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I have an 89% win rate over 18 trades, with a 27% profit. How many trades should I do before going live?
So I've been doing some scalping on pairs with high spreads in cryptocurrencies previously with great success, but I finally figured I'd give forex a real shot (was into it a few years ago, but didn't go live). Last time I scalped in crypto, I had 14 out of 14 successful trades, but only about a 10% profit. I haven't heard about anyone scalping the way I do in crypto, but I find my method extremely reliable when I just find the right pair to trade. This is just to say I have some experience with trading, but I'm by no means an expert. Now, I've been scalping the past few days with a paper trading account on TradingView. I've mostly been trading the US Currency Index, S&P 500 and some crypto pairs thus far. I'm scalping on the 1m time frame using bollinger bands and looking at trends, price action and stoch RSI for confirmation on my entries. I started out with 100k a few days ago and first doubled my account to around 200k and then did a 1,3 mill trade, but I was running like 500-1000 USD per pip, so if the market turned against me, I'd be liquidated real quick. While the trades were good, I figured I was disconnected from the risk I was taking because it isn't real money, and I wanted to try doing more conservative and realistic trades, so I reset the account yesterday. Edit (more trades done): Since the account was reset, I've done 45 trades where I've lost on two of them. If my math serves me right, that's about an 95.5% win rate. I'm up around 77.5% currently. I did lose 1500 on one trade, but that's because I by mistake placed a sell order when I was supposed to add another buy order double down on my long position, so I'm not counting that one in (but I'm not counting the 1500 I lost as profit either). I have a very strict strategy I'm sticking to when doing these scalps. I realize 45 trades is not a huge sample size, but that is kinda why I'm asking: How many trades should I do on the paper trading account before I should run it live with confidence? For anyone who might be interested, here's my account history: https://imgur.com/a/zuRSWwd Edit: here's 6 trades more: https://imgur.com/a/CmbyU6n Edit2: some more trades: https://imgur.com/a/q9xqVyq Edit3: I think we're up to 45 trades now: https://imgur.com/a/CsWZEN7
So there seems to be a lot of new people on this sub. And makes sense if you have questions a lot of time you'll turn to reddit for the answers (I know I do). Well here are some tips that I think would benefit new traders.
Don't trade ANY Euro pairs. Look I know it's the most traded pair it goes up and down really fast and there's so much potential for you to make money. Turns out there's even more for you to lose money. It's way too volatile specially if you don't know what you're doing. EUUSD is the worst offender.
Trade the Daily. Might think you're cool looking at charts every x amount of times during the day. You get to tell your friends and family that you trade all day and they might be impressed at what you're doing but unless you have some years under you stick to the daily. There's less noise. You can see clearer trends and when you don't stare at the screen all day you're less emotional therefore a more effective trader. I only look at the chart 15 minutes a day to either enter close or manage my trades. Whatever happens when I'm gone is what happens.
There is no holy grail indicator Look for it all you want. It doesn't exist. There are good indicators. There are bad indicators. There are some indicators that are so broken if you do the opposite of what they're intended for you'll actually make a profit. But the fact remains that there's no perfect one. Stop looking. What you should be looking for is an indicator that fits with your strategy.
What currencies to pick. I actually never see this brought up. The notion in forex is that all pairs can be traded equally. To a certain extent that's not false. But until you get the hang of it stick to a strict trading diet. Look for pairs that trend a lot. Duh look for the trend I can hear you say. When I say trend I don't mean a couple of days or weeks. I mean a couple of months. Half a year. Pairs that do that have a higher tendency to stick with one direction for a while. That's where you make your money. An easy way to identify those pairs as well is putting together a volatile currency (USD) with a less volatile one(JPY).
USE YOUR SL Trust me even if not putting a SL has netted you all kinds of gains eventually the market will turn around and bite you. With no safety net you'll lose most if not all your profit. The best offense is a good defense.
How to pick your TP and SL level. Most new traders care so much about that. I put it near the bottom because in my opinion you should know everything listed first. This is my opinion and I use it for my strategy I use the ATR(average true range) indicator. It's a really helpful tool that helps you identify the range at which the candles will either rise or fall. Obviously you want to set your TP inside of that range and your SL slightly outside of it.
Lot sizes. Everyone has a different story about how they pick their lot size. The general consensus is don't risk over 2% of your account. But I'm a simple man and I can't be bothered to figure out what my risk is every single time. So what I do is I put $0.10 for every $100 I have on the account. I then assign $300(minimum) to each pair. That's $0.30 per pair. It's easy to remember. 10 cent for every $100. If you're able to blow $100 with $0.10 then you probably shouldn't trade.
How to avoid reversals. Tbh you can't. There's no way to predict the future so eventually you'll get hit by one. What you can do however is minimize the blow. How I do it is for every pair I take two trades. If you remember in the previous tip is said I do about$0.30 per pair well I divide it 2:1. I take one trade with a TP(2) and one without (1). If my TP is hit I pocket that amount and if the trend keeps going in my direction I make even more. If the trend decides to end or reverses my losses are minimal because at least I kept half.
There is NO right way to trade. Stop listening to people telling the best way to trade is fundamentals or naked charts of to use some specific indicator. There are no right way to do this. It's as flexible and unlimited as your imagination. I personally use indicators but if that's not your thing do YOU! Just remember to manage your trades properly and be level headed when trading. Hell if your trading strategy is flipping a coin with proper trade management you'd probably make some money (don't quote me on that).
Trade money you're willing to lose Don't trade your rent money.
That's all I have for now. If anyone sees this and wants to add more feel free. Hope this helps someone.
I currently manage around half a million dollars and have been trading for 6+ years with 3 years of consistent profitability. Paid for my trading lessons the hard way by losing a lot of money at first. Here's some advice that might help you. 1) Treat trading like a business. I know you probably heard this 100 times before but I feel like I should emphasize this point. Majority of traders overestimate their ability to make money and underestimate their risk exposure. 2) Think long term. The more complex your trading system is, the less freedom it has in terms of flexibility because of too many variables in your analysis. So, keep your trading system simple. 3) Do not rationalize or predict the market. Do not look for comfort in your strategy. In fact, do the reverse. Find comfort in the thought that markets are chaotic and there's always a good chance of you losing a lot of money. This should keep you up on your toes and controls your greed during a profitable streak (You are not a money printing machine, trust me. ) 4) Every trade you open should be assumed as a loss. This is very important in terms of having a healthy mindset towards managing risk. I never open a position based on how much money I can make. I do it based on how much I can afford to lose in this particular trade. 5) Biggest mistake I have observed while working with other traders is not doing their homework. If you don't plan your trades before the day even began, then you will develop a mindset of chasing the market which will lead to your downfall. Which brings me to my next point 6) Maintain three things - a) your daily trading notes that you read before you begin trading b) market observation notes which includes particular strategies and observations in specific markets and c) a full fledged trading journal where you record everything you traded. Always remember that majority of your trading work is done when you're not trading. 7) Journaling is the most important and also most neglected part of trading and most traders, including some very good traders do it in a wrong way. How do I know that? Let me ask you something : Tell me about what kind of trading setups were the most and least profitable in the last 100 trades. Explain them to me in detail including your analysis and opinion on what you think might have happened. If you can answer this in detail and with specific examples from your last 100 trades then I know you have a good journaling habit. If you cannot , then it's time to improve on your record keeping. Remember that your journals are the only way you can guarantee that you will grow as a trader. 8) Remember this no matter what - Not having a position in the market is itself a position if you know what you are doing. There's no need for you to always trade all day everyday and try to make money. In fact, I can guarantee you that markets will not always behave according to your trading system and during those times trying to "find a needle in a haystack " type of behavior is reckless and will take an emotional toll on your mind. Just sit on the sidelines if the market isn't moving according to your system. 9) There's no thing as overbought or oversold scenarios especially in forex. Heaving a bearish bias because the market moved up by a lot is just ridiculous and most likely guarantee that you miss out on bullish scenarios. If you start developing a bearish bias after a huge bullish move then you better have a damn good reason for it instead of just saying " It moved up by a lot so I'm expecting a reversal". 10) This one is a personal opinion. Always remember to take breaks and relax during the weekends. Managing stress while maintaining performance is a huge part of the job and I don't want you to burn out after a few months of serious trading everyday. Maintain a decent social life outside of trading to keep your sanity intact. Get some hobbies. Your health and well being is very important to your long term performance as a trader so don't neglect it.
Double Supertrend Strategy Backtest (8500+ Trades on 28 Pairs)
Hi everyone, so a few months ago I discovered this post by u/AHoomanBeanz which is a strategy I've never heard of before. Basically, you have 2 Supertrends, a short-term one, and a long-term one and when both Supertrends go in the same direction you take a trade. I took the liberty of modifying the strategy by setting fixed TPs instead of trailing SL with the short-term Supertrend. Check out his post for more info about entries, SL, etc. In order to determine what way is the most efficient, I backtested this exact strategy on all 28 Majors and Minors and took five different approaches to TPs and moving of SL: - 1:1 RRR, No Breakeven SL - 1:1.5 RRR, No BE SL - 1:2 RRR, No BE SL - 1:1.5 RRR, Move SL to BE at 1:1 RRR - 1:2 RRR, Move SL to BE at 1:1RRR There would be many other ways to handle the TPs and SLs but it already took me months to backtest this but if anyone wants to extend this backtest, feel free. The Results Using all 5 ways there were 8 out of 28 pairs that weren't profitable at all. (EURGBP, EURCAD, GBPAUD, GBPNZD, AUDCHF, NZDJPY, CADCHF, CHFJPY) The remaining 20 pairs were profitable with at least one of the 5 ways. So I combined all 20 pairs and their most profitable TP/SL management methods and it turns out that the strategy isn't even that bad considering that you really just have to understand how Supertrends work. Now here are some quick stats: Backtest Period: Jan 2017 - Aug 2020 - Risk Per Trade: 1% - Winrate: 44.66% - Profit Factor: 1.65 - Average Monthly Return: 5.81% - Max Drawdown: 18.4% Notice that the drawdown is pretty high so if you're trading with a prop firm like FTMO you could just risk half as much (0.5% per trade) and your max DD would be 9.2%. Keep in mind that the return would also get cut in half. If you want to get a more detailed view, here's the backtesting spreadsheet (Before anyone asks: I spent 2-4h per day for around 6 weeks backtesting and tracking this stuff.)
Consistently Profitable Trader in Less Than a Year
I just recently got into this subreddit to browse and pretty sure this post will get roasted but here goes. I started learning forex using babypips around November 2019. Didn’t really take it seriously until I bought a few courses when COVID hit in March and really grinded and studied every day. On this subreddit, I see a lot of advice to not pay for a course because “you can learn it for free” or you can “YouTube” it. And while that may be true, there’s SO much information online, and a lot of it isn’t good. As a newbie or even long time trader, you can get overwhelmed with BS and the endless amount of indicators and strategies. To each their own, but I believe you’re gonna pay the markets your tuition for learning somehow: either through a mentocourse or just losing all your $$$ to the markets. I did babypips, and while that info was useful, I would say it’s definitely NOT enough to become profitable. In these past 6 months, I’ve lost and earned a lot. I can proudly say I consistently made 10k+ each month from July-Sept and it’s only going up from here. (I didn’t start with a 10k account either.) Im definitely in the green overall, passed and verified on an FTMO account, and been making around 3k+ each day these past few days (thank you volatility!). Psychology is the hardest to overcome, but it’s doable. To all the newbies and traders struggling out there, it’s possible to become consistently profitable, don’t let anyone else tell you otherwise. and F the people who don’t believe in you. But to be fair, you have to have a passion for trading and put in the work. You can’t go into this just for the money. I love analyzing the charts and trading now. It’s changed my life. If anyone has any questions, feel free to hit me up.
We all know it's difficult for retail individual trader to gauge real forex volume.
But synthetic volume synthesized from tick data streamed from your broker can give you an approximation of the real volume.
This approximation is probably far from perfect, but it's better than nothing. I don't know how close it is to the real volume (who knows what the real volume is in forex?). However, it was good enough to provide new insights and break my algos' plateau and improve their performance.
It's possible to create a profitable strategy that only uses price data.
However, if you ignore volume, then you're missing out a lot, and your algos will never reach their full potential because volume can give you some insights about the market that price can never will.
It takes little effort to synthesize synthetic volume from tick data. The result is worth this extra effort.
That is a list of my humble newbie opinions from my recent discoveries. Feedbacks, suggestions and advice will be highly appreciated.
i'm new in this forex stuff (not even starting yet) & first time visiting Forex. But i've read that forex basically gambling (guessing either it goes up or down, and you got previous data as reference). I'm also read about foolproof gambling tricks that works in real life roulette. Basically it goes like this :
bet $1 on red - if you win, repeat step 1.
if you lose, bet $3. if you win, repeat step 1.
if you lose again, bet $6. if you win, repeat step 1.
if you lose again, bet $14. if you win repeat step 1.
if you lose again, bet $31. if you win, repeat step 1
so, can this be apply on forex trading? (there's lot ads about forex trading apps, thinking to try it) can't profit big, but seem cant lose either. might be a good strategy. any thought? edit 1 : what i mean in this forex is binary options, which some forex trading apps operates. edit 2 : it takes 5 unlucky trading before $55 account blown off. is that really common to get 5 unlucky trading in a row? edit 3 : here's the math (cnp from reply) some forex apps (like expert option or olymp trade) operate on binary option (this is unregulated securities?) where usually they give 80% return on trade. the math goes like this :
$1 trade and win = $0.80 profit
lose then $3 trade and win = $2.4 - $1 (lose) = $1.4 profit
lose then $6 trade and win = $4.8 - $4 (lose) = $0.8 profit
lose then $14 trade and win = $11.2 - $10 (lose) = $1.2 profit
lose then $31 trade and win = $24.8 - $24 (lose) = $0.8 profit
profit means got back your initial too
edit 4 : some reply said **binary options type forex trading apps** are scam & fraud. bummer. maybe trading via smartphone isnt easy as i thought. edit 5 : still, add some ability to reading indicator & chart could help avoiding 5 unlucky trading in a row. damn, if i'm a programmer, i'll make a trading bots based on this idea xD
[Strategies] Here is My Trading Approach, Thought Process and Execution
Hello everyone. I've noticed a lot of us here are quite secretive about how we trade, especially when we comment on a fellow trader's post. We're quick to tell them what they're doing isn't the "right way" and they should go to babypips or YouTube. There's plenty of strategies we say but never really tell them what is working for us. There's a few others that are open to share their experience and thought processes when considering a valid trade. I have been quite open myself. But I'm always met with the same "well I see what you did is quite solid but what lead you to deem this trade valid for you? " The answer is quite simple, I have a few things that I consider which are easy rules to follow. I realized that the simpler you make it, the easier it is for you to trade and move on with your day. I highlight a few "valid" zones and go about my day. I've got an app that alerts me when price enters the zone on my watchlist. This is because I don't just rely on forex trading money, I doubt it would be wise to unless you're trading a 80% win rate strategy. Sometimes opportunities are there and we exploit them accordingly but sometimes we are either distracted by life issues and decide to not go into the markets stressed out or opportunities just aren't there or they are but your golden rules aren't quite met. My rules are pretty simple, one of the prime golden rules is, "the risk is supposed to be very minimal to the reward I want to yield from that specific trade". i.e I can risk -50 pips for a +150 and more pips gain. My usual target starts at 1:2 but my most satisfying trade would be a 1:3 and above. This way I can lose 6/10 trades and still be profitable. I make sure to keep my charts clean and simple so to understand what price does without the interference of indicators all over my charts. Not to say if you use indicators for confluence is a complete no-no. Each trader has their own style and I would be a narcissistic asshole if I assumed my way is superior than anybody else's. NB: I'm doing this for anybody who has a vague or no idea of supply and demand. Everything here has made me profitable or at least break even but doesn't guarantee the same for you. This is just a scratch on the surface so do all you can for due diligence when it comes to understanding this topic with more depth and clear comprehension. Supply and Demand valid zones properties; what to me makes me think "oh this zone has the potential to make me money, let me put it on my watchlist"? Mind when I say watchlist, not trade it. These are different in this sense. 👉With any zone, you're supposed to watch how price enters the zone, if there's a strong push in the opposite direction or whatever price action you're observing...only then does the zone becomes valid. YOU TRADE THE REACTION, NOT THE EXPECTATION Some setups just fail and that's okay because you didn't gamble. ✍ !!!IMPORTANT SUBJECT TO LEARN BEFORE YOU START SUPPLY AND DEMAND!!! FTR. Failure to Return.(Please read on these if you haven't. They are extremely important in SnD). Mostly occur after an impulse move from a turning point. See attached examples: RBR(rally base rally)/DBD(drop base drop). They comprise of an initial move to a certain direction, a single candle in the opposite direction and followed by 2 or more strong candles in the initial direction. The opposite candle is your FTR(This is your zone) The first time price comes back(FTB) to a zone with an FTR has high possibilities to be a strong zone. How to identify high quality zones according to my approach:
Engulfing zones; This is a personal favorite. For less errors I identify the best opportunities using the daily and 4H chart.
On the example given, I chose the GBPNZD trade idea I shared here a month ago I believe. A double bottom is easily identified, with the final push well defined Bullish Engulfing candle. To further solidify it are the strong wicks to show strong rejection and failure to close lower than the left shoulder. How we draw our zone is highlight the whole candle just before the Engulfing Candle. That's your zone. After drawing it, you also pay attention to the price that is right where the engulfing starts. You then set a price alert on your preferred app because usually price won't get there immediately. This is the second most important part of trading, PATIENCE. If you can be disciplined enough to not leave a limit order, or place a market order just because you trust your analysis...you've won half the battle because we're not market predictors, we're students. And we trade the reaction. On the given example, price had already reached the zone of interest. Price action observed was, there was a rejection that drove it out of the zone, this is the reaction we want. Soon as price returns(retests)...this is your time to fill or kill moment, going to a 4H or 1H to make minimum risk trades. (See GBPNZD Example 1&2)
Liquidity Run; This approach looks very similar to the Engulfing zones. The difference is, price makes a few rejections on a higher timeframe level(Resistance or support). This gives the novice trader an idea that we've established a strong support or resistance, leading to them either selling or buying given the opportunity. Price then breaks that level trapping the support and resistance trader. At this point, breakout traders have stop orders below or above these levels to anticipate a breakout at major levels with stops just below the levels. Now that the market has enough traders trapped, it goes for the stop losses above or below support and resistance levels after taking them out, price comes back into the level to take out breakout traders' stop losses. This is where it has gathered enough liquidity to move it's desired direction.
The given example on the NZDJPY shows a strong level established twice. With the Bearish Engulfing movement, price leaves a supply zone...that's where we come in. We go to smaller timeframes for a well defined entry with our stops above the recent High targeting the next demand zone. The second screenshot illustrates how high the reward of this approach is as well. Due diligence is required for this kind of approach because it's not uncommon but usually easily misinterpreted, which is why it's important it's on higher timeframes. You can back test and establish your own rules on this but the RSI in this case was used for confluence. It showed a strong divergence which made it an even easier trade to take. ...and last but definitely not least,
Double Bottom/Top. (I've used double bottoms on examples because these are the only trades I shared here so we'll talk about double bottoms. Same but opposite rules apply on double tops).
The first most important rule here is when you look to your left, price should have made a Low, High and a Lower Low. This way, the last leg(shoulder) should be lower than the first. Some call this "Hidden Zones". When drawing the zones, the top border of the zone is supposed to be on the tip of the Low and covering the Lower Low. **The top border is usually the entry point. On the first given example I shared this week, NZDCAD. After identifying the structure, you start to look for zones that could further verify the structure for confluence. Since this was identified on the 4H, when you zoom out to the daily chart...there's a very well defined demand zone (RBR). By now you should know how strong these kind of zones are especially if found on higher timeframes. That will now be your kill zone. You'll draw another zone within the bigger zone, if price doesn't close below it...you've got a trade. You'll put your stop losses outside the initial zone to avoid wicks(liquidity runs/stop hunts) On the second image you'll see how price closed within the zone and rallied upwards towards your targets. The second example is CHFJPY; although looking lower, there isn't a rally base rally that further solidifies our bias...price still respected the zone. Sometimes we just aren't going to get perfect setups but it is up to us to make calculated risks. In this case, risk is very minimal considering the potential profit. The third example (EURNZD) was featured because sometimes you just can't always get perfect price action within your desired zone. Which is why it's important to wait for price to close before actually taking a trade. Even if you entered prematurely and were taken out of the trade, the rules are still respected hence a re entry would still yield you more than what you would have lost although revenge trading is wrong. I hope you guys learnt something new and understand the thought process that leads to deciding which setups to trade from prepared supply and demand trade ideas. It's important to do your own research and back testing that matches your own trading style. I'm more of a swing trader hence I find my zones using the Daily and 4H chart. Keeping it simple and trading the reaction to your watched zone is the most important part about trading any strategy. Important Note: The trade ideas on this post are trades shared on this sub ever since my being active only because I don't want to share ideas that I may have carefully picked to make my trading approach a blind pick from the millions on the internet. All these were shared here. Here's a link to the trade ideas analyzed for this post specifically Questions are welcome on the comments section. Thank you for reading till here.
Former investment bank FX trader: Risk management part II
Firstly, thanks for the overwhelming comments and feedback. Genuinely really appreciated. I am pleased 500+ of you find it useful. If you didn't read the first post you can do so here: risk management part I. You'll need to do so in order to make sense of the topic. As ever please comment/reply below with questions or feedback and I'll do my best to get back to you. Part II
Letting stops breathe
When to change a stop
Entering and exiting winning positions
Letting stops breathe
We talked earlier about giving a position enough room to breathe so it is not stopped out in day-to-day noise. Let’s consider the chart below and imagine you had a trailing stop. It would be super painful to miss out on the wider move just because you left a stop that was too tight. Imagine being long and stopped out on a meaningless retracement ... ouch! One simple technique is simply to look at your chosen chart - let’s say daily bars. And then look at previous trends and use the measuring tool. Those generally look something like this and then you just click and drag to measure. For example if we wanted to bet on a downtrend on the chart above we might look at the biggest retracement on the previous uptrend. That max drawdown was about 100 pips or just under 1%. So you’d want your stop to be able to withstand at least that. If market conditions have changed - for example if CVIX has risen - and daily ranges are now higher you should incorporate that. If you know a big event is coming up you might think about that, too. The human brain is a remarkable tool and the power of the eye-ball method is not to be dismissed. This is how most discretionary traders do it. There are also more analytical approaches. Some look at the Average True Range (ATR). This attempts to capture the volatility of a pair, typically averaged over a number of sessions. It looks at three separate measures and takes the largest reading. Think of this as a moving average of how much a pair moves. For example, below shows the daily move in EURUSD was around 60 pips before spiking to 140 pips in March. Conditions were clearly far more volatile in March. Accordingly, you would need to leave your stop further away in March and take a correspondingly smaller position size. ATR is available on pretty much all charting systems Professional traders tend to use standard deviation as a measure of volatility instead of ATR. There are advantages and disadvantages to both. Averages are useful but can be misleading when regimes switch (see above chart). Once you have chosen a measure of volatility, stop distance can then be back-tested and optimised. For example does 2x ATR work best or 5x ATR for a given style and time horizon? Discretionary traders may still eye-ball the ATR or standard deviation to get a feeling for how it has changed over time and what ‘normal’ feels like for a chosen study period - daily, weekly, monthly etc.
Reasons to change a stop
As a general rule you should be disciplined and not change your stops. Remember - losers average losers. This is really hard at first and we’re going to look at that in more detail later. There are some good reasons to modify stops but they are rare. One reason is if another risk management process demands you stop trading and close positions. We’ll look at this later. In that case just close out your positions at market and take the loss/gains as they are. Another is event risk. If you have some big upcoming data like Non Farm Payrolls that you know can move the market +/- 150 pips and you have no edge going into the release then many traders will take off or scale down their positions. They’ll go back into the positions when the data is out and the market has quietened down after fifteen minutes or so. This is a matter of some debate - many traders consider it a coin toss and argue you win some and lose some and it all averages out. Trailing stops can also be used to ‘lock in’ profits. We looked at those before. As the trade moves in your favour (say up if you are long) the stop loss ratchets with it. This means you may well end up ‘stopping out’ at a profit - as per the below example. The mighty trailing stop loss order It is perfectly reasonable to have your stop loss move in the direction of PNL. This is not exposing you to more risk than you originally were comfortable with. It is taking less and less risk as the trade moves in your favour. Trend-followers in particular love trailing stops. One final question traders ask is what they should do if they get stopped out but still like the trade. Should they try the same trade again a day later for the same reasons? Nope. Look for a different trade rather than getting emotionally wed to the original idea. Let’s say a particular stock looked cheap based on valuation metrics yesterday, you bought, it went down and you got stopped out. Well, it is going to look even better on those same metrics today. Maybe the market just doesn’t respect value at the moment and is driven by momentum. Wait it out. Otherwise, why even have a stop in the first place?
Entering and exiting winning positions
Take profits are the opposite of stop losses. They are also resting orders, left with the broker, to automatically close your position if it reaches a certain price. Imagine I’m long EURUSD at 1.1250. If it hits a previous high of 1.1400 (150 pips higher) I will leave a sell order to take profit and close the position. The rookie mistake on take profits is to take profit too early. One should start from the assumption that you will win on no more than half of your trades. Therefore you will need to ensure that you win more on the ones that work than you lose on those that don’t. Sad to say but incredibly common: retail traders often take profits way too early This is going to be the exact opposite of what your emotions want you to do. We are going to look at that in the Psychology of Trading chapter. Remember: let winners run. Just like stops you need to know in advance the level where you will close out at a profit. Then let the trade happen. Don’t override yourself and let emotions force you to take a small profit. A classic mistake to avoid. The trader puts on a trade and it almost stops out before rebounding. As soon as it is slightly in the money they spook and cut out, instead of letting it run to their original take profit. Do not do this.
Entering positions with limit orders
That covers exiting a position but how about getting into one? Take profits can also be left speculatively to enter a position. Sometimes referred to as “bids” (buy orders) or “offers” (sell orders). Imagine the price is 1.1250 and the recent low is 1.1205. You might wish to leave a bid around 1.2010 to enter a long position, if the market reaches that price. This way you don’t need to sit at the computer and wait. Again, typically traders will use tech analysis to identify attractive levels. Again - other traders will cluster with your orders. Just like the stop loss we need to bake that in. So this time if we know everyone is going to buy around the recent low of 1.1205 we might leave the take profit bit a little bit above there at 1.1210 to ensure it gets done. Sure it costs 5 more pips but how mad would you be if the low was 1.1207 and then it rallied a hundred points and you didn’t have the trade on?! There are two more methods that traders often use for entering a position. Scaling in is one such technique. Let’s imagine that you think we are in a long-term bulltrend for AUDUSD but experiencing a brief retracement. You want to take a total position of 500,000 AUD and don’t have a strong view on the current price action. You might therefore leave a series of five bids of 100,000. As the price moves lower each one gets hit. The nice thing about scaling in is it reduces pressure on you to pick the perfect level. Of course the risk is that not all your orders get hit before the price moves higher and you have to trade at-market. Pyramiding is the second technique. Pyramiding is for take profits what a trailing stop loss is to regular stops. It is especially common for momentum traders. Pyramiding into a position means buying more as it goes in your favour Again let’s imagine we’re bullish AUDUSD and want to take a position of 500,000 AUD. Here we add 100,000 when our first signal is reached. Then we add subsequent clips of 100,000 when the trade moves in our favour. We are waiting for confirmation that the move is correct. Obviously this is quite nice as we humans love trading when it goes in our direction. However, the drawback is obvious: we haven’t had the full amount of risk on from the start of the trend. You can see the attractions and drawbacks of both approaches. It is best to experiment and choose techniques that work for your own personal psychology as these will be the easiest for you to stick with and build a disciplined process around.
Risk:reward and win ratios
Be extremely skeptical of people who claim to win on 80% of trades. Most traders will win on roughly 50% of trades and lose on 50% of trades. This is why risk management is so important! Once you start keeping a trading journal you’ll be able to see how the win/loss ratio looks for you. Until then, assume you’re typical and that every other trade will lose money. If that is the case then you need to be sure you make more on the wins than you lose on the losses. You can see the effect of this below. A combination of win % and risk:reward ratio determine if you are profitable A typical rule of thumb is that a ratio of 1:3 works well for most traders. That is, if you are prepared to risk 100 pips on your stop you should be setting a take profit at a level that would return you 300 pips. One needn’t be religious about these numbers - 11 pips and 28 pips would be perfectly fine - but they are a guideline. Again - you should still use technical analysis to find meaningful chart levels for both the stop and take profit. Don’t just blindly take your stop distance and do 3x the pips on the other side as your take profit. Use the ratio to set approximate targets and then look for a relevant resistance or support level in that kind of region.
Not all returns are equal. Suppose you are examining the track record of two traders. Now, both have produced a return of 14% over the year. Not bad! The first trader, however, made hundreds of small bets throughout the year and his cumulative PNL looked like the left image below. The second trader made just one bet — he sold CADJPY at the start of the year — and his PNL looked like the right image below with lots of large drawdowns and volatility. Would you rather have the first trading record or the second? If you were investing money and betting on who would do well next year which would you choose? Of course all sensible people would choose the first trader. Yet if you look only at returns one cannot distinguish between the two. Both are up 14% at that point in time. This is where the Sharpe ratio helps . A high Sharpe ratio indicates that a portfolio has better risk-adjusted performance. One cannot sensibly compare returns without considering the risk taken to earn that return. If I can earn 80% of the return of another investor at only 50% of the risk then a rational investor should simply leverage me at 2x and enjoy 160% of the return at the same level of risk. This is very important in the context of Execution Advisor algorithms (EAs) that are popular in the retail community. You must evaluate historic performance by its risk-adjusted return — not just the nominal return. Incidentally look at the Sharpe ratio of ones that have been live for a year or more ... Otherwise an EA developer could produce two EAs: the first simply buys at 1000:1 leverage on January 1st ; and the second sells in the same manner. At the end of the year, one of them will be discarded and the other will look incredible. Its risk-adjusted return, however, would be abysmal and the odds of repeated success are similarly poor.
The Sharpe ratio works like this:
It takes the average returns of your strategy;
It deducts from these the risk-free rate of return i.e. the rate anyone could have got by investing in US government bonds with very little risk;
It then divides this total return by its own volatility - the more smooth the return the higher and better the Sharpe, the more volatile the lower and worse the Sharpe.
For example, say the return last year was 15% with a volatility of 10% and US bonds are trading at 2%. That gives (15-2)/10 or a Sharpe ratio of 1.3. As a rule of thumb a Sharpe ratio of above 0.5 would be considered decent for a discretionary retail trader. Above 1 is excellent. You don’t really need to know how to calculate Sharpe ratios. Good trading software will do this for you. It will either be available in the system by default or you can add a plug-in.
VAR is another useful measure to help with drawdowns. It stands for Value at Risk. Normally people will use 99% VAR (conservative) or 95% VAR (aggressive). Let’s say you’re long EURUSD and using 95% VAR. The system will look at the historic movement of EURUSD. It might spit out a number of -1.2%. A 5% VAR of -1.2% tells you you should expect to lose 1.2% on 5% of days, whilst 95% of days should be better than that This means it is expected that on 5 days out of 100 (hence the 95%) the portfolio will lose 1.2% or more. This can help you manage your capital by taking appropriately sized positions. Typically you would look at VAR across your portfolio of trades rather than trade by trade. Sharpe ratios and VAR don’t give you the whole picture, though. Legendary fund manager, Howard Marks of Oaktree, notes that, while tools like VAR and Sharpe ratios are helpful and absolutely necessary, the best investors will also overlay their own judgment. Investors can calculate risk metrics like VaR and Sharpe ratios (we use them at Oaktree; they’re the best tools we have), but they shouldn’t put too much faith in them. The bottom line for me is that risk management should be the responsibility of every participant in the investment process, applying experience, judgment and knowledge of the underlying investments.Howard Marks of Oaktree Capital What he’s saying is don’t misplace your common sense. Do use these tools as they are helpful. However, you cannot fully rely on them. Both assume a normal distribution of returns. Whereas in real life you get “black swans” - events that should supposedly happen only once every thousand years but which actually seem to happen fairly often. These outlier events are often referred to as “tail risk”. Don’t make the mistake of saying “well, the model said…” - overlay what the model is telling you with your own common sense and good judgment.
Coming up in part III
Available here Squeezes and other risks Market positioning Bet correlation Crap trades, timeouts and monthly limits *** Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
Instagram forex traders will not make you successful.
I feel like I need to have a rant. I have been trading for just over a year now and I have just started to become profitable. What made me profitable? Blocking out all of the rubbish that comes from forex Instagram. I didn’t find a fancy new strategy. I’m using the strategy that I formed in the first 3 months of me trading. So why only now am I starting to become profitable when I knew about the strategy almost a year ago? Because i chose to digest information coming from instagram forex traders. I’m not talking about the obvious scammers you see on your Instagram feed such as IML, broker commission marketers, or any of the likes. I’m talking about the select few that portray themselves as trading veterans and are popular in the trading community. They are constantly posting on their stories/profile 24/7. At least once a day they will post something like ‘only 2 slots left In my mentorship’ or ‘come join my free telegram channel’. Warning: if a trader you follow is trying to promote something, even if it’s just for Instagram followers, unfollow them. They will not help you become successful. So I had my strategy by month 3 of trading. I backtested it and it worked. But I started taking advice from these traders, I got my hands on a few of their courses and my trading began to fail. Every single course was pathetic. Never showed any live trading. No proof of anything. Always making excuses of why they can’t tag their MyFxBook. I unfollowed all these ‘traders’ and now I am profitable. Rant over.
Former investment bank FX trader: Risk management part 3/3
Welcome to the third and final part of this chapter. Thank you all for the 100s of comments and upvotes - maybe this post will take us above 1,000 for this topic! Keep any feedback or questions coming in the replies below. Before you read this note, please start with Part I and then Part II so it hangs together and makes sense. Part III
Squeezes and other risks
Crap trades, timeouts and monthly limits
Squeezes and other risks
We are going to cover three common risks that traders face: events; squeezes, asymmetric bets.
Economic releases can cause large short-term volatility. The most famous is Non Farm Payrolls, which is the most widely watched measure of US employment levels and affects the price of many instruments.On an NFP announcement currencies like EURUSD might jump (or drop) 100 pips no problem. This is fine and there are trading strategies that one may employ around this but the key thing is to be aware of these releases.You can find economic calendars all over the internet - including on this site - and you need only check if there are any major releases each day or week. For example, if you are trading off some intraday chart and scalping a few pips here and there it would be highly sensible to go into a known data release flat as it is pure coin-toss and not the reason for your trading. It only takes five minutes each day to plan for the day ahead so do not get caught out by this. Many retail traders get stopped out on such events when price volatility is at its peak.
Short squeezes bring a lot of danger and perhaps some opportunity. The story of VW and Porsche is the best short squeeze ever. Throughout these articles we've used FX examples wherever possible but in this one instance the concept (which is also highly relevant in FX) is best illustrated with an historical lesson from a different asset class. A short squeeze is when a participant ends up in a short position they are forced to cover. Especially when the rest of the market knows that this participant can be bullied into stopping out at terrible levels, provided the market can briefly drive the price into their pain zone. There's a reason for the car, don't worry Hedge funds had been shorting VW stock. However the amount of VW stock available to buy in the open market was actually quite limited. The local government owned a chunk and Porsche itself had bought and locked away around 30%. Neither of these would sell to the hedge-funds so a good amount of the stock was un-buyable at any price. If you sell or short a stock you must be prepared to buy it back to go flat at some point. To cut a long story short, Porsche bought a lot of call options on VW stock. These options gave them the right to purchase VW stock from banks at slightly above market price. Eventually the banks who had sold these options realised there was no VW stock to go out and buy since the German government wouldn’t sell its allocation and Porsche wouldn’t either. If Porsche called in the options the banks were in trouble. Porsche called in the options which forced the shorts to buy stock - at whatever price they could get it. The price squeezed higher as those that were short got massively squeezed and stopped out. For one brief moment in 2008, VW was the world’s most valuable company. Shorts were burned hard. Incredible event Porsche apparently made $11.5 billion on the trade. The BBC described Porsche as “a hedge fund with a carmaker attached.” If this all seems exotic then know that the same thing happens in FX all the time. If everyone in the market is talking about a key level in EURUSD being 1.2050 then you can bet the market will try to push through 1.2050 just to take out any short stops at that level. Whether it then rallies higher or fails and trades back lower is a different matter entirely. This brings us on to the matter of crowded trades. We will look at positioning in more detail in the next section. Crowded trades are dangerous for PNL. If everyone believes EURUSD is going down and has already sold EURUSD then you run the risk of a short squeeze. For additional selling to take place you need a very good reason for people to add to their position whereas a move in the other direction could force mass buying to cover their shorts. A trading mentor when I worked at the investment bank once advised me: Always think about which move would cause the maximum people the maximum pain. That move is precisely what you should be watching out for at all times.
Also known as picking up pennies in front of a steamroller. This risk has caught out many a retail trader. Sometimes it is referred to as a "negative skew" strategy. Ideally what you are looking for is asymmetric risk trade set-ups: that is where the downside is clearly defined and smaller than the upside. What you want to avoid is the opposite. A famous example of this going wrong was the Swiss National Bank de-peg in 2012. The Swiss National Bank had said they would defend the price of EURCHF so that it did not go below 1.2. Many people believed it could never go below 1.2 due to this. Many retail traders therefore opted for a strategy that some describe as ‘picking up pennies in front of a steam-roller’. They would would buy EURCHF above the peg level and hope for a tiny rally of several pips before selling them back and keep doing this repeatedly. Often they were highly leveraged at 100:1 so that they could amplify the profit of the tiny 5-10 pip rally. Then this happened. Something that changed FX markets forever The SNB suddenly did the unthinkable. They stopped defending the price. CHF jumped and so EURCHF (the number of CHF per 1 EUR) dropped to new lows very fast. Clearly, this trade had horrific risk : reward asymmetry: you risked 30% to make 0.05%. Other strategies like naively selling options have the same result. You win a small amount of money each day and then spectacularly blow up at some point down the line.
We have talked about short squeezes. But how do you know what the market position is? And should you care? Let’s start with the first. You should definitely care. Let’s imagine the entire market is exceptionally long EURUSD and positioning reaches extreme levels. This makes EURUSD very vulnerable. To keep the price going higher EURUSD needs to attract fresh buy orders. If everyone is already long and has no room to add, what can incentivise people to keep buying? The news flow might be good. They may believe EURUSD goes higher. But they have already bought and have their maximum position on. On the flip side, if there’s an unexpected event and EURUSD gaps lower you will have the entire market trying to exit the position at the same time. Like a herd of cows running through a single doorway. Messy. We are going to look at this in more detail in a later chapter, where we discuss ‘carry’ trades. For now this TRYJPY chart might provide some idea of what a rush to the exits of a crowded position looks like. A carry trade position clear-out in action Knowing if the market is currently at extreme levels of long or short can therefore be helpful. The CFTC makes available a weekly report, which details the overall positions of speculative traders “Non Commercial Traders” in some of the major futures products. This includes futures tied to deliverable FX pairs such as EURUSD as well as products such as gold. The report is called “CFTC Commitments of Traders” ("COT"). This is a great benchmark. It is far more representative of the overall market than the proprietary ones offered by retail brokers as it covers a far larger cross-section of the institutional market. Generally market participants will not pay a lot of attention to commercial hedgers, which are also detailed in the report. This data is worth tracking but these folks are simply hedging real-world transactions rather than speculating so their activity is far less revealing and far more noisy. You can find the data online for free and download it directly here. Raw format is kinda hard to work with However, many websites will chart this for you free of charge and you may find it more convenient to look at it that way. Just google “CFTC positioning charts”. But you can easily get visualisations You can visually spot extreme positioning. It is extremely powerful. Bear in mind the reports come out Friday afternoon US time and the report is a snapshot up to the prior Tuesday. That means it is a lagged report - by the time it is released it is a few days out of date. For longer term trades where you hold positions for weeks this is of course still pretty helpful information. As well as the absolute level (is the speculative market net long or short) you can also use this to pick up on changes in positioning. For example if bad news comes out how much does the net short increase? If good news comes out, the market may remain net short but how much did they buy back? A lot of traders ask themselves “Does the market have this trade on?” The positioning data is a good method for answering this. It provides a good finger on the pulse of the wider market sentiment and activity. For example you might say: “There was lots of noise about the good employment numbers in the US. However, there wasn’t actually a lot of position change on the back of it. Maybe everyone who wants to buy already has. What would happen now if bad news came out?” In general traders will be wary of entering a crowded position because it will be hard to attract additional buyers or sellers and there could be an aggressive exit. If you want to enter a trade that is showing extreme levels of positioning you must think carefully about this dynamic.
Retail traders often drastically underestimate how correlated their bets are. Through bitter experience, I have learned that a mistake in position correlation is the root of some of the most serious problems in trading. If you have eight highly correlated positions, then you are really trading one position that is eight times as large. Bruce Kovner of hedge fund, Caxton Associates For example, if you are trading a bunch of pairs against the USD you will end up with a simply huge USD exposure. A single USD-trigger can ruin all your bets. Your ideal scenario — and it isn’t always possible — would be to have a highly diversified portfolio of bets that do not move in tandem. Look at this chart. Inverted USD index (DXY) is green. AUDUSD is orange. EURUSD is blue. Chart from TradingView So the whole thing is just one big USD trade! If you are long AUDUSD, long EURUSD, and short DXY you have three anti USD bets that are all likely to work or fail together. The more diversified your portfolio of bets are, the more risk you can take on each. There’s a really good video, explaining the benefits of diversification from Ray Dalio. A systematic fund with access to an investable universe of 10,000 instruments has more opportunity to make a better risk-adjusted return than a trader who only focuses on three symbols. Diversification really is the closest thing to a free lunch in finance. But let’s be pragmatic and realistic. Human retail traders don’t have capacity to run even one hundred bets at a time. More realistic would be an average of 2-3 trades on simultaneously. So what can be done? For example:
You might diversify across time horizons by having a mix of short-term and long-term trades.
You might diversify across asset classes - trading some FX but also crypto and equities.
You might diversify your trade generation approach so you are not relying on the same indicators or drivers on each trade.
You might diversify your exposure to the market regime by having some trades that assume a trend will continue (momentum) and some that assume we will be range-bound (carry).
And so on. Basically you want to scan your portfolio of trades and make sure you are not putting all your eggs in one basket. If some trades underperform others will perform - assuming the bets are not correlated - and that way you can ensure your overall portfolio takes less risk per unit of return. The key thing is to start thinking about a portfolio of bets and what each new trade offers to your existing portfolio of risk. Will it diversify or amplify a current exposure?
Crap trades, timeouts and monthly limits
One common mistake is to get bored and restless and put on crap trades. This just means trades in which you have low conviction. It is perfectly fine not to trade. If you feel like you do not understand the market at a particular point, simply choose not to trade. Flat is a position. Do not waste your bullets on rubbish trades. Only enter a trade when you have carefully considered it from all angles and feel good about the risk. This will make it far easier to hold onto the trade if it moves against you at any point. You actually believe in it. Equally, you need to set monthly limits. A standard limit might be a 10% account balance stop per month. At that point you close all your positions immediately and stop trading till next month. Be strict with yourself and walk away Let’s assume you started the year with $100k and made 5% in January so enter Feb with $105k balance. Your stop is therefore 10% of $105k or $10.5k . If your account balance dips to $94.5k ($105k-$10.5k) then you stop yourself out and don’t resume trading till March the first. Having monthly calendar breaks is nice for another reason. Say you made a load of money in January. You don’t want to start February feeling you are up 5% or it is too tempting to avoid trading all month and protect the existing win. Each month and each year should feel like a clean slate and an independent period. Everyone has trading slumps. It is perfectly normal. It will definitely happen to you at some stage. The trick is to take a break and refocus. Conserve your capital by not trading a lot whilst you are on a losing streak. This period will be much harder for you emotionally and you’ll end up making suboptimal decisions. An enforced break will help you see the bigger picture. Put in place a process before you start trading and then it’ll be easy to follow and will feel much less emotional. Remember: the market doesn’t care if you win or lose, it is nothing personal. When your head has cooled and you feel calm you return the next month and begin the task of building back your account balance.
That's a wrap on risk management
Thanks for taking time to read this three-part chapter on risk management. I hope you enjoyed it. Do comment in the replies if you have any questions or feedback. Remember: the most important part of trading is not making money. It is not losing money. Always start with that principle. I hope these three notes have provided some food for thought on how you might approach risk management and are of practical use to you when trading. Avoiding mistakes is not a sexy tagline but it is an effective and reliable way to improve results. Next up I will be writing about an exciting topic I think many traders should look at rather differently: news trading. Please follow on here to receive notifications and the broad outline is below. News Trading Part I
Why use the economic calendar
Reading the economic calendar
Knowing what's priced in
First order thinking vs second order thinking
News Trading Part II
Preparing for quantitative and qualitative releases
Data surprise index
Using recent events to predict future reactions
Buy the rumour, sell the fact
The mysterious 'position trim' effect
Some key FX releases
*** Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
Some trading wisdom, tools and information I picked up along the way that helped me be a better trader. Maybe it can help you too.
Its a bit lengthy and I tried to condense it as much as I can. So take everything at a high level as each subject is has a lot more depth but fundamentally if you distill it down its just taking simple things and applying your experience using them to add nuance and better deploy them. There are exceptions to everything that you will learn with experience or have already learned. If you know something extra or something to add to it to implement it better or more accurately. Then great! However, my intention of this post is just a high level overview. Trading can be far too nuanced to go into in this post and would take forever to type up every exception (not to mention the traders individual personality). If you take the general information as a starting point, hopefully you will learn the edge cases long the way and learn how to use the more effectively if you end up using them. I apologize in advice for any errors or typos. Introduction After reflecting on my fun (cough) trading journey that was more akin to rolling around on broken glass and wondering if brown glass will help me predict market direction better than green glass. Buying a $100 indicator at 2 am when I was acting a fool, looking at it and going at and going "This is a piece of lagging crap, I miss out on a large part of the fundamental move and never using it for even one trade". All while struggling with massive over trading and bad habits because I would get bored watching a single well placed trade on fold for the day. Also, I wanted to get rich quick. On top all of that I had a terminal Stage 4 case of FOMO on every time the price would move up and then down then back up. Just think about all those extra pips I could have trading both directions as it moves across the chart! I can just sell right when it goes down, then buy right before it goes up again. Its so easy right? Well, turns out it was not as easy as I thought and I lost a fair chunk of change and hit my head against the wall a lot until it clicked. Which is how I came up with a mixed bag of things that I now call "Trade the Trade" which helped support how I wanted to trade so I can still trade intra day price action like a rabid money without throwing away all my bananas. Why Make This Post? - Core Topic of Discussion I wish to share a concept I came up with that helped me become a reliable trader. Support the weakness of how I like to trade. Also, explaining what I do helps reinforce my understanding of the information I share as I have to put words to it and not just use internalized processes. I came up with a method that helped me get my head straight when trading intra day. I call it "Trade the Trade" as I am making mini trades inside of a trade setup I make from analysis on a higher timeframe that would take multiple days to unfold or longer. I will share information, principles, techniques I used and learned from others I talked to on the internet (mixed bag of folks from armatures to professionals, and random internet people) that helped me form a trading style that worked for me. Even people who are not good at trading can say something that might make it click in your head so I would absorbed all the information I could get.I will share the details of how I approach the methodology and the tools in my trading belt that I picked up by filtering through many tools, indicators strategies and witchcraft. Hopefully you read something that ends up helping you be a better trader. I learned a lot from people who make community posts so I wanted to give back now that I got my ducks in a row. General Trading Advice If your struggling finding your own trading style, fixing weakness's in it, getting started, being reliably profitable or have no framework to build yourself higher with, hopefully you can use the below advice to help provide some direction or clarity to moving forward to be a better trader.
KEEP IT SIMPLE. Do not throw a million things on your chart from the get go or over analyzing what the market is doing while trying to learn the basics. Tons of stuff on your chart can actually slow your learning by distracting your focus on all your bells and whistles and not the price action.
PRICE ACTION. Learn how to read price action. Not just the common formations, but larger groups of bars that form the market structure. Those formations carry more weight the higher the time frame they form on. If struggle to understand what is going on or what your looking at, move to a higher time frame.
INDICATORS. If you do use them you should try to understand how every indicator you use calculates its values. Many indicators are lagging indicators, understanding how it calculates the values can help you learn how to identify the market structure before the indicator would trigger a signal . This will help you understand why the signal is a lagged signal. If you understand that you can easily learn to look at the price action right before the signal and learn to watch for that price action on top of it almost trigging a signal so you can get in at a better position and assume less downside risk. I recommend using no more than 1-2 indicators for simplicity, but your free to use as many as you think you think you need or works for your strategy/trading style.
PSYCOLOGY. First, FOMO is real, don't feed the beast. When you trade you should always have an entry and exit. If you miss your entry do not chase it, wait for a new entry. At its core trading is gambling and your looking for an edge against the house (the other market participants). With that in mind, treat as such. Do not risk more than you can afford to lose. If you are afraid to lose it will negatively effect your trade decisions. Finally, be honest with your self and bad trading happens. No one is going to play trade cop and keep you in line, that's your job.
TRADE DECISION MARKING: Before you enter any trade you should have an entry and exit area. As you learn price action you will get better entries and better exits. Use a larger zone and stop loss at the start while learning. Then you can tighten it up as you gain experience. If you do not have a area you wish to exit, or you are entering because "the markets looking like its gonna go up". Do not enter the trade. Have a reason for everything you do, if you cannot logically explain why then you probably should not be doing it.
ROBOTS/ALGOS: Loved by some, hated by many who lost it all to one, and surrounded by scams on the internet. If you make your own, find a legit one that works and paid for it or lost it all on a crappy one, more power to ya. I do not use robots because I do not like having a robot in control of my money. There is too many edge cases for me to be ok with it.However, the best piece of advice about algos was that the guy had a algo/robot for each market condition (trending/ranging) and would make personalized versions of each for currency pairs as each one has its own personality and can make the same type of movement along side another currency pair but the price action can look way different or the move can be lagged or leading. So whenever he does his own analysis and he sees a trend, he turns the trend trading robot on. If the trend stops, and it starts to range he turns the range trading robot on. He uses robots to trade the market types that he is bad at trading. For example, I suck at trend trading because I just suck at sitting on my hands and letting my trade do its thing.
Trade the Trade - The Methodology
Base Principles These are the base principles I use behind "Trade the Trade". Its called that because you are technically trading inside your larger high time frame trade as it hopefully goes as you have analyzed with the trade setup. It allows you to scratch that intraday trading itch, while not being blind to the bigger market at play. It can help make sense of why the price respects, rejects or flat out ignores support/resistance/pivots.
Trade Setup: Find a trade setup using high level time frames (daily, 4hr, or 1hr time frames). The trade setup will be used as a base for starting to figure out a bias for the markets direction for that day.
Indicator Data: Check any indicators you use (I use Stochastic RSI and Relative Vigor Index) for any useful information on higher timeframes.
Support Resistance: See if any support/resistance/pivot points are in currently being tested/resisted by the price. Also check for any that are within reach so they might become in play through out the day throughout the day (which can influence your bias at least until the price reaches it if it was already moving that direction from previous days/weeks price action).
Currency Strength/Weakness: I use the TradeVision currency strength/weakness dashboard to see if the strength/weakness supports the narrative of my trade and as an early indicator when to keep a closer eye for signs of the price reversing.Without the tool, the same concept can be someone accomplished with fundamentals and checking for higher level trends and checking cross currency pairs for trends as well to indicate strength/weakness, ranging (and where it is in that range) or try to get some general bias from a higher level chart that may help you out. However, it wont help you intra day unless your monitoring the currency's index or a bunch of charts related to the currency.
Watch For Trading Opportunities: Personally I make a mental short list and alerts on TradingView of currency pairs that are close to key levels and so I get a notification if it reaches there so I can check it out. I am not against trading both directions, I just try to trade my bias before the market tries to commit to a direction. Then if I get out of that trade I will scalp against the trend of the day and hold trades longer that are with it.Then when you see a opportunity assume the directional bias you made up earlier (unless the market solidly confirms with price action the direction while waiting for an entry) by trying to look for additional confirmation via indicators, price action on support/resistances etc on the low level time frame or higher level ones like hourly/4hr as the day goes on when the price reaches key areas or makes new market structures to get a good spot to enter a trade in the direction of your bias.Then enter your trade and use the market structures to determine how much of a stop you need. Once your in the trade just monitor it and watch the price action/indicators/tools you use to see if its at risk of going against you. If you really believe the market wont reach your TP and looks like its going to turn against you, then close the trade. Don't just hold on to it for principle and let it draw down on principle or the hope it does not hit your stop loss.
Trade Duration Hold your trades as long or little as you want that fits your personality and trading style/trade analysis. Personally I do not hold trades past the end of the day (I do in some cases when a strong trend folds) and I do not hold trades over the weekends. My TP targets are always places I think it can reach within the day. Typically I try to be flat before I sleep and trade intra day price movements only. Just depends on the higher level outlook, I have to get in at really good prices for me to want to hold a trade and it has to be going strong. Then I will set a slightly aggressive stop on it before I leave. I do know several people that swing trade and hold trades for a long period of time. That is just not a trading style that works for me.
Enhance Your Success Rate Below is information I picked up over the years that helped me enhance my success rate with not only guessing intra day market bias (even if it has not broken into the trend for the day yet (aka pre London open when the end of Asia likes to act funny sometimes), but also with trading price action intra day. People always say "When you enter a trade have an entry and exits. I am of the belief that most people do not have problem with the entry, its the exit. They either hold too long, or don't hold long enough. With the below tools, drawings, or instruments, hopefully you can increase your individual probability of a successful trade. **P.S.*\* Your mileage will vary depending on your ability to correctly draw, implement and interpret the below items. They take time and practice to implement with a high degree of proficiency. If you have any questions about how to do that with anything listed, comment below and I will reply as I can. I don't want to answer the same question a million times in a pm. Tools and Methods Used This is just a high level overview of what I use. Each one of the actions I could go way more in-depth on but I would be here for a week typing something up of I did that. So take the information as a base level understanding of how I use the method or tool. There is always nuance and edge cases that you learn from experience.
I keep a general high level Macro outlook for currencies. I dont get too deep into Fundamentals and just keep an eye out for news. If I am already in a trade I will hold it if its far enough away from my entry. However, I wont enter right before/during news as it can invalidate your setup.
I started with the basics of learning the standard price action formations/patterns and candles. You can find tons of free info on that online, google is your friend. Then I stared at charts and said "why did the price do that or do this etc" then after a while I started to understand what's happening without having to think about it and I can see the market structure without having to look as closely as I did in the past.
After many many hours of staring at 5 min charts for 15 hours a day 5 days a week I learned how to look at 5 min charts and be like "Oh that's a hammer on the 15 min etc. If you keep track of time you can do the same for hourly candles as well and you will start to see market structure naturally. However I typically trade in a two chart panel window so I have a 15 min and 5 min chart up when trading intra day so I dont have to think too hard about it.
Draw support resistance lines on Daily/4hr timeframes. I prefer to use body of the candle instead of the wick for support/resistance.
You can find support/resistance liquidity levels through out the day as well and trade those if the price retraces back through levels its already been through that same day.
It would be a bit length to explain exactly the best place to draw them. If your unsure there is plenty of free resources on the internet. Just try to use your head and look for price levels where the price was "Supported" or it "Resisted" that price level then slap a line on it. Draw as few or as many lines as you feel helps you and your style. I tend to lean on the side of fewer. I typically do about 6 lines main support/resistances (3 of each).
Draw two Fibonacci Extensions. One on the daily timeframe, and then one on the 4hr time frame. Then you can trade the Fibonacci levels and use them for TP targets or entry zones if price action respects the level. Also you can use it along with support/resistance and pivots if they happen to line up or are very close.
I cannot really figure out how to put it into words how to draw a Fib if you dont know how. I will have to make a picture to demonstrate it. If your interested post below and I will draw one up and post a link. Probably the easiest way to understand. Just keep in mind the Fib you draw on the 4hr time frame will be inside the daily timeframe one.
The TradeVision2020 dashboard that I use just helps me keep a tab on the current market post plus any swing strength/momentum a currency might have on higher time frames. Helps me look for shifts in the market or confirmation that the bias it already has in momentum is continuing. I have found that often currencies when they get really/weak or strong might continue for several days or even longer like a full week or more. We recently had what felt like 1 week or so of flat out Yen weakness which was making some things wonky. All it does is allow me to look at the dashboard instead of a million other charts.
I use two that work well for my intra day style. The Stochastic RSI is just like a RSI but its faster. The second is the Relative Vigor Index which I use to detect swings in momentum and divergences in bullish/bearish momentum. I have used many others in the past, but as I have grown and got better as a trader I have found making my analysis simpler has improved my trading.I dont like the whole idea of have 43 different indicators on 32 different time frames light up a dashboard to be green for me to enter a trade. With how I do it now, I have a clear understanding of what I expect to happen and why. That way when it does happen I understand the move and dont get freaked out if the market moves funny after I am in the trade.
Conclusion I use the above tools/indicators/resources/philosophy's to trade intra day price action that sometimes ends up as noise in the grand scheme of the markets movement.use that method until the price action for the day proves the bias assumption wrong. Also you can couple that with things like Stoch RSI + Relative Vigor Index to find divergences which can increase the probability of your targeted guesses. Trade Example from Yesterday This is an example of a trade I took today and why I took it. I used the following core areas to make my trade decision.
Fundamental Bias: I already had a bullish fundamental outlook on EUUSD with expecting the markets to price in future similes due a higher an higher chance of Biden winning on paper as the election closed in and a "Blue wave" coming which would lead to a weaker dollar. Also, the Euro Zone is getting hammered with COVID pretty hard plus Brexit drama so I had a strong Euro bias.NOTE: As frame of reference, all the other pairs I trade I traded as if they were ranging and trade a range. Markets are messed up right now.
Currency Strength/Weakness: I use a tool that gives me a currency strength/weakness dashboard called TradeVision2020. Helps me track individual currency strength/weakness intra day. Took me about a month to get used to it, but helps me keep track of intra day strength/weakness that can add a bias to trade direction as the day unfolds. Like "Will this run have a 2nd or 3rd push higher" or "I should look to TP at the first sign of weakness in the push" type bias data. You still got to use your brain and figure out the best decision. It wont make choices for you, its only a guide.NOTE: I am not trying to adverse the tool (if providing the code is against sub rules let me know), its just a tool I use every day that helps me with directional bias calls. I am sharing the coupon code that was given to me when I found out about the tool in the TradingView forex chatroom and the guy gave me the code to use when I signed up. I dont want someone to read the name and want to try it out then overpay for no reason. The coupon will give you 40% off. Coupon Code: 3F7A0T5T
Higher Timeframe Analysis: Detected some early signs of Bearish Divergence on the 1hr chart using a on a higher time frame using a Stochastic RSI. Then I saw more confirmation on 5 min charts using Relative Vigor Index to help time my entry mid session.
Pivot Points: I treat pivot points like support/resistance and trade them as such using price action to give me some idea how its being treated by the market. Pretty straight forward.
It may seem like a lot of stuff to process on the fly while trying to figure out live price action but, for the fundamental bias for a pair should already baked in your mindset for any currency pair you trade. For the currency strength/weakness I stare at the dashboard 12-15 hours a day so I am always trying to keep a pulse on what's going or shifts so that's not really a factor when I want to enter as I would not look to enter if I felt the market was shifting against me. Then the higher timeframe analysis had already happened when I woke up, so it was a game of "Stare at the 5 min chart until the price does something interesting" Trade Example: Today , I went long EUUSD long bias when I first looked at the chart after waking up around 9-10pm Eastern. Fortunately, the first large drop had already happened so I had a easy baseline price movement to work with. I then used tool for currency strength/weakness monitoring, Pivot Points, and bearish divergence detected using Stochastic RSI and Relative Vigor Index. I first noticed Bearish Divergence on the 1hr time frame using the Stochastic RSI and got confirmation intra day on the 5 min time frame with the Relative Vigor Index. I ended up buying the second mini dip around midnight Eastern because it was already dancing along the pivot point that the price had been dancing along since the big drop below the pivot point and dipped below it and then shortly closed back above it. I put a stop loss below the first large dip. With a TP goal of the middle point pivot line Then I waited for confirmation or invalidation of my trade. I ended up getting confirmation with Bearish Divergence from the second large dip so I tightened up my stop to below that smaller drip and waited for the London open. Not only was it not a lower low, I could see the divergence with the Relative Vigor Index. It then ran into London and kept going with tons of momentum. Blew past my TP target so I let it run to see where the momentum stopped. Ended up TP'ing at the Pivot Point support/resistance above the middle pivot line. Random Note: The Asian session has its own unique price action characteristics that happen regularly enough that you can easily trade them when they happen with high degrees of success. It takes time to learn them all and confidently trade them as its happening. If you trade Asia you should learn to recognize them as they can fake you out if you do not understand what's going on. TL;DR At the end of the day there is no magic solution that just works. You have to find out what works for you and then what people say works for them. Test it out and see if it works for you or if you can adapt it to work for you. If it does not work or your just not interested then ignore it. At the end of the day, you have to use your brain to make correct trading decisions. Blindly following indicators may work sometimes in certain market conditions, but trading with information you don't understand can burn you just as easily as help you. Its like playing with fire. So, get out there and grind it out. It will either click or it wont. Not everyone has the mindset or is capable of changing to be a successful trader. Trading is gambling, you do all this work to get a edge on the house. Trading without the edge or an edge you understand how to use will only leave your broker happy in the end.
I am a Software Engineer / Data Scientist and I decided to give a go at automating a strategy based on the ParallaxFX strategy floating around and backtests the results, also due to some inspiration by Vanguer
I backtested on the majors 4H timeframe between January 2015 to January 2020.
I am only considering trades from the top and bottom bands for now.
But the position size calculator tells me that I want to open a position with the 70-pips SL and with the risk exposure of 1.5%, I should specify the 0.21 lot sizing. It's a deal I have recently opened.
I googled and it's said that you should never take your margin to the vicinity of 100%. But it took me 16 lots to take my margin to that level! Thus, the 0.12 lot sizing equals to 1.25% of the 16 lots...
Thus, it looks like I am utilizing only 1.25% of the margin made availlable by the broker, right?
And, ofc, I should be basing my lot sizings based on the desired risk exposure and not based on the available margin because the second scenario is gambling.
So, do I understand this correctly:
a. margin is well... it's for gamblers, uknow, the folks who wouldn't be able to follow the narrative in this post... who treat forex like slots... playing, not trading with a good trading strategy. b. but I can create the deals with super-tight SLs and let them run. Thus, if I already have the deal that is well into the profits zone, i can then just move SL from the original level to BE. And then I can open another deal. If I open the second deal, the cumulative margin utilization would result at 2.5% from the available volume. And thus, if I have 20 such deals running for months, then my margin utilization would be 25%, right? I mean it's not bad and there would be risk of the margin call... I would need to open 80 thus-sized deals to get to the dangerous area. Did I get it right?
Hey guys, absolute Forex noob here. Started studying Forex 6 months ago and have begun my demo account period of testing my trading strategy. As you can imagine my confidence is not all that great with this vast and intimidating market. I was hoping to get a few opinions on whether this trade was an absolute fluke, or did I legitimately use technical analysis to correctly predict the market. This was my first ever green trade btw, hence why I am skeptical it went the right way!! Bit of context: I placed this trade on Friday and it managed to hit my demo take profit (to the absolute tee). The reason I took the trade was because GBP/JPY was in an uptrend creating higher highs and higher lows. I scaled down into a 15m time frame and used Fib retracement and saw it bounce off the 0.5 retracement level. I took a long position with my target profit at the 0.27 extension which it eventually rose to before retracing back to a key level (137.500). Any comments would be appreciated. Trade
Hello, i started trading not a long time ago, im still a newbie with a demo account. I have 1000$ on the demo account, with vantage fx and the highest leverage, so im pretty sure its 500:1. I kept trading XAUUSD and i realized that its so volatile, when its around 1892, whether i sell or buy, i would be profitable after waiting cause the price would go up or down after a few hours to my take profit. For example, if i bought at 1892, even if it dropped to 1888, after a few hours or a day or 2, it would go back up to around 1894 at some point and i would be profitable. Keep in mind that i trade with lot sizes of 0.02 or 0.03, meaning that i always end up making around 5-10$. Everyone on the Internet keeps saying you cant just hold in forex, but i dont get why. Even when my trade would be negative, it would never be under -35$, and all i have to do is just wait until im profitable with 5$ and close the trade. I know this is confusing, but can anyone explain to me why it isnt a good strategy?
Forex Signal Fraud ! Forex Signal Factory. I am Finished !
So I have been searching these forex signals to invest my 4 years of saving. And found a huge page on telegram called “Forex Signal Factory”, I saw that they offer account management where they will control your account and take 50% share of the profit. But the requirement is 1:500 leverage 10000 usd account etc. So I asked them why should I share my large account with them. They said that they will only ask for my mt4 credentials. So I thought yeah right they wont be able to withdraw money only using mt4 username passwords right ? And what is in it for them if they blow up my account right ? They need to make profit with my account so that they can also profit to get the 50 50 share right ? Well thats what I thought and gave them the mt4 credentials with 10000 usd in it. Well after 6 hours I entered my mt4 app and this is what exactly I saw. -2400 -2600 -1800 and so on. I had a mini heart attack and didnt know what was going on. I didnt know what to do, my finger were shaking and I was feeling numb (still now). I changed my password right away and contacted them what was going on. They told that it was my fault for closing the trades…. I was like WHAT? I didnt even know what was going on until I saw this. They were already closed with around 9400usd loss. Then they didnt reply and gone just like that. All I am saying is that yes I did a huge mistake. I dont know what to do. I am in a Lot of Pain right now and I dont want you to go through the same fate. I dont know how but they have these huge followers and posts since 2019 about gains but please dont let your eyes decieve you. They destroyed me, I dont know what these devils got from it but I am warning you please dont trust them or follow them. If you want to earn money from forex then do it on your own way, just learn strategies from the tutors but giving account for management is the last thing u should do. Please dont do the same mistake I did. And please share this to raise awareness and so that everyone knows about this. 🙏
That Time I Gained 337.59% In One Week - Storytime
Just a quick story on my biggest gain in one week, which I'll more than likely never do again because my risk tolerance is not as high anymore. But before: I highly discourage anyone especially the newbies on here to risk as much or trade in the following manner. It was late May and I was popping off from paper trading, I must've hit 20+ take profits with no losses. I was growing a demo that I started with $70 two weeks prior and I was already at like $623 lmao, in only two weeks??? So of course I thought I was a god. I saw some better trades coming up and decided it was time to get back in the market with some real money. I had $75 from freelancing, I got $60 as a covid grant from the government and my mom gave me another $60 to trade in the casino (Forex Market). So it was time. I got into trades Sunday night (May 31) as soon as the market opened and they were already doing well the next morning. Here's a screenshot I sent showing off my gross trading prowess and the positions I had opened: https://imgur.com/a/GFrcLEu I stayed diligent and took my setups just as I would in demo, and fast forward: https://imgur.com/a/5JwIDl3 I got way too overwhelmed and closed some shortly after, and ended the week with no losses, 1155.5 pips, 9 trades completed and net $651.41. I thought I was the best trader ever but luckily I withdrew half of it and took my steady, inevitable losses after :) Here's all the trades I had made (I didn't know about myfxbook but I had recorded all my trades in a nice little excel sheet to help me with risk and I still do - I'm currently making it into a nice little software): https://imgur.com/a/RNtt5wz The statistics from excel: https://imgur.com/a/8gQlFBU Strategies: Breakouts, Swings (S/R) and Trends. Risk Tolerance: I was literally risking about 25% of my account on trades and whenever the trade took off, I considered it 0% risk so I could re-enter more so I didn't have to wait until close. Why I probably will never gain this much in a week again:
Risking 25% on a trade is downright awful unless your account is super small.
Deeming a trade 0% risk is never true unless you have your sl in profit (most times I didn't).
I'm okay with not gaining quickly, now I'm just about protecting my capital.
What I learnt: I did take some good trades so there's not much I could've learnt, the weeks after though did teach me:
Not to risk that much on trades
Go for slow and steady gains
Stay out of the market as much as possible.
TLDR: I went from $193.48 - $846.64 in one week by taking big dick risks and then lost half of it later, lol.
Factset: How You can Invest in Hedge Funds’ Biggest Investment Tl;dr FactSet is the most undervalued widespread SaaS/IT solution stock that exists If any of you have relevant experience or are friends with people in Investment Banking/other high finance, you know that Factset is the lifeblood of their financial analysis toolkit if and when it’s not Bloomberg, which isn’t even publicly traded. Factset has been around since 1978 and it’s considered a staple like Bloomberg in many wealth management firms, and it offers some of the easiest to access and understandable financial data so many newer firms focused less on trading are switching to Factset because it has a lot of the same data Bloomberg offers for half the cost. When it comes to modern financial data, Factset outcompetes Reuters and arguably Bloomberg as well due to their API services which makes Factset much more preferable for quantitative divisions of banks/hedge funds as API integration with Python/R is the most important factor for vast data lakes of financial data, this suggests Factset will be much more prepared for programming making its way into traditional finance fields. According to Factset, their mission for data delivery is to: “Integrate the data you need with your applications, web portals, and statistical packages. Whether you need market, company, or alternative data, FactSet flexible data delivery services give you normalized data through APIs and a direct delivery of local copies of standard data feeds. Our unique symbology links and aggregates a variety of content sources to ensure consistency, transparency, and data integrity across your business. Build financial models and power customized applications with FactSet APIs in our developer portal”. Their technical focus for their data delivery system alone should make it stand out compared to Bloomberg, whose UI is far more outdated and complex on top of not being as technically developed as Factset’s. Factset is the key provider of buy-side portfolio analysis for IBs, Hedge funds, and Private Equity firms, and it’s making its way into non-quantitative hedge funds as well because quantitative portfolio management makes automation of risk management and the application of portfolio theory so much easier, and to top it off, Factset’s scenario analysis and simulation is unique in its class. Factset also is able to automate trades based on individual manager risk tolerance and ML optimization for Forex trading as well. Not only does Factset provide solutions for financial companies, they are branching out to all corporations now and providing quantitative analytics for them in the areas of “corporate development, M&A, strategy, treasury, financial planning and analysis, and investor relations workflows”. Factset will eventually in my opinion reach out to Insurance Risk Management a lot more in the future as that’s a huge industry which has yet to see much automation of risk management yet, and with the field wide open, Factset will be the first to take advantage without a shadow of a doubt. So let’s dig into the company’s financials now: Their latest 8k filing reported the following: Revenue increased 2.6%, or $9.6 million, to $374.1 million compared with $364.5 million for the same period in fiscal 2019. The increase is primarily due to higher sales of analytics, content and technology solutions (CTS) and wealth management solutions. Annual Subscription Value (ASV) plus professional services was $1.52 billion at May 31, 2020, compared with $1.45 billion at May 31, 2019. The organic growth rate, which excludes the effects of acquisitions, dispositions, and foreign currency movements, was 5.0%. The primary contributors to this growth rate were higher sales in FactSet's wealth and research workflow solutions and a price increase in the Company's international region Adjusted operating margin improved to 35.5% compared with 34.0% in the prior year period primarily as a result of reduced employee-related operating expenses due to the coronavirus pandemic. Diluted earnings per share (EPS) increased 11.0% to $2.63 compared with $2.37 for the same period in fiscal 2019. Adjusted diluted EPS rose 9.2% to $2.86 compared with $2.62 in the prior year period primarily driven by an improvement in operating results. The Company’s effective tax rate for the third quarter decreased to 15.0% compared with 18.6% a year ago, primarily due to an income tax expense in the prior year related to finalizing the Company's tax returns with no similar event for the three months ended May 31, 2020. FactSet increased its quarterly dividend by $0.05 per share or 7% to $0.77 marking the fifteenth consecutive year the Company has increased dividends, highlighting its continued commitment to returning value to shareholders. As you can see, there’s not much of a negative sign in sight here. It makes sense considering how FactSet’s FCF has never slowed down: https://preview.redd.it/frmtdk8e9hk51.png?width=276&format=png&auto=webp&s=1c0ff12539e0b2f9dbfda13d0565c5ce2b6f8f1a https://preview.redd.it/6axdb6lh9hk51.png?width=593&format=png&auto=webp&s=9af1673272a5a2d8df28f60f4707e948a00e5ff1 FactSet’s annual subscriptions and professional services have made its way to foreign and developing markets, and many of them are opting for FactSet’s cheaper services to reduce costs and still get copious amounts of data and models to work with. Here’s what FactSet had to say regarding its competitive position within the market of providing financial data in its last 10k: “Despite competing products and services, we enjoy high barriers to entry and believe it would be difficult for another vendor to quickly replicate the extensive databases we currently offer. Through our in-depth analytics and client service, we believe we can offer clients a more comprehensive solution with one of the broadest sets of functionalities, through a desktop or mobile user interface or through a standardized or bespoke data feed.” And FactSet is confident that their ML services cannot be replaced by anybody else in the industry either: “In addition, our applications, including our client support and service offerings, are entrenched in the workflow of many financial professionals given the downloading functions and portfolio analysis/screening capabilities offered. We are entrusted with significant amounts of our clients' own proprietary data, including portfolio holdings. As a result, our products have become central to our clients’ investment analysis and decision-making.” (https://last10k.com/sec-filings/fds#link_fullReport), if you read the full report and compare it to the most recent 8K, you’ll find that the real expenses this quarter were far lower than expected by the last 10k as there was a lower than expected tax rate and a 3% increase in expected operating margin from the expected figure as well. The company also reports a 90% customer retention rate over 15 years, so you know that they’re not lying when they say the clients need them for all sorts of financial data whether it’s for M&A or wealth management and Equity analysis: https://www.investopedia.com/terms/f/factset.asp https://preview.redd.it/yo71y6qj9hk51.png?width=355&format=png&auto=webp&s=a9414bdaa03c06114ca052304a26fae2773c3e45 FactSet also has remarkably good cash conversion considering it’s a subscription based company, a company structure which usually takes on too much leverage. Speaking of leverage, FDS had taken on a lot of leverage in 2015: https://preview.redd.it/oxaa1wel9hk51.png?width=443&format=png&auto=webp&s=13d60d2518980360c403364f7150392ab83d07d7 So what’s that about? Why were FactSet’s long term debts at 0 and all of a sudden why’d the spike up? Well usually for a company that’s non-cyclical and has a well-established product (like FactSet) leverage can actually be good at amplifying returns, so FDS used this to their advantage and this was able to help the share’s price during 2015. Also, as you can see debt/ebitda is beginning a rapid decline anyway. This only adds to my theory that FactSet is trying to expand into new playing fields. FactSet obviously didn’t need the leverage to cover their normal costs, because they have always had consistently growing margins and revenue so the debt financing was only for the sake of financing growth. And this debt can be considered covered and paid off, considering the net income growth of 32% between 2018 and 2019 alone and the EPS growth of 33% https://preview.redd.it/e4trju3p9hk51.png?width=387&format=png&auto=webp&s=6f6bee15f836c47e73121054ec60459f147d353e EBITDA has virtually been exponential for FactSet for a while because of the bang-for-buck for their well-known product, but now as FactSet ventures into algorithmic trading and corporate development the scope for growth is broadly expanded. https://preview.redd.it/yl7f58tr9hk51.png?width=489&format=png&auto=webp&s=68906b9ecbcf6d886393c4ff40f81bdecab9e9fd P/E has declined in the past 2 years, making it a great time to buy. https://preview.redd.it/4mqw3t4t9hk51.png?width=445&format=png&auto=webp&s=e8d719f4913883b044c4150f11b8732e14797b6d Increasing ROE despite lowering of leverage post 2016 https://preview.redd.it/lt34avzu9hk51.png?width=441&format=png&auto=webp&s=f3742ed87cd1c2ccb7a3d3ee71ae8c7007313b2b Mountains of cash have been piling up in the coffers increasing chances of increased dividends for shareholders (imo dividend is too low right now, but increasing it will tempt more investors into it), and on top of that in the last 10k a large buyback expansion program was implemented for $210m worth of shares, which shows how confident they are in the company itself. https://preview.redd.it/fliirmpx9hk51.png?width=370&format=png&auto=webp&s=1216eddeadb4f84c8f4f48692a2f962ba2f1e848 SGA expense/Gross profit has been declining despite expansion of offices I’m a bit concerned about the skin in the game leadership has in this company, since very few executives/board members have significant holdings in the company, but the CEO himself is a FactSet veteran, and knows his way around the company. On top of that, Bloomberg remains king for trading and the fixed income security market, and Reuters beats out FactSet here as well. If FactSet really wants to increase cash flow sources, the expansion into insurance and corp dev has to be successful. Summary: FactSet has a lot of growth still left in its industry which is already fast-growing in and of itself, and it only has more potential at its current valuation. Earnings September 24th should be a massive beat due to investment banking demand and growth plus Hedge fund requirements for data and portfolio management hasn’t gone anywhere and has likely increased due to more market opportunities to buy-in. Calls have shitty greeks, but if you're ballsy October 450s LOL, I'm holding shares I’d say it’s a great long term investment, and it should at least be on your watchlist.
This thread is the direct continuation of my previous entry, which you can find here. I have the feeling my rambles may be long, so I'm not going to repeat anything I already said in my previous post for the sake of keeping this brief. What is this? I am backtesting the strategy shared by ParallaxFx. I have just completed my second run of testing, and I am here to share my results with those who are interested. If you want to read more about the strategy, go to my previous thread where I linked it. What changed? Instead of using a fixed target of the -100.0 Fibonacci extension, I tracked both the -61.8 and the -100.0 targets. ParallaxFx used the -61.8 as a target, but never tried the second one, so I wanted to compare the two and see what happens. Where can I see your backtested result? I am going to do something I hope I won't regret and share the link to my spreadsheet. Hopefully I won't be doxxed, but I think I should be fine. You can find my spreadsheet at this link. There are a lot of entries, so it may take a while for them to load. In the "Trades" tab, you will find every trade I backtested with an attached screenshot and the results it would have had with the extended and the unextended target. You can see the UNCOMPOUNDED equity curve in the Summary tab, together with the overall statistics for the system. What was the sample size? I backtested on the Daily chart, from January 2017 to December 2019, over 28 currency pairs. I took a total of 310 trades - although keep in mind that every position is most often composed by two entries, meaning that you can roughly halve this number. What is the bottom line? If you're not interested in the details, here are the stats of the strategy based on how I traded it.
Extended: 223.46 R of return, 2.34 of profit factor, 0.72 R of expected value, 46.13% winrate. The average win is 2.72 R while the average loss is -1.00 R.
Unextended: 172.20 R of return, 2.19 of profit factor, 0.56 R of expected value, 53.23% winrate. The average win is 1.92 R while the average loss is -1.00 R.
The highest drawdown for both systems was 18 R. This seems like a lot, but remember you're splitting risk in half.
Here you can see the two uncompounded equity curves side by side: red is unextended and blue is extended. Who wins? The test suggests the strategy to be more profitable with the extended target. In addition, most of the trades that reached the unextended target but reversed before reaching the extended, were trades that I would have most likely not have taken with the extented target. This is because there was a resistance/support area in the way of the -100.0 extension level, but there was enough room for price to reach the -61.8 level. I will probably trade this strategy using the -100.0 level as target, unless there is an area in the way. In that case I will go for the unextended target. Drawdown management The expected losing streak for this system, using the extended target, is 7 trades in a row in a sample size of 100 trades. My goal is to have a drawdown cap of 4%, so my risk per trade will be 0.54%. If I ever find myself in a losing streak of more than 8 trades, I will reduce my risk per trade further. What's next? I'll be taking this strategy live. The wisest move would be to repeat the same testing over lower timeframes to verify the edge plays out there as well, but I would not be able to trust my results because I would have vague memories of where price went because of the testing I just did. I also believe markets are fractals, so I see no reason why this wouldn't work on lower timeframes. Before going live, I will expand this spreadsheet to include more specific analysis and I will continue backtesting at a slower pace. The goal is to reach 20 years of backtesting over these 28 pairs and put everything into this spreadsheet. It's not something I will do overnight, but I'll probably do one year every odd day, and maybe a couple more during the weekend. I think I don't have much else to add. I like the strategy. Feel free to ask questions.
First week of live trading and actually having a plan
Been learning forex trading now for about 2 years just reading and practising on demo, in the past 6 months however I've taken a more data driven approach and now I've just completed my first week of live trading (a small amount, nothing too big, just 200). the plan I guess is to reflect on the trades I've taken every week and use this medium as a way of peer reviewing the things I do. Took 3 trades this week, 21/10/2020 - EURAUD and EURNZD sell After identifying these pairs as sells, I viewed the potential sell move that could take place as a broader sell off of the euro rather than individual rising of the AUD or the NZD. For that reason, I decided to split my normal risk per trade amount (2.5%) in half and treat this as one euro sell trade. I closed my trades when they hit the previous days low, however as you can see, price continued moving down for a deeper sell off which is a lilbit depressing to see, knowing I could have made more if I had held, but meh, still bagged 3 times my risk so can't be too sad for the first trades of the first week. Outcome (In RR): EURAUD - 2.9 EURNZD -3.35 23/10/2020 - AUDNZD Buy I was late on my analysis on this trade because I woke up late, however I was still able to fill the limit order after price returned back to my buy zone. The trade looked good going in, however, the moves that I trade on tend to be higher momentum moves, and a few hours into the trade I could tell that there just wasnt any steam, so I moved the stop closer to the entry (but not breakeven, to give it room to breath), anyway, the market moved against me and took me out for 0.5R, saved 50% from the initial risk size so not bad. Outcome (In RR) -0.5 From demo trading this strategy, I know that sometimes the trades can run for a long time. I was curious to know how those of you that have long term swing moves manage the risk and lock in profits but also give the trades room to breath, I've been messing around with using donchians as a trailing stop method however Im eager to know of other methods. p.s lemme know if Im breaking any rules by posting this here, new to reddit and all, also, if there is any interest in it, I can post my reasoning for entering these trades if requested. p.p.s the screenshots of the trades were moderated out, but I've reposted them on my profile
You do need a proper strategy for judging your take profit. This piece of the puzzle basically means you need to try and predict the future. Fortunately, the Forex market is a creature of habit and history tend to repeat itself. Furthermore, the historical price movement allows you to assume the most probable future based on your trade being correct. This is all you can do as a trader, assume ... It goes without saying that the take profit strategy is just as important as a trader’s stop-loss placement. Both aspects are integral parts of the reward to risk (r:r) ratios. This ratio analyzes and determines the balance between the potential profit and the potential loss of the trade. The r:r ratio is a vital and crucial factor whether a trader is profitable or not. The other item is the ... Beim Take Profit, der mitunter auch Zielpreis genannt wird, verhält es sich umgekehrt. Hierbei erteilt man dem Broker eine Take Profit Order, die ihn dazu veranlasst, eine offene Position oder einen Trade bei einem bestimmten Höchstpreis zu schließen. Die Stop Loss Order im Trading Den richtigen Take-Profit finden. Wo sollte man den Take-Profit setzen? Nun, dies ist natürlich schwierig, natürlich will man nicht zu früh aussteigen, aber natürlich auch nicht zu spät. Ein erster Anhaltspunkt ist der Stop-Loss. Hat man einen Stop-Loss von 10 Pips gewählt, dann sollte der Take-Profit 10 Pips und mehr betragen. Denn sonst ... If you want to learn how to trade a proven trading strategy yourself (including a solid take profit strategy), have a look at my Trade Advisor program. It’s designed to get you up and running with my reversal trading strategy as fast as possible and it teaches you everything you need to know in order to have the best chances of success as a trader. Good luck trading! You might also like this ... Stop Loss und Take Profit richtig einsetzen als Forex Trader. Mit Stop Loss- und Take Profit-Niveaus können Händler beim Forex Trading unnötige Risiken vermeiden und sich die Gewinne von erfolgreichen Trades sichern. Dagegen werden Stop Loss- und Take Profit-Limits gesetzt, um eine bestimmte Position zu öffnen bzw. zu schließen. Beim Verfolgen einer bestimmten Strategie werden die Stop ... Stop Loss- und Take Profit-Niveaus werden von Forex-Tradern genutzt, um unnötige finanzielle Risiken zu vermeiden und um sich Gewinne bei erfolgreichen Trades zu sichern. Stop Loss- und Take Profit-Limits werden gesetzt, um eine Position zu öffnen oder zu schließen. Händler, die einer speziellen Strategie folgen, werden in der Regel ihre Stop Loss- und Take Profit-Limits bereits beim Trade ...
Vote for me for FOREX TRAINER of the Year http://linkis.com/atozforex.com/2017-f/kftAw FOREX TRADING video taking a look at the importance of having the corr... How to take profits in trading? If you still don't know how to craft your take profit strategy, i want to share with you when to take profit and how to take ... Forex Take Profit and Stop Loss Trading Strategy https://www.forexelite.com Non-profit, educational or personal use tips the balance in favor of fair use. 1)This video has no negative impact on the original works (It would actually be positive for them) 2)This video is ... CONTACT: EMAIL: [email protected] WEBSITE: www.teamtakeprofits.net FACEBOOK: Jay Wayne INSTAGRAM: JayTakeProfits Master The Trend Line Strategy - Fore... A good take profit strategy is probably one of the most difficult skills to master. So in this video I am going to share exactly how me and other traders at SMILe do it when we are day trading the ...