Saturday, December 31, 2011

Meta-Trader - 2011 Wrap-up

Welcome back Meta-Traders and Happy New Year!

As of today's post, this blog is now 2 years old so Happy Birthday wishes are in order as well. Blogging has allowed me to connect with like-minded people from around the world. Through blogging I was introduced to MetaTrader 4 and to Daniel Fernandez from Asirikuy whose work has produced the bulk of my results.

It was a wild year in financial markets and foreign exchange as well. The world economy is still struggling to recover from a financial crisis and despite an incredibly easy US Federal Reserve, equity markets struggled as well with the S&P 500 losing a fraction of 1% on the year. But with a dividend yield of about 2.4% and government bonds yielding almost nothing, equities continue to be the place to be versus bonds and cash. What about Forex, that's why you are reading this blog, right?

The table on the left shows my live results for the year. The numbers in the current column may not agree with current account balances because I have subtracted out recent deposits and deposit bonuses to reach a before and after number. As you can see, I made money in all but one account and my overall return was 16.94% which beat the S&P 500 by almost 14%, even considering dividends!

It is important to note a good part of the returns are due to deposit bonuses. For example with Atipaq Full Portfolio, I started with $2000, then put $2100 to work from deposit bonus, and the rest was the result of trading profits and pip rebates paid by the referring broker. It's important to note because deposit bonuses help in the account building stage, but will not help further once I am fully invested. Now let's go through each account.

Atinalla #1 had an excellent year returning about 27.6%. The bulk of the returns were made in January of 2011 and has since held onto its gains which says something for the robustness of the 3 embedded systems.

Atipaq Full Portfolio was the star performer of the year returning a stunning 59.5%. This portfolio had a rough period during August drawing down from being up almost 67% to almost 19%. I don't mind draw down so much when its giving back profits versus when it cuts into the initial investment. That's why its psychologically important to survive the initial account draw down since I would probably cut the loss on any account once its exceeds a 20% loss from the initial start up.

Megadroid Live had a pretty decent year, up about 9.62% for the year. I added FX-Regression USD/CAD and USD/CHF to the account in early December to goose the returns. While the account is still down slightly since opening, note that I started the year down about 10%, so it had a decent recovery off the lows.

FX-Regression Live returned about 4.7% for the year. Most of this profit was due to pip-rebates and profits from actual trading were close to nil. This account was up as much as 20% and down as much as 15%. Clearly this system needs additional work but has survived one year of live trading which is somewhat of an accomplishment.

Atinalla FE was another case where the bulk of the profits came from a deposit bonus and the actual system had a slightly negative return. I have stopped trading this system and will likely switch to Sunqu in 2012.

Atinalla #3 was another case where the profits came from the deposit bonus and the actual return for the system was slightly negative. I have made some adjustments to this account and will continue to trade it live in 2012.

Atinalla Custom was my only losing account. I started this account trading Atinalla #4 from Asirikuy, but had a number of problems due to an incorrectly high starting balance. Also, I had poor performance from Sapaq and God's Gift ATR. As of now, I am running a subset of the systems in Atinalla #4 and the account is already starting to recover.

Overall, it was an excellent year and its clear that the deposit bonus and pip rebates made the difference in many cases. My overall performance did not meet my 30% to 60% target, but its possible that my goal was not attainable. Of course, the best accounts made those targets, but you can never tell in advance which system will perform best. That's why its important to have a good mix of systems each with a positive expectation.

That's all for now, enjoy your New Year's celebration and i'll see you back in 2012.

Saturday, December 24, 2011

Meta-Trader - Sunqu Review

Welcome back Meta-Traders.

Here's wishing you a joyous winter solstice and greetings of the season! Summer is now officially on the way!

In this review we tackle Sunqu, Asirikuy’s first expert advisor which makes use of neural network technology.

Before approaching a topic like this, it’s good to get some context. There are a lot of good introductory articles on Neural Networks. If you are not familiar with the topic, check out this article here.

To put it simply, Neural Networks are mathematical models that accept one or more numeric inputs, perform a mathematical function and produce a number as output. I have some familiarity with the topic since I did an independent study based on Neural Networks when I was working on my Master’s Degree in Computer Science back in the winter of 1988. The project turned out to be more like a solution looking for a problem in the sense that I didn’t focus on any particular problem domain. So it’s fortunate that all these years later I have an excellent problem domain in the forex markets!

First, Sunqu means door in Quechua, the language of the Inca people in Central America. Sunqu runs on EUR/USD against the daily charts and attempts a once-per-day prediction of the direction of the close based on the today’s open plus the prior X bars price action. Sunqu trains by looking a X bar price patterns over Y number of bars of recent price action.

Since the network weights are initialized to random values, it turns out that the network may produce different results on 2 subsequent runs - even if presented with the same input data! This would appear to violate the definition of a mathematical function that given the same inputs, should produce the same output no matter how times you run it, right?

Daniel tackles this problem by making a ‘committee’ of networks, that all are presented with the identical input data and produce their prediction. Then he polls each of the networks and considers the results to be valid only if some percentages of the network’s predictions agree on one direction or the other. As a result of that process you get one of 3 results:

  • All Bullish
  • All Bearish
  • No-agreement
Based on the daily evaluation, the trading strategy falls out as follows:

  • An "All Bullish" prediction: results in opening a long position - and first closing an open short if necessary
  • An "All Bearish" prediction results opening a short position - and first closing an open long if necessary
  • No-Agreement results in no position being taken, and existing longs and shorts are closed if necessary
Other key points of the strategy as follows:
  • Position size defaults to 1 risk unit using the standard Asirkuy position size calculation based on the 14 bar daily ATR
  • There is also an option to pyramid positions where you get agreeing signals for more than one day in a row
  • Stop losses default to 200% of the ATR value
Back testing Sunqu is time-consuming and CPU-intensive to say the least. Running a back test for 10-years on EUR/USD took the better part of 24-hours to complete. It would have taken much longer except I reduced the committee size to 5 and the agreement threshold to 80% - so 4 of the 5 networks would have to agree to produce a trading signal. Daniel coordinated a group-back test in which many Asirikuy members ran the back tests to compare results. As a result of that effort, Daniel came out with a recommended number of committes and agreement threshold. Clearly, you can be more liberal with the number of networks used for live or demo trading versus back testing.

Before we talk about performance, keep in mind that your results may vary. That’s always the case with back-test and live trading of course. But there’s an extra bit of uncertainty due to the semi-deterministic nature of the neural network and the results that it produces.

In a 10-year back-test, against EUR/USD, Sunqu showed an annual return of 5.62% with a maximum drawdown of 14.05%. That sets the Average Annual Return to Maximum Drawdown Ratio at about 0.4 which does not compare favorably to many Asirikuy systems and portfolios. To put it more simply, Sunqu risks about $1 for every 40 cents in realized profit.

But those numbers don’t really tell the whole story. Considered on a year-by-year basis, Sunqu showed a profit in 9 of the 10 years between 2000 and 2010 and the largest yearly loss was -3.63%. So to consider the overall performance, Sunqu does not produce a lot of profits, but drawdown is also relatively low. Also, the fact that its trading signals are completely unrelated to the other systems on Asirikuy, adds additional diversification to the trading results and should therefore be a good complement to other systems on Asirikuy.

One more thing – Sunqu has a cool user interface which can be enabled through an external variable or property for the expert advisor. When enabled, Sunqu pops up a window during network training which shows the actual performance over the past Y days, and the system’s predictions versus the target data during the training process. Each round of training can take between 10 and 30 seconds and based on the settings and the number of networks to be trained, the system can take up to 15-20 minutes to finish testing once it has started the process.

Another positive thing about Sunqu is that it trades often. Looking at the demo account, the system was in a trade more often than not for the testing period. That means more opportunities to be on the right side of a big more even if utterly unforeseen by other circumstances. Also, more trading means more pip rebates which his always a good thing.

Another plus is NFA compliance, since the system trades in only one direction at a time.

Sunqu was tested on the daily chart of several major pairs, and most pairs were not profitable with the exception of EUR/USD. Sunqu has been show to be profitable on USD/CHF as well as EUR/USD.

Sunqu is currently not enabled for live trading. Once it is, I will apply it to one of my spare forex.com accounts.

That’s all, have a great weekend folks.

Friday, December 16, 2011

Meta-Trader - What's your Edge?

Welcome back Meta-Traders.

Do you have an edge in the markets? I've often heard it said that if you don't know what your edge is, than you probably don't have one!

Forex Trading presents a great opportunity to find and develop an edge. There are also some inherent advantages to Forex trading on the Meta-Trader platform, particularly if you know the tricks. And the tricks are not 100% about trading strategy itself. What am I talking about? Read on.

Trick #1

Use a broker-paid deposit bonus. Every dollar deposited to the accounts followed here has been been paid at least a 5% deposit bonus. That means that if you deposit $1000, the broker will put in an extra $50 and you have $1050 to trade. This doesn't mean you can deposit $1000 on Monday and withdraw $1050 on Wednesday. There are often conditions that the broker must earn at least as much as they paid you in bonus before you can withdraw the funds. But if you have a long-term perspective and a good trading edge, this should not be a problem.

Do I consider deposit bonus to be part of the total return? Absolutely! It may not show up in the account performance on the right side of the blog, but it will be considered part of total return shown in my end of year blog post.

Not all brokers pay a deposit bonus. Do your homework and find one that does before you give them your money.

Trick #2

Use Pip Rebates. When you open an account with your Forex broker, do it through an Introducing Broker often abbreviated an IB. That allows the IB to capture a portion of the broker's revenue. And if you pick the right Introducing Broker, they will split the proceeds with you, the trader. This means that you capture a portion of the bid-ask spread which (when you don't open your account through an IB) by default goes 100% to your Forex Broker!

If you use an IB, then a portion of that money goes to the IB. And if you select the right IB, they will pay you a portion of the Pip rebates. If you are not using an IB that pays Pip rebates, find another setup, because you are giving away profits!

For all of my live trading, I use Trader's Choice FX. These guys pay $5 US for each 100K lot. This may not seem like much, but for systems which trade a lot, this can add up. For my own Expert Advisor FX-Regression, this adds up to about 0.5% of the account per month or about 6% return per year - aside from the gains returned by the expert!

To see this affect in action, check out the deposit made to my FX-Regression account between the 28th and 30th of each month. For my $1000 account, the bonus payment is about 0.5% per month or 6% per year. What affect does this have on the total return of the account? As of 12/16/2011, this account is up 7.47% for the year, but the actual account balance is just over 10%. Pip rebates clearly favor accounts that trade often.

For the record, I have no affiliate relationship with Traders Choice FX, and getting them to pay the promised bonus can sometimes be like pulling teeth. They won't make starting bonus payments which amount to less that $20. So sometimes you have to wait many months, then go back to them for pip rebates earned in prior months. I am in this situation with my FXDD accounts which have never received a bonus payment, and if all goes well should get a fat payment toward then end of this month. Once the account is setup, they will deposit the bonus directly into your trading account (like you see above for my Forex Regression account) for trades executed 2 months prior.

Of course you can skip this step and open an account directly with the Forex broker, but then you are just giving away a portion of your profits.

Tip #3

Develop a trading edge.

In my humble opinion, trading Forex is incredibly hard. Sometimes a pair will move 50 pips in 2 minutes, but most of the time, they just slosh around within their daily range 24 hours a day, 5 days a week. I can't think of market more prone to false breakouts, whipsaws, head fakes and just plain old untradable conditions. I simply don't have the time to spend watching, analysing and trading the markets. That doesn't mean I don't want to work hard on trading, it just means I don't want to trade manually.

In his excellent book Trading in the Zone, Mark Douglas reduces trading to something along the lines of finding your edge in the markets and executing it regularly, relentlessly and without hesitation. That can be a challenge for anyone to do manually. We are all human and our human needs, mental, physical and psychological all stand in the way of proper trading.

Fortunately, Meta-Trader comes to our rescue here by automating the trading process. But you need to carefully follow a process that goes something like this:

1) Find a system that provides a tradable edge. Get to know the system including key characteristics such as entry and exit conditions, average 10 year returns, expected drawdown in both quantity and duration. Obviously, Asirikuy is a huge help here.

2) Run the system in demo mode for at least 3 months and monitor its performance.

3) Once you are satisfied the system is running properly, start it with real money and off you go!

Finally, keep your expectations reasonable. I consider a 10% annual return to be pretty good, but my target is 30-60%. I suspect my annual return for 2011 will be something closer to 20%. Check back around the first of the year for my 2011 wrap-up post.

And yes, be patient. Being a Doctor, Lawyer, Athlete or anything else worth doing takes time. Consider making a trading plan. My 5-year plan can be found in my blog post Forex Trading, my 5-year plan. I'm about to begin year 3 of my 5 year plan.

What's my long term objective? To be able to live off the forex markets as follows. If have have a million dollars under management, and I can make 20% return, that $200,000 per year, and yes, I can live comfortably on that much.

Take care and enjoy your weekend.

Saturday, December 10, 2011

Meta-Trader - Welcome Coatl H1

Welcome Back, Meta-Traders.

This week I started trading on my new FXDD Account which will be running Coatl H1 from Asirikuy. Here are a few pointers for new account start up from my experience:

- The LAST thing you want to do is let the expert go live on the first tick of the Sunday open. A lot of stuff goes on at the open and you want to make sure your experts are running properly and everything is kosher before live trading.

- Instead, load up all the experts, with all the preset files except uncheck the box to allow live trading. This way the experts will run, but they won't be able to trade.

- Next, monitor the systems for a few days. Check the lot size, starting balance and make sure the position size looks correct.

- Check for trades - the log files will fill up with stuff like this:

02:58:58 COATL EURJPY,H1: openBuyOrder: Trading is not allowed.
02:58:58 COATL EURJPY,H1: openBuyOrder: Trading is not allowed.
02:59:00 COATL EURUSD,H1: openBuyOrder: Trading is not allowed.
02:59:00 COATL EURJPY,H1: openBuyOrder: Trading is not allowed.
02:59:00 COATL EURJPY,H1: openBuyOrder: Trading is not allowed.
02:59:00 COATL USDCAD,H1: openBuyOrder: Trading is not allowed.
02:59:00 COATL USDCAD,H1: openBuyOrder: Trading is not allowed.
02:59:00 COATL EURJPY,H1: openBuyOrder: Trading is not allowed.
02:59:00 COATL EURJPY,H1: openBuyOrder: Trading is not allowed.
02:59:00 COATL EURUSD,H1: openBuyOrder: Trading is not allowed.
02:59:00 COATL EURUSD,H1: openBuyOrder: Trading is not allowed.

- Sanity check the trades if possible and compare against other instances.

- Once you are satisfied, you can slowly enable live trading for all 8 pairs being traded.

In my case, I started monitoring on Monday, and let it run most of the week with no live trading. Finally on Friday, I enabled trading on EUR/USD and USD/CAD and took a few trades. I'm going to enable the remaining instances in the coming week or so. Am I cherry-picking the opening trades? Maybe a little. As long as I let them run live after start up with no interference, I'm sticking to my plan.

If you don't know what COATL is about, check out the Prior blogs posts I did on the subject:

COATL Part 2

COATL Part 3

There's some pretty good stuff in there, and COATL is a mind-blowing achievement in itself, reducing a large decision space (2.14 X 10^16) into 3 different sets of parameters per currency pair via Genetic selection and optimization. And this is only one of about 8 possible Coatl portfolios.

Enjoy your weekend.


Saturday, December 3, 2011

Meta-Trader - Blog Updates

Welcome back, Meta-Traders.

The end of the calendar year brings an opportunity to reassess our routines on the lower time frames, daily, weekly, etc. I am convinced that success is the net result of all the little behaviors we do on a routine basis, without having to think about it. Along those lines, I am evaluating my weekly blogging routine.

Every Friday night and Saturday morning, I spend between 2 and 3 hours reviewing the week's news events, and my equity and forex trading. For the most part, it is fun and I enjoy it. But is it the best use of my time?

As it turns out, I'm not that great an equity trader, and my performance is highly correlated with the S&P 500. So does blogging about my equity trading provide any benefit to you, my loyal blog readers? I believe the answer is no. It also can have a negative affect on my own trading because I have to concern myself with whether what I'm saying makes me look smart or dumb, since I'm laying it out there for everyone to see.

On top of that, the weekly up and down, thrill of victory, and agony of defeat takes its toll. After blogging about my Zulutrade experiences for a year, and then this blog for coming up on 2 years straight - without missing a week - I'm ready for a break.

Yes - I am still going to blog. Yes - I will talk about automated forex trading and the equity markets. Yes - I'm still going to post my weekly accounts performance on the right. No - I'm not going to talk about my own equity trading on a per-trade basis. But I will keep an eye on the markets and their performance, particularly as it relates to Forex Trading.

Instead, here's what I'm going to focus on:
  • Original research in Forex Trading including hints, tips, etc.
  • Review of Trading Resources, Books, web sites, anything I find helpful
  • Anything else want to talk about that is vaguely on topic
So for this week's tip, here is what I have:

For those of you trading Asirikuy systems, pay particular attention to the Starting Balance value which appears inside the Experts window. The starting balance is stored in a file underneath the Experts\Files folder in your platform and is named according to the Account Number and Instance ID for that account. The balances can be wrong if you just made a deposit or withdrawal from your account and that could result incorrect lot sizing calculations.

If the balance is incorrect, you have 3 options:
  • Backup the files, then delete them and let them get re-created or
  • Edit the files to adjust the starting value. Leave the other number alone to keep the same balance reset date or
  • Set the UseGlobalBalance properly in your experts to True
One more thing, I'm taking the last 2 weeks of December off from my regular job, and i'm looking forward to some good research and blogging time.

So check back for that and have a great weekend all.

Saturday, November 26, 2011

Meta-Trader - Forex Robots 2012

Welcome back Meta-Traders. Happy Thanksgiving to all my readers and wishing you the best of the season!

This week I’m taking a break from the weekly Forex Robots performance horse race commentary and instead focus on my Forex Robots portfolio line up for 2012. Here are the objectives of this exercise:

- Reward and/or add-to the winners
- Cut and/or eliminate the losers
- Consolidate accounts
- Maximize capital growth through use of a deposit bonus
- Include a Worst Case scenario based on Monte-Carlo simulations. This is the point at which we will stop trading the system.

A quick word on what I consider “winners” and “losers”. A winner is an account that has performed according to expectations and behaved consistent with other instances of that system traded elsewhere. A loser is an account which has not performed to expectations or has not traded consistently with same accounts elsewhere, or accounts for which I have no basis for comparison.

Now let's go through each account and comment on its status:

Atinalla #1 had an excellent year and I’m going to add about $1300 from my FXDD deposit to this account to bring the account total up to about $4000. Worst case scenario based on Monte Carlo simulations is a loss of almost 40%

Next up is Atipaq Full Portfolio which was up nearly 59% and has performed consistent with expectations, so I want to add to this one. Where will I get the money from? Read on. It is important to note that Atipaq Full Portfolio has a worst-case scenario loss of almost 85% which is pretty high.

Both Megadroid and FX-Regression had sub-par years. Megadroid has been a disappointment 2 years in a row and both it and FX-Regression suffer from adverse risk to reward ratios. But at the same time, I don't want to totally give up on these systems just yet. So here's what I came up with. Each account has about a $1000 balance, so I will close the one and transfers the funds over into to Atipaq Full Portfolio bringing its balance up to about $4200.

As for the other account, I'm going to continue to trade Megadroid, plus FX-Regression on USD/CHF and USD/CAD. This way I can keep these 3 together and isolated from the Asirikuy Portfolios and NFA compliant with none of the systems fighting with one another. Since I am consolidating the Megadroid/FX-Regression accounts down to 1, it effectively halves the amount of funds traded and demotes their contribution to my overall performance. Worst case loss is 50% of the account based on my own limit.

Next up is Atinalla FE.

Atinalla FE is a good system and has performed fairly well this year, though nowhere close to my 30-60% target. Part of the reason for the underperformance is that the system itself is not NFA-compliant, yet I’m running it on an account which requires NFA compliance.

I considered adding Atinalla FE to my Atinalla #1 account which runs on FXDD and can therefore handle non-NFA compliant systems. But in combination with the systems in there already, its adds too much risk. So my plan therefore is to close the account trading Atinalla FE, and transfer the funds over to my existing account running Atinalla #3.

Next we have Atinalla #3 which has not performed according to expectations. Similar accounts on Asirikuy are all up at least 20%. I’ve concluded that this difference in performance is due to the USD/JPY instance which is performing poorly when compared to the USD/JPY instance included inside Atipaq Full Portfolio. So I’m going to adjust the parameters on USD/JPY to match Atipaq Full Portfolio and go on with the new funds into 2012. Worst case scenario for Atinalla #3 is a loss of about 54%.

Finally we have Atinalla #4. This account has been a disappointment and is not trading consistent with the other AT4 systems on Asirikuy. Also, the account is under capitalized and shares several system-pair instances in other accounts I’m already trading. So I plan to scrap Atinalla #4 and add funds to start trading a new system. In the course of that, I also add a new account bringing my total number of FXDD accounts to 3.

FXDD Account #1 will run Atinalla #1 portfolio and have about $4000 for starting balance.

FXDD Account #2 will run COATL USD-Centered Account and have about $4500 capital to trade. A 11-year simulation shows an average annual return of nearly 57%, but a maximum drawdown of as much as 30%. This portfolio is going to take a lot of patience and long term perspective to trade, but I have an excellent shot of making my long-term performance objectives. This system has a maximum worst case loss of 34.6% of the account.

FXDD Account #3 will run COATL H1 portfolio and will have about $3660 to trade. A 12-year simulation shows an average annual return of about 52% per year with maximum drawdown of about 24% and a worst-case loss of 34% of the account.

Both COATL account are going to be very difficult to trade psychologically and will take a long-term perspective to be successful.

Here is a summary of the new asset allocations:

$4000 - FXDD - Atinalla #1

$4500 - FXDD - COATL USD-Centered

$3660 - FXDD - COATL H1 portfolio

$4200 - Forex.com - Atipaq Full Portfolio

$1050 - Forex.com - Megadroid EUR/USD and FX-Regression USD/CHF and USD/CAD

$3419 – Forex.com – Atinalla #3

Total accounts now 7, after restructuring, 6. I’m adding one FXDD account bringing the total FXDD accounts to 3. At the same time, I am deleting 2 Forex.com accounts bringing the total account across both brokers to 6.

Total funds now, nearly $13,000, total funds after restructuring about $20,000.

Let’s see how it goes. Take care all.

Saturday, November 19, 2011

Meta-Trader - Tale of 2 Robots

Welcome Back, Meta-Traders.

It was the best of times, it was the worst of times we might say about this past week. You'll see what I mean when I get to the Forex accounts. That said, it was a rough week and we look losses on both the Forex and Equities side.

The super-committee on deficit reduction deadline coming up on Monday loomed heavy on the markets with Republicans and Democrats as polarized as ever.

It begs the question, if the full House and Senate can't agree on how to reduce the deficit together, why would 12, highly partisan politicians be able to pull it off? What about the 'Sequester' automatic, across the board spending cuts? Will congress actually let that go ahead? It brings up a lot of questions, and that equals sell.

Europe did us no favors either this week, but it shines a light on the fact that things are pretty dysfunctional right here in the old USA, never mind what's going on in Europe.

My Amazon position turned against me. I failed to sell the calls last week at 9.60 as I planned, and the position turned hard against me and I'm down about 16 points. Ouch. Surgical Equipment maker Mako Surgical sold off hard and I took a hit on that as well. Double ouch.

On the bright side, my OIH 130 calls expired worthless and I collected $660 per account on that one. Offsetting that somewhat was my AKAM Nov 30 calls expired worthless, lost about $220 per account on that one.

Interesting development in OIH, the ETF is re-organizing and I have received an offer to exchange these shares and exchange them for new shares as of about mid-December. Important to note since I can't have any short calls against the shares during this transition. Pharmacy Benefit Manager SXCI continued to recover from its sell-off and close the gap.

As for the robots, let's go from worst to best.

Atinalla #4 continued to draw attention. On the bright side, the USD/CHF instance took a nice winning trade. On the bad side, I had a nasty string of 5 consecutive losses across Teycanani, God's Gift, and Sapaq. These system are supposed to offset each other, but instead they all lost as a team. I checked Asirikuy and this performance was matched across the other instances. That all added up to just over 11% lost in one week, nasty.

More importantly, I had a breakthrough on this account and that is the the starting balances are way off. I went through the systems and found that the starting balances are in the $2600 range. I never traded this account with that much money, so this seems like an obvious problem and is another reason why this account is getting crushed. More to come on this and another reason to stop any further trades until this is worked out.

Megadroid had a large losing trade and cut its yearly take from 16% to 9% in one fell swoop.

On the plus side was Atipaq Full Portfolio which gained a stellar 9% on the week and is up an impressive 51% on the year.

On the development side, FXDD paid me the 5% deposit bonus. What other business gives you a 5% up-front bonus on deposited funds other than the forex industry?

And that's enough for 1 week. Enjoy your weekend.

Saturday, November 12, 2011

Meta-Trader - The Slop and Chop

Welcome back Meta-Traders.

It was a wild week in world markets. US equities gapped back and forth, but closed positive on the week despite a 3.5% plunge on Wednesday.

Events in Europe ruled the day with a power shakeup in Italy causing a spike in Italian Interest rates. Political theatre continued in Greece and was described in an interview with Niall Ferguson on Bloomberg radio as "more farce than tragedy."

Equities were positive and I didn't do much. I've had my eye on Amazon since it plunged back to $200 after earnings. Since then its been climbing back, coming ever closer to closing the gap at $225 but still well off the all-time high of $246. It traded strong on Monday and Tuesday and finding support at about $215. Wednesday's opening gap down brought it under $215 and I went long 100 shares in each account just south of $215.

This turned out to be a mistake since AMZN moved lower on the day. I learned something here which is if you are going to trade against the general direction of the market, don't do so first thing in the morning. Wait for the day to play out since, if the direction of the day continues, you will like get a better price later in the day. Anyway, I stuck with it and it closed the week above $217. I'm going to let it go a few points higher, then sell to open the Dec 220 calls at $9.60 or better.

Also on the plus side, we had a nice recovery in the shares of pharmacy benefit manager SXCI. We also had a nice bull-elephant candle with a breakout to a new all-time high in health care cost containment stock HMSY and I'm loaded long in that stock.

Forex Robots were positive with gains in all accounts except for Atinalla #4 and FX-Regression. One interesting observation is that Atinalla #1 had winning trades, but the lot sizes were small, just 0.01 when earlier in the year it was trading 0.02 and even 0.05. I think this is due to the lot sizing algorithm and the relatively high level of the ATR.

It also raises the issue of account capitalization, and that at certain high levels of ATR, the account can appear to be under capitalized and it holds back the performance of the system. At certain dollar amounts (say less than $1000) it makes more sense to trade a 'penny' account. Well it turns out as the ATR increases, the amount of $ needed to exceed 0.01 lots increases as well. Help is on the way, however, as plan to add funds to all accounts shortly as soon as FXDD finds the 5% deposit bonus they promised me.

Atipaq Full Portfolio continues to chug along moving its way upward. Atipaq is probably my favorite system overall because of its simplicity and universality - it works on so may different currency pairs. Megadroid also took a pair of winners.

FX-Regression continues to disappoint. This system suffers from a number of problems and I'm getting close to throwing in the towel on live trading. This is worthy of an entire post - to analyze the failure and try to learn from it.

My AT#4 account had a bad week as well. First, it had a string of losing trades in both God's Gift ATR for both EUR and GBP pushing it deeper into the hole. Secondly, it stopped reporting to MyFxbook on Tuesday 11/8 and my efforts to restart it thus far have failed. I'm pretty close to pulling the plug on this portfolio, and re-positioning it for 2012 with more funds and a new system, probably of the Coatl portfolios. Failure is part of the business and I don't want to let these systems do any further damage on what has been a positive year overall.

That's all I have for your now. Enjoy your weekend and go do something you enjoy, preferably outdoors.

Saturday, November 5, 2011

Meta-Trader - The Wash and Rinse

Welcome back Meta-Traders.

It was a wild week in equity and currency markets. Last week's euphoria regarding an agreement among Euro-zone countries was thrown into doubt when Greek Prime Minister Papandreou made a shocking announcement that the Greeks would hold a referendum on the bailout plan itself.

This shocking news trashed Equities and brought funds flooding back to the USD. The EUR/USD tells the story perfectly. Last Thursday's rally in EUR/USD broke the 1.40 mark decisively to the upside setting up up for further gains, right?

Wrong. News of the referendum trashed the rally and EUR/USD sold off right back to the bottom of the range and found support at the 1.36 level before closing the week at 1.3790. It was a setup for the EUR longs, the false breakout followed by a throw-back of the breakout and then some. Shows how hard it is to trade currencies manually and why I don't even bother to try.

I did make a few trades this week and we had some good action with the Forex Robots, so let's get to that.

I was feeling pretty bearish on Monday and felt that last week's rally had gone too far, too fast. So I bought 1 of the SDS Nov 19 calls in each account for about $2.15 or $215. SDS is the Proshares double-short ETF - so this is a derivative on a derivative. All I can say is - is this a great country or what?

Anyway, that trade worked out and I sold the contracts a day later for $305 or about $80 profit each, but after E*Trade's $11 commission each way, only $58. Some day, I'm going to grow up and get Interactive Brokers or Tradestation where the same trade would cost me 2 bucks.

One more thing about this trade - why just 1 contract? I seem to have a psychological block about playing the short side. For some reason, I have a hard time making money on the bear side. Perhaps its because the odds are against me in that stocks rise about 66% of the time. But stocks fall faster than they rally, and to become an all-season trader, I have to learn to embrace the bear.

We got some supportive words from the US Fed on Tuesday, and a surprise rate cut from the ECB on Thursday which helped stocks to recover. Late in the week, I noticed some constructive price action in Akamai (AKAM), so I bought 2 of the Nov 30 calls at about 0.95. We got some follow-through and the contract closed the week at 1.05. Will try to sell these next week in the 2.0 to 2.5 range.

Forex Robots had a bang-up week, with nice gains is most accounts. The star of the week was Atipaq Full Portfolio which picked up about 7% for the week and is now up 40.18% on the year.

Atinalla FE had a solid week, up about 4.5%. This system had 3 winning trades in a 2 day period which is unusual to say the least. This system traded well in the face of the steep selling in EUR this week, taking 3 consecutive winners on the short side.

Megadroid Live picked up about 1.5% on the week. Since the Margin level went to 1:50, Megadroid no longer doubles its size after a loss. This makes it a safer system to trade overall.

Most of the other accounts were a disappointment. FX-Regression took a pasting with all this directional action and lost about 6% on the week.

All of the Coatl portfolios lost, since they were setup for further upside in the Euro, which didn't turn out as expected.

On the development side, my new FXDD Account is open and funded. More to come on that.

Enjoy your weekend.

Monday, October 31, 2011

Meta-Trader - What's wrong with AT4?

Welcome back Meta-Traders and Happy Halloween!

For a Halloweeen Trick or Treat, let's take a look at my under performing account Atinalla #4.

In order to achieve my annual profit target of 30-60% per year, every account in the portfolio must be operating in top form. And we have a related mystery on our hands with my Atinalla #4 Portfolio from Asirikuy. Based on historical simulations, this account is supposed to return an average of nearly 75% with an average draw down of about 16% However, the link above shows that my account is down -7.26% for the year. What’s the deal?

First of all, we know this is a bad performance by way of comparison. Asirikuy has a total of 7 live accounts running Atinalla #4. Each and every one of them is up at least 20% with the best of them (set to double risk) being up almost 60%! There’s even an instance running FXDD with 1:50 leverage, just like mine. So what gives Meta-Traders?

Peeling back the candy wrapper, I found these facts:

I started trading Atinalla #4 in this account on 1/21/2011. Prior to that, I was running the “Live Twin Scalpers” (Megadroid and Swissie Scalper) in this account. If I filter the account from 1/1/2011 to 1/21/2011 using Myfxbook, I can see the Twin Scalpers lost -2.36% or about -$44 in that 21-day period. I noticed that Myfxbook seems have duplicated each trade (both winning and losing) between 1/21/2011 and 2/18/2011.

Once I noticed that, I took a look at the FXDD Report viewer, a web site provided by the broker for this purpose. According to FXDD, the Twin Scalpers actually lost the same amount, -2.3% or about $44. This means that Myfxbook was reporting the percentages properly, and the duplication of trades was just a display problem.

Then I filtered the account using Myfxbook starting on 1/21/2011 to the present and found the account is down -6.17%. However when I view the same period with the FXDD account viewer, it indicates the P&L is only -$17.28 which is only 9/10’s of 1% or 0.009. Who is correct here? It’s hard to say, so I filtered the account using the FXDD viewer for the entire year, and found I’m down only $62 or about -3.2% of the original cash in the account of $1904!

Another possible conclusion is that FXDD is using a larger starting balance than FXDD for the same period. This is possible since I deposited money into this account and disbursed to my other account from here. If so, this would appear to be a bug in FXDD since it should consider the balances only for the period in question.

Conclusion #1

Myfxbook has some reporting distortions, and I’m not down -7.26%, I’m actually down -3.2%.

Part of that could be due to the fact that FXDD performs a back office netting operation which allows the trader to avoid NFA-imposed restrictions related to FIFO and Hedging. So reporting is clearly part of the problem, but clearly not the whole problem since I’m still losing money.

Conclusion #2

Part of the loss in this account was incurred before I starting trading Atinalla #4 in this account.

What about the performance of Atinalla #4 for the first 21-day period when I was not trading it? How much profit did I miss during that 21 day period?

According to 3 of the instances on Asirikuy, I lost out on between 8% and 24% of yearly profits during that short time period! This makes sense since I’ve found that the Forex market tends to make big moves the first week or 2 of the trading year. I’ll do more research on that and perhaps write a separate post later in the year backed by some statistics.

Conclusion #3

I missed out on a minimum of 10% profit for the year by not trading Atinalla #4 in the 21-day period from 1/1/2011 through 1/21/2011.

What about the rest of the trading year? What can we gather from the data regarding that period?

Taking a deeper dive, I took a look at the performance of each individual system. Daniel’s systems make this easy since the text printed along the upper left of each expert screen shows the P&L for each individual system. Look at each instance (currency pair plus expert) 5 of the 8 instances were profitable. Unfortunately, 2 of the 3 losing instances lost more than any of the other systems putting the account into the red overall.

Here’s where it starts to get interesting. Of the 8 systems instances on Atinalla #4, I am trading 4 of them in other portfolios and for 2 of the 4 with the same broker. This allows for a head to head comparison between the 2 instances. What did that comparison show?

Unfortunately, this thread didn’t pan out for comparison purposes as cleanly as I wanted because the balances earned on the Atinalla #1 portfolio were reset, and the profits shown were not since the beginning of the year, rather since the last balance reset. However it was useful in one regard – I noticed the instance running Watukushay #5 (aka Atipaq) against USD/CHF didn’t seem to be placing its daily limit orders to buy above and sell below the market.

The Atipaq – USD/CHF instance is important since its one of the best performing instances. I checked Atipaq / USDCHF on my “Atipaq Full Portfolio” and it has returned $365 since it started, but the same instance in my AT4 account has only returned $66!

So I took a look at the expert screen and sure enough, it was not creating daily orders at on a regular basis like the one that runs as part of “Atipaq Full Portfolio”.

Conclusion #4

My Atipaq – USD/CHF instance as part of my Atinalla #4 Portfolio is screwed up.

Meta-Trader creates 2 sets of logs as follows:

- General Meta-Trader messages under MetaTrader folder\Logs

- Expert-specific messages under MetaTrade Folder\Experts\Logs

Looking at the General logs, I found nothing but an occasional failure with uploads to MyFxBook.
Looking at the Experts\Logs, I hit pay dirt as follows:

20:58:35 stdlib USDCHF,H1: loaded successfully
20:58:35 WATUKUSHAY_NO5 USDCHF,H1: Error info: 3 description: invalid trade parameters
20:58:36 WATUKUSHAY_NO5 USDCHF,H1: openSellOrder-OrderSend: instrument: USDCHF order size: 0.04 open price: 0.8585 slippage: 30 stop loss: 0.8631 take profit: 0.8512
20:58:36 WATUKUSHAY_NO5 USDCHF,H1: Error info: 3 description: invalid trade parameters


Okay so what's the cause of this error? I look a look and the only thing that strikes me as strange is that the pricing is 4 digits, but its a 5 digit broker. The other trades for this broker show all 5 digits.

Is that the the answer? Check back later to find out and enjoy your day!

Friday, October 28, 2011

Meta-Trader - Best Day Ever

Welcome back Meta-Traders.

It was a wild week in financial markets, full of both the thrill of victory and the agony of defeat. I also had my best day ever, but I'll get to that below.

Monday started off banking a nice profit from the sale of Amazon and collecting the full premium on my short call. On the flip side, pharmacy benefit manager SXCI opened the day Monday with a crushing 14-point downside gap on news of the takeover of SXC customer Healthspring by insurer Cigna. I have 200 shares in each account so that was $2,800 times 2 or $5,600 loss. Ouch and how's that for a way to start a Monday morning?

When life gives you lemons, you make lemonade, so I bought 200 shares in each account at about 43.20 on Monday at about 10AM. Normally, I don't like to average down, but that seemed the only way to profit from a bad situation. Within an hour or 2, I was up about $500 per account and feeling better. Unfortunately, the profits started to fade, so I closed the new positions at about 2PM booking a $380 dollar gain in each account which helped to ease the pain.

Tuesday rolled around and I noticed (using my favorite charting tool http://www.tc2000.com) that GLD had a bull-elephant bar on Monday and cleared recent congestion to the upside. Also, someone on CNBC noted that huge quantitative stimulus from the Euro-zone via the EFSF will leave to further commodity inflation. So I picked up 100 shares in each account in anticipation at a possible run at the old highs.

Wednesday rolled around and Amazon had a huge gap down after reporting an earnings miss on Tuesday evening. The stock opened close to $200 a share, and I felt pretty good about having recently sold it at an effective price of $229. Investing in individual stocks can really be a mine field and this was a case in point. But no pain no gain as the big boys like to say.

Thursday rolled around the market completely blew out to the upside, opening with about a 2.4% gap in the S&P 500. What really struck me was the strength in energy shares. Oil Services ETF OIH closed Wednesday at close to 126 and gapped up to 130 on the open and traded as high as 135 on the day! I took advantage of this situation and sold a November 131 call at a limit of $5.60 and got filled late in the morning. This trade turned out to be a bit premature since the fund closed the week close to $135. But just 3 short weeks ago, I was down nearly 3K per account on this position, so I felt grateful to get that money back. Plus with this trade I'll book an easy $560 per account in under 3 weeks time.

Thursday closed the day up almost 3% on the major averages. When I calculated all the gains, I was up in the low 5 figures on the day and had by best day ever! I'm not going to say exactly how much, but it was nearly enough to pay cash for my current wheels which is a 2011 Honda Civic, shown above. Of course, I probably had my worst day ever sometime in the August-September sell off. But it is my blog and i'm allowed to accentuate the the positive.

Friday was a bit of a disappointment as health-case cost containment company HMSY reported earnings that beat estimates, but revenues missed. This shot another hole in my portfolio and was another setback along with SXCI. Stocks sometimes sell off after earnings without a good justification and this is a case in point. So I'll just have to wait for reason to prevail.

Forex robots were a sloppy this week to put it kindly. Nearly everything was down except for scalper Megadroid Live, Atinalla #4 and Neural Network trader Sunqu. That Sunqu account is a thing of beauty, so be sure to check it out.

On the development side, my new FXDD account is created and I'm waiting for the check to clear and funds to become available. I've already mapped out my new systems and accounts allocation for 2012 and I will cover that in a separate post.

Also, I started working on another blog post called "What's Wrong with AT4?" which will delve into the performance of my Atinalla #4 portfolio and try to uncover why its under-performing other AT4 portfolios, even on the same broker. Check back for that, its sure to be learning experience - especially for me!

That's all, enjoy your weekend!

Saturday, October 22, 2011

Meta-Trader - Upside Resolution

Welcome back, Meta-Traders.

This past week the rains finally blew out of town leaving a splash of beautiful fall colors along with blue skies and cool, crisp temperatures. Its autumn in the Northeast US and there's nothing quite like it.

Meanwhile the equity markets seemed to shake of their worst fears regarding financial meltdown in Europe. The Dow and the S&P 500 both resolved a nearly 4 month range to the upside on Friday. This was a mere 14 sessions from a fake-out move to the downside where stocks seem to resolve the range to the downside. Equities have been a binary affair lately - either straight up or straight down. There seems to be some optimism things will resolve themselves in Europe - and the world will not come to an end - at least this week.

As for equity trading, my short AMZN Oct 220 call expired and the stock will almost certainly be called away since it closed at 234. That sale will yield almost $1500 profit on sale of the stock plus $960 premium received on the short call makes $2400 times 2 accounts or about $4800 which is not bad. On the downside, my Intel Oct 21-20 put spread expired worthless, so I lost about $100 and change on that trade.

I'm considering a similar position with IBM which recently hit an all-time high at $190, but gapped down to $180 on an earnings disappointment. There's some fat premium on the upside calls to be collected in this one.

As for new equity positions, I added some more Mako Surgical (MAKO). The stock recently broke out to a new all time high at about $43 and dipped back below $40 where I picked some up. I'm expecting a run-up into earnings due out Nov 9 and I might let it run up then sell some premium. I also added a 1 lot of FDO - Family Dollar another one off the new all-time highs list.

For stock scanning, I'm using http://www.tc2000.com. Its a marvelous tool and you can scan all US stocks for any number of technical conditions in seconds. Plus you get real-time data and real-time intraday charting all for about $300 a year. I recently dumped my E-Signal subscription (saved $1400/year) in favor of this product. Check it out, its really, really good.

Forex was a sloppy affair this week fully of whippy moves and false breakouts. EUR/USD started the week at 1.3870 and ended the week at 1.3886, not far from where it started. EUR seems to be agitating for an upside breakout and a resolution of this debt issue will give it the spark it needs to light the fire. Also, we are starting to see equities signal a year-end rally which will drive USD downward and EUR upward.

Nearly every forex account was down for the week with the exception of Megadroid Live and Sunqu. Sunqu is starting to peak my interest, and shows a lot of potential as a pattern recognition engine to predict the next day's direction - either up or down - based on short-term candlestick formations.

As for development, I have to get my FXDD account funded before the end of next week to get the 5% deposit bonus. Need to get cracking on that.

That's it, enjoy your weekend, you earned it!

Saturday, October 15, 2011

Meta-Trader - 3 Drunks in a Bar

Welcome back Meta-Traders.

It was risk-on this week as equities had their best week since July of 2009 with S&P rising 6% this past week and rising 11% since the plunge lower back on October 3rd. In the past 2 weeks, we plunged to a new low, then turned around and raced right back up to the top of the range. Equities are trading more like futures being priced for both disaster, then recovery, almost by the day. This market is behavior is downright manic.

All this jubilation in equities took USD lower against all pairs with the DXY dropping about 5% on the week and pushing EUR/USD right back to resistance at 1.38.

For me, the highlight of the week was an interview on Bloomberg Radio with Andy Brough from Schroder's Investment Management. "You look at the Euro, your look at the Dollar, the look at Sterling, its a bit like 3 drunks in a bar, propping each other up .. at different times one feels better than the other." You can hear the entire interview here.

As for equities, I didn't make any trades this past week, but it was good to see nearly 10% of my account value - which had recently evaporated - come back almost as fast as it left.

As for Automated Currency Trading, it was a postive week on balance.

Atinalla FE gained about 3% for the week. It would have done better, except it got stuck in a FIFO trading violation where it tried to open and close a new position while it had one open already:

05:58:46 ATINALLA_FE EURUSDFXF,H1: Alert: Cross above CCI threshold detected
05:58:46 ATINALLA_FE EURUSDFXF,H1: open #14568118 buy 0.03 EURUSDFXF at 1.3797 ok
05:58:46 ATINALLA_FE EURUSDFXF,H1: modify #14568118 buy 0.03 EURUSDFXF at 1.3797 sl: 1.3674 tp: 1.3922 ok
06:58:42 ATINALLA_FE EURUSDFXF,H1: Alert: Long entry RSI cross detected
06:58:42 ATINALLA_FE EURUSDFXF,H1: open #14568246 buy 0.03 EURUSDFXF at 1.3773 sl: 1.3674 tp: 1.3922 ok
06:58:42 ATINALLA_FE EURUSDFXF,H1: modify #14568246 buy 0.03 EURUSDFXF at 1.3773 sl: 1.3677 tp: 1.3867 ok
08:58:43 ATINALLA_FE EURUSDFXF,H1: handleBuyTrade: instrument: EURUSDFXF ticket: 14568246
08:58:43 stdlib EURUSDFXF,H1: loaded successfully
08:58:43 ATINALLA_FE EURUSDFXF,H1: Error info: 150 description: prohibited by FIFO rules
08:58:43 ATINALLA_FE EURUSDFXF,H1: Alert: RSI Cross to exit long detected

To unlock this condition, I had to close the first existing open position first at a loss. This is what happens when you trade a non-NFA compliant system on an NFA compliant broker. Thanks alot for that one, Dodd-Frank!

Atipaq full Portfolio have a few losers, but went into the weekend with about 2.5% in unrealized gains.

Megadroid Live and my own EA FX-Regression tacked on some gains as well.

On the development side, i'm hard at work on re-balancing my Forex Portfolios for 2011. It seems that only FXDD will be offering a deposit bonus, so that's where the funding will come in.

I'm also making progress on more FX-Regression improvements, and hope to be ready to share those before 2011 is out.

That's all, enjoy your weekend!

Saturday, October 8, 2011

Meta-Trader - Life, Love and Death

Welcome back, Meta-Traders.

Last week's drubbing in equity markets continued in earnest this week. On Monday, we sliced through the low of the recent range, taking out the lows of the year, and once again putting my open portfolio positions into the red. This was a classic trend continuation move and a confirmation that we were headed lower.

By Tuesday mid-day, I figured we had enough on the downside and decided to take a long position looking for a bounce. I picked Apple Computer since it was the day of the iPhone announcement, and figured with the stock off a recent high of $409 down to $375, it had been punished enough. So I picked up an October 350 call in each account at about $35. After a few wobbles, this position started to work out, and within an hour or so, the stock was at $380 and I was up about $300 in each account. I was shooting for about a 15-point target or about half of the recent $35 dollar downside range.

After lunch, the iPhone event started at 1PM EST. The stock started to wobble and gave back its gains. I watched nervously as the stock started to come apart down to $375, 372, 370. When it broke $370 to the downside, I knew I was in trouble and on the wrong side of this trade. So I bit the bullet and sold the 2 contracts not long after for about a $500 loss per contract or about $1000 loss across both accounts. This loss hurt and I was stung with this loss as well as the other losses for the better part of the next 2 days.

Watching AAPL stock later that day, within an hour or 2, it was $360 and had an intra-day low of $354! So my 5 point loss could have been a 20-point loss, had I not been quick to close it. As it turns out, there was much disappointment in the market that Apple had just released the iPhone 4s, and not a new iPhone 5 has many had expected. But it was a bad trade nonetheless and I learned a good lesson, don't trade the news, particularly when you don't know what its going to be!

As it turns out, I was right about the market, which made a new intra-day low on Tuesday, but closed higher, right at about the bottom of recent support. We rallied for the rest of the week which was a relief.

Wednesday evening brought the shocking news of the death of Apple co-founder Steve Jobs. Apple had a large influence on my life. I learned assembly language on an Apple II running the Motorola 6502 back in college in 1983. I sold Apple Mac hardware as a computer sales guy in the mid 1980's. And Apple stock has been my biggest portfolio winner of the past several years.

On top of all his accomplishments, was the perspective he brought in his commencement speech at Stanford University back in 2005 which you can view here. I highly recommend you take the 15 minutes to watch the speech. There's not a shred of rhetoric, just a few short lessons, live your life without fear, and love what you do.

Most important was a message to realize that death is a fate that awaits us all. "... All external expectations, all pride, all fear of embarrassment or failure just fall away in the face of death leaving only what is truly important. Remembering that you are going to die is the best way to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart."

This powerful message put my small losses in context. The world has lost a tech leader, visionary and extraordinary human being. Rest in Peace, Mr Jobs, you will be missed.

As for Automated Forex trading, we had a mixed week. The recent US Dollar strength peaked on Tuesday and reversed along with the equity markets. This led to losses in all of the COATL portfolios which tend to build up positions over time to benefit from moves which play our over weeks and months.

Atipaq Full Portfolio had 2 huge winners in AUDUSD and NZDUSD which took 5 days to run take profits. Unfortunately, half of those gains were given back on a long USDCHF trade which played out in only 5 hours.

Megadroid Live went on a small winning streak and traded every day this week which is unusual.

FX-Regression took a pounding early in the week, but came back with a series of winners.

All other systems were mixed to negative. Its also interesting to note that Teyacanani when out short EURUSD on Friday in a large move late in the European session. Strange to see that kind of activity so late on a Friday.

Also, I added the God's Gift ATR systems back into my Atinalla #4 portfolio last week. After many months of draw down, these systems are once again showing signs of life and took a few trades this week including a 150+ pip winner in GBP/USD. Daniel - I understand that adding and deleting systems based on recent performance is antithetical to everything Asirikuy stands for so I promise not to make a habit of it.

On the development side, FXDD is running a 5% deposit bonus promotion for the month of October for deposits of $5000 or more. So I will probably take advantage of that to fund my accounts in preparation for 2012.

That's all for now, enjoy your weekend.

Saturday, October 1, 2011

Meta-Trader - Kicked to the curb

Welcome back Meta-Traders.

The 3rd quarter of 2011 came to an end on Friday and without the typical month-end, quarter-end fanfare and window dressing rally. In fact it was the other way around with the bears firmly in control.

Stocks had their worst quarter since the credit crisis in 2008 with the S&P loosing -7.8% for the month and -14.3% for the quarter. The blue-chip Dow Jones Industrial Average fared somewhat better, dropping only -6.03% for the month and -12.09% for the quarter.

Individual stocks told the story even more clearly with a AAPL tracing out a major top and selling off 20 points from the pivot at $400 and closing close to $380 for the week. AMZN was a similar story trading as high as $235 during the week on news of the release of its Kindle Fire, its competitor to the iPad. Amazon gave up the ghost as well and sold off ending the week at $216.

As for stock trading, I only made 2 trades this week. I sold AAPL at about $293 and took profits on the positions I slowly built up earlier in the sell-off. Also, I sold ULTA and took a nasty -8 point loss on a position I took just the week earlier. This was the wrong trade at the wrong time for the wrong reasons and I clearly need to be much more careful going forward.

As for stock positions, i'm still short the AMZN Oct 120 call which is looking good. I'm taking a beating on OIH, Oil Services ETF. I'm in the hole -26 points on this position and taking it on the chin. I should have capitulated already and will probably do so next week. I did some work with http://www.tc2000.com, and this ETF has gotten whacked harder than every major index (SPY, DIA), OIL ETF USO and even Goldman Sachs Commodity Index ETF GSG. Brutal, just fricking brutal.

Commodities got whacked as well, with the air continuing to come out of all related items, energy, materials, industrials, financials you name it. The ugly stick was swinging around wildly, whacking off capital and destroying value without discrimination.

The only thing that seems to be working in my direction is the Intel Oct 21-20 put spread which I put on for about $100 and if the stock closes below 20, I make $300. We'll see how that one works out.

All this wreckage in equity markets, was bullish for USD with the dollar rallying strongly against nearly all pairs. EUR/USD resumed its recent downtrend on Friday, but not before shaking out some shorts on an upside excursion to just under 1.37 earlier in the week. This trend continuation was positive for the COATL portfolios which trade USD such as Coatl H1 and Coatl USD-Centered Portfolio.

Atipaq Full Portfolio took no trades, but has some good unrealized gains on a set of long USD trades versus AUD and NZD which are up a combined 238 pips in unrealized gains.

The rest of the system results were pretty lackluster with the exception of the COATL H1 and COATL USD-Centered as I noted above.

Its worth pointing out that my Forex portfolio is up about +16% for the year, versus my equity portfolios which are down about -8% for the year. So that's positive and makes the case for continuing to diversity to Forex. My 5-year plan calls for increasing my forex portfolio to 20K by the start of 2012, so I need to start planning for that.

Also on a positive note, we just started the 4th quarter which is seasonally very good for stocks. So once we get October out of the way, the "Risk On" trade could come back very quickly as portfolio managers try to end the year on a good note. So while we ended the quarter on a bad note, we're looking for better times ahead.

Enjoy your weekend.

Saturday, September 17, 2011

Meta-Trader - Low and Inside

Welcome back Meta-Traders.

All eyes were on the Euro zone this past week as world leaders worked to contain a potential financial contagion that would be triggered by a Greek default.

In an interview with CNBC's Jim Cramer on Tuesday, US Treasury Secretary Tim Geithner assured the world in the strongest possible terms that he and other leaders would work together to avoid the failure of Europe's public institutions. And work together they did, announcing on Thursday a huge combined "US dollar liquidity providing operation" between now and year end in combination with the US Federal Reserve, Bank of England, the Swiss National Bank and the Bank of Japan.

It's great to see bankers coming together to provide confidence and stability, even if they do what central bankers always do - create money out of nothing and throw it at the problem!

In any case equity markets loved it and we had a strong week with 5 straight up days. Checking the charts though, we have just rallied back to the top of the range. Problems in Europe - and the rest of the world for that matter - are far from over and its always good to keep the weekly chart in mind when looking at the daily chart action.

As for equities it was a tale of extremes. Tech giants Netflix (NFLX) and Research in Motion (RIMM) got crushed and slammed to the downside while Amazon (AMZN) and Apple (AAPL) stepped out to new all-time highs.

Amazon was the story of the week. On Wednesday, it quietly slipped above the strike of my short call contract at $220. On Thursday it took on the prior all-time high at $227.45, but stopped short of that number. On Friday it opened a hair above the prior all-time high and rocketed higher gaining a stunning +12.25 on the day! I was long the stock, but short the $220 call, so I sat - deer in the headlights - and watched it all happen. At this point, there's not much else left to do but wait for the premium to come out of the short call.

Speaking of short calls, my OIH October 130 call expired on Friday and on Monday I will collect $450 premium in each account - not bad for 2 weeks of doing nothing! But I sat and watched the shares gyrate around the strike on Friday. With less than a minute left in trading on Friday, I watched it move in tight fashion around the strike, hoping for a close just under $130 so I get to keep the stock. The close was at 130.10 which means I will probably get called away. Not a problem at all but somewhat less than optimum.

Its a feeling I came away with the entire week. Sort of like a pitch in baseball, low and inside and not worth a swing.

On the Forex side, it was a retracement week, where the USD gave back some of its gains from the prior week.

As for EUR/USD, it made a rally attempt back up to breakdown point of 1.3970, but petered out somewhat short of that target. Teyacanani took a longside trade toward the upper part of the range, and it occurred to me at the time that I would never take that trade since it looked like a rally right up to resistance. That trade didn't work out and EUR/USD rolled back over and closed the week at just south of 1.38.

As for the robots, Atipaq Full Portfolio gave back about 5% for the week after last week's monster gain.

Megadroid Live took a 15-pip winner on Thursday in a quiet week.

My own FX-Regression had a nearly perfect week except for a losing EUR trade on Monday which sent it to the bench for the remainder of the week. This system gained about 4% for the week and is now just short of positive for the year. I'm still convinced this system is a winner, but I don't blame you if you are a skeptic. I've been working on some improvements to FX-Regression, and i'll share them when the time is right.

Finally, I entered CNBC's Million Dollar Portfolio challenge contest which starts this coming week. I'm not sure if my results will be public, but i'll keep you posted. Its a good opportunity to sharpen my trading and investing game and includes both Equities and Currency.

That's all for now, enjoy your weekend.

Saturday, September 10, 2011

Meta-Trader - Forex en Fuego

Welcome back, Meta-Traders.

Summer gave way to fall this past week in North America and sent the kids back to school and brought the big money back from the beach. This simple change of season seemed to flip a switch which lit the forex markets on fire. And after a long and listless summer season full of drawdown, I say bring it on!

Speaking of fires, we had some massive wildfires in the state of Texas as shown in the photo on the left. Texas has had a brutal summer with months of 100+ plus temperatures and no rain. Meanwhile, we have had so much rain in New York, I need to drain the swimming pool. The weather, like financial markets, have been dominated by extremes lately.

Monday was the Labor Day holiday and I used a good part of the day to get migrated to a new laptop platform with all my live accounts on one laptop and demos setup on a separate machine. I also revisited the parameter settings for some portfolios and made a few minor adjustments.

Tuesday morning brought some shocking news that the Swiss National Bank decided to massively intervene to weaken the CHF. "With immediate effect (SNB) will no longer tolerate a EUR/CHF exchange rate below 1.20 CHF. The SNB will enforce this minimum rate with utmost determination and is prepared to buy currency in unlimited quantities."

This shocker caused massive moves in EUR/CHF and USD/CHF. Fortunately, Atipaq went long USD/CHF just an hour earlier in 3 separate accounts at about 0.79 with a take profit just under 0.80. When the news hit, USD/CHF gapped about 300 pips to the upside and I took profits at 0.82 in both Atipaq Full Portfolio and Atinalla #3. Interestingly, I got taken out of the same trade in Atinalla #4 at exactly the take profit of 0.80044!

The difference in this case was the broker. Forex.com let me have the extra 200 pips, but FXDD took me out at exactly the TP. I went back to look at the FXDD trade history, and I found in nearly every case on winning trades, FXDD took me out exactly at the TP, with rarely any slippage in my direction. But for losing trades, there was nearly always some slippage against me, and rarely any slippage in my favor. Very interesting indeed and shows you why I will always have at least 2 different Forex brokers. Its also probably worth a chat with FXDD who seem to be taking a "heads I win, tales you lose" position on order handling.

Wednesday brought a nice rally in the equity markets and I took the opportunity to sell to open some September 130 calls in OIH for $4.5 against the position I entered last week in the low $129's. Come hell or high water, I'm going to book $450 in profit in each account next Friday. Sometimes writing options seems like taking candy from a baby, particularly if you are willing to assume the risks of a long stock ownership. Also, I'm coming to appreciate what a great trading vehicle OIH (Oil Service Holders) is. It is wonderfully volatile instrument with 11 points of range last week or about 8%. And its a pretty good bet that energy service companies underlying the ETF are not going out of business!

The rest of the week was all about the Euro which decisively broke out of a 4 month trading range to the downside. The breakout-based systems from Asirikuy handled it beautifully.

Atinalla #1 had a banner week rising about 8% with solid contributions from all 3 embedded systems. The best system of the 3 (Teyacanani) brought in a massive 445 pips on short EUR/USD position opened on Tuesday and closed on Friday.

Atinalla FE went on a tear last week and has now booked 7 straight profitable trades bringing in +453 pips. Recall this is a free expert advisor can be downloaded here Atinalla FE.

My own system FX-Regression took a string of profitable trades and gained about 4% for the week.

The only real bummer of the week was Megadroid Live which took a 6% loss on Monday evening. I also took a loss in a short AUD/NZD trade recommended by Andy Bush from CNBC's Money in Motion currency trading TV show.

Regarding demos, I have removed the demo accounts for COATL which I attempted to restart this past week, but ran into some technical problems. Also, I decided I don't really like the way COATL trades in the sense that it opens up many positions and keeps them open for days and weeks. I think sometimes causes it to get into position and less than optimal times and ties up capital for entries at better times, something Daniel calls "Startup time dependency."

Finally on Friday, the Equity Markets sank in a depressing fashion, losing nearly 3% for the day. At this point, I'm almost inured to the volatility. It seems like the market is pricing in a bad recession and accompanying drop in earnings. Yet is the end, its not clear that the earnings will suffer that badly. Also, bear in mind that the dividend yield on stocks will provide a support for good companies. So I'm continuing to bet equities will beat bonds and cash and expect I will be right if I keep I just wait out the volatility.

That's all for now, get some rest and enjoy your weekend.



Saturday, September 3, 2011

Meta-Trader - Dodged some bullets

Welcome back Meta-Traders.

Hurricane Irene came and went this past week trashing the Northeast USA and leaving thousands without power and billions in property damage. The winds didn't meet expectations but the rain was intense and we got about 8 inches of rain in less than 24 hours. That led to severe flooding in anything vaguely resembling a flood plain as shown in this photo posted by one of my Facebook friends. Fortunately, I came through with no property damage, no flooding an no loss of electricity. There's one bullet dodged.

As for the financial markets, we closed out the month of August which was particularly cruel to the Equity Markets. I was hit hard in that sell-off, but i'm trying to make the best of the volatility and produce some alpha using options.

Recall I went into last week long AMZN in both accounts and long a pair of AMZN September 190 calls. My August 110 call expired worthless at the bottom of the sell off which was a good thing. But I was deep in the hole on the AMZN stock and the pair of calls. Well AMZN had an amazing V-shaped recovery and rallied all the way from 180 to the low 200's as of last weekend.

As my calls came into the money, I sold one at $22 on Tuesday about a point above where I bought it, and held onto the other one for further gains. $210 seemed like a reasonable target since it was an earlier support area.

The rally continued as the week went on, and I was reminded from watching CNBC that this rally had the look of end-of-the-month window dressing, with money managers and hedge funds trying to repair their badly damaged portfolios for the monthly statement. I held onto the other call and sold it on Thursday for about $26, pulling in an extra 5 points as a bonus. Another bullet dodged.

AMZN continued to push higher on Thursday and I bought the September 200 call for about $17 not long after I sold the 190 call. This was not a particular smart move since I was in a nearly identical position just 10 minutes earlier. But there was a decent chance AMZN could fight its way up to the next strike at $220 and I wanted to be on board for that move.

Well that position didn't work out and I watched in the early afternoon as the market started to come apart. So I closed the September 200 call for about a $170 loss and turned around and sold to open the October $220 call for 9.6 bring in a healthy $960 of premium. With the stock at $213 that could translate into a 7% return if called, and a 4.5% return if the stock closed below the $220 strike at expiration. That turned out to be a good move and AMZN started to sell off and ended the week at $210.

Finally on Friday, I bought 100 shares of OIH, the Energy Services ETF at about 129 with the intention of selling the September 130 calls for $4.10. My limit order expired worthless, but I expect i'll have an opportunity to get into that position this coming week.

Netflix had a pretty good recovery during the week and traded as high as $241 during the week. Recall I sold last week at about $216 taking a hefty loss from my entry in the high 200's. On Thursday, a news story broke and NFLX gapped down sharply and close the week at about $213. I avoided getting sucked into the recovery rally. From experience, I've seen that once a growth stock goes bad, its best avoided on the long side. Another bullet dodged.

As for Forex Robots, we saw some improvement. Atinalla finally took home a winner after 9 consecutive losses. Atinalla FE took home a pair of winners after 5 consecutive losers, all of which were larger than these 2 gainers. Atipaq Full Portfolio had a pair of winners reversing a long series of losing trades. This portfolio was up over 50% just a few short months back.

Its been a long slide down for the robots portfolio after being up almost 23% for the year a few months back. I checked this morning, and i'm still up for the year just about 9%.

As for new developments, I started a demo of Sunqu, the new neural-network based Expert Advisor from Asirikuy. Its a topic I have some history with, and certainly worthy of a review. I've been unable to get a clean backtest, so stay tuned. But the demo account has been added, so check the right side of the blog for demo results.

That's it, have a great weekend, you earned it!

Saturday, August 27, 2011

Meta-Trader - Kicking the Can

Welcome back Meta-Traders.

All eyes were on US Fed Chairman Ben Bernanke this week waiting for Friday's speech from the economic symposium in Jackson Hole, Wyoming. Recall that last year at this time, Uncle Ben starting dropping hints about asset purchases that let to the Fed's 600 billion asset purchase plan known as QE2. With QE2 behind us, and most of the resulting stock market gains gone, what would the Fed Chairman have for us this time?

Nothing much was the answer. Ben's thinking went like this: with Obama in Martha's Vineyard, Congress out on their summer recess, and the big money out in the Hamptons, why should the Fed have to do anything? After all, interest rates are already less than zero on an inflation adjusted basis.

Bernanke acknowledged that the US Credit Rating downgrade probably hurt business and consumer confidence, but he did strike an overall optimistic tone. It was good to see the Fed chairman using the bully pulpit to jawbone the market higher without causing further erosion in the USD. In any case, he effectively kicked the can down the road to the September Fed Meeting which was expanded to 2 days to allow for extra discussion regarding what to do with the remaining tools at the Fed's disposal.

The currency market had a confused reaction, first with a sell off in EUR/USD followed by a rally. In the end, it was an inside week for EUR/USD with all the action taking place within the prior week's high and low. Looking farther back, EUR/USD hasn't had any meaningful price action since April, and that might explain the poor performance in Forex robot's lately. More on that below.

The stock market reacted positively on Friday to end what was a positive week overall, gaining in 4 out of 5 sessions. My stock sales from last week were all poorly timed, with all of them well up from the levels where I sold. On the positive side, Amazon.com (AMZN) had a sharp recovery and was enough to pull me most of the way out of a five-thousand dollar hole in my portfolio. My AMZN September 190 calls gained back about half of their value and i'll be looking to get out of those positions and scratch or better this coming week if I get the chance.

Gold had a wild week with a nasty 8% sell off on Tuesday and Wednesday followed by a key reversal on Thursday and a great buying opportunity for a day trade on Friday. I didn't make any stock or option trades this week since I was out on vacation and away from the screen most of the time. I'm watching to see if gold will re-test the old highs this coming week and may consider going short.

Forex Robots were another disaster this week and my leading account Atipaq Full Portfolio lost a stunning 13% dropping from +40.55% to +27.55%. It probably would have been worse, but my laptop rebooted itself on Tuesday and I didn't get back to restart it until late Thursday.

We had some positive action in FX-Regression and Atinalla No3. Atinalla No4 broke down to a new equity low in a disappointing development. I'm considering some tactics to take profits and filter out trading during non-trending periods in the future. I have some pretty simple rules in mind, but i'm not going to share any ideas without some 10-year backtests to prove the concept.

Overall, its been a pretty rough summer for Forex Robots after a solid first half of the year. It highlights the need for systems which take advantage of sideways and trendless markets.

That's all for now, have a great weekend.

Wednesday, August 24, 2011

Meta-Trader - COATL - EUR-Centered Portfolio

Welcome back, Meta-Traders.

With all the volatility lately in financial markets, it’s a good opportunity to get back to the basics of what this blog is about. In this post, let’s examine COATL-EUR Centered portfolio from Asirikuy. Recall that I already discussed some details of this portfolio back in part 3 of my review of the COATL system here.

This past weekend, Daniel re-released the COATL system along with a new set of parameters. For this post, I reproduced back-tests for the EUR-Centered Portfolio and compared them with those included with the portfolio. There are a total of 8 COATL-based portfolios on Asirikuy, and I decided to dig into this one because it’s one of the 3 that I am demo-testing over on the right-side pane of this blog.

Reproducing the back-tests for COATL portfolios is very easy as follows:
  • Install the latest COATL expert files using the Asirikuy system installer
  • Download the daily historical data. Asirikuy provides historical data for 25 different currency pairs dating back as far as 1978.
  • Import the historical data for the pair being tested as follows. Select Tools, History Center, double click on the Currency Pair to expand the sub-tree then click on Daily. Click on Import and select the .HST file for the currency pair being tested and click Ok.
  • Select View, Strategy Tester to bring up the Strategy tester
  • Select COATL for Expert Advisor, Select the Symbol, under Model, select Control Points, and under Time Frame, select Daily.
  • Finally (and this step is important) click Expert Properties, click Load and load up the parameter Preset file for the Currency Pair
Once all that is done, click Start and the back-test will be completed in less than one minute. Once completed, click on the Report tab and examine the results. Then save the results into a folder on your hard drive. Repeat this for each of the 7 pairs in the portfolio. Once you have all 7 back-tests, load them up in the Asirikuy performance analyzer – which was used to create the graphic above. I decided to test the portfolio for an 11-year period from 1/1/2000 through 12/31/2010 to arrive at these results:
  • 100K grew to 21 Million dollars, versus 14 Million under the earlier COATL system
  • Annual Gain was over 66%, slightly better than the earlier version
  • Maximum Drawdown was about 15%, much improved from the 21% drawdown from the prior version
  • On a monthly basis, the system was profitable in 111 of 132 months, an impressive 85% of the time.
  • The largest monthly loss was over 13% while the largest monthly gain was just over 22%, not much different from the prior version.
  • The system was profitable in all but one of the 11-years in the back-test period
These results show that the new version is a definite improvement over the prior version. Profitability is improved while drawdown is reduced.

Overall, my results were about 10-15% better than Daniel's. The only thing I can attribute that to would be different spreads on the currency pairs which vary over time even with the same broker. Spreads are fixed and wider on the weekend, and vary throughout the trading day with the narrowest spreads during the most active trading hours.

If I get some time later this week, I will work on some of the other COATL portfolios and post the results here. Let's watch the performance of the new COATL portfolios for the remainder of this year before deploying live capital in 2012.

Make it a great day.