My Life as a Currency Trader and I thought I would never say that

Today I want to write a post which has a more personal tone than the other posts you may have read on my website in the past. A few people have asked me about my daily routine and if trading actually leaves room to "free me" from the 9 to 5 life style and provide me with the ability to spend a lot of time with my friends, family, etc. Within the next few paragraphs I will tell you the story of my everyday life so that you can see how my life around automated trading woprks and if this is the type of life style you would want to have. I have to warn you that my life doesnt include monthly cruises to the Caribbean or driving a Porsche out of my drive way but I can assure you that it has many negative and positive aspects, like any other life style has.

I am a big believer in early mornings and I usually wake up sometime between 5 and 6 a.m, usually with the first ray of sunlight. After doing this I usually check my email and answer whatever questions, doubts or inquiries people have sent me during the night, this usually takes me about half an hour although I can get even 25 emails every day which require thoughtful and precise answers (I am a fast typer by the way !). After doing this I like to spend an hour checking on the markets and the systems currently being traded, I check on all my personal, asirikuy and third party accounts and I send emails to anyone who has an account with a problem in order to correct it ASAP (most of the time there are actually no problems). Then I like to watch an old time movie - probably in the style of Indiana Jones or Independence day - or an old episode of Seinfeld (my all time favorite show) while I do my daily 40 minutes of cardio (youre all doing this too right ?).

After this I cook my breakfast and depending on the mood I either spend the rest of the day working or I take the day off and go out to have lunch and spend the afternoon with my girl or my family (which includes hers). I usually work more than 60 hours every week (no kidding), making and preparing videos for Asirikuy, writing the weekly newsletter, designing new systems, researching commercial systems, researching systems developed in forums, testing systems, analyzing data, etc. I often tend to think that the fact that I dont have a 9 to 5 job is actually detrimental to my life in the sense that I tend to over-work a lot, since there is no 9-5 span of time which limits when I work... I just sometimes work all the time !

I do have to say that there are several things I like about my life style, one of the things I like the most is the freedom to cook :o). I love cooking and I have to say that I spend about 3 hours every day preparing meals for myself and my girl when she is home. I am by no means a great cook but I am improving and hopefully in the future Ill be able to eat delicious meals everyday, courtesy of cooking skills developed over years of training. It seems that most chemists end up being good cooks, hopefully I am not the exception !

Now there are other aspects I hate, and the most important of this is that I have no control over when I can be or not be available. Trading - either manual or automated- demands a great deal of focusing and control, it is not an option but mandatory to have a 24/7 internet connection you can use all the time and you cannot simple "get lost" as there are many people (in my case) which count on you and your expertise everyday. So I actually do not work 9-5, in a few ways I work 24/7 .

Maybe I am just a hopeless workoholic but I like what I am doing and I think (at least hope !) that I am making a difference in the sense that I am providing an honest and transparent approach to automated trading without hoping for any massive reward. The earning I get from Asirikuy and this website are quite small (I would have to charge about 50 USD for the subscriptions if I wanted to live from this !) but I think that all the work is rewarded in the sense that I get to live from trading my own systems, I get to improve them as time goes by and I get to do all of this without having to be dishonest, unethical or scamming any poor soul. Will I ever get burned out from doing this and decide to just live from trading and leave the stress of handling my small -yet very time consuming- business ? Hopefully with all the good feedback I get and the satisfation this generates me this wont be the case :o)

If you would like to learn more about my approach to profit from automated trading and how you too can learn to get realistic profits using sound trading strategies 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 04.32 0 komentar

Trading S R a Guide to my Trading Methodology

I have received some requests from people who have been interested in learning more about my manual support and resistance trading system inquiring about the specifics of the system and how it may be traded successfuly. It seems that there is a lot of confusion regarding how I choose my entries and how the system is globally traded. The objective of todays post is to draw some light into the steps I take when trading this S&R method so that other people can start trading this same way successfuly. The method uses incredibly sound trading tactics based solely on price action and I believe this is one of the simplest and most effective ways in which anyone can trade the forex markets.

To begin with, I am going to tell you the steps that I take when I go into trading my S&R trading methodology. By following these steps youll be able to get a lot more into my thought process and realize why I take the trades that are executed on the demo account (which I comment and signal on twitter). You will see that the steps require a great deal of discretion and that practice is the most important thing to trade my S&R method in a successful manner. One thing which I believe is great about this system is that as one gets experience with it, market behavior starts to show in a much clearer fashion. So what are the steps I take when using this method (my day trading S&R tactic) ?

1. Take an instrument you want to trade

2. Open up a one hour chart and other charts if you want to

3. Based on this information answer the question : Where is the trend going ? It is very important for you to be able to answer this question clearly. The system depends greatly on your ability to know where the market is globally heading. That is, you should be able to follow the trend. If the picture is not clear to you, then do NOT trade. As a wise trader once said "It is always better to lose opportunities than capital". Also do not overanalyze the situation, look at the chart. During the last 20 hours has price gone up ? or down ? If you can clearly say where the trend is likely headed then go to 4.

4. Now that you know where price is going you should locate support and resistance levels. The trick here is that you are going to wait for price to reach a resistance after a new low (in downtrends) or a support after a new high (in uptrends) and when price tests that level you are going to get into the trade in the direction of the trend. You should set your SL at a break of the resistance/support level you entered and the TP at the low or high price reached (which is a support or resistance level).

5. Before placing the trade make sure that you only place it if you can achieve a risk to reward ratio of at least 1:2, most preferably 1:3 and make sure that you trade a lot size such that you risk only 2% of your trading capital. Using the TradingBuddy EA mentioned on a post a few days ago should greatly help you with the accurate money management of trades.

As you see, the system is based on some very simple principles. You have to follow the trend, you have to enter on favorable spots (buy low, sell high) and you should have adequate money management with a very favorable risk to reward ratio. This tactic makes sure that it will be extremely hard for you to blow an account. You need to lose 50 consecutive trades to wipe an account and each trade you win buys you at least 3 loses. Trading this method will make you better at judging price action and will make market action much clearer to your eyes. In a few months you will be great at judging overall price direction and you will feel comfortable trading without any indicators.

However you should understand that this is no holy grail. Often you will not read market direction appropiately or price will reach your SL before continuing in the direction of the trend. This is normal. This method intends to allow you to have a fair share of loses, that is, you can lose 60% of the time and still come out with a profit. The key is to follow the method and learn from your mistakes. A trading journal in which each trade is recorded is VITAL to the success of anyone who wants to become a good manual trader.

If you would like to learn more about money management and the use of automated trading systems to trade the forex market successfully please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Diposting oleh Unknown 10.17 0 komentar

Calculating Support and Resistance My First Solution

Yesterday I wrote a post about the mathematical definition of support and resistance levels and why it is so hard to accurately define these levels in a way a computer can understand. We talked about several of the problems which affect this definition mainly the fact that most of the currently used approaches do not have any way of discriminating between the importance of different levels, something which has a devastating effect over system profitability. At the end of yesterdays post I also highlighted that there are mainly three steps that have to be taken into account to successfuly tackle the problem of mathematically defining support and resistance levels for forex trading :

• Defining the S&R levels
• Eliminating unimportant levels
• Defining S&R zones

On todays post I am going to tell you how I intend to solve each one of these issues and how I believe this will lead to a reliable definition of S&R levels.

The first problem seems to be the one people have worked the most on. As I said on yesterdays post there are several ways of defining these S&R levels but the technique I find the most reliable involves the use of the fractal indicator. Since fractals signal reversals, they are useful in determing the global position of S&R levels. This concept is not new and it is a quite typical way of defining support and resistance in a mechanical fashion.

Now the next problems are a little bit harder to solve. How do we discriminate between the importance of levels and define their zones ? From the definition of support and resistance levels it becomes quite clear that the importance of a support or resistance level is given by the number of times this level has been tested (either as support or resistance). Therefore, if we save an array containing all fractals and we then assign each fractal a frequency value depending on the number of times this exact level was tested then we will have a reliable indication of which levels are "strong" and which levels are "weak". Staying only with the strong levels will definitely allow us to trade S&R strategies in a much more reliable fashion.

Of course, several of you may be thinking that I wont be able to succeed with this tactic given the fact that fractals are bound to be many times similar but almost never identical. For example a level around 1.5343 on the EUR/USD could be tested 3 times to give fractals at 1.5341, 1.5343 and 1.5345, within my definition, these three levels would be discarded since they are all different and therefore "insignificant". The solution to this problem is the addition of a "tolerance" zone around each fractal to group them according to the zones they cover. For example, two fractals will be considered as belonging to the same support or resistance zone if their values are within X distance of each other. How do we define this distance ? Volatility seems to be the best candidate since this is the main factor which affects the width of S&R zones. We can define X as a given percentage (for example 10%) of the standard deviation of price within the last Y number of periods.

Then we have the problem of having only a "huge" important price level given that all fractals are bound to be close to another one. We need to define a "center fractal" for each level which will be defined as a fractal which has more than Y fractals within its tolerance zone. This takes care of the importance problem and level definition at the same time.

This simple grouping of fractals will let us define the important S&R zones and simulatenously the width of these zones which of course will be limited to +/- X% of the standard deviation (however they can still be smaller than this). The steps this S&R indicator would need to do are highlighted below :

• Calculate all fractal levels
• Calculate each fractals population within its tolerance zone
• Assign "level status" to fractals with the highest populations
• Determine the highest and lowest fractal within each central fractal population zone

In the end this indicator will give us each important S&R zone coupled with its width, a criteria which is bound to be extremely useful for the making of long term profitable systems based on S&R trading. I will start developing this indicator soon and hopefully youll be able to see some graphical results within the next few weeks. Do you have any suggestions to improve this technique ? Leave a comment and Ill be glad to discuss it with you. :o)

If you would like to learn more about the automated trading systems I have coded and how they were developed step by step 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 13.15 0 komentar

Watukushay No2 Beyond My Expectations

A few days ago I wrote a post about the next EA in the Watukushay series. For those of you who have not heard about these expert advisors, the Watukushay project was an idea I had in order to develop and evaluate a series of different expert advisors with a careful documentation of the whole creation process. The idea is that people are able to see what the necessary steps are for the creation, programming and evaluation of a long term profitable trading system.

As I said on the last post, the Watukushay No.2 expert advisor is completely based on price action. I have just finished all the preliminary coding and evaluation and I have to say that this EA far surpassed my expectations. It took me a few weeks to find a way to build a profitable logic solely based on price action as candlestick patterns depend greatly on the context in which they occur and entering or exiting trades based on a single pattern proved to be a totally unreliable and unprofitable strategy. I tried at least 15 different candlestick pattern with non of them by themselves generating a reliable system.

Finally I realized that the problem was that my approach was too simplistics. I decided to apply the sound, logical trading advice we hear from our start in trading. I decided to only enter trades on a very popular candlestick continuation pattern (the three soldiers) and to exit a trade based on either an ATR adjusted TP or a series of candlestick reversal patterns, such as a hammer, morning star or engulfing candlesticks. As you would expect from such a sound trading approach, the results were overall profitable although there was still a lot of room for improvement.

This is when it came to my mind that I was defining candlestick pattern rigidly when in the market a hammer or a 3 soldier pattern was different in 2000, 2004, 2009, etc. Of course, the easiest solution was to adapt these patterns also towards market volatility. So what do you get ? You get a trading system that is absolutely adapted to the market, more than any other system I have ever coded. The EA adjusts the size of the candlestick patterns as well as the SL and TP based on market volatility and the EA is able to profit seaminglessly from Jan 2000 to Nov 2009. This EA has given one of the most beautiful equity curves I have seen. The EA uses a very wide TP (80% of the ATR) and a wide SL (100% of the ATR) and every identification of a candlestick pattern is done based on previous bar closes so it is safe to say that backtesting is reliable (although live testing will definitely confirm this) since there are no one minute interpolation errors and no hindsight whatsoever.

You can see on the backtest shown below the equity curve given by this EA. It is very smooth with every year reaching new equity highs. The EA has a very good risk projection with the maximum draw down being just 6% for each 10% average yearly profit one wishes to obtain. However this is in fact improved by the ATR lot size money management which when risk is increased achieves an incredible 100% average yearly profit with a maximum draw down of under 40%. The EA should also be pretty much broker independent as a few pip variations will not affect the overall candlestick patterns, however, brokers that have Sunday candles vs those that dont can show different results as the overall patterns may change. Up until now this have proven to be the best results for the EUR/USD, I run several tests on other currencies but it seems that the ATR values of the patterns change a lot depending on the instrument traded and therefore all the optimization needs to be redone for every currency pair traded.
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I am very pleased with this EA, this is the first EA I ever code that used absolutely no indicators (besides the ATR) that is actually more profitable and smooth in backtesting than the gods gift ATR. Of course, this EA would be tested live on my weekly newsletter and all its programming and evolution will be a new chapter on my ebook. This chapter will treat how candlestick patterns can be defined in code and how I came up with each pattern as I progressed through the programming of the EA. I am currently writing this chapter which should be out in mid December and should be around 30-60 pages long. If you are interested in the Watukushay No.2 EA please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Diposting oleh Unknown 17.30 0 komentar

Support And Resistance My First Attempt to Implement Mechanical Detection of Important Price Levels

The detection of important price levels - so called support and resistance - is one of the most difficult things to do in algorithmic trading since their detection by the human eye seems to be extremely discretional, something that just pops out at an experienced trader when he or she looks at the chart. Through the past few years several attempts have been done to detect important support and resistance levels but most of them fail due to the fact that intermediate levels -which are not important - are often detected and used by computers when their real relevance is minimal. The question then arises : Can we algorithmically detect support and resistance levels in a reliable way ? Moreover, can we actually make a computer "know" the importance of each level ? Can we then develop a profitable system based on this detection ? On todays post I want to give my first set of answers to these questions showing you my first attempt at the computational detection of S&R levels and the achievements this technique has had up until now when used as part of a mechanical trading system.

On previous posts I had talked about how we could approach S&R detection in forex trading by using the fractal indicator (not the default but one that doesnt repaint) and performing a historical evaluation of the accumulation of fractals in certain zones, assigning a particular importance to each of these levels. However this approach seems to be a little bit complex so I decided to implement a much simpler approach in order to first evaluate the concept behind this way of "detecting" S&R levels. What I did was simply to use the High and Low levels of past candles counting their presence amongst different zones and assigning a "percentage value" to each price level pertaining to the "population" of historical candle high/low levels around this area. Areas that are heavily populated by hourly highs and lows and prone to be important daily support and resistance areas owing to the fact that price tends to "hug them" failing to move "straight through them".
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The significance of these levels is then easily evaluated by the percentage population of each price level and we can easily measure if price is moving towards a zone with a high population or outside a zone with a high population. When price is trading within a highly populated area it will have a tendency to remain there while when price trades in a "population scarse zone" it will tend to go to a zone where more trading has happened in the past. As it is shown on the image above, we could create a system by entering a position after we "breakout" of a zone that has a high population value. It is good here to note that we dont use levels but zones using a given amount of space to gather a given high/low population, this is done due to the fact that in forex trading support levels tend to be "spread" over a given area instead of pined to a given level (this is a consequence of not having a central exchange).

What is the result of implementing this S&R "tactic" on an expert advisor ? Eventhough the results of my first analysis are not absolutely incredible, it does reveal that the above given way of measuring S&R level and entering trades has some merit and - at least - a positive mathematical expectancy and some potential for profitability. The below image shows you the equity curve of an S&R system implementing the above explained criteria for entering breakouts of S&R levels (10 year backtesting period Jan-2000, Jan-2010).
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The system does most of the time what I intended it to do, entering trades after breakouts of S&R zones like it is shown on the image below. However the problem now becomes to know which period needs to be used to evaluate the S&R levels and what percentages are going to be required for any given S&R level to be considered important on different timeframes. As you may see, the population is an absolute number and we need to do a deep historical analysis to see what this number should exactly be to call a level "important or unimportant". Nonetheless I consider this step a very important achievement since there is now a way to measure the population of a given price level and some mathematical criteria to establish its importance. I will continue to develop and improve this S&R technique and there will most certainly be an EA with it in the future :o).
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If you would like to learn more about automated trading and how you too can learn to use, design and implement your own likely long term profitable systems 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 13.31 0 komentar