Trading is difficult sometimes

I hadn't realised that it is nearly 2 months since I commented here, so an update is obviously overdue.

I've found trading over this time to be particularly difficult.  The markets are changing every day, and although I am a fan of Elliott Wave analysis I am having difficulty with establishing the direction that any pair is heading.  Communication with associates seems to support my view, but perhaps we all think that the market is ALWAYS getting harder to understand.

I'm still very bearish on the direction of my favourite pairs - GBPJPY, EURJPY, and AUDUSD - but the frequency of my trading has dropped off considerably.   Now I'm looking for more analysis and research on each decision, which is a double-whammy because I'm working harder and making less trades!

Of course I could look at this as an 'education' thing, as we all need to be learning at all times, but it's a bit frustrating when a lot of due diligence comes up with a worse result.

Meanwhile, the profits are still rolling in, albiet slowly.  I've tweaked my 'method' a few times and more minor adjustments are in the works, but meanwhile, slow and steady small advances is the answer.

It wasn't my fault

I don't like losing.  I've said this before, but a few losses lately have really upset me.

And now I've discovered that the 'errors' are not my direct fault.  Let me explain:  As clients come and go in my Managed accounts, I've done dozens of re-proportions to involve clients in trades at the risk levels they've indicated, and to share the returns accordingly.  The last two re-proportioning exercises have been very complex, with multiple trades open, some with unrealised losses, and some with unrealised profits, and where some clients are adding funds, and some are de-allocating from their balance.

I've discovered that the action of re-proportioning has a few flaws, and in these last two events, we ALL lost money un-necessarily.  Staff at OANDA are looking into the matter, but initially they say I changed a setting (which I didn't).

Anyway, from now on, I'm only going to re-proportion when all trades are closed.  Sometimes this may be weeks or months apart.  Expect this please, and don't add money that you will need in the short-term.

Due to human error, a transaction has occurred that resulted in a loss.

I am considerably upset at this as it represents the first substantial loss, for any of the accounts that I manage, in the last 6 months.

It was during a re-proportioning phase when I was incorporating new Client money into the Managed Pool, as well as de-merging money for 2 Clients, that I chose the wrong option to do this re-proportioning and inadvertantly closed all the open trades in one of my managed accounts.  These trades were in a drawdown situation whilst I was awaiting a pullback in the currencies, and I had no intention of closing them at that point in time as I was anticipating that those trades would have subsequently recovered to a profitable position.  The net effect, however, is that there has now been a substantial loss incurred in that account.

As you will be aware I have increased my Client's accounts steadily since we started, and I have proven that my trading methodology is relatively risk-free (except for the human errors!), and I believe it will continue to be a very profitable methodology in the future.

I intend to continue trading, and I am incorporating a few fail-safe features so the human-error component of my money management is effectively eliminated.

Once again, I apologise for this error.

Since that error, there have been developments on the money markets of the world that caught me by surprise.  I have always attempted to trade with a '5 year worst case loss' built into my trading methodology, but recent rumours in the press, panics amongst forex traders, and (imho) incorrect decisions by the Banks and Governments of the major financial pairs, have all combined to make the market the most unstable that I have ever seen it.

I am doing my best to stay sane (and profitable) whilst everyone else is losing their minds, but this is definitely the craziest market that I have ever seen.

Currency Pairs traded

I've been following a lot of different pairs since I started with FOREX, but the one I like most is GBP/JPY.

Every pair has it's moments when it seems 'predictable', but I find GBP/JPY to be very 'stable' as well, and also returns more-per-move than the others.  What I mean here is that when the market decides the price should go up or down, it usually goes up or down further with GBP/JPY than with any other pair I've followed.

Therefore most of my trades this last year have been in GBP/JPY, although I still use 2 other pairs.

Also, as you can see in this table, I'm also nearly always being pessimistic, in that I think the pair is going to fall in value, so nearly all the trades are SHORT, rather than LONG.

Bring on the collapse!

Update on Holding Times for trades

I've discovered errors in the formulae that I was using in my records spreadsheet, and fixing those errors means the published table of 'Length of TIME for each closed Individual Trade' is incorrect.

Here is the corrected table, as at the end of yesterdays trading.

Some of the trades are still a bit long!

Interest

It doesn't seem fair to be paying so much interest, as well as giving the brokers all those pips in the spreads, but there really isn't much choice.

This table shows the totals since I started the current collection of statistics, and the most surprising fact to me is that there are so many separate interest calculations.   I wouldn't want to be doing all the necessary paperwork by hand!

Luckily, OANDA's system works it all out.

Pips Gained (or Lost) per week

Another statistic I keep is to measure the number of wins and losses per week by pips gained or lost, and by whether or not the trades were long or short.

This allows me to keep all accounts on track for steady profits, without excessive peaks and troughs.  The peaks are OK, of course, because that's better-than-average profit, but when trading is slower, I start to worry that I'm not doing the right thing for my clients.

Here is the latest table of pips gained (or lost) per week:

I'm quite proud to say that there has only been one 'losing' week, by this way of counting, and that was when I stuffed up.  I was very tired and it was very late and my brain obviously wasn't in gear when I decided to put trailing stops on some open trades that were losing at the time.  When I do that on an MT4 platform, it isn't effective until the trade is in profit, but I forgot that on the OANDA platform, the trailing-stop is effective immediately, so a small retracement spat me out!

So I still know that my trading method works, giving steady returns each and every week!

Win-Loss ratios

One of the statistics I keep from my trading is the number and percentages of winning trades and losing trades.

I always try to win of course but sometimes, it just doesn't happen.  This table shows the breakdown of the figures for the most recent week, and also since I started keeping this record, in October 2009.

As you can see, the record shows that I'm 'doing alright!', but actually I'm very disappointed with these figures, because they would've been much better if I hadn't listened to some nay-sayers a few months ago.

At that time I was talked into trying a different approach to trading, and it reflects here, because at the end of week 30, the SINCE START figures were 790 (99.62%) wins, and 3 (0.38%) losses!

This 'set-back' had 2 effects on my trading - one was to bring DOUBT into my decision-making, and the other was to add to STRESS levels, which none of us need!

But don't worry, I'm ignoring the nay-sayers again, and trading 'my way'.

Lately the opportunities do seem to be a bit less obvious, but it'll get better!

Image is everything!

It's very frustrating trying to portray a true picture of my trading that will give Clients a fair and honest view of the risks, the rewards and the timing aspects of Forex trading.

As a manager of other-peoples-money, I am always trying to do the right thing by ALL my clients, but individuals have their own agenda, and try as I might, most of the time I can't convince some of them to see the 'big picture'.  This is especially true when Clients want to take money out when the trades are in a drawdown overall, which is obviously the wrong time to withdraw money because doing so converts UNREALISED losses into REALISED losses.

To see the real effects on both the individual and the manager's position of withdrawals, have a look at OANDA's explanation of 'Reproportioning' in the User Guide for Managers on this URL page:
http://fxtrade.oanda.com/forex_trading/fxmanager/

To make a long story short, Reproportioning creates interim buys and sells to merge or de-merge the Client's money from the 'pool' of managed money.  Only the Client instigating the reproportioning is affected by the re-arrangement of the open trades.  Most Clients don't even know that the trade has changed in any way, but the Client who closes-out can suffer a large loss if this is done at the wrong time.

Why I'm referring to this now is because companies like myfxbook (which I think is doing an excellent service for us all) uses the raw data from brokers like OANDA (and they are also the best in my opinion) to display charts and statistics, and because the interim reproportioning trades are identified the same way as my real trades, the results shown by myfxbook are misleading.  That affects my image!

The following two graphs are from myfxbook, showing the 2 public accounts I manage through OANDA.

I just HAVE to point out that during the last two months or so, I've made 154 actual trades and there has been only one loss, and that was only $0.64 !

In other words, the graphs show big losses that WEREN'T FROM MY TRADING.  As I initially said, it's very frustrating ...

Holding time for trades

**** this was edited for errors, see later post on 1 September 2010 ****

I'm continually being asked why I hold some trades for a very long time, rather than use a stop-loss procedure to minimise drawdowns.  The short answer is that it is just part of a winning 'formula'. 

My trading records show that I close over 84.5% of my trades within the same day that I opened them.  Another 3.4% are closed within the next day.  Therefore I consider myself to be a short-term trader, rather than a 'hold-and-pray' trader.

The problem is that when I show average trading times, such as in this table below, the few longer trades bias the results so much that the figures are nearly meaningless.

I'm still searching for a better way to show the average length of trades, that doesn't distort the facts.

Meanwhile you can see a breakdown of my trading results on myfxbook:

http://www.myfxbook.com/members/unclebigpete

myfxbook shows the details of my three managed accounts at OANDA.  The oldest account is private, but you can join either of the other two.  Just email me on peter@douglas.id.au, and I'll send you the 'paperwork'.

Meanwhile, happy trading!

Return on Capital

I think that return on capital is the most important factor of any trading method/style/scheme.

And everything should be measured in percentages, as the actual dollars involved aren't important. This type of thinking allows me to trade large amounts exactly the same way as small amounts, without fear or nerves getting in the way!

This graph is a combined total of the three managed accounts I have at OANDA.  I started this graph on October 15th, 2009, when I only had one account (with a few private clients), and since then I started the other two managed accounts (and these are open for anyone to join).

Because this is a combination of 3 accounts, note that not all monies is available to be committed to each trade, so there are 2 lines on the graph - the cumulative returns of the available bank, and the cumulative returns of the total bank.

The distance between the green squares indicates the number of trades I made in one of these accounts each week.  This graph covers 1,142 trades, over 43 weeks.  There have been some 'slow' trading periods - like the recent past - but overall I'm averaging nearly 7 trades per day.

Single trade returns

Those who know me personally will know that I don't like losing, especially money!

That's one of the reasons I've tried so hard to develop a trading methodology that results in lots of profits, and very few losses.  It's over a year since I (effectively) settled on a way to trade with  a high 'sleep-at-night' factor.

And I'm still tweaking it, as this graph of my last 1,142 trades shows:

If you know where to look, you'll see several distinct periods, where I used take-profit closes rather than manual closes, or where I tried stop-losses rather than trust my research/skill/diligence etc.

And the human-error trades show up, such as where I closed a losing trade when I was trying to open a new trade!  Those who know me will also remember how much stomping and yelling I did when that happened!

Trading frequency

I get regular comments about 'overtrading', so I thought I'd publicise my recent trading details.

This is a table of my trading since mid-October 2009.  

As you can see, I've averaged just short of 7 trades per day, but I don't trade every day as I'm trying to have a life, too!

When I trade, I use several chart scales to assess the market.  The trading decisions are based on the trend (which I get from the 4hr or Daily charts), and I drill down through the smaller timeframes to the 5 second chart to find the best entry and exit points.

I'm watching for patterns, such as Elliott Waves, and I also use the RSI, MACD and Stochastic indicators to time my entry/exit.

Some weeks, the market moves very predictably, so I get a lot of trades, but sometimes it's so unstable that trading really drops off.   That's one reason I think that it is always better to publish long-term statistics, so that the good times and the bad times are accounted for.

Welcome to my FOREX blog

Welcome to my trading 'group'.  I trade on the Foreign Exchange market using my money, and I also trade several accounts for other people who are clients with OANDA.  I also manage other accounts that are not with OANDA.


I'm from Brisbane, Australia, and have many many years of trading experience, including Stocks and Options, but I am really in love with Currency Trading!  


My trading results are private, but I can show some details, as per the following chart.  


This is a recent combined summary of three OANDA accounts I manage, showing the Weekly Return on Bank (since 15th October, 2009, as a percentage of the available bank at the commencement of each week)

If you are a client of OANDA, I'm able to take you on as a Client, all you have to do is have your account with OANDA's FXTrade, and then join my FXManager account(s). You need to accept/agree to the fee structure (which may change in the future, but is currently 25% of the profit from each trade), and then deposit/transfer/allocate money to my/your FXManager account (there is no minimum).

To be an OANDA client is independent of my 'Managing', so you need to have an OANDA FXTrade account.  So this is the first step - contact OANDA and get an account with their FXTrade platform.