No Stoploss or Limit Orders for US brokers

I was a little bit shocked and surprised when a customer sent me an email earlier today regarding a new regulation that will be taking effect on July 31, 2009 that forbids the use of Stoploss and other limit orders on US forex broker accounts. After reading a lot more on the subject I realized that apparently only FXCM has issued a warning to their customers telling them that they will be unable to use these type of orders from July 31. What does the regulation exactly do and what can you do to protect yourself and your automated trading system ?

Well, as I said before the regulation prevents you from assigning any stoploss or takeprofit levels to your orders, that is, you cannot issue any pending orders with these values or place these values on existing trades. This means that in order to avoid risk, if you are manually trading, you are required to stay in front of the screen a longer amount of time. Expert advisors can also emulate the stoploss and take profit values simply by closing orders at predetermined price levels calculated by their logic but this is quiet risky and requires you to have an extremely reliable internet connection (that is, you need a very robust vps) because a failure to do so may leave your account opened to terrible loss levels and unmanaged risk.

What options do you have ? You can either migrate to a non-US broker and continue trading in the same fashion, you can simply use expert advisors to manage your stop loss and take profit levels (if you are manually trading) or you can modify your current expert advisors if you are auto trading so that they too can emulate and manage your orders according to the takeprofit and stoploss levels.

As retarted as this regulation may sound, it does provide a safer trading level for traders in that it absolutely prevents the ability of brokers to stop hunt trading positions and thus eliminates whatever influence brokers may be having in price, that is, it eliminates the artificial movements some brokers may be creating in order to make trades reach stop loss levels. This will probably make the market easier to trade on US brokers with the added pain of having to manage your risk in alternative fashions. Nonetheless, these brokers will lose a fairly good amount of their customers to off shore brokerages.

As far as my expert advisors go, I will modify the gods gift ATR to comply with the rule and use an internal mechanism to close orders according to stoploss and takeprofit values. Other expert advisor creators should do the same in order to maintain their systems at a good level. What do you think, will you adapt or migrate ?

If you would like to learn more about the gods gift ATR and other expert advisors 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 23.00 0 komentar

Watukushay No 5 The Aussie and the Kiwi More Encouraging Results

During this weekend I released the first official version of Watukushay No.5 coupled with all its 10 year backtesting data showing profitable results on 6 different currency pairs in Asirikuy. From my last post about this EA you might remember that Watukushay No.5 had been tested on the EUR/USD, GBP/USD, USD/JPY and USD/CHF, however at that time I hadnt completed my analysis on two other currency pairs that also show us great results with this strategy despite their overall lack of liquidity, the AUD/USD and the NZD/USD. On todays post I want to share with you some of the results of the EA on these currency pairs and how the EA is able to use a completely different trading technique to profit from the different trading mechanics of these two instruments.

As you may already know, Watukushay No.5 attempts to exploit breakout inefficiencies on the different currency pairs. On the 4 majors this is done by exploiting periods of low volatility when the currency pairs form significant ranges, entering breakouts when important moves develop within the following trading sessions. However, these trading tactics do not work well on the AUD/USD and NZD/USD, not only because they tend not to form areas of compact trading but due to the fact that this areas do not lead to successful or unsuccessful breakouts with any statistical significance. In the end if you try the same tactics as with the majors you will obtain slightly profitable results which are definitely not worth using in live trading.

Upon my analysis of these two instruments it became clear that I needed to think the problem from another perspective if I was going to find any profitable results for this EA on these two pairs. This meant going back to a meticulous analysis of the currency pairs and the way in which the medium and long term trends develop within them. After spending a few days working on this I finally realized that the key was to rely on breakouts of more volatile sessions but aiming at much higher take profit and stop loss targets. The idea was that this large breakouts do allow us to predict long term trend direction with a good statistical edge in the long term.

Backtesting results were indeed very encouraging showing me that my analysis had been right. When you exploit this different and larger breakouts on the AUD/USD and the NZD/USD, you obtain some very profitable results which are achieved as the EA is able to follow long term trends through the periodical entering of this large session breakouts. The effect resembles the accumulation technique used by the turtle trading system, allowing us to follow a trend and greatly profit from its long term direction. Below you can see a picture of how this trading works on the NZD/USD, notice how the EA got a lot of profit from a developing trend.
-
-
The 10 year backtesting results also give us great results for both of these currency pairs. We arrive at results which have average compounded yearly profit to maximum draw down targets better than Watukushay FE and the same as Teyacanani on the EUR/USD in the case of the NZD/USD. Surprisingly, the best trading results for this EA have been found on the NZD/USD, showing us the robustness of this strategy as a portfolio solution. The EA shows us its robustness and its ability to exploit two completely different market inefficiencies based on the same trading mechanics but aiming for entirely different things.
-
-
Later today 3 live accounts with real money will be added to Asirikuy to start the testing of the system on the USD/CHF, NZD/USD and a full portfolio setup. Hopefully within the next year we will be able to gather some very useful information about its trading system, its tactics and its ability to tackle changing market conditions. The ability of this EA to adapt to each particular market situation and its very large set of adaptive parameters will probably lead it to succeed in this quest against market changes.

If you would like to learn more about automated trading and how you too can develop your own likely long term profitable systems 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 23.01 0 komentar

Why There is No Universal System Differences Between Currency Pairs

Can we build a system that trades successfully on all forex currency pairs ? This has often been a question of the automated trading system world that simply asks if there is a universal inefficiency, an inefficiency that is so common that it can be found an exploited on all different currency pairs. Up until now, the answer to this question has been a resounding and unequivocal NO. To the best of my knowledge no system has ever been developed to work on all currency pairs despite the claims of many system sellers who tell you that you can use their systems on all of them. But why has it been impossible to build such a system ? Why does trading all currency pairs seems like such a big challenge ? The answer lies within the very fabric of the market and the way in which the different currency pairs trade and react. Within the following paragraphs I will explain to you some of the basic aspects of these currency pair differences and why it makes the creation of any universal system extremely hard if not impossible.

You may have been told that inefficiencies in the market arise due to crowd behavior- which is a human characteristic- and that all currency pairs in forex show it to some degree. When you hear this it becomes easy to think that if a system "really works" then it is bound to work on absolutely all the instruments available in the currency market. After all, every instrument is bought and sold by humans and this would make them inherently inefficient.

Certainly if all instruments traded with the exact same number of people and with the exact same objectives we would be able to easily find a universal inefficiency but the matter of fact is that this is not the case. The first dramatic difference between instruments is the number of participants and the inherent liquidity of each currency pair. Some pairs like the EUR/USD are very liquid while others like the GBP/CHF dont have 1/10th of the liquidity of the former so their price action is dramatically different and the inefficiencies within it become dramatically different. The less people who trade a given pair, the more efficient it becomes since crowd behavior becomes less pronounced and individual decisions start to play important roles.

Then we have other differences that also make the movements of currency pairs different. For example if you are trading the USD/JPY and there is a negative trade balance against Japan then there will be a given fixed amount of money each month that will pull the USD against the JPY just merely because of business transactions that have nothing to do with speculation. The volume of these transactions is very significant and the time in which they are processed and their magnitude will have an impact on the way in which a pair moves.

Many other factors such as central bank intervention and even cultural differences play an important role in the way in which a pair moves when compared to another and all of these factors help to explain why the finding of universal inefficiencies is so hard. However when you look at higher time frames (daily and beyond) there seems to be some coherence and this is the reason why some systems that target month or year long trends manage to exploit the same inefficiency on several different currency pairs. However the success of these systems along the whole portfolio is never total and more often than not there are very strong differences between the profitability of different currency pairs and several pairs where the systems simply do not work.

So will we ever find a global and total inefficiency ? I would have to say that probably no, but if there is a chance it will take a lot more liquidity on all instruments and a lot more market participants to make this the case. Certainly in the future if the market volume on the illiquid currency pairs increases enough we might be able to have - even though not a truly universal system - at least systems that will have better success along different currency pairs.

If you would like to learn more about system development and how you too can build 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 13.30 0 komentar

Becoming Successful in Forex When There is NO Time Tips for the Family Guy with a Full Time Job Part No 2

On yesterdays post we talked about the disadvantages people have when they attempt to become full time forex traders or even simply successful traders when they have full time jobs and families that take up substantial amounts of their time. Near the end of the post I pointed out that patience and a long term look are bound to be absolutely important to the success of a person in this situation and I also said that exploiting strengths and reducing weaknesses was also an important part of this journey. On todays post I will elaborate on the more practical aspects of this advice and I will lay out a plan that you - as a person with a full time job and family - can follow to become successful in forex trading in the long term.

Many of you may be asking how I came up with such a plan if I dont have a full time job nor a few kids to make my life a lot more complicated. The truth is that even though this is not the case my advantage is that I know what has to be done to become a successful trader even if I did not do it from the above mentioned situation. This has allowed me to extrapolate what I learned to device a plan for people in such a situation. Of course, I would not bother to tell you this plan if I had not put it into practice before, something I have been doing for a while with a friend who has a wife, two kids and a full time job. For the past year this friend has been executing my plan to the letter and his results have been very good - a positive evolution towards a long term profitable trading outcome. Certainly he is not even close to quitting his day job but he made profit this year and did not wipe his account (a true achievement for having such a small amount of time !).

What was the plan he followed ? When he asked me to help him become a successful trader I told him about all the disadvantages I talked about in yesterdays post and I said to him that he had to approach trading in a very particular way to achieve success. Since I knew he had no clue about what he needed to do I laid out a plan for him so that he could go towards long term success in trading with under 5 hours of work each week. This is what I advised him to do :

Forget about short term trading, to trade one hour charts you need to stay at least 5-8 hours a day in front of your computer, to trade even smaller time frames you need even more time. If you attempt to trade short term charts when you get home tired at night you will definitely only get frustrated and lose.

Learning is the top priority, understanding what you are doing is the most important part of trading success. I told him to dedicate 2 hours each week to go through learning material and through its application. I encourage him to read classical book in currency trading and technical analysis and to actually PUT that knowledge in practice over visual backtests of at least 5 years of data. Often people read a lot but they fail to apply the concepts and knowledge they acquire.

Daily trading systems, perhaps one of the most important things I told him to do was to start trading daily systems and STICK with them. I encourage him to do evaluations of several different daily systems and to stick to those that had profitable long term results. He ended up trading a very simple MA cross based system on the EUR/USD. One pair, one decision each day, efficient, trend following trading.

Keep a journal. I told him that keeping a detailed journal of his trades was VITAL. Since the system traded once every few weeks it was actually quite easy to do this and visual backtesting analysis of his systems became CLEAR.

Learn to program. I said that evaluation is a significant part of success and that coding was an important thing to speed up evaluation. I insisted that he spent one "learning session" every month to learn how to code on mql4. The result was that after a few months he was able to start coding and backtesting his simple daily trading strategies.

Profits, for now, do not matter. When you start trading everything seems to be about the profits. I told him that profits are the reward for learning and that the first thing you wanted to do was learn and then profits would come. I advised him to just trade the systems he designed and evaluated without concerning himself with "last trade was a winner or a loser" or "I have lost all the trades".

So to sum it up, what you need to do is to approach trading in a way that exploits your strengths (your willingness to become a successful trader) and diminishes your weaknesses (lack of time). Putting a very strong emphasis on education and focusing on the evaluation and trading of daily strategies seems to be the best way for people who have "very busy lives" to start to become successful traders. Certainly it will take a few years to get there but the road is much easier, much clearer and much more rewarding than attempting to trade at a play field where you will most likely lose. By using systems that require little baby sitting and just a few quick minutes of analysis my friend was able to go from not trading at all to becoming at least a person in a clear path towards long term profitability in forex trading.

I hope that the above article has been helpful to all of you who are facing this situation of wanting to become successful trades with little time to do so :o) If you would like to learn more about automated trading systems and how they can be used to achieve profits in trading through understanding and sound design 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

The Road To Financial Freedom Part No 2 Is this Right for You

It is not uncommon for people to persue the dream of "financial freedom" thinking only about the fact that they are tired of a 9 to 5 job and want to have an easy way to earn a living in which work is hardly ever present. On todays post of the road to financial freedom series I will try to give you a good insight into what I think the goals and mindset of a person who wants financial freedom should be and which people should not seek financial freedom because they are either doing it for the wrong reasons or with the wrong perspective in mind.

In what I have seen, there are mainly two types of people looking for financial freedom (trading wise at least). The first are people who are willing to do whatever it takes, work as long as they can, do whatever effort they have to in order to arrive to the dream of profitable trading -manual or automated- and then there are those who simply just dont want to do anything and think of trading as a way in which an income can be achieved without lifting a finger.

Things evolve differently for those two kinds of people. The first kind often struggles a lot in the beginning and have to work about 10 times what they thought they would have to, many with obssesive personalities end up with broken families, health problems, etc, due to the sometimes long hours and inevitable amount of hard work that must go in either manual or automated trading. The fact that they also put a financial burden on their families and take money to trade - almost certainly losing all of it at first- makes things harder for the people around them, specially spouses who sometimes fail to understand the goal to be achieved (mainly because the non-trading partner is usually more rational at this point).

The second kind works almost as hard as the first but in a different area. Their work is not centered on actually learning what they are doing but it is centered in the finding of the "system" that will make them rich without signficant effort. These people often give trading a try for a while and after 1 or 2 years they give up because of the fact that everything they have tried has eventually failed them (or has not achieved the income level they wanted), eventually they find out that their is no "free lunch" and that trading is not the bottomless "gold mine" they read on the sales newspages. These people either quit, or become part of the first group.

Now, there is also a problem associated with the intented amount of money people want to make in trading. Often I hear people talking about a 5-10% consistent monthly profit in forex being a "rational" thing to expect (these people NEVER know someone who has actually been making that kind of money consistently -for a few years-, it is just a dream created by the sales pages). Oh boy, 5% every month would turn 50 USD into one trillion dollars in less than 60 years. The profitable traders I know are often happy with a 1-3% average profit per month, which is very good for most purposes. Take into account that in financial markets, doing better than the S&P 500 is considered to be "beating the market" in the sense that you outperform buy and hold strategies. That is something that very few people in the world are able to do.

Novice trader minds are often "contaminated" with the unrational notion that the forex market is able to give very high profits, thinking that 10-20% per month or more is a rational expectation. The worst thing is that people get into their minds that it is something they can achieve if they work hard. The people who are hard working but believe they can achieve a profit level which is simply unprecedented are the ones who get the worst out of it. They lose and lose money and they struggle and struggle trying to achieve something which is simply not within realistic expectations (taking into account what most profitable traders I know do achieve ). They often get beat up, chewed and spit by the market and in the end they are beaten and defeated. These people usually quit at this point when they realize that they will not get to that million dollars from that 1000 USD account.

My objective with this post is to speak to all of you and tell you that you should give this a very HARD and long look and think about if trading is really what you want to do. Trading is a very intense, time consuming, work intensive way of life. Starting to trade with realistic expectations for success requires good capitalization (at least 2 to 5 times your expected yearly salary if you expect to live from this) and a commitment to work through all the emotions and frustration that will arise from attempting it. Trading is also not your 9 to 5 job so you may have long periods of loses with no paycheck at your door and there will be no one there to pat you in the back and tell you that everything will be ok. As I said on the last post, it is entirely up to you. Your possibilities are limited by your efforts.

For most people out there, forex is not a good opportunity for "financial freedom". Most people are simply undercapitalized, unfamiliar with the whole concept of trading and unaware of how their emotions respond to the trading world. Most people are also unable to deal with the stress of having no paycheck in the mailbox, no "fixed" income and no guarantee of future profits. The extremely large amount of hype and useless things out there dont make it easier for them either. The fact that 90% of new traders fail speaks for itself. If you think forex is not the way to go, then it does not mean you cannot achieve financial freedom, you can always look at a brick and mortar business or an online business which aligns better with your knowledge and personality.

However, if you are truly interested in trading after all that I have said, then you will enjoy the rest of the road to financial freedom series in which I will explain to you the steps I took and all the things I have done (and what I would have liked to do) in order to achieve financial freedom with forex trading. My first step was simple. I wrote in a piece of paper : "I am going to be a profitable forex trader". If you are also interested in my work and would like to know about how profitable trading can be achieved with realistic profit and drawdown expectations on the forex market 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 19.45 0 komentar