trend trading strategy. The strategy will have the largest draw-down from starting balance in the first 1-2 months, while longer-term trades get initiated. The draw-down could be close to -10% before profit starts to kick-in. The first 1-2 months will be one of the most difficult times for this strategy.

The concept is to enter trades both short and long. Sometimes, I will have a long and short position on at the same time. Stops will range from 5 to 150 pips. Once the trade is 10 - 30 pips in profit the stop loss will be moved to break-even. Once the trade is securely set at breakeven then positions will be added, to 'build' a position. The majority of trades will be stopped out at breakeven. A small minority of trades will be closed after 1-8 weeks to keep the equity curve from having too sharp of drawdowns. A very small minority of trades will be kept for 2 months to 2 years. These longer term trades will be the majority of my profit. I will carry a very large unrealized profit from month to month. At least that is the plan.

Basically the idea is to enter low risk trades, set stop loss to breakeven as soon as possible, add more size to winners, close the losers quickly, close some profitable trades to keep the equity curve going the right direction and hold some very long-term trades for major profit.

Entries will be based on regular old price action using candlestick charts. About the only indicators on my charts will be some moving averages. Used only for a guilde and not specific decisions. Exits will be based on price action exhaustion.

2010 End of Year Catchup

The later half of the year was somewhat of a disappointment on the trading front. That is if you go off pure profit/loss $. Which I think any business should use P/L as their primary benchmark for success or failure.

In review, May, June and July were good months. Not great but good. They aligned with goals and it was steady-as-you-go. In August, I changed things around and started off without thoroughly testing my hypothesis, what could possibly go wrong! Well about ($729) worth of wrong. Basically, I lost all my previous months gains.

I added in a short-term trading strategy that did not work out and was using full gearing which added to an already down month. It was a risk, I accepted the possibility and now I'm here. My P/L for the year 2010 will be around ($500).

Since the end of August beginning of September, I have been working on a new trading paradigm. Yes, more significant changes to how I trade. If you have read this blog for a while then you will probably not be surprised by another shift. Normally I would consider this a problem. However, at this point, I view this as an evolution in my trading expertise. A critical shift to one day make this a profitable endeavour. In essence, it is like another building block onto the structure to make it one day finished.

For the last couple months I have been working on a strategy based on this forum thread (http://www.forexfactory.com/showthread.php?t=245149)

This strategy/concept will probably be my last. Last in the sense that my trading has run its course. I have spent so, so much time devoted to this effort. At some point, I have to either move it to the success column or failure column. Now with the 'failure' word mentioned, I don't think it will end that way!

The concepts presented in the forum thread mentioned above are quite different to anything I have studied. The author has seen amazing success. I have been testing this strategy and at the start, saw some promise but nothing amazing. So I went back re-read the forum and have adjusted areas that I was doing wrong. Since then I have been witness to some amazing findings. I have been trading with a real account, but very small amount, just to prove the concepts.

On December 26, 2010 I will start trading more than my little test account on this strategy. My next post will outline the strategy from a high-level and my basic trading plan.

All for now...

KeelRisk

June 2010 Review

June was a struggle. A struggle in a couple ways. First I was sick over the month that encompassed almost 2 weeks. Secondly, I was on vacation for over week. Between both of those events it severely limited the amount of time I could spend on trading. Finally, the trades I did put on didn't do much and I remained flat for most of the month. Then the last couple days of the month, I was able to put on a good trade that could have been a whole lot better. That last trade put me into the profitable column for the month of June!

Through all the struggles this month, I was able to have a positive month. I profited +1.22%, $132.80.

The GOOD:

• Risk control
• Did not over-trade

The BAD:

• Trade size not consistent

As I mentioned in last months' review I did not keep my trade size consistent and it cost me money. Well, I did the same thing this month! The one series of profitable trades were only traded at half the gearing I should have used. That will be the focus of July.

Overall I'm thrilled with the results. It furthers proof that my trading proficiency is at a level that can eventually be built into a sustainable business. July will be a very important month. Not to get too far ahead of myself; however, if July is a profitable month I would start plans to get more capital infused into my trading, to take it to the next level up the ladder.

May 2010 Review

What a month! My goal for this first month of live trading was 2%. I crushed it and brought home 5.03% for a profit $519.42. I think the best part of this month was the ups and downs I encountered. In other words, I encountered some challenges and made errors and I still came out of the month with a great profit. I easily left >2% on the table making stupid errors. I left another 2% on the table due to using inconsistant trading size. With a couple of improvents there is no reason this month couldn't have been a +8% or +9% month.

Next is a review of the good and bad:

GOOD:

• The end result >5% profit
• The discipline on each and every trade (i.e. stops on all trades)
• 2 home run trades
• I put myself in position for more home run trades. The more I'm up to bat the more runs I will get.
• I had absolute control of my trading. I knew I would only lose about 1% per trade, period.

BAD:

• A couple gut instinct rush trades that cost me > $200
• Most trades I traded $20k lots. Some I traded 10k trades and ended up profiting which would have been double the profits if I traded $20k lots. I need to maintain lot size the whole month for better consistancy. This mistake cost me >$200

A look forward...

I need to keep my emotions in check. I had a great month and I'm hoping I can have another >2% month. I know in this business that if you get too confident it will bit you in the ass.

As I have written before, probably a couple times...I'm not elated because the money. I'm elated because, if I can find a consistent way to beat this game all I need to do is add zeros at the end of my trades to make real money. For example, I made over $500 dollars with a $10k account. If I can rinse and repeat each month consistently...all I need to do to is up my trading account to 100k and add a zero at the end of my trade size. That is all I need to do and now I'm making $5000 a month!! Then double it, triple it...then I'm making some serious money. The thing is, some elite traders are doing it. Some are doing $20k - 40k a day. I know eventually I can too! I will become elated with the money when I'm making $20k a month via trading as a side business.

Alright, let me come back to earth. OK, this month will be challenging because I will be going on vacation for 1 week. That leaves me 3 weeks of trading to make something happen. My goal 2% or better.

One thing I have to add after writing this post and reviewing all my monthly results. I have other months where I have increased in value +5%. I'm am here to tell you these results I have posted in the last couple months are different. I'm playing a different game than I ever have all these years trading and trying to figure it all out. I can't describe the feeling right now. It is the same feeling that I have felt since Dec. 13th 2009. The day that it all came together...10 years of trading, all came together. It is the same feeling for the last 6 months, through winners and losers. I AM ONTO SOMETHING BIG!

Week 1 Review

Week one live trading completed. My end result was good with a 1.53% gain which translates to $157.74. Although satisfied with the end result, I have to say how I got to that result left a little to be desired.

The Good:

• Decent risk
  
• End result, aligns with goals
  
• One very good bigger trade

The Bad:

• Risk could have been better
  
• Too many scalp trades
  
• Not enough pre-planned longer-term trades
  
• Trade size was all over the place. I need to trade closer to my 1% risk threshold on each trade.

Going forward, I will focus on more analysis based approach. In other words, review the charts this weekend and have more of my trades planned in advance. Such as identify the support and resistance and if price gets to those point have planned what trade(s) will be taken.

Continue some short-term scalps but I need to be more selective.

Live Currency Trading

As I alluded to in my previous post, I have started trading live once again. Today, Sunday, May 2, 2010, I have kicked off my first trade with the new replenished account. The starting account balance is $10,333.74 USD.

Following are the high-level details of the trading plan:

• No more than 1% risk per trade.
• Hard stops will always be placed at the time of starting a trade.
• No more than 2% risk at any one time.
• Strategy is trend trading and following, off of 5, 15, 30 minute charts. I will also be looking at longer term charts to base decisions.
• Trade decisions will be based on price action and support/resistance. The only technical indicators I use are 20 EMA and 50 SMA. They are only used for guidance, not trading decisions by themselves.
• Goal for live trading is to average > 3% per month.
• Plan is to implement a longer-term trend following strategy off the daily/weekly charts in the near future.

Back to realtime trading

It looks like it is that time again...time to put real money at work. At this point, I will be starting with around $10,000. It looks like I will initiate the deposit in the next couple days.

It will be very interesting to see how it goes this time around. I certainly have more confidence than I have every had at my trading. I feel I have broken through to a new level.

Is it just words or a feeling or did I really break-through. Only time will tell. The next 6 months will be very telling.

Cool Trading Related Site

I just came across a very cool free site. Checkout FreeStockCharts.com, I think you will like it. You can even bring up Forex data.

The Best Retail Forex Broker

I think two brokers fit into this category. It all depends on what you are trying to accomplish and your trading volume. For the smaller trader, my choice is to trade with Oanda. For smaller volumes you won't find smaller spreads along with good customer support. For me, I will probably always have an account with Oanda. Until I start trading over 500k lots on a regular basis will I even consider changing. With that said, once I get to that level, I will consider moving over to Interactive Brokers. If I was to trade futures I would definitely trade at Interactive Brokers.

Forex Success Principle #3, #4 and #5

Continuation from previous post.

3) Never Average Down - At one point in my trading career, I wholeheartedly believed averaging down was the way to go. I WAS WRONG! I will never consider this option going forward.

4) Do Average Up - This principle I currently do not follow. However, I believe this is what ultimately separates the top trend-traders. Psychologically, this is extremely tough to do. I am currently working on gaining this knowledge. Precisely, the times to do it and the time not to do it and just take your profit. I think you can be profitable without this tool; however, I think you can go into a whole new level if can master this technique.

5) Know your Trading Costs - Trading often, results in a LOT of costs $$$. I was always aware of the costs but it never sunk into my brain until I started doing back-tests. At that point, I would test a year of trades and see what half or even one additional pip cost per trade and it is amazing what you have to overcome to be profitable. Let's run through an example...you trade 20 times a month. Your cost is 2 pips. You trade mini lots of $10,000. Your account balance is $3000. So 20 trades per month x 12 months = 240 trades a year. 240 trades a year x $2 per trade cost(2pips spread) = $480 cost. You have to make 16% per year just to break even!!! In essence, you need to make 36% per year just to hit 20% profit per year. That is only 20 trades a month. Heck ,a lot of Forex amateurs trade 20 times in one day. Seriously, in a previous life, I would occasionally trade 100 - 200 times in one month. Needless to say I have seen the light and I don't run against the wind. Instead I run with the wind at my back, it is a lot easier.