KLCI At Historical High

KLCI recorded another record high of 1629! As we can see from the chart above, there was a reverse head and shoulder formed during the period of April to mid June 2012. On June 19th, there was a breakout from this bullish chart pattern and now heading towards the price target of 1646.

While technical analysis tells you the possibility of near term price action, in a larger picture, we still rely on the fundamentals to give us a glimpse into the future.

The Euro debt crisis is still on, the politicians have not come up with the best solution yet. The concern is the bond yield (or the cost of borrowing) for Greece, Span and other debt ridden countries are much higher than their counterparts like Germany, Sweden and Denmark. For example, the 10 yr bond yield for Germany is below 3% while Spain is closed to 7%. It is believed that those debt ridden countries cannot survive with such high cost of borrowing and that they are suggesting the richer EU countries like Germany and Denmark to share the weaker countries debt burden by jointly issuing government bonds. By doing so, the borrowing cost of Spain and Greece is lowered while that of the Germany is raised.

During the recent Brussel Summit in June the above proposal did not materialized but instead a temporary measure is agreed upon. That is the 120 billion euros growth package was agreed upon during the 2 day summit with funding from the ECB to help solve the problem temporary.

In the US, concern is with the unemployment data that remain stubbornly high at above 8% but it is declining which is a good news for the US. In addition, the corporate sector is generating huge profits as products such as Microsoft, Apple, Johnson & Johnson etc are selling all over the world!

On a contrary, things are not looking good in China. Recently the Chinese data shows that the economy is contracting with weaker PMI and GDP data.

Hence we shall expect the markets to remain choppy until the situations get better in the EU and China.

Happy investing,
Pauline Yong

Diposting oleh Unknown 11.30 0 komentar

Does Hedging on the same currency pair Really Exist A Look at Position Holding in Forex Trading

One of the things I consider the funniest about forex traders is that they seem to have a strong opposition against the removal of "hedging" from their trading capacity. However few of them do realize that the traditional hedging we have seen where you buy and sell a given currency pair at the same time is merely and illusion and that in reality it doesnt exist or -for that matter- make any real sense. On todays post I want to talk about the concept of hedging, why it simply doesnt exist in reality and why any strategy that uses this concept can be implemented without its use. After reading this post you will understand better that hedging a currency pair by having open long and short positions at the same time is not possible in the real market and you ll see how you can actually understand what you are doing when you have this on your account and how it can be implemented within your strategy to have the exact same results without ever having more than one position opened per currency pair.

What is hedging after all ? In general it refers to the taking of opposite positions with a certain degree of correlation that offers some protection against side movements in the market. So for example going short EUR/USD and short USD/CHF is bound to guarantee some protection against variations in either currency pair since they are heavily and negatively correlated. However since the correlation is not 1 the actual effectiveness of this hedge depends on market conditions and - when correlation is temporarily lost - such hedges become extremely dangerous.

However, when people in the MT4 community refer to "hedging" they generally talk about having a long and short position opened at the same time on a currency pair. For example they open up a long on the EUR/USD at X price and then a short afterwards to cover up their loses or to "fix" some of the profit level they have achieved. Many traders who are not familiar with how the market works consider hedging absolutely vital for their success and the removal of this feature seems to be extremely unacceptable.

When we look close having a short and a long trade opened on the same pair is merely an illusion. What you are doing is buying and selling the same contract so if you were actually carrying out currency exchanges (of physical currency) you would have done the same exchange twice and ended up with what you started with (your ending net positioning is 0). It doesnt actually make sense if you think about it and the way it has been implemented in MT4 is practical in some ways but very misleading in others.

As a matter of fact, any hedging strategy can be implemented EXACTLY in the same way without ever having two positions opened in the market. For example if you bought USD/JPY at 85.54 then you want to enter a short position at 84.54 then exit the short and the long at 86.54 the same effect would be realized if you closed the long at 85.54 because closing the long is indeed what you would be doing in reality if you entered a short. The later point where you exit both the long and short is irrelevant since your net positioning from the open of the short is 0.

Case 1 ( Buy 85.54, Sell 84.54, Close both 86.54)

Long Result = 86.54-85.54 = 100 pip profit
Short Result = 84.54-86.54 = 200 pip loss

Net Result = 100 pip loss

Case 2 (Buy 85.54, Close 84.54)

Long Result = 85.54-84.54 = 100 pip loss

Net Result = 100 pip loss

So in summary it is now evident that the current "short and long hedging ability" in metatrader 4 is simply an illusion and that any strategy can be implemented which currently relies on this feature simply by taking into account the net positioning of the account. When shorts are entered they close longs and when longs are entered they close shorts. In the end this leads to the exact same effect as we would have had if we had simply opened all the short and long positions simultaneously since what matters is merely our net positioning in the market. This is the approach that really makes sense and falls in line with what would happen in a physicial currency exchange.

To sum it up, if you currently have a portfolio trading on the same instrument or if you are trading a system that opens longs and shorts on the same currency pair, dont worry about hedging as you can always implement your strategy using a net positioning approach, something we will all have to do once we move entirely towarsd metatrader 5.

If you would like to learn more about my journey in automated trading and how you too can code likely long term profitable systems using reliable trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Diposting oleh Unknown 16.45 0 komentar

The Greatest Advantage of Automated Trading at Least for Me !

It is true that my posts regarding automated trading are generally focused towards the negative aspects of this way of trading and explaining why it is bound to be harder to achieve than simple manual profitable trading. However, there are a few advantages inherent to automated trading that have made it my operational way of choice and the generator of the majority of my current income level. Within the next few paragraphs I will be explaining to you one of the main reasons why I decided to use automated instead of manual trading systems to succeed in forex trading, especially why this is so beneficial for my trading style and personality. I will also tell you why this quality is also a double edged sword and why it does NOT mean that you can just "set and forget" trading systems.

Yes, we have all heard the many "benefits" inherent to automated trading. Most EA sellers just tell you that you can make money while you sleep, trade like a professional without knowing anything and simply enjoy the profits using the forex market like some sort of ATM machine. The truth is VERY far away from this and automated trading is simply not what they tell you it is. In reality automated trading is harder to achieve than manual profitable trading and it is as challenging and demanding from a psychological point of view.

What is the difference then ? What are the TRUE advantages of automated trading ? In reality automated trading has a lot of pitfalls but it also has some great advantages that made me decide to go with it instead of regular full time manual trading when starting to build my forex trading career.

Truth be told, the fact that you are able to watch the markets 24/7 and "not miss any trades" or do a "ton of analysis in a millisecond" were not the things that made me choose this way of trading over manual execution. Even though you may think that this is actually better the fact is that you can use manual trading systems that require only a few minutes every day to achieve the same profitability levels as a regular long term profitable automated trading system. I know traders who trade daily charts and dont spend much time "working" and achieve the same profit targets as me so the fact that you can just have an ever-watchful eye is not a true reason to choose automated over manual trading since being on a constant lookout for trading opportunities is not necessary nor does it warranty more success in trading.

The most important reason that drove me to use automated instead of manual trading systems was simply that - from a psychological point of view - I am better able to control my short term emotions when I do not have to take the actual trades of the systems I am using. I am very good at dealing with draw down periods since I always have a strong analysis and long term perspective but having to take trades from a strategy that has been losing for a given period of time manually is just psychologically hard for me to do. As a trader, I quickly noticed that draw down periods when trading manually made me change my strategy and this led to long term loses and deviations from my projected profit and draw down targets.

Automated trading is a blessing in the sense that it offers me the ability to have a long term plan and stick to its guidelines even if I am not actually personally executing each position the system goes into. Of course this does NOT mean that automated trading is emotionless and those of you who assume this to be the case will be making a BIG mistake. Automated trading attacks your psychology a LOT but from a different perspective. If you dont understand the system you are using you will not be successful because you will not know if you should or shouldnt stop using a given trading system when a draw down period happens, you will constantly wonder if it has stopped working and you will NOT be able to achieve long term profitability.

Even though automated trading is very demanding emotionally, it is demanding in a way which I am more comfortable with. I am very meticulous about the analysis and understanding of my trading systems and I have built what I think is a very good capacity to draw plans around automated trading systems and stick to them. Manual trading is demanding for me in a way that I cannot handle very well, reason why automated trading became the perfect answer for my question about success in forex trading.

So for me not having to personally suffer through each trade of my systems is great since I am better able to handle the great psychological pressure that is exerted by automated trading systems in other ways. However what you have to realize here is that whatever you choose -manual or automated trading -, it will be challenging and believing that automated trading will be a "breeze" simply because you dont have to watch and take every trade is going to be a FATAL mistake. In the end it comes down to having a well laid out plan, a GREAT understanding of your trading strategy and the will to execute your plan exactly as you have laid it out.

If you would like to learn more about the psychology of automated trading, the building of systems and how you can trade with confidence with a likely long term profitable system YOU build based on sound trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Diposting oleh Unknown 07.31 0 komentar

Trading Reality and Automated Trading Realistic Profit Expectations Looking at the Barclay Currency Traders Index

Yesterday I received a very interesting email from an Asirikuy member pointing me to a database showing the past 20 years of performance of top forex traders and funds (the data was originally discussed in this article). Although I had seen the indexed performance of several currency traders before this is the first time in which I had found this data in such an organized and reliable fashion, put together by Barclay Hedge. The Barclay Currency trader index,- in their own words- contains "An equal weighted composite of managed programs that trade currency futures and/or cash forwards in the inter bank market. In 2010 there are 119 currency programs included in the index". To sum it up, the Barclay Currency trader index gives you a snapshot at what the proffesionals in the field are achieving showing you exactly what profit expectations are more realistic and which ones are to be considered completely dilusional. On todays post I want to write a little bit about this data to get those of you who are unaware of what the "industry standard" is, a better perspective of what is and what is not realistically achievable in currency trading.

In the world of currency trading - and particularly in automated trading - people are often pointed out that it is "very easy" to achieve huge amounts of profit in the forex market. Moreover, real live results that show you increases of 100-1000% in a few months are not uncommon in the forex market and they appear to show new traders that you can actually make a small fortune quickly from a small investment in currency trading. However new traders often have absolutely no idea of what the industry proffesionals are achieving or what hedge funds that deal with currency instruments actually get and therefore they often believe the paid actors that pose as traders on automated trading sales sites saying that they have earned millions in currency trading in a few months.

The fact is that huge returns are possible with a huge market exposure and the problem with a huge market exposure is that it causes huge wipeouts of capital as the market evolves. So this is analogous to a person who wins the lottery. You get a huge amount of return in one run but if you spent all your lottery money in tickets, you would hardly ever win again or if you do, keeping on doing this will eventually wipe you clean. The market - I believe - has a self-limiting character which makes the systematic exploitation of market inefficiencies to achieve huge profits impossible due to the fact that huge profits require huge exposures, and huge exposures - lead to wipeouts.

The golden question is then what is realistically possible ? Since there is no way in which the "top" possible average profitability can be inferred the best measurement we have of what can be systematically achieved is what the average people in the field are actually doing and have been doing for a long time. I have to stress here that the "long time" part here is very important since long periods of time imply robustness and statistical significance. Anyone can triple an account in 2 months, but doing it for 20 years is something very different. When you have been trading for a long amount of time it means that you have very sound risk and money management tools that guarantee your long term success by limiting your present market exposure.
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If you check the Barclay Currency Traders Index you will see that the average compounded yearly returns are not to die for. Currency traders average a 7.71% compounded anual return with a worst draw down of 15.26%, certainly traders are in average conservative. However looking at all the profit and draw down figures of the particular traders you will see that average compounded returns and maximum draw down figures are often in a 1:2 to 2:1 ratio, meaning that the average yearly return is actually never better than twice the maximum draw down. If you are thinking that these figures dont apply to you because these traders dont have the "flexibility" of small account holders, you are wrong. Many of these traders are NOT trading billions and many of them have access to liquidity you would only dream of so if anything trading conditions for most of these guys are only better than for the average forex trader.

A very important thing about this index is also that it shows that diversification is the key to long term success with the sum of all traders giving a very smooth equity curve over a 20 year long period. So probably a good lesson to learn here is that using several strategies that are all long term profitable will probably help us reduce draw downs as it helps the Barclay Currency Traders Index smooth its performance. As we have seen with the Atinalla project, having a large amount of diversification is very beneficial in the long term for trading strategies.

However the most important thing about these profit and draw down figures is that they show us the true face of market exposure and what you can expect to be realistic. If in the best case your maximum draw down level is likely going to be around one half your average compounded yearly profit then a monthly 100-200% return or a 100% yearly return for that matter are unrealistic or excessively risky for any sound investor. In the end, this currency trader index tells us that for moderate risks, forex investors should aim for a yearly profit of 20-30% if their risk appetite is moderate.

Currently our Atinalla No.1 portfolio would hold a place near the top of the Barclay Index and for this reason I would be tempted to say that it is very profitable. However we must consider here that the portfolio has not been run for 20 years on a live account and only time will tell us what its real profit and draw down targets are. Nonetheless the most important thing about Atinalla project portfolios is that they are traded with a very good profit expectation and a VERY clear worst case equity-loss scenario in mind, which is 36% for the Atinalla No.1 Portfolio.

If you would like to learn more about forex automated trading and how you too can design your automated trading systems based on sound risk and profit targets please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Diposting oleh Unknown 16.15 0 komentar