qoxugrup@gmail.com
13 Ağustos 2011 Cumartesi
16 Mart 2011 Çarşamba
Meteoric AUDJPY Rise
I'm starting to get more than a little cautious about the stellar increase in the AUDJPY over the last several days.
While it's true that markets can continue to move higher or lower for long periods of time it's important not to get too caught up in recent events. In fact, though we all react to these things at different rates, you can consider it a warning whenever there is something to get caught up in.
Insidiously, it is often those things that happen over a very long period of time that we forget to take notice of. For example, the smart phone has been growing in leaps and bounds and will probably do so for years, but at some point it is likely to turn into the next PC. If you haven't noticed PC's are now relatively cheap commodity products which leaves PC makers turning to the service sector in an attempt to fuel continued growth.
In any case, this is a point at which I have to resist ramping up the aggression factor in my trading robot... and the notion that it might be a good idea to take a bigger bite out of upward movement needs to serve as a warning to me.
While it's true that markets can continue to move higher or lower for long periods of time it's important not to get too caught up in recent events. In fact, though we all react to these things at different rates, you can consider it a warning whenever there is something to get caught up in.
Insidiously, it is often those things that happen over a very long period of time that we forget to take notice of. For example, the smart phone has been growing in leaps and bounds and will probably do so for years, but at some point it is likely to turn into the next PC. If you haven't noticed PC's are now relatively cheap commodity products which leaves PC makers turning to the service sector in an attempt to fuel continued growth.
In any case, this is a point at which I have to resist ramping up the aggression factor in my trading robot... and the notion that it might be a good idea to take a bigger bite out of upward movement needs to serve as a warning to me.
Recent Forex Results
I've had some success analyzing the AUDJPY over the last few days. In particular, whether by luck or otherwise I managed to spot some channels, one of them an apparent bull flag, a wedge leading to 82.00 and then predicting a breakthrough beyond that level.
It's very rewarding to make an observation and then have results conform to your expectations.
Anyway, I'm still letting my robot do my trading for me. It's earning north of 1% per day and I continue to make minor tweaks in an attempt to push the appreciation rate closer to 2% if I can.
Recent tweaks involve looking at various stochastic values in order to adjust position entry scale to some degree. Obviously, as the robot only opens long positions, the idea is to open less positions during periods of strength and more positions during periods of weakness.
It's never as simple as it sounds.
For more radical tweaks or outright departures from the main trading robot I'll strike out with a small amount of capital in a new account. I have one of these experimental robots running right now. It's very heavily tweaked.
I've got another radical, but simple, idea in the wings. It will have to wait until next weekend so that I'll have time to implement it.
It's very rewarding to make an observation and then have results conform to your expectations.
Anyway, I'm still letting my robot do my trading for me. It's earning north of 1% per day and I continue to make minor tweaks in an attempt to push the appreciation rate closer to 2% if I can.
Recent tweaks involve looking at various stochastic values in order to adjust position entry scale to some degree. Obviously, as the robot only opens long positions, the idea is to open less positions during periods of strength and more positions during periods of weakness.
It's never as simple as it sounds.
For more radical tweaks or outright departures from the main trading robot I'll strike out with a small amount of capital in a new account. I have one of these experimental robots running right now. It's very heavily tweaked.
I've got another radical, but simple, idea in the wings. It will have to wait until next weekend so that I'll have time to implement it.
Possible AUDJPY Reversal Point
I obviously have no guarantees but, according to my own proprietary reversal indicator, this is a potential reversal point.
Again, do your own homework, but this is the "signal" I'll be posting to my alerts blog...
UPDATE: It's about 9:49pm and the AUDJPY 1hr chart is showing a potential twin tail.
UPDATE: It's 10:03pm and here's the 1hr chart right now...
And here's the chart from my last post showing the 3hr trend channel.
I don't know if we are going to stay in trend, but I wouldn't expect a straight drop through a support line that has been in effect for so long.
Again, do your own homework, but this is the "signal" I'll be posting to my alerts blog...
UPDATE: It's about 9:49pm and the AUDJPY 1hr chart is showing a potential twin tail.
UPDATE: It's 10:03pm and here's the 1hr chart right now...
And here's the chart from my last post showing the 3hr trend channel.
I don't know if we are going to stay in trend, but I wouldn't expect a straight drop through a support line that has been in effect for so long.
AUDJPY: October Trend
The AUDJPY has been on an upward trajectory for a while now.
There is no telling, at least not in advance, whether we'll see more massive upward movement due to hawkish statements from the RBA or not.
However, here is a 3hr chart showing recent movements:
Obviously, clear support and resistance helps identify some lower risk entry points.
There is no telling, at least not in advance, whether we'll see more massive upward movement due to hawkish statements from the RBA or not.
However, here is a 3hr chart showing recent movements:
Obviously, clear support and resistance helps identify some lower risk entry points.
New Robot Rules Fermenting
It's late Friday night, the markets are closed, and all through the house not a creature is stirring. Well, nobody but the scheming trader hatching up another robotic system.
As someone who designs software systems for a living I can assure you that, in terms of making improvements, nothing is more helpful than watching a system in action. The key point here is the concept of "seeing" the results. While this arena is a bit of a different animal I've always been proud to claim that if I could see the problem I could fix it. You see, no matter how complex the problem there is usually something along the lines of a paradigm shift which greatly changes the nature of available solutions.
So, at the end of the week, when I'm not at work, I can review charts, apply various indicators, and see how various changes might affect trading and earnings. During the week I can see or hear positions open and close and watch the daily results tally up. Simple but powerful stuff.
Anyway, the thing that is keeping me awake at night, in a good way, is a relatively easy way to increase the profit per trade. I believe so anyway. Hopefully we'll find out next week... as I'll be developing this new ARTFAB robot pronto.
I do already have a robot trading at an average return of 1.2% per day over the last five weeks (BREAD - basic robot earning all day) but I've set an aggressive stretch goal of averaging 2.5% per day. BREAD just isn't going to get there. Assuming that other people have done much better than my paltry goal really gets the creativity flowing -- as you simply know it's possible if others have done it. There must be a way to get there while strictly controlling risk levels.
I'm sure there are many ways. I intend to find one of them.
As someone who designs software systems for a living I can assure you that, in terms of making improvements, nothing is more helpful than watching a system in action. The key point here is the concept of "seeing" the results. While this arena is a bit of a different animal I've always been proud to claim that if I could see the problem I could fix it. You see, no matter how complex the problem there is usually something along the lines of a paradigm shift which greatly changes the nature of available solutions.
So, at the end of the week, when I'm not at work, I can review charts, apply various indicators, and see how various changes might affect trading and earnings. During the week I can see or hear positions open and close and watch the daily results tally up. Simple but powerful stuff.
Anyway, the thing that is keeping me awake at night, in a good way, is a relatively easy way to increase the profit per trade. I believe so anyway. Hopefully we'll find out next week... as I'll be developing this new ARTFAB robot pronto.
I do already have a robot trading at an average return of 1.2% per day over the last five weeks (BREAD - basic robot earning all day) but I've set an aggressive stretch goal of averaging 2.5% per day. BREAD just isn't going to get there. Assuming that other people have done much better than my paltry goal really gets the creativity flowing -- as you simply know it's possible if others have done it. There must be a way to get there while strictly controlling risk levels.
I'm sure there are many ways. I intend to find one of them.
Challenging Times
While I realize the world went through a bit of an unwind, before and after the Dubai incident, I've been busy with work and family issues instead.
Things have just been incredibly busy!
In any case, what with the volatility and unwinding that has been going on it's probably a good time to be inactive. I did manage to blow up my small discretionary account (my robots are far better traders than I am) but that's insignificant.
However, the big news, from my own point of view, is that I have some tweaks for my up-and-coming robot. Basically, I need it to detect a downward slide quickly and then decide not to waste it's risk capital on redundant positions.
Maybe I'll have some time to do some blogging and tweaking this week?
Things have just been incredibly busy!
In any case, what with the volatility and unwinding that has been going on it's probably a good time to be inactive. I did manage to blow up my small discretionary account (my robots are far better traders than I am) but that's insignificant.
However, the big news, from my own point of view, is that I have some tweaks for my up-and-coming robot. Basically, I need it to detect a downward slide quickly and then decide not to waste it's risk capital on redundant positions.
Maybe I'll have some time to do some blogging and tweaking this week?
AUDJPY: Market Call
The AUDJPY has done a whole lot of nothing for the last few days.
Can you blame it? It must be tired after the recent climb.
More seriously, with the
RBA considering whether to raise rates another 25 or perhaps even 50 basis points, I don't expect any type of calamitous drop.
I think we might see a drop down to 83.00 again but if it does stop in that region I'd consider the range between there and 84.30 to be a consolidation zone. Again, given the interest rate decision in the near term future I'd eventually expect more upward movement as long as there is not an RBA based negative surprise.
Your mileage may vary.
UPDATE: Wednesday after 10:00am, we have an apparent AUDJPY breakout... currently at 84.50 and testing the underside of our previous support channel. I'm hoping that we reject 84.50 a few times before crossing -- as that will help my trading robot better take advantage of the movement.
See what I'm talking about? You can go back through a few previous posts to get a wider view of recent events.
Can you blame it? It must be tired after the recent climb.
More seriously, with the
RBA considering whether to raise rates another 25 or perhaps even 50 basis points, I don't expect any type of calamitous drop.
I think we might see a drop down to 83.00 again but if it does stop in that region I'd consider the range between there and 84.30 to be a consolidation zone. Again, given the interest rate decision in the near term future I'd eventually expect more upward movement as long as there is not an RBA based negative surprise.
Your mileage may vary.
UPDATE: Wednesday after 10:00am, we have an apparent AUDJPY breakout... currently at 84.50 and testing the underside of our previous support channel. I'm hoping that we reject 84.50 a few times before crossing -- as that will help my trading robot better take advantage of the movement.
See what I'm talking about? You can go back through a few previous posts to get a wider view of recent events.
Da Signals
It takes a lot of fortitude to use them but I think the signals blog is proving itself useful.
For example, right now we seem to have established a bottom in the recent AUDJPY downward movement.
So, especially under such a condition, we get good results if we see a signal and then look for confirming behavior. Basically, the signals are great lead-ins to a period of analysis.
No, they aren't all useful. As you would expect there will often be signals that are simply useless. The key point is that you don't have to be watching the markets all day long to take advantage of signals. You can simply fire up the charts and issue a yes or no decision several bars after they arrive.
For example, right now we seem to have established a bottom in the recent AUDJPY downward movement.
So, especially under such a condition, we get good results if we see a signal and then look for confirming behavior. Basically, the signals are great lead-ins to a period of analysis.
No, they aren't all useful. As you would expect there will often be signals that are simply useless. The key point is that you don't have to be watching the markets all day long to take advantage of signals. You can simply fire up the charts and issue a yes or no decision several bars after they arrive.
AUDJPY: Ominously Flat
I'm looking at a short term chart, but the lack of volatility suggests that something is in the air.
Even with the recent good news from China things have been relatively lethargic.
The daily chart is also showing the potential to have a few down days.
This seems like a good time to manage risk.
UPDATE: This evening, while I was on the road, I see that we had a nice spike upwards, hitting my take-profit points and leaving me flat. Nice.
Even with the recent good news from China things have been relatively lethargic.
The daily chart is also showing the potential to have a few down days.
This seems like a good time to manage risk.
UPDATE: This evening, while I was on the road, I see that we had a nice spike upwards, hitting my take-profit points and leaving me flat. Nice.
AUDJPY: Support Becomes Resistance
My last post showed a profitable overnight setup based on a week long support line on the 1hr chart.
Here, I've got an example of a support becoming resistance once it has been violated.
Take a look at the following 15min chart:
See the violation around 9:00pm last night? As an aside, this was a good point to try a well protected short. Overnight we tested a longer term support line (see my previous two posts) which held.
Finally, notice that recently this previous support line held as resistance just before 6:00am. I do expect it to be violated as the longer term support held -- but obviously we'll have to wait and see.
Here, I've got an example of a support becoming resistance once it has been violated.
Take a look at the following 15min chart:
See the violation around 9:00pm last night? As an aside, this was a good point to try a well protected short. Overnight we tested a longer term support line (see my previous two posts) which held.
Finally, notice that recently this previous support line held as resistance just before 6:00am. I do expect it to be violated as the longer term support held -- but obviously we'll have to wait and see.
Trading Week Recap
I've been leery of letting BREAD (my primary trading robot) trade too much. I suspect prior tweaks have it taking too much risk. As such I kept it on a short leash and it only earned 0.9% for the week. Perhaps I'll have time to make some adjustments over the weekend.
On the discretionary front I was back down to a more reasonable 13% this week. Last week's 34% was probably some type of market movement vs trading style confluence. These thing happen.
In other news I have a new Bollinger Band based robot in the works. An early version of it was trading this week -- earning almost %1 as well. More trials and adjustments to look forward to!
UPDATE: No time to do anything Forex related this weekend.
On the discretionary front I was back down to a more reasonable 13% this week. Last week's 34% was probably some type of market movement vs trading style confluence. These thing happen.
In other news I have a new Bollinger Band based robot in the works. An early version of it was trading this week -- earning almost %1 as well. More trials and adjustments to look forward to!
UPDATE: No time to do anything Forex related this weekend.
28 Ocak 2011 Cuma
Robot Trading: Six Weeks In
Things are going well. As you can see BREAD (Basic Robot Earning All Day) is starting to look like a winner.
Although the last week of earnings was great it's really too early to know how this robot will perform in the long term. As mentioned in a recent post I know that BREAD will earn the most during a consolidation period with prices confined in a range that ends in an upward break. I do expect the AUDJPY to exhibit this behavior a lot but it certainly won't do this all the time.
Now what?
This thing has been trading live for a while now. The only thing I plan to do is keep on letting it run until I'm able to create something better. ARTFAB (A Rising Tide Floats All Boats) is the latest attempt...
UPDATE: Something I'm curious about is if I'll notice a longer term cycle in robot behavior. For example, the last time BREAD earned more than 10% in a week there were a couple of weeks that then underperformed. It is possible that the market will exhibit behavior that is clearly visible through trading profits.
UPDATE: I have discovered this very good blog... Hack the market. From there I've noted the following graph:
This suggest to me that I can gauge my daily returns against that of the bigger players to see whether not I'm doing well. Notice that the smallest group seems to have much better returns -- and thus is where I should be comparing my results. Perhaps my stretch goal of 2.5% is a little two low? Regardless, I'll be happy to up my goal when I reach it.
Return Day
0.1900% Sun 13 September
3.2339% Mon 14
3.1616% Tue 15
3.2615% Wed 16
2.1510% Thu 17
0.4442% Fri 18
--------------- 13.05%
0.1850% Sun 20
2.0259% Mon 21
0.9016% Tue 22
1.1536% Wed 23
0.2460% Thu 24
0.1338% Fri 25
--------------- 4.72%
0.0000% Sun 27
0.1900% Mon 28
0.6862% Tue 29
2.3444% Wed 30
0.3317% Thu 01 October
0.7376% Fri 02
--------------- 4.44%
0.7311% Sun 04
1.0346% Mon 05
1.0587% Tue 06
1.9310% Wed 07
1.6854% Thu 08
0.9897% Fri 09
--------------- 7.75%
0.0915% Sun 11
1.2179% Mon 12
1.4263% Tue 13
1.9298% Wed 14
1.3023% Thu 15
1.2064% Fri 16
--------------- 7.38%
0.2985% Sun 18
1.6787% Mon 19
2.1774% Tue 20
2.3200% Wed 21
2.3552% Thu 22
1.2715% Fri 23
--------------- 10.52%Looking back, this system was too aggressive during the first week. Later tweaks reduced this aggressiveness to some degree but also lead to lower earnings. At the moment aggression is scaled based on market factors so that in some situations it will take a larger slice.Although the last week of earnings was great it's really too early to know how this robot will perform in the long term. As mentioned in a recent post I know that BREAD will earn the most during a consolidation period with prices confined in a range that ends in an upward break. I do expect the AUDJPY to exhibit this behavior a lot but it certainly won't do this all the time.
Now what?
This thing has been trading live for a while now. The only thing I plan to do is keep on letting it run until I'm able to create something better. ARTFAB (A Rising Tide Floats All Boats) is the latest attempt...
UPDATE: Something I'm curious about is if I'll notice a longer term cycle in robot behavior. For example, the last time BREAD earned more than 10% in a week there were a couple of weeks that then underperformed. It is possible that the market will exhibit behavior that is clearly visible through trading profits.
UPDATE: I have discovered this very good blog... Hack the market. From there I've noted the following graph:
This suggest to me that I can gauge my daily returns against that of the bigger players to see whether not I'm doing well. Notice that the smallest group seems to have much better returns -- and thus is where I should be comparing my results. Perhaps my stretch goal of 2.5% is a little two low? Regardless, I'll be happy to up my goal when I reach it.
Forex Robot Wars: BREAD vs ARTFAB
Two titans of the forex robot trading industry are squaring off in the search for higher profits.
In the green corner we have BREAD (Basic Robot Earning All Day) with consistent earnings of approximately 1.2% per day. In the other green corner we have the relatively new ARTFAB (A Rising Tide Floats All Boats) with very promising early results. Already today ARTFAB has locked in over 3.0% returns.
Wait, before you change the channel, neither of these robots is for sale and I do not want to manage your money. Relax, it's safe here.
In a macro sense BREAD and ARTFAB work using very different concepts. BREAD attempts to time the market and move money in and out during cyclical movements. This allows a small amount of risk to be taken, hopefully profited from, and then put back to work during another apparent down cycle.
ARTFAB, on the other hand, doesn't care about cycles when opening positions. It accumulates small positions and releases them when larger price moves have made them significantly profitable. However, cycles are examined with respect to determining when it may be a good time to close a position.
Both of these strategies appear to be working reasonably well. I'm hoping that ARTFAB will prove to consistently earn more than BREAD, such that I am enticed to move capital from one robot sub-account to the other. However, I have to keep in mind that BREAD functions best during a consolidation while ARTFAB's best earnings occur during a market move.
Of course, as I trade the AUDJPY currency pair almost exclusively both of these robots are trading it. As I have mentioned from time to time my trading account is with Oanda (which let's me scale trade sizes down to the unit level) and I'm using the FxSpyder platform to create and run robots. I prefer Oanda's platform for discretionary trading.
In the green corner we have BREAD (Basic Robot Earning All Day) with consistent earnings of approximately 1.2% per day. In the other green corner we have the relatively new ARTFAB (A Rising Tide Floats All Boats) with very promising early results. Already today ARTFAB has locked in over 3.0% returns.
Wait, before you change the channel, neither of these robots is for sale and I do not want to manage your money. Relax, it's safe here.
In a macro sense BREAD and ARTFAB work using very different concepts. BREAD attempts to time the market and move money in and out during cyclical movements. This allows a small amount of risk to be taken, hopefully profited from, and then put back to work during another apparent down cycle.
ARTFAB, on the other hand, doesn't care about cycles when opening positions. It accumulates small positions and releases them when larger price moves have made them significantly profitable. However, cycles are examined with respect to determining when it may be a good time to close a position.
Both of these strategies appear to be working reasonably well. I'm hoping that ARTFAB will prove to consistently earn more than BREAD, such that I am enticed to move capital from one robot sub-account to the other. However, I have to keep in mind that BREAD functions best during a consolidation while ARTFAB's best earnings occur during a market move.
Of course, as I trade the AUDJPY currency pair almost exclusively both of these robots are trading it. As I have mentioned from time to time my trading account is with Oanda (which let's me scale trade sizes down to the unit level) and I'm using the FxSpyder platform to create and run robots. I prefer Oanda's platform for discretionary trading.
Quantitative Analysis?
It has been more than a few years since I've had to apply any serious math skills towards my work. However, I have noticed some discussion of quantitative analysis in a few forex forums as well as job listings posted for quants.
For a very general introduction to this concept here are some links from Wikipedia:
Some other places to look:
The biggest issue is time. Until I can get to the point that I'm a full time trader, I can't sit around all day rediscovering my math skills in order to develop complex software systems. However, I might be able to spend some time looking into these ideas -- perhaps getting a book or two on the subject -- to see how they may fit into future trading efforts.
For a very general introduction to this concept here are some links from Wikipedia:
- Stochastic calculus
- Itō calculus
- Monte Carlo option model
- Stochastic volatility
- Quantitative analyst
- Fairmat: software intro
Some other places to look:
- Quantitative analysis primer (pdf)
- Algorithmic trading blog
- Quantlib: open source software
- Wilmott quantitative community (reg req'd)
- Quantitative analysis (amazon search)
The biggest issue is time. Until I can get to the point that I'm a full time trader, I can't sit around all day rediscovering my math skills in order to develop complex software systems. However, I might be able to spend some time looking into these ideas -- perhaps getting a book or two on the subject -- to see how they may fit into future trading efforts.
Minor BREAD Adjustments
The BREAD trading robot has had a minor tweak during this last weekend.
To make a long story short, another risk modification metric has been defined. If things work as planned this will give the robot the ability to trade over a wider currency pair price move.
Obviously, the plan is to simultaneously maintain the same level of profitability.
My initial readings on quantitative analysis, via forums, seem to indicate another insular pool of thinking. Unfortunately, it seems that ego often persuades people that their own area of expertise is the right area while other areas have nothing to offer.
Advice to any that will take it...
Find the important or valuable information without consideration of the source. Often, combining a few great insights from various fields (validly) will provide greater value than being very proficient at all the skills of a particular field. The real world often is not as simple as the assumptions made in order to perform calculations at the edge of the envelope.
To make a long story short, another risk modification metric has been defined. If things work as planned this will give the robot the ability to trade over a wider currency pair price move.
Obviously, the plan is to simultaneously maintain the same level of profitability.
My initial readings on quantitative analysis, via forums, seem to indicate another insular pool of thinking. Unfortunately, it seems that ego often persuades people that their own area of expertise is the right area while other areas have nothing to offer.
Advice to any that will take it...
Find the important or valuable information without consideration of the source. Often, combining a few great insights from various fields (validly) will provide greater value than being very proficient at all the skills of a particular field. The real world often is not as simple as the assumptions made in order to perform calculations at the edge of the envelope.
Tough Week All Around
With the recent downward move in the AUDJPY my robot has been sidelined.
No big deal really but it does point to a possible correlation as I'd noted earlier. After a very good robot week, perhaps with behavior characteristic of a local top and massive robot profit, the market takes a downturn. There are only two data points so far but I'm definitely staying on the lookout for this. Above average robot profits... be skeptical.
On another note, I contacted someone concerning proprietary trading last week. While I had suspected as much, the fact that my robot is willing to be a carry trader during downturns relegates it to the world of personal trading. So, sadly, my dreams of leaving the standard workforce have been delayed.
The biggest negative event is H1N1 making the rounds through my household. It's bad enough when I feel like crap but it's a lot tougher watching my son cough, wheeze and shiver.
Hopefully we'll be back to normal by Monday. I need to get around to making a better robot -- or at least one with different characteristics.
No big deal really but it does point to a possible correlation as I'd noted earlier. After a very good robot week, perhaps with behavior characteristic of a local top and massive robot profit, the market takes a downturn. There are only two data points so far but I'm definitely staying on the lookout for this. Above average robot profits... be skeptical.
On another note, I contacted someone concerning proprietary trading last week. While I had suspected as much, the fact that my robot is willing to be a carry trader during downturns relegates it to the world of personal trading. So, sadly, my dreams of leaving the standard workforce have been delayed.
The biggest negative event is H1N1 making the rounds through my household. It's bad enough when I feel like crap but it's a lot tougher watching my son cough, wheeze and shiver.
Hopefully we'll be back to normal by Monday. I need to get around to making a better robot -- or at least one with different characteristics.
Signals Blog Online
Just a short note to let you know that my new signals blog is online. Obviously this is a use at your own risk situation.
Anyway, when my robots notice various conditions they will post a message concerning the event in question.
The only notice type currently active may identify a situation that will either have a short term AUDJPY price rise offering a scalping opportunity or a longer term bottom situation if the pair is continuing an upward trend.
Anyway, when my robots notice various conditions they will post a message concerning the event in question.
The only notice type currently active may identify a situation that will either have a short term AUDJPY price rise offering a scalping opportunity or a longer term bottom situation if the pair is continuing an upward trend.
27 Ocak 2011 Perşembe
Da Signals
It takes a lot of fortitude to use them but I think the signals blog is proving itself useful.
For example, right now we seem to have established a bottom in the recent AUDJPY downward movement.
So, especially under such a condition, we get good results if we see a signal and then look for confirming behavior. Basically, the signals are great lead-ins to a period of analysis.
No, they aren't all useful. As you would expect there will often be signals that are simply useless. The key point is that you don't have to be watching the markets all day long to take advantage of signals. You can simply fire up the charts and issue a yes or no decision several bars after they arrive.
For example, right now we seem to have established a bottom in the recent AUDJPY downward movement.
So, especially under such a condition, we get good results if we see a signal and then look for confirming behavior. Basically, the signals are great lead-ins to a period of analysis.
No, they aren't all useful. As you would expect there will often be signals that are simply useless. The key point is that you don't have to be watching the markets all day long to take advantage of signals. You can simply fire up the charts and issue a yes or no decision several bars after they arrive.
AUDJPY Forecast
What the heck, I may as well jump out on a limb and let you know what I'm seeing with the AUDJPY.
Basically, if you look at the chart, we've had a good support line since the beginning of November.
Now, if I've got the right chart uploaded, take a look below:
Personally, I'd suggest taking a long position when the price approaches the support line. You can set a nearby stop and protect yourself from much by way of downside risk.
The only issue, for me, is that Sunday trading seems a bit wild at times.
UPDATE: Well, I hope somebody played the bounce...
It was worth it.
Basically, if you look at the chart, we've had a good support line since the beginning of November.
Now, if I've got the right chart uploaded, take a look below:
Personally, I'd suggest taking a long position when the price approaches the support line. You can set a nearby stop and protect yourself from much by way of downside risk.
The only issue, for me, is that Sunday trading seems a bit wild at times.
UPDATE: Well, I hope somebody played the bounce...
It was worth it.
Trading Week Recap
Since the trading robot, BREAD, was predominantly sidelined for the last couple of weeks I felt the need to do more discretionary trading.
While the capital used wasn't very large it felt great to pull in a 34% increase over the course of the week. If I could scalp like this all the time it would definitely spell the end of the day job. I have dreams of setting up a trading office with spacious rental cubes available for other traders. Rookie's trading pit.
Back to reality, BREAD on the other hand snailed along earning 2.4% and 1.7% over the last two weeks. Sometimes I think I live in Bizarro world when I have disdain for a 100% annualized rate of return...
In any case, I think the long tail of H1N1 recovery has finally come about. I should be able to concentrate both on my day job and on creating new robot strategies during evenings.
While the capital used wasn't very large it felt great to pull in a 34% increase over the course of the week. If I could scalp like this all the time it would definitely spell the end of the day job. I have dreams of setting up a trading office with spacious rental cubes available for other traders. Rookie's trading pit.
Back to reality, BREAD on the other hand snailed along earning 2.4% and 1.7% over the last two weeks. Sometimes I think I live in Bizarro world when I have disdain for a 100% annualized rate of return...
In any case, I think the long tail of H1N1 recovery has finally come about. I should be able to concentrate both on my day job and on creating new robot strategies during evenings.
AUDJPY: Support Becomes Resistance
My last post showed a profitable overnight setup based on a week long support line on the 1hr chart.
Here, I've got an example of a support becoming resistance once it has been violated.
Take a look at the following 15min chart:
See the violation around 9:00pm last night? As an aside, this was a good point to try a well protected short. Overnight we tested a longer term support line (see my previous two posts) which held.
Finally, notice that recently this previous support line held as resistance just before 6:00am. I do expect it to be violated as the longer term support held -- but obviously we'll have to wait and see.
Here, I've got an example of a support becoming resistance once it has been violated.
Take a look at the following 15min chart:
See the violation around 9:00pm last night? As an aside, this was a good point to try a well protected short. Overnight we tested a longer term support line (see my previous two posts) which held.
Finally, notice that recently this previous support line held as resistance just before 6:00am. I do expect it to be violated as the longer term support held -- but obviously we'll have to wait and see.
AUDJPY: Price Alert
Since I'm awake I thought I'd point out a price alert.
The AUDJPY currency pair is testing a support line.
A long tail break (closing on or above the support line) would still be a bullish sign.
Anywhere, here's a recent 1hr chart snip.
This is a good place to look for a trade. Good luck.
NOTE: See the previous post... it shows the support line valid since November 1st.
UPDATE: Upon waking this morning I see my take profit was hit and I managed to add 2% to my NAV while sleeping. Honestly, this is quite rare, but a good trendline (one that has been and does get honored again) gives you a well defined opportunity.
See how the violations are "tailed" and the line provides support? I got in at 83.21 at 12:38am and took profit at 83.70 at 5:35am. If I had of been awake I probably would have been nervous during the second testing after 3:00am.
The AUDJPY currency pair is testing a support line.
A long tail break (closing on or above the support line) would still be a bullish sign.
Anywhere, here's a recent 1hr chart snip.
This is a good place to look for a trade. Good luck.
NOTE: See the previous post... it shows the support line valid since November 1st.
UPDATE: Upon waking this morning I see my take profit was hit and I managed to add 2% to my NAV while sleeping. Honestly, this is quite rare, but a good trendline (one that has been and does get honored again) gives you a well defined opportunity.
See how the violations are "tailed" and the line provides support? I got in at 83.21 at 12:38am and took profit at 83.70 at 5:35am. If I had of been awake I probably would have been nervous during the second testing after 3:00am.
AUDJPY: Ominously Flat
I'm looking at a short term chart, but the lack of volatility suggests that something is in the air.
Even with the recent good news from China things have been relatively lethargic.
The daily chart is also showing the potential to have a few down days.
This seems like a good time to manage risk.
UPDATE: This evening, while I was on the road, I see that we had a nice spike upwards, hitting my take-profit points and leaving me flat. Nice.
Even with the recent good news from China things have been relatively lethargic.
The daily chart is also showing the potential to have a few down days.
This seems like a good time to manage risk.
UPDATE: This evening, while I was on the road, I see that we had a nice spike upwards, hitting my take-profit points and leaving me flat. Nice.
26 Ocak 2011 Çarşamba
AUDJPY: Signs Of A Bottom?
First, I have to warn you, I'm eternally bullish on the AUDJPY. This means I'm wrong on my predictions a fair amount due to my long term viewpoint.
With that said, I've noticed a chart sign that implies some possible upward movement.
Take a look:
It may not be easy to see, but notice how the recent tails, at 09:00, under the last few candlesticks did not project below the closing prices during a recent, at 03:00, previous low?
Up until now, for days now, we'd see the close of each new low at the level of the tails of previous lows. This doesn't mean we can't go further down -- especially during the Asian session. However, it does mean that we have the potential to be running out of downward pressure.
If so, whether it is short lived or not will depend on upcoming news and the impact this has on the sentiment of traders. As you know the political unrest in the US and the tightening in China has set the mood negative lately.
UPDATE: Boom. Instant downward movement to invalidate my sign. The fact it showed temporarily may hint at trend weakening. We do have a fair amount of gloom and momentum to work through.
UPDATE: It's now 23:00 and AUDJPY has just risen to just under 81.60 which would seem to suggest that downward pressure had indeed been flagging. Of course, nothing goes straight up or straight down... but trading 100+ point moves is rather nice.
With that said, I've noticed a chart sign that implies some possible upward movement.
Take a look:
It may not be easy to see, but notice how the recent tails, at 09:00, under the last few candlesticks did not project below the closing prices during a recent, at 03:00, previous low?
Up until now, for days now, we'd see the close of each new low at the level of the tails of previous lows. This doesn't mean we can't go further down -- especially during the Asian session. However, it does mean that we have the potential to be running out of downward pressure.
If so, whether it is short lived or not will depend on upcoming news and the impact this has on the sentiment of traders. As you know the political unrest in the US and the tightening in China has set the mood negative lately.
UPDATE: Boom. Instant downward movement to invalidate my sign. The fact it showed temporarily may hint at trend weakening. We do have a fair amount of gloom and momentum to work through.
UPDATE: It's now 23:00 and AUDJPY has just risen to just under 81.60 which would seem to suggest that downward pressure had indeed been flagging. Of course, nothing goes straight up or straight down... but trading 100+ point moves is rather nice.
AUDJPY: Oh Oh
While I've been talking about the cake being baked we've just done nice big double top over the course of October 2009 through February 2010 on the daily charts.
Obviously, this doesn't have to "fire" but it does invite a big panic drop to retest the July 2009 low of 70.75 or so. Considering today's rapid plummet of 300 points at this point who can say.
As I noted on my last post I do think people are being two pessimistic. However, they can panic and be pessimistic far long than I can stay solvent if I bet against them. Be careful out there.
Obviously, this doesn't have to "fire" but it does invite a big panic drop to retest the July 2009 low of 70.75 or so. Considering today's rapid plummet of 300 points at this point who can say.
As I noted on my last post I do think people are being two pessimistic. However, they can panic and be pessimistic far long than I can stay solvent if I bet against them. Be careful out there.
AUDJPY: The Cake is Baked
Well, the RBA just decided not to increase rates.
Recently, China decided to tighten up capital requirements for lenders.
Also, there has been talk of taxing or otherwise restricting carry trade activities.
Lest we forget, recent news in Australia is mixed.
The US market has been skittish.
Emerging markets have been very skittish.
So, what am I trying to say?
I'm thinking the cake is baked. You might want to let the dust settle from the RBA decision -- but I think we have become overly pessimistic. We are so pessimistic that all the bad news and presumptions of bad news should soon be baked into the price of the AUDJPY.
All we need now are some upside surprises...
UPDATE: It's thursday morning and we are having a nice panic day apparently due to a less than stellar jobs report. I think the panic is unnecessary but I do understand the lynchpin that is being attacked here. If jobs don't come back then how can the economy recover? However, I think they have it backwards, as we do see spending continue to recover, which should after a lag lead to jobs. Obviously, the market can stay irrational far longer than you can remain solvent, so don't jump in just because you have a long term belief (as I do).
I guess the cake is baking, but not yet ready to come out of the oven.
Recently, China decided to tighten up capital requirements for lenders.
Also, there has been talk of taxing or otherwise restricting carry trade activities.
Lest we forget, recent news in Australia is mixed.
The US market has been skittish.
Emerging markets have been very skittish.
So, what am I trying to say?
I'm thinking the cake is baked. You might want to let the dust settle from the RBA decision -- but I think we have become overly pessimistic. We are so pessimistic that all the bad news and presumptions of bad news should soon be baked into the price of the AUDJPY.
All we need now are some upside surprises...
UPDATE: It's thursday morning and we are having a nice panic day apparently due to a less than stellar jobs report. I think the panic is unnecessary but I do understand the lynchpin that is being attacked here. If jobs don't come back then how can the economy recover? However, I think they have it backwards, as we do see spending continue to recover, which should after a lag lead to jobs. Obviously, the market can stay irrational far longer than you can remain solvent, so don't jump in just because you have a long term belief (as I do).
I guess the cake is baking, but not yet ready to come out of the oven.
AUDJPY: Poised?
I don't have time to snip a chart or anything, however I'd suggest taking a few moments to analyze the AUDJPY.
What I see is the potential for a so-called "big W" on the 3 hour chart. You'll notice the right side of the W has a double bottom. If we do get the full "big W" we should see some dramatic upward movement over the week.
Fundamentally, inflation, employment and other indicators in Australia seem to indicate the need for the RBA to continue to increase rates. If any more hot growth news comes out prior to February we may see speculation on a 50 basis point increase instead of the widely expected 25 basis points.
In summary, look for a safe low-risk entry point if your analysis of the charts agrees (or even disagrees) with mine.
UPDATE: If you disagreed with me you'd be happy with this morning's (Jan 20) breakdown... though so far the next resistance point seems to have held.
What I see is the potential for a so-called "big W" on the 3 hour chart. You'll notice the right side of the W has a double bottom. If we do get the full "big W" we should see some dramatic upward movement over the week.
Fundamentally, inflation, employment and other indicators in Australia seem to indicate the need for the RBA to continue to increase rates. If any more hot growth news comes out prior to February we may see speculation on a 50 basis point increase instead of the widely expected 25 basis points.
In summary, look for a safe low-risk entry point if your analysis of the charts agrees (or even disagrees) with mine.
UPDATE: If you disagreed with me you'd be happy with this morning's (Jan 20) breakdown... though so far the next resistance point seems to have held.
AUDJPY: Profit Is My Density
No, that's not a typo. It's a rip-off of a line from the Back To The Future movie. Anyway, this post is another in the series of theoretical considerations with respect to various robot building strategies.
In this scenario let's consider fixing our maximum total position size across a specific price range. For example, perhaps we are willing to purchase 10000 units per 1000 pips (remember, I'm generally talking about small account sizes). For Oanda traders this will run you up to about $175.00 in margin.
If you want to limit your overall positions to 10% of your account capital then you'll have to ante up $1750.00 to play in that 1000 pip range. Obviously, a large account value will either give you a larger playing field or a higher density of positions if you don't expand the playing field.
Are you still with me?
I know, at this point things are pretty boring. In fact, we're looking at a simple grid that we can play every time price passes through our space. However, this gets a bit spicier if we can find a way to optimize the open and close activities.
For example, what if we can compress our position openings towards the low end of a short term movement? Similarly, what if we can compress our position closings towards the higher end of price movements within our price space?
If you have good ideas for these processes, then you are set!
My thought is to adjust the probability of closing profitable positions based on the amount of profit a position embodies. For example, perhaps a position with a 10 pip profit has a 1% chance of being closed while a 20 pip profit has a 5% chance of being closed -- per bar. What would this do to the expected profit per position? Are some probability formulas able to provide much better returns?
Remember, we're talking about trading a maximum density of positions while prices move through our trading space. We know our total position, our total risk, and simply want to allow our winners to run as much as we can based on historical price movement patterns. Basically, we know that prices range for a while and then take off up or down. It's the multi-day upward movement that we want to catch... letting go of positions slowly during smaller moves until we can eventually latch onto a bigger move.
I'm probably about 85% into building a new robot based on this concept. I like the measured aspect of this on the risk side. I like the less definable profitability expectation -- it's beyond my math skills at any rate -- which is suggestive of an ability to preferentially capture larger profits. I also like that it should continue to eek out smaller profits if the price decides to languish in a smaller range for some period of time.
Maybe I'll be able to fire this up on Monday.
In this scenario let's consider fixing our maximum total position size across a specific price range. For example, perhaps we are willing to purchase 10000 units per 1000 pips (remember, I'm generally talking about small account sizes). For Oanda traders this will run you up to about $175.00 in margin.
If you want to limit your overall positions to 10% of your account capital then you'll have to ante up $1750.00 to play in that 1000 pip range. Obviously, a large account value will either give you a larger playing field or a higher density of positions if you don't expand the playing field.
Are you still with me?
I know, at this point things are pretty boring. In fact, we're looking at a simple grid that we can play every time price passes through our space. However, this gets a bit spicier if we can find a way to optimize the open and close activities.
For example, what if we can compress our position openings towards the low end of a short term movement? Similarly, what if we can compress our position closings towards the higher end of price movements within our price space?
If you have good ideas for these processes, then you are set!
My thought is to adjust the probability of closing profitable positions based on the amount of profit a position embodies. For example, perhaps a position with a 10 pip profit has a 1% chance of being closed while a 20 pip profit has a 5% chance of being closed -- per bar. What would this do to the expected profit per position? Are some probability formulas able to provide much better returns?
Remember, we're talking about trading a maximum density of positions while prices move through our trading space. We know our total position, our total risk, and simply want to allow our winners to run as much as we can based on historical price movement patterns. Basically, we know that prices range for a while and then take off up or down. It's the multi-day upward movement that we want to catch... letting go of positions slowly during smaller moves until we can eventually latch onto a bigger move.
I'm probably about 85% into building a new robot based on this concept. I like the measured aspect of this on the risk side. I like the less definable profitability expectation -- it's beyond my math skills at any rate -- which is suggestive of an ability to preferentially capture larger profits. I also like that it should continue to eek out smaller profits if the price decides to languish in a smaller range for some period of time.
Maybe I'll be able to fire this up on Monday.
AUDJPY: A Change Of Mind
Finally, something has happened to lift the pall from the AUD/JPY market.
What happened? The Australian economy showed signs of heat. We have recent employment numbers that absolutely blew away expectations.
Apparently, today, the AUD/USD moved from a value that gave a 25% chance of a hike in march to a 50% chance of a hike in march.
Do you remember me talking about the need for a upside surprise to start movement off a possible bottom? In order to continue upward all we need is some nice stats from China and the lack of a new crisis of confidence.
There is a lesson in this -- as if you don't know this already.
When the world has given up and this has been priced in (baked in) there will be a good chance to grab an upside move. The employment report could have been traded by taking a position with a reasonable stop prior to release... if you thought employment was going to be strong (hopefully because you had insight or evidence instead of just raw gambling).
My insight offering would be that a ship the size of China doesn't turn around overnight just because of some tightening. Alternately, tightening credit in China with an aim to keeping growth at 8% or so isn't tightening in the same sense that we'd consider it in the western world.
This was an obvious and big miss...
What I see is an opportunity to figure out some of the blind spots that the big money has -- let them spend their powder moving the herd and then pick a good point to have their mistake revealed, such as Australian employment stats, and take a stop protected position on it.
What happened? The Australian economy showed signs of heat. We have recent employment numbers that absolutely blew away expectations.
Apparently, today, the AUD/USD moved from a value that gave a 25% chance of a hike in march to a 50% chance of a hike in march.
Do you remember me talking about the need for a upside surprise to start movement off a possible bottom? In order to continue upward all we need is some nice stats from China and the lack of a new crisis of confidence.
There is a lesson in this -- as if you don't know this already.
When the world has given up and this has been priced in (baked in) there will be a good chance to grab an upside move. The employment report could have been traded by taking a position with a reasonable stop prior to release... if you thought employment was going to be strong (hopefully because you had insight or evidence instead of just raw gambling).
My insight offering would be that a ship the size of China doesn't turn around overnight just because of some tightening. Alternately, tightening credit in China with an aim to keeping growth at 8% or so isn't tightening in the same sense that we'd consider it in the western world.
This was an obvious and big miss...
What I see is an opportunity to figure out some of the blind spots that the big money has -- let them spend their powder moving the herd and then pick a good point to have their mistake revealed, such as Australian employment stats, and take a stop protected position on it.
Weekend Notes
I've been through a lot of (non-trading) issues since I last wrote.
My family and I have moved halfway across the nation, we've gotten new jobs, and had to take care of a million minor items that occur when you relocate your life. Sorry for the lack of updates.
I have been doing a little manual trading here and there.
The AUDJPY has been failing in the 87.xx range for most of this month. Greece, Goldman Sachs and various other items are scaring risk takers while continuing signs of improvement placate them. I'm expecting an eventual spike once the 87.xx resistance is overcome -- so I'm very willing to open long positions when we pull back into the 83.xx, 84.xx or 85.xx zones.
On another note... trading seems to be getting "easier" as time goes by.
My family and I have moved halfway across the nation, we've gotten new jobs, and had to take care of a million minor items that occur when you relocate your life. Sorry for the lack of updates.
I have been doing a little manual trading here and there.
The AUDJPY has been failing in the 87.xx range for most of this month. Greece, Goldman Sachs and various other items are scaring risk takers while continuing signs of improvement placate them. I'm expecting an eventual spike once the 87.xx resistance is overcome -- so I'm very willing to open long positions when we pull back into the 83.xx, 84.xx or 85.xx zones.
On another note... trading seems to be getting "easier" as time goes by.
Topping Out?
It looks like the AUDJPY may be topping out. The following 15 minute chart shows a return to a previous high with something that could end up being a head and shoulders pattern emerging.
However, the 3 hour chart is showing a possible continuation and has been trending upwards for quite a while.
Open up your trading platform and choose your play...
Play safe!
However, the 3 hour chart is showing a possible continuation and has been trending upwards for quite a while.
Open up your trading platform and choose your play...
Play safe!
Return Of The Robots
Once again I am purely a robot trader.
Part of the reason is that my day job does not allow me to use company Internet or computing resources for the purpose of earning revenue. This is a sensible restriction even if my use would only have been to let me view charts and enter trades.
Now I use the Internet at work purely to watch how my robot is doing. I don't enter trades, I can't access or change the robot's behavior during the day, so really, I'm watching buy and sell events for entertainment purposes. As long as it isn't chewing up bandwidth or interfering with my productivity that is alright.
The latest incarnation of live robot is a bi-directional trader. The theory is that at any point in time prices are going to move in some direction for a while and then in the other direction. This back and forth movement will continue endlessly.
Conceptually, break the bi-direction robot into two unidirectional robots.
With that done, admittedly, it is possible that one of my robots will run out of ability to trade as the price moves a long way in the wrong direction. However, my other robot will be earning a profit during this time. Additionally, I am certainly able to manually reallocate resources between these two robots if and when conditions support the reversal of a large movement.
With the volatility of last week this reasonably cautious robot did fairly well. However, this robot isn't suitable for professional trading as it is allowed to hang onto negative positions for a long period of time.
Perhaps the most important aspect of this robot is the sound it makes whenever it closes a profitable position. Hearing the ka-ching sound whenever there is price movement up or down is very rewarding... as it happens so often.
Part of the reason is that my day job does not allow me to use company Internet or computing resources for the purpose of earning revenue. This is a sensible restriction even if my use would only have been to let me view charts and enter trades.
Now I use the Internet at work purely to watch how my robot is doing. I don't enter trades, I can't access or change the robot's behavior during the day, so really, I'm watching buy and sell events for entertainment purposes. As long as it isn't chewing up bandwidth or interfering with my productivity that is alright.
The latest incarnation of live robot is a bi-directional trader. The theory is that at any point in time prices are going to move in some direction for a while and then in the other direction. This back and forth movement will continue endlessly.
Conceptually, break the bi-direction robot into two unidirectional robots.
With that done, admittedly, it is possible that one of my robots will run out of ability to trade as the price moves a long way in the wrong direction. However, my other robot will be earning a profit during this time. Additionally, I am certainly able to manually reallocate resources between these two robots if and when conditions support the reversal of a large movement.
With the volatility of last week this reasonably cautious robot did fairly well. However, this robot isn't suitable for professional trading as it is allowed to hang onto negative positions for a long period of time.
Perhaps the most important aspect of this robot is the sound it makes whenever it closes a profitable position. Hearing the ka-ching sound whenever there is price movement up or down is very rewarding... as it happens so often.
FOREX (FOReign EXchange market)
Forex is an inter-bank market that took shape in 1971 when global trade shifted from fixed exchange rates to floating ones. This is a set of transactions among forex market agents involving exchange of specified sums of money in a currency unit of any given nation for currency of another nation at an agreed rate as of any specified date. During exchange, the exchange rate of one currency to another currency is determined simply: by supply and demand – exchange to which both parties agree.
The scope of transactions in the global currency market is constantly growing, which is due to development of international trade and abolition of currency restrictions in many nations. Global daily conversion transactions came to $1,982 billion in mid-1998 (the London market accounted for some 32% of daily turnover; the New York market exchanged approx. 18%, and the German market, 10%). Not only the scope of transactions but also the rates that mark the market development are impressive: in 1977, the daily turnover stood at five billion U.S. dollars; it grew to 600 billion U.S. dollars over ten years – to one trillion in 1992. Speculative transactions intended to derive profit from jobbing on the exchange rate differences make up nearly 80% of total transactions. Jobbing attracts numerous participants – both financial institutions and individual investors.
With the highest rates of information technology development in the last two decades, the market itself changed beyond recognition. Once surrounded with a halo of caste mystique, the foreign exchange dealer’s profession became almost grasroots. Forex transactions that used to be the privilege of the biggest monopolist banks not so long ago are now publicly accessible thanks to e-commerce systems. And the foremost banks themselves also often prefer trade in electronic systems over individual bilateral transactions. E-brokers now account for 11% of the forex market turnover. The daily scope of transactions of the biggest banks (Deutsche Bank, Barclays Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Chartered Bank) reaches billions of dollars.
The FOREX market as a place where to apply one’s personal financial, intellectual and psychic power is not designed for attempts at catching a bluebird there. Sometimes someone manages to do so but for a short time only. The key advantage of a forex market is that one can succeed there just by the strength of one’s intelligence.
Another essential feature of the FOREX market, no matter how strange it might seem, is its stability. Everybody knows that sudden falls are very typical of the financial market. However, unlike the stock market, the FOREX market never falls. If shares devalue it means a collapse. But if the dollar slumps, that only means that another currency gets stronger. For instance, the yen strengthened by a quarter against the dollar late in 1998. On some days dollar fell by dozens percentage points. However, the market did not collapse anywhere; trading continued in the usual manner. It is here that the market and the related business stability lie - currency is an absolutely liquid commodity and will be always traded in.
The FOREX market is a 24-hour market that does not depend on certain business hours of foreign exchanges; trade takes place among banks located in different corners of the globe. Exchange rates a`re so flexible that significant changes happen quite frequently, which enables to make several transactions every day. If we have an elaborate and reliable trade technology we can make a business, which no other business can match by efficiency. It is not without reason that the pivotal banks buy expensive electronic equipment and maintain the staffs of hundreds of traders operating in different sectors of the FOREX market.
The starting costs of joining this business are very low now. Actually, it costs several thousands of dollars to take a course of initial training, to buy a computer, to purchase an information service and to create a deposit; no real business can be established with this money. With excessive offers of services, finding a reliable broker is also quite a real thing. The rest depends on the trader himself or herself. Everything depends on you personally, as in no other area of business now.
The main thing the market will require for successful operations is not the quantity of money you will enter it with – the main thing is the ability to constantly focus on studying the market, understanding its mechanisms and participants’ interests; this is constant improvement of one’s trade approaches and their disciplined implementation. Nobody has achieved success in that market by forcing one’s way with one’s capital atilt. The market is stronger than anything else; it is even stronger than central banks with their huge foreign exchange reserves. George Soros, a national hero of the FOREX market, did not win the Bank of England at all, as many of us believe – he made the right guess that, with existing contradictions inherent in the European financial system, there were plenty of problems and interests that would not allow to hold the pound. That’s exactly what happened. The Bank of England, having spent nearly $20 billion to maintain the pound rate, jacked it up, by giving it in to the market. The market settled this problem, and Soros got his billion.
The global monetary system has gone a long way during thousands of years of the human history, but it is surely experiencing the most exciting and earlier unthinkable changes. The two main changes determine a new image of the global monetary system:
* the money is fully separated from any tangible media;
* powerful information and telecommunications technologies made it possible to consolidate monetary systems of different nations into the single global financial system that has no boundaries.
The scope of transactions in the global currency market is constantly growing, which is due to development of international trade and abolition of currency restrictions in many nations. Global daily conversion transactions came to $1,982 billion in mid-1998 (the London market accounted for some 32% of daily turnover; the New York market exchanged approx. 18%, and the German market, 10%). Not only the scope of transactions but also the rates that mark the market development are impressive: in 1977, the daily turnover stood at five billion U.S. dollars; it grew to 600 billion U.S. dollars over ten years – to one trillion in 1992. Speculative transactions intended to derive profit from jobbing on the exchange rate differences make up nearly 80% of total transactions. Jobbing attracts numerous participants – both financial institutions and individual investors.
With the highest rates of information technology development in the last two decades, the market itself changed beyond recognition. Once surrounded with a halo of caste mystique, the foreign exchange dealer’s profession became almost grasroots. Forex transactions that used to be the privilege of the biggest monopolist banks not so long ago are now publicly accessible thanks to e-commerce systems. And the foremost banks themselves also often prefer trade in electronic systems over individual bilateral transactions. E-brokers now account for 11% of the forex market turnover. The daily scope of transactions of the biggest banks (Deutsche Bank, Barclays Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Chartered Bank) reaches billions of dollars.
The FOREX market as a place where to apply one’s personal financial, intellectual and psychic power is not designed for attempts at catching a bluebird there. Sometimes someone manages to do so but for a short time only. The key advantage of a forex market is that one can succeed there just by the strength of one’s intelligence.
Another essential feature of the FOREX market, no matter how strange it might seem, is its stability. Everybody knows that sudden falls are very typical of the financial market. However, unlike the stock market, the FOREX market never falls. If shares devalue it means a collapse. But if the dollar slumps, that only means that another currency gets stronger. For instance, the yen strengthened by a quarter against the dollar late in 1998. On some days dollar fell by dozens percentage points. However, the market did not collapse anywhere; trading continued in the usual manner. It is here that the market and the related business stability lie - currency is an absolutely liquid commodity and will be always traded in.
The FOREX market is a 24-hour market that does not depend on certain business hours of foreign exchanges; trade takes place among banks located in different corners of the globe. Exchange rates a`re so flexible that significant changes happen quite frequently, which enables to make several transactions every day. If we have an elaborate and reliable trade technology we can make a business, which no other business can match by efficiency. It is not without reason that the pivotal banks buy expensive electronic equipment and maintain the staffs of hundreds of traders operating in different sectors of the FOREX market.
The starting costs of joining this business are very low now. Actually, it costs several thousands of dollars to take a course of initial training, to buy a computer, to purchase an information service and to create a deposit; no real business can be established with this money. With excessive offers of services, finding a reliable broker is also quite a real thing. The rest depends on the trader himself or herself. Everything depends on you personally, as in no other area of business now.
The main thing the market will require for successful operations is not the quantity of money you will enter it with – the main thing is the ability to constantly focus on studying the market, understanding its mechanisms and participants’ interests; this is constant improvement of one’s trade approaches and their disciplined implementation. Nobody has achieved success in that market by forcing one’s way with one’s capital atilt. The market is stronger than anything else; it is even stronger than central banks with their huge foreign exchange reserves. George Soros, a national hero of the FOREX market, did not win the Bank of England at all, as many of us believe – he made the right guess that, with existing contradictions inherent in the European financial system, there were plenty of problems and interests that would not allow to hold the pound. That’s exactly what happened. The Bank of England, having spent nearly $20 billion to maintain the pound rate, jacked it up, by giving it in to the market. The market settled this problem, and Soros got his billion.
The global monetary system has gone a long way during thousands of years of the human history, but it is surely experiencing the most exciting and earlier unthinkable changes. The two main changes determine a new image of the global monetary system:
* the money is fully separated from any tangible media;
* powerful information and telecommunications technologies made it possible to consolidate monetary systems of different nations into the single global financial system that has no boundaries.
Margin Trading System
A typical transaction amounts to $10 million in inter-bank trade. However, it is quite clear that such transaction values are not affordable for a private investor – well, at least to the overwhelming majority of them.
Involvement of small and medium investors in the Forex market was facilitated by intermediacy of dealing or brokerage companies. Medium and small investors have access to the global forex market in many nations, using the sums of money starting from $2,000 in their transactions. A dealing company provides its customers with a credit line – a so-called dealing leverage, or a credit leverage, that is several times as big as the deposit. Brokers providing margin trading services require that a pledge deposit should be contributed, and provide a customer with an opportunity of entering into forex sales and purchase transactions for amounts that are 50, 100 and sometimes even 200 times as large as the deposit made. The risk of losses is borne by the customer; the deposit serves as security hedging a broker. The system of operations through a dealing (brokerage) house, with a credit leverage, was called margin trading.
To put it simply, the essence of margin trading can be reduced to the following: by placing pledged capital, an investor becomes able to manage target loans provided against this pledge and to guarantee indemnification against any potential losses on open forex positions with the deposit.
As mentioned above, unlike with forex transactions with actual delivery or actual currency exchange, FOREX participants, especially those with little funds, make use of trading with an insurance deposit - margin trade, or leverage trade. In case of marginal trade, each transaction must consist of the two stages – purchase/sales of foreign exchange at one price, and then its compulsory sales/purchase at another (or at the same) price. The first action is called the opening of a position; the second is the closing of a position. Opening of a position is not accompanied with actual delivery of foreign exchange, and a participant that opened the position contributes an insurance deposit that serves as guarantee of indemnification against any possible losses. Upon closing of a position, the insurance deposit is returned, and profit or losses are calculated.
Any margin trading transaction must comprise two parts: opening of a position and closing of a position. For instance, when forecasting the euro goes up (looks up) vs the dollar, we want to buy a cheaper euro with dollars now and to sell it back when it rises in price. In this case, the transaction will look as follows: opening of a position – euro purchase; closing of a position – its sale. All the time until the position has been closed we have an “open euro position.” Just the same, when we believe that the euro will cheapen (look down) vs the dollar, our transaction will consist of the following steps: opening a position – sales of a more expensive euro; closing a position – purchase of a cheapened euro. Therefore, we are able to generate profit whether the exchange rate goes up or down.
You can enter FOREX through an intermediary only. A dealing center may act as such intermediary. This agency provides you with a (computer or telephone) communications channel with a broker who makes available forex quotations to you and through whom you can enter into transactions. You can also operate directly from your home PC through the Internet. The last option has been becoming increasingly more common recently. The prices you can see on your computer’s screen are prices of actual transactions at FOREX.
A customer concludes a contract with the company whereby the latter undertakes, at the customer’s order and in its own name, to enter into transactions. In this case, the company runs the risk of losses from entering into such transactions, so the customer deposits a certain sum of money with the bank as pledge. The amount of this deposit is determined based on the amount of transactions entered into by the bank and on the credit lever provided to the customer. If a dealing company makes losses from a concluded transaction, the investor becomes liable to it in the amount of this loss, and these liabilities are covered from the pledge deposit; if the company generates profit from a concluded transaction, it becomes liable to the investor in the amount of this profit. Generated profit is remitted to the customer’s pledge deposit. The customer’s order to the company to close an open position is a must; yet the company jobs with its own money. Otherwise the bank may close a long position with a short one, and the customer may sustain losses. The situations when cross rates change by more than two percentage points hardly ever happen in the global market, and losing his or her pledge is next to impossible if a customer jobs reasonably. If the bank’s dealer understands that potential losses, if the rate changes for the worse, might exceed the pledge deposit amount, the dealer can close a position independently, without waiting for the customer’s instructions, with losses not exceeding the pledge amount.
Margin trading appeals by its affordability. Investing funds into securities of the most developed foreign countries to generate any fixed income would hardly be interesting for our compatriots. U.S. Treasury bonds are surely the most reliable and stable, but, being very expensive, they have low yield (approx. 6% p.a.) and are the object of long-term investments. Shares generate higher yield; however, dividend amount is directly dependent on successful operations of any particular enterprise and its shareholders’ preferences. Share purchase for bull transactions seems more attractive but requires greater investments. Margin trading is free from the said limitations – you can sell and buy depending on your expectations, and 1%-3% of a transaction value will do to enter into the transaction.
Involvement of small and medium investors in the Forex market was facilitated by intermediacy of dealing or brokerage companies. Medium and small investors have access to the global forex market in many nations, using the sums of money starting from $2,000 in their transactions. A dealing company provides its customers with a credit line – a so-called dealing leverage, or a credit leverage, that is several times as big as the deposit. Brokers providing margin trading services require that a pledge deposit should be contributed, and provide a customer with an opportunity of entering into forex sales and purchase transactions for amounts that are 50, 100 and sometimes even 200 times as large as the deposit made. The risk of losses is borne by the customer; the deposit serves as security hedging a broker. The system of operations through a dealing (brokerage) house, with a credit leverage, was called margin trading.
To put it simply, the essence of margin trading can be reduced to the following: by placing pledged capital, an investor becomes able to manage target loans provided against this pledge and to guarantee indemnification against any potential losses on open forex positions with the deposit.
As mentioned above, unlike with forex transactions with actual delivery or actual currency exchange, FOREX participants, especially those with little funds, make use of trading with an insurance deposit - margin trade, or leverage trade. In case of marginal trade, each transaction must consist of the two stages – purchase/sales of foreign exchange at one price, and then its compulsory sales/purchase at another (or at the same) price. The first action is called the opening of a position; the second is the closing of a position. Opening of a position is not accompanied with actual delivery of foreign exchange, and a participant that opened the position contributes an insurance deposit that serves as guarantee of indemnification against any possible losses. Upon closing of a position, the insurance deposit is returned, and profit or losses are calculated.
Any margin trading transaction must comprise two parts: opening of a position and closing of a position. For instance, when forecasting the euro goes up (looks up) vs the dollar, we want to buy a cheaper euro with dollars now and to sell it back when it rises in price. In this case, the transaction will look as follows: opening of a position – euro purchase; closing of a position – its sale. All the time until the position has been closed we have an “open euro position.” Just the same, when we believe that the euro will cheapen (look down) vs the dollar, our transaction will consist of the following steps: opening a position – sales of a more expensive euro; closing a position – purchase of a cheapened euro. Therefore, we are able to generate profit whether the exchange rate goes up or down.
You can enter FOREX through an intermediary only. A dealing center may act as such intermediary. This agency provides you with a (computer or telephone) communications channel with a broker who makes available forex quotations to you and through whom you can enter into transactions. You can also operate directly from your home PC through the Internet. The last option has been becoming increasingly more common recently. The prices you can see on your computer’s screen are prices of actual transactions at FOREX.
A customer concludes a contract with the company whereby the latter undertakes, at the customer’s order and in its own name, to enter into transactions. In this case, the company runs the risk of losses from entering into such transactions, so the customer deposits a certain sum of money with the bank as pledge. The amount of this deposit is determined based on the amount of transactions entered into by the bank and on the credit lever provided to the customer. If a dealing company makes losses from a concluded transaction, the investor becomes liable to it in the amount of this loss, and these liabilities are covered from the pledge deposit; if the company generates profit from a concluded transaction, it becomes liable to the investor in the amount of this profit. Generated profit is remitted to the customer’s pledge deposit. The customer’s order to the company to close an open position is a must; yet the company jobs with its own money. Otherwise the bank may close a long position with a short one, and the customer may sustain losses. The situations when cross rates change by more than two percentage points hardly ever happen in the global market, and losing his or her pledge is next to impossible if a customer jobs reasonably. If the bank’s dealer understands that potential losses, if the rate changes for the worse, might exceed the pledge deposit amount, the dealer can close a position independently, without waiting for the customer’s instructions, with losses not exceeding the pledge amount.
Margin trading appeals by its affordability. Investing funds into securities of the most developed foreign countries to generate any fixed income would hardly be interesting for our compatriots. U.S. Treasury bonds are surely the most reliable and stable, but, being very expensive, they have low yield (approx. 6% p.a.) and are the object of long-term investments. Shares generate higher yield; however, dividend amount is directly dependent on successful operations of any particular enterprise and its shareholders’ preferences. Share purchase for bull transactions seems more attractive but requires greater investments. Margin trading is free from the said limitations – you can sell and buy depending on your expectations, and 1%-3% of a transaction value will do to enter into the transaction.
FOREX » RISK WARNING
High Risk Investment
Margined Currency Trading is one of the riskiest forms of investment available in the financial markets and is only suitable for sophisticated individuals and institutions. An account with PFG Inc. permits you to trade foreign currencies on a highly leveraged basis (up to approximately 100 times your account equity). An initial deposit of $1,000 will enable the account holder to take a maximum position with $100,000 market value (please note that the minimum required to open an account is $2000.00). The funds in an account trading at maximum leverage can be completely lost, if the position(s) held in the account has a one percent swing in value. Theoretically, an account could lose more than the equity it contains, if the account is trading at maximum leverage and positions held in the account swing more than one percent in value. Given the possibility of losing one's entire investment, speculation in the foreign exchange market should only be conducted with risk capital funds that if lost will not significantly effect one's personal or institution's financial well being.
Market Opinions PFG Inc.
Any opinions expressed by representatives of PFG Inc. as to the future direction of prices of specific currencies are purely opinions, do not necessarily represent the opinion of PFG Inc., and are not guaranteed in any way. In no event shall PFG Inc. have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided verbally or via the Internet, or any delays, inaccuracies, errors in, or omissions of information.
Internet Trading Risks
In addition, there are risks associated with utilizing an Internet-based deal execution trading system including, but not limited to, the failure of hardware, software, and Internet connection. Since PFG Inc. does not control signal power, its reception or routing via Internet, configuration of your equipment or reliability of its connection, we cannot be responsible for communication failures, distortions or delays when trading via the Internet. PFG Inc. employs back up systems and contingency plans to minimize the possibility of system failure, and trading via telephone is always available.
Margined Currency Trading is one of the riskiest forms of investment available in the financial markets and is only suitable for sophisticated individuals and institutions. An account with PFG Inc. permits you to trade foreign currencies on a highly leveraged basis (up to approximately 100 times your account equity). An initial deposit of $1,000 will enable the account holder to take a maximum position with $100,000 market value (please note that the minimum required to open an account is $2000.00). The funds in an account trading at maximum leverage can be completely lost, if the position(s) held in the account has a one percent swing in value. Theoretically, an account could lose more than the equity it contains, if the account is trading at maximum leverage and positions held in the account swing more than one percent in value. Given the possibility of losing one's entire investment, speculation in the foreign exchange market should only be conducted with risk capital funds that if lost will not significantly effect one's personal or institution's financial well being.
Market Opinions PFG Inc.
Any opinions expressed by representatives of PFG Inc. as to the future direction of prices of specific currencies are purely opinions, do not necessarily represent the opinion of PFG Inc., and are not guaranteed in any way. In no event shall PFG Inc. have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided verbally or via the Internet, or any delays, inaccuracies, errors in, or omissions of information.
Internet Trading Risks
In addition, there are risks associated with utilizing an Internet-based deal execution trading system including, but not limited to, the failure of hardware, software, and Internet connection. Since PFG Inc. does not control signal power, its reception or routing via Internet, configuration of your equipment or reliability of its connection, we cannot be responsible for communication failures, distortions or delays when trading via the Internet. PFG Inc. employs back up systems and contingency plans to minimize the possibility of system failure, and trading via telephone is always available.
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