Friday, November 30, 2012

Meta-Trader - Threading the Needle

Welcome Back, Meta-Traders.

This was my 2nd full week of live trading the 5-minute bars with the Triple-MA Crossover method described here.  I didn't make a lot of money, but I came out in the positive thanks to a short trade in AUD/USD on Thursday shown on the left which highlights a few key elements of the method as follows:

- Go with the trend which in this case was down.  Its hard to see from this small chart and would be that much more obvious on a larger chart.  But the 50-bar (purple) MA clearly shows a downtrend.

- Wait for the price bar to straddle all 3 moving averages like we see above.  This prevents us from entering when the price is too far extended in either direction and due for a snap back to the moving average.

- Do not enter unless the stop is close - in my case no more than 10 pips but generally under 5 pips. Signals bars with large bodies are not good because the stop is too far away.

In the above case, I sold AUD/USD at 1.04396 with a stop at 1.04440 - just 4.4 pips away.   I closed the trade 14 minutes later right about at the bottom of that huge bear elephant bar and took profits at 1.04257 for a 13.9 pip profit.  The take profit was about 3 times the size of the stop loss which is a good risk to reward ratio.  It takes patience and and waiting for the right entry is somewhat like threading a needle.

Also, it remains to be seen whether I have just been lucky or I can really trade like this consistently week in and week out.  But I'm having fun and you can follow my live trading results on the Sunqu Live link shown above.

And speaking of fun I had a pretty good week in equities with new positions in Facebook (FB) and Research in Motion (RIMM) which are both showing signs of life after big sell-offs.  Also an e-mail from a blog reader caused me to dust off the "New High, Low PE, High Growth" TC2000 scan.  Based on that I picked up some EBAY which hit new all-time highs a few times this past week and has excellent fundamentals with a 5-year earnings growth rate of 57% and a PE of under 17!  The smart money is rotating out of last years winners like AAPL into next years winners and EBAY has all the makings.  We'll see.

On the Automated Forex Trading side of things, I am in the process of cashing out some of these losing accounts.   Based on the results of Automated Forex Trading this year, I could easily get depressed, about the year's results.  But in the larger scheme of things, I haven't lost all that much money and good money management is a matter of rewarding success and punishing failure.  Its not much more complicated that that.

Finally, I want to leave you with a quote from Benjamin Franklin, one of the founding fathers of the United States of America:

"Diligence is the mother of good luck".

That's all.  Enjoy your weekend.

Saturday, November 24, 2012

Meta-Trader - 1 in 137

Welcome back Meta-Traders.

My education as a Forex Trader took a positive step forward this past week with my first week of live, manual trading. I didn't  make a lot of money, but the results were positive and I think I am finally on track with my Forex trading.

There are probably at least 137 ways to lose money trading Forex. I have wiped a few Forex accounts to make it to this point, and this year's results are a case in point.  But I suspect you are reading this blog to find out what works with Forex trading.  So here are the basics of what I have found:

  • Don't trade all the time!  Trade only during active, prime-time hours for your pairs.  For me, that means about 6 AM to 12 Noon EST for my favorite 4 pairs.  Don't trade during semi-holidays or any other time when all the players are not on the field.
  • Review each pair from higher to lower time frames.  Get the feeling whether they are going up or down. Stick the day's directional bias into your head for each of the 4 pairs. 
  • Go to the M5 and overlay the Triple-MA template and the MA-Clusters indicator I uploaded in last week's post.  These 3 moving averages bring a world of clarity to just about every chart.
  • Avoid spiking, ranging or otherwise uncommitted markets.  If its not clear to you what direction the pair is taking, just avoid it and wait for clarity.

Those 4 items alone will eliminate a huge amount of bad trades and reduce the failure space from say 137 down to about 63.   If the price bar is not straddling all 3 MA's or at least 2 of the 3, don't consider entry.  The arrows in the MA-Clusters indicator will only draw when the price bar straddles all 3 MA's.  I've also found that once a good trend is going straddling just the 5 and the 20 can yield some pretty good results.  Case in point in the chart of the left of AUD/USD which showed a good pullback to the 20-bar MA with a good, solid entry bar in the middle which straddles the 5-bar and 20- bar MA. Note how price found support at the 20-bar MA and continued in its prior direction.

Once you get a signal bar, you have another 5 minute bar to decide whether to take the trade.  Once you enter,  place your stop loss a few ticks on the opposite side of the signal bar.  For good entries, your stop should be not too far away, certainly less than 10 pips but typically closer to 5 pips.  Once the stop loss is in place, walk away for a few minutes and just let things play out.

If you have done everything properly up to now, you just need to wait to make the spread and for it come into profit.  When to take profit is the hardest part and I need to learn patience.  Generally speaking we are going for a profit 4 to 5 times the range of the signal bar.  I need to learn patience and learn its okay to take a  losing trade and be able hang on long enough to let a big winner develop.

Following this method this past week, I took 3 trades and won on 2 of the 3 and took home about 8 pips or about 88 cents trading 0.01 lots.  It's just a small start and you can follow the results in my Sunqu Live account link found in the upper right hand page of the blog.

One last thing about this method that works for me is that I don't have to spend my evening and weekends trying to program a winning Forex system.  Instead, I can worry about trading during trading hours and live my life on the weekends.  So it makes for a better work-life balance.

That's all, enjoy your weekend.

Saturday, November 17, 2012

Meta-Trader - Almost time for Reset

Welcome back, Meta-Traders.

With 2012 drawing rapidly to a close, its a good time for some strategy and planning.  Clearly, it has been a disappointing year for our Automated Forex Trading experiment.  We are approaching the end of year 3 of my 5 year plan.  After putting together a 16.94% return in 2011, we have taken about a 25% hit in year 3. I started the year with about $20,000 under management and as of today, I an down to about $15,000 so I have taken about a 25% loss overall for the year.

What's more disappointing is that the losses have come nearly across the board with nearly every account taking a shellacking.  And the only ones which did not get crushed are the ones which I stopped after initial losses. What's even more depressing is the fact that the losses I have taken this year wiped out my profits from year One and put the entire Automated Forex Trading experiment into the negative.

But nearly all asset classes have losing years and that's why we hit the Reset button once per year when managing our assets.  This allows us to wash our hands of whatever worked, or didn't work for the prior year.  It also gives us a chance to take stock of our situation, and re-balance funds as needed.   So between now and the end of the year, we will plan our asset allocations and get the funds lined up so we are ready to start trading the 1st of the year.   This is key since the first 10 days of the year are often explosive in Forex Trading capturing a disproportionate amount of the year's gains.

As for Equities this week, Apple had a big move on Friday trading down to as low as 505.75 intra-day, then (along with the rest of the market) staging a dramatic V-shaped reversal at about 11:30 AM.  This was right about when congressional leaders emerged from a meeting with the President with conciliatory language all around indicating the 2 sides were perhaps not so far to agreement to keep the US from falling off the fiscal cliff.  Also, notice from the chart that this is the 8th weekly down bar for Apple computer, and as Oliver Velez points out, things often happens in 5, 8, 13 and 21 bar patterns.  So Apple and the entire market are more that a little oversold, and discounting the worst case scenario from the fiscal cliff negotiations.  I used this opportunity to pickup a small amount of shares after having sold a few weeks back at about 608.

This coming week I'm going to start live trading 0.01 lots of my 5-minute intraday scalper system.  For more information on this system, see my post from a few weeks back 5-Minute Bar.  Along these lines, I uploaded to my blog these 3 files in a single file called as follows:

Fx-Ma-Cluster.mq4 - Place into .\experts folder
MA-Cluster.mq4 - Place into .\experts\indicators folder
Triple-Ma-Template - Place into .\Templates folder

This system is based on the premise that you can do semi-automated intra-day trading on 5-minute bars on active pairs, EUR/USD, USD/CHF, AUD/USD and USD/JPY.  Check back next week to see how that worked out.

That's all, enjoy the rest of your weekend and have a great week ahead.

Sunday, November 11, 2012

Meta-Trader - Out of the Dark

Welcome back, Meta-Traders.

After a 12-day ordeal, my power has finally been restored. I owe a debt of thanks to the local village government who opened the municipal building 24x7 for warming, charging and bathrooms. Also our friends, family and neighbors all pitched in to help me and my family through a difficult situation.  I will never be quite the same and its a healthy reminder to be grateful for all we have in our lives.

Now back to the markets.  My Forex robots laptop has been down hard since about 7PM on 10/29/2012.  Looking back over that period, I missed about a 1% gain in Atinalla #1 and Atipaq Full Portfolio, and about a 6% gain in Atinalla #3 based on performance from some accounts in Asirikuy.  Results vary of course and I don't regret the decision to avoid the cost of a VPS. Someday perhaps when Forex robots prove their mettle, but I'm not there yet.

By this past Friday, things were normalized enough that I could take a look at the markets with an eye toward some trading opportunities.  My favorite stock Apple Computer has taken quite a round trip, from a high of $705.07 back on 9/21/2012 to Friday's closing price of $547.06.  That's about a 22% selloff and quite a reaction from the high.  And during this period, iPhone 5 sales were ramping, and also the recent release of the new iPad mini is doing well. 

Looking at the chart,  there's near perfect symmetry in this move with the stock finding support at the 45 degree line on the way up, and find resistance at the 45 degree line on the way down. After finding support briefly at the take-off point on the way down, the stock gapped down and plunged to a new 4-month low. Friday's action seemed to try and find a base putting in a daily low at 533 and a daily high at about 554, over a 21-point range!

This made for a some good trading opportunities and I was back to my old ways, buying the November 17 530 call and for about $2160 looking for a quick move up to $3000.  I didn't get it, but I was able to exit the position with a gain of about $200 within a few short hours.  With a stock making 20 point moves in a day, you know there are trading opportunities there!

I am continuing in my new vein of making trading an active pursuit during the trading day, versus a scientific approach on the weekends.  Of course there's plenty of opportunites for good computer-based analysis and the weekend is a great time to do it.  But I am no longer in the mindset that I can make a living with algorithm-based trading, and least not from the profits.

Good trading is all about studying the markets, being right on direction and timing, picking entries, cutting losses and letting the winners take care of themselves.  After all, good trading is not rocket science.

Have a great week all and count your blessings.

Saturday, November 3, 2012

Meta-Trader - Slammed by Sandy

Welcome back Meta-Traders.

Its been a rough week for your humble blog author.  Hurricane Sandy came through the NY Metro area Monday evening, and I lost just before 7PM Monday evening.  As of Saturday, power still has not been restored and the indications are it may not be back for another week.

Soon after the power loss, I got the Forex robots laptop onto the Internet via cellular Wi-Fi and closed all open positions.  So Forex has been down hard all week.  Here's one case where I could have benefited from a VPS, but its cost would have only put me deeper in the hole on Automated Forex Trading.

The local municipal building has been open 24x7 and they have power and working bathrooms which is a plus since my house has no pressure left in the water system, so we can't even run water to wash hands.  Toilets can be flushed by only by lugging pool water in via buckets and dumping it into the toilet tank.

As if all that were not enough, gasoline is now in short supply and long lines are forming at stations wherever gas can be found.  We expect that situation to ease in the next few days however but some people are stocking up just in case which only makes the situation worse.

By all accounts, things are worse in New Jersey which took a direct hit from the storm and is more densely populated than where I live.  And the people who live in the high-rises is lower Manhattan are going to have some stories to tell since living in the city with no power has to be a major challenge. Where I live, many stores and supermarkets never lost power and getting food and drinking water has not been a problem.

But every crisis has a positive side.  Despite the loss of life and property damage, this storm will lead to an increase in economic activity.  The landscaping and tree repair crews are cleaning up, both literally and financially.  I will be making a few purchases when my power comes back that I would not have otherwise.  And those whose houses and properties were destroyed will rebuild - at the cost of the insurance industry and at the benefit of the housing industry.  And housing construction benefits everyone from the construction crews and their families to the suppliers via the invisible hand of Adam Smith.

That's enough for one week Meta-Traders.  Health and Happiness to all and a special congratulations to Daniel Fernandez who got engaged to his sweetie Paola Torres this past week.  All the best, Daniel!