Fast and Furious Trading
In this week BKT Weeks Video, Boris Schlossberg continued his discussion on the 10 pips strategy. This link (Fast and Furious Trading) will direct you to his YouTube video.
His rules are as follows:
1. Look at 5 min charts - on EUR/USD and USD/JPY
2. Sell 2nd candle close above 2nd SD Band (for Sell Trades) or close below 2nd SD Band (for Buy Trades). Exception is 00 and 05 level.
3. Trade on all sessions using EUR and JPY
4. 10 pips stop; 7 pip limit
There are some interesting observations:
1. Boris stressed that this is not a strategy that can be automated. So, he believes that if someone designs an EA on this strategy, it will fail as there is discretion as to whether the rules should be implemented.
2. This is not a Holy Grail. There will be losing trades. I have personally observed the strategy and interestingly, it is more likely than not making money.
3. In this version, Boris did not cover the use of GBP/USD although in his video last week, he said GBP/USD may be incorporated into this system to improve the equty curve of the entire system.
2009-03-28
2009-03-21
Winning by Losing
by Kathy Lien and Boris Schlossberg of GFT Forex
"The key to succeeding in trading is to lose well. It doesn't matter if you are a die hard fundamentalist who thinks that chart reading is akin to astrology or an unrepentant technician who thinks that all news flow has less value than celebrity gossip. Every great trader I ever met knew how to control risk which is simply a polite way of saying that they knew how to take losses.
Of course losing is not what every newbie trader focuses on. Everybody wants to win big. Everybody approaches trading as though it was a lottery not a business. I am always amused by new traders who email me for the next 10 point trade and the next one and the next one after that thinking that the FX market is like a massive ATM machine. Those traders usually have a shorter shelf life than a half eaten apple.
On the other hand, traders that approach the market with a much more cautious attitude tend to do better. They soon learn that in trading losing is the only variable that you can control. Winning is frequently a function of luck, but losing is always a matter of skill.
Everybody hates stops. What's even worse is to be stopped two, three, four times in a row. In a debate between tight stops and wide stops I used to always hear "You don't want to die a death of a thousand cuts!" Well actually I do. After years of trading I came to the conclusion that tight stops will keep me in the game. I may be bloodied, I may be hobbled but I will remain alive to trade another day. In a choice between taking many small measured stops versus a few very large ones I will always choose the former because large stops can frequently turn into catastrophic losses, and much as it is unpleasant to lose money, it is always easier to recoup a series of small losses rather several huge ones.
Recouping is what trading is actually all about. Everybody who begins trading envisions an ever climbing equity curve that builds with the consistency of a weekly paycheck. Nothing can be further from the truth. In reality trading is always the act of giving money back to the market and then trying to claw it back.
Trading is tough precisely because it is so brutal. Unlike a job that pays us even if we are sick or distracted or simply not in the mood to do our best, trading promises you nothing. You lose, you don't eat. That's why I have such enormous respect for those traders who make their living solely from the market. They are the gladiators of modern finance and the ones that survive always know how to take a stop. The rest of us must learn those skills.
The need to build wealth through trading is greater now than at any time in the past 50 years. Does anyone who is 40 or younger believe that Social Security will pay them anything? How about your decimated 401K plans that are likely to range trade for the next 10 years as stocks cycle much like they did in the 1970's? Bonds? Good luck trying to fund your retirement with 2% yields.
Bottom line is that in the next decade trading may be the only avenue left to build wealth with your savings. That's why it is more important than ever to master key principle of the game - in order to win in trading you must learn how to lose properly."
What a timely reminder to many aspiring traders who think that traders have easy life and trading is as simple as ABC. Also, this article serves to reiterate that professional traders approach trading in a completely different way compared with amateurs. Professional traders always deal with the risks and profit target is the second. In this case of Kathy and Boris, they always talk about hitting T1 and move the stop to breakeven, and let the remaining lots do what they are supposed to do. They make they make. They don't make, it's fine. At least risk has been removed after hitting T1.
That's why I subscribed to their mode of trading completely, and it makes perfect sense to me. So, if one feels that forex is an ATM machine, and he can learn the tricks by attending courses but no practices after that, he may wish to spend to money to buy me kopi instead.
by Kathy Lien and Boris Schlossberg of GFT Forex
"The key to succeeding in trading is to lose well. It doesn't matter if you are a die hard fundamentalist who thinks that chart reading is akin to astrology or an unrepentant technician who thinks that all news flow has less value than celebrity gossip. Every great trader I ever met knew how to control risk which is simply a polite way of saying that they knew how to take losses.
Of course losing is not what every newbie trader focuses on. Everybody wants to win big. Everybody approaches trading as though it was a lottery not a business. I am always amused by new traders who email me for the next 10 point trade and the next one and the next one after that thinking that the FX market is like a massive ATM machine. Those traders usually have a shorter shelf life than a half eaten apple.
On the other hand, traders that approach the market with a much more cautious attitude tend to do better. They soon learn that in trading losing is the only variable that you can control. Winning is frequently a function of luck, but losing is always a matter of skill.
Everybody hates stops. What's even worse is to be stopped two, three, four times in a row. In a debate between tight stops and wide stops I used to always hear "You don't want to die a death of a thousand cuts!" Well actually I do. After years of trading I came to the conclusion that tight stops will keep me in the game. I may be bloodied, I may be hobbled but I will remain alive to trade another day. In a choice between taking many small measured stops versus a few very large ones I will always choose the former because large stops can frequently turn into catastrophic losses, and much as it is unpleasant to lose money, it is always easier to recoup a series of small losses rather several huge ones.
Recouping is what trading is actually all about. Everybody who begins trading envisions an ever climbing equity curve that builds with the consistency of a weekly paycheck. Nothing can be further from the truth. In reality trading is always the act of giving money back to the market and then trying to claw it back.
Trading is tough precisely because it is so brutal. Unlike a job that pays us even if we are sick or distracted or simply not in the mood to do our best, trading promises you nothing. You lose, you don't eat. That's why I have such enormous respect for those traders who make their living solely from the market. They are the gladiators of modern finance and the ones that survive always know how to take a stop. The rest of us must learn those skills.
The need to build wealth through trading is greater now than at any time in the past 50 years. Does anyone who is 40 or younger believe that Social Security will pay them anything? How about your decimated 401K plans that are likely to range trade for the next 10 years as stocks cycle much like they did in the 1970's? Bonds? Good luck trying to fund your retirement with 2% yields.
Bottom line is that in the next decade trading may be the only avenue left to build wealth with your savings. That's why it is more important than ever to master key principle of the game - in order to win in trading you must learn how to lose properly."
What a timely reminder to many aspiring traders who think that traders have easy life and trading is as simple as ABC. Also, this article serves to reiterate that professional traders approach trading in a completely different way compared with amateurs. Professional traders always deal with the risks and profit target is the second. In this case of Kathy and Boris, they always talk about hitting T1 and move the stop to breakeven, and let the remaining lots do what they are supposed to do. They make they make. They don't make, it's fine. At least risk has been removed after hitting T1.
That's why I subscribed to their mode of trading completely, and it makes perfect sense to me. So, if one feels that forex is an ATM machine, and he can learn the tricks by attending courses but no practices after that, he may wish to spend to money to buy me kopi instead.
2009-03-18
Trading 'expert' ordered to refund fees
I am sure many folks in Singapore are bombarded with the recent case of Dr. C who was successfully sued by a group of students. See this Link.
The basis of the claim lodged by the complainants is that Dr. C misrepresented to them on his qualification. Is it a joke? Yes, at least to me. When a self-proclaimed options guru markets his course, the participants relied only on his academic qualifications. Well, there is a big difference between academic qualifications and practical / experience qualifications.
Lecturers (or nka Assistant Professors) are all assumed to have at least Doctorate Degree, and it is a requirement. Do they necessarily possess practical experience? Not really. They need to be exposed to the development outside the campus in order to understand what the heck it is going on in the world. Having a paper qualification is good but it does not mean that this person is an expert.
If we all respect trading as a business, and is a skill we need to practise in order to get better and better, we just have to do and learn from someone who does it professionally and day in day out. Learning trading from a PhD will give us very good textbook knowledge. In this case, of course, I have the privilege to speak to Dr's classmates many years ago and understand his background and his trading journey. From what I was told, I did notice immediately that this guy is going to be in trouble one fine day. It's just a matter of time. Why? It's because when he is teaching someone options, he does not even bother (or should I say he knows?) talking about volatility and Greeks. He simply asked his students to have "faith" on him (btw, what faith is he talking about?). He also taught my good friends a 911 strategy which clearly does not make any sense as he did not reveal the entire risk of making that particular adjustment.
On the brighter side, without him in this market for the last few years, options won't be a popular subject at all. Most of my friends would probably not wake up and still live in the dream of knowing the so-called most powerful strategy in the Planet, which after I had a chance to look at it, is merely a pure gambling on direction without regard to volatility at all.
So, Dr. , you have done a few good deeds. Kudo to you! Salute!!
I am sure many folks in Singapore are bombarded with the recent case of Dr. C who was successfully sued by a group of students. See this Link.
The basis of the claim lodged by the complainants is that Dr. C misrepresented to them on his qualification. Is it a joke? Yes, at least to me. When a self-proclaimed options guru markets his course, the participants relied only on his academic qualifications. Well, there is a big difference between academic qualifications and practical / experience qualifications.
Lecturers (or nka Assistant Professors) are all assumed to have at least Doctorate Degree, and it is a requirement. Do they necessarily possess practical experience? Not really. They need to be exposed to the development outside the campus in order to understand what the heck it is going on in the world. Having a paper qualification is good but it does not mean that this person is an expert.
If we all respect trading as a business, and is a skill we need to practise in order to get better and better, we just have to do and learn from someone who does it professionally and day in day out. Learning trading from a PhD will give us very good textbook knowledge. In this case, of course, I have the privilege to speak to Dr's classmates many years ago and understand his background and his trading journey. From what I was told, I did notice immediately that this guy is going to be in trouble one fine day. It's just a matter of time. Why? It's because when he is teaching someone options, he does not even bother (or should I say he knows?) talking about volatility and Greeks. He simply asked his students to have "faith" on him (btw, what faith is he talking about?). He also taught my good friends a 911 strategy which clearly does not make any sense as he did not reveal the entire risk of making that particular adjustment.
On the brighter side, without him in this market for the last few years, options won't be a popular subject at all. Most of my friends would probably not wake up and still live in the dream of knowing the so-called most powerful strategy in the Planet, which after I had a chance to look at it, is merely a pure gambling on direction without regard to volatility at all.
So, Dr. , you have done a few good deeds. Kudo to you! Salute!!
2009-03-16
Common Flaws found in Free Breakout Forex System
I have been a big fans of forex breakout system because it is a no-brainer and is fairly easy to implement. It is also uncommon that one can find breakout trading systems free in the internet.
This is an example:
Let me give you an example:
Suppose you have a set-up to buy EUR/USD
EP - 1.2959
PT - 1.3059
SL - 1.2859
Risking 100 pips for 100 pips profit (or RRR 1:1)
Some people will place the system diligently without asking any further questions. Some "smarter" ones will tell you that you should check the range - if it is 80pips or more, the set-up fails. So, you will ask "why 80 pips or more?" You get a response that it has been backtested.
While I found all these craps in the internet, we at the same time realize that market conditions do changes. So, we must be nimble and adaptive to the changing market conditions.
Have you ever wondered that EUR/USD can make 200 pips daily move consistently since last month? This was definitely not the case in 2008. So, relying on 80 pips as a gauge is a complete disregard of the current market conditions. Anyone talking about 80 pips does not know what he is doing.
To be in a better position, ask yourself what's the opening price for EUR/USD say at 5:00pm EST. Suppose the opening price is 1.2800. You roughly know that given a 200 pips average daily move on this pair, hitting a PT of 1.3059 is challenging as the estimated high will only be 1.3000.
You will also realize that different pairs/ crosses have different average daily move, which is something you need to know. As we are getting more experience as a forex trader, this is definitely a relevant question to ask. You will realize that not all set-ups can give us the best bang for the buck. This means that we have to think whether we should still take that trade.
See, this is something you may not find in free websites. However, you realize that you now know this relevant issue by reading my blog. It is easy, isn't it?
I have been a big fans of forex breakout system because it is a no-brainer and is fairly easy to implement. It is also uncommon that one can find breakout trading systems free in the internet.
This is an example:
*******************************************
-Determine the 08.00 – 12.00 GMT (0:00am to 4am EST) High Low on EUR/USD and GBP/USD
-Determine the 12.00 – 16.00 GMT High Low on EUR/USD and GBP/USD
-Set Buy Stop at High + 5 pips and SellStop at Low - 5 pips for both time frames and both currencies.
-Set Target Price at entry + 80 pips for EUR/USD and entry + 120 pips for GBP/USD
-Set Stop Loss at entry - 50 pips for EUR/USD and entry - 70 pips for GBP/USD.If the other side of the breakout is within 50 pips for EUR/USD or within 70 pips for BP/USD then the Stop Loss will be that level.(Longtrade:
SL = Low range - 5 pips = Sell Stop; Short trade: SL = High range + 5 pips = Buy Stop)
-Move the SL to breakeven after a gain of 30 pips for EUR/USD and a gain of 40 pips for GBP/USD.
-If a certain position is taken and price turns against you and it breaks the other side of the breakout channel then turn. If the breakout channel is broader then the stop loss first the stoploss will be hit. If the breakout channel is narrower then the stoploss then hitting the other side means that you have to turn your position.There is only one turn per time frame possible .
-At 24.00 CET all orders expiring and close all trades at market On Friday we do the same at 23.00 CET.
Note :
6 – 10 CET or 8 – 12 GMT
10 - 14 CET or 12 - 16 GMT
********************************
Sound easy to implement, huh? However, contrary to free information, no one seems to discuss a big flaw in this type of trading system.Let me give you an example:
Suppose you have a set-up to buy EUR/USD
EP - 1.2959
PT - 1.3059
SL - 1.2859
Risking 100 pips for 100 pips profit (or RRR 1:1)
Some people will place the system diligently without asking any further questions. Some "smarter" ones will tell you that you should check the range - if it is 80pips or more, the set-up fails. So, you will ask "why 80 pips or more?" You get a response that it has been backtested.
While I found all these craps in the internet, we at the same time realize that market conditions do changes. So, we must be nimble and adaptive to the changing market conditions.
Have you ever wondered that EUR/USD can make 200 pips daily move consistently since last month? This was definitely not the case in 2008. So, relying on 80 pips as a gauge is a complete disregard of the current market conditions. Anyone talking about 80 pips does not know what he is doing.
To be in a better position, ask yourself what's the opening price for EUR/USD say at 5:00pm EST. Suppose the opening price is 1.2800. You roughly know that given a 200 pips average daily move on this pair, hitting a PT of 1.3059 is challenging as the estimated high will only be 1.3000.
You will also realize that different pairs/ crosses have different average daily move, which is something you need to know. As we are getting more experience as a forex trader, this is definitely a relevant question to ask. You will realize that not all set-ups can give us the best bang for the buck. This means that we have to think whether we should still take that trade.
See, this is something you may not find in free websites. However, you realize that you now know this relevant issue by reading my blog. It is easy, isn't it?
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