Friday, September 19, 2014

Today's Signals 9/19/14

So far only two signals:

Buy USD/CHF .9350 or lower
Buy USD/CAD 1.0965 or lower

Stops are based on an hourly close BELOW the swing low at the time of the the signal.

September has returned with welcome volatility

After what has been a shockingly sludgy market, September has seen volatility expansion to the Forex markets with a bang.

Here are the pip totals so far with 2 weeks of trading said and done.

EUR/USD no trades
GBP/USD +212
AUD/USD +114
EUR/JPY +171
GBP/JPY +198
XAU/USD +231
OIL +272

Most gains were primarily set up on Tuesday the 16th, which was a FED speaking day. It's encouraging to see that the FED announcements are once again causing markets to move.

*Please note, all trades are taken off the meantrades hourly system applying a daily supertrend filter to determine which trades to exclude and which trades to take.

**No position sizing modifications were made for these pip totals. If one were to consider position sizing modification, the first trade after the daily supertrend filter would be a full sized position while each additional trade taken in the same direction as the established daily supertrend would be a half size position. This is necessary in a low volatility environment where waiting for the supertrend cross to exit would create extremely small gains as the price behavior in such an environment, contrary to expectations, does not trend well at all. It is in the truest sense of the word, a mean reverting environment.

Wednesday, January 23, 2013

Forex System Development Consulting

I now offer consulting for those who are finally at the systems development phase of their trading journey. Most are looking for a good system which is just the entry phase of becoming a trader.

The next phase requires that you adapt what you have learned until that point into a personalized version of how you see the markets trading.

It took me a good 5 years into my trading development before I began to realize this massive difference.

All the great books on trading will tell you the same thing. One of the Market Wizards is famous for saying that he could give his exact profitable system to 10 people and some of them would still lose money.

With this in mind, I offer my 12 plus years experience in Forex and Futures trading to those who are ready to  take the next step.

If your system is viable, I can even code it for you in EA format.

I will watch you trade and give important technical and psychological feedback every step of the way. I enjoy the path which trading allows one to discover about themselves and I would like very much to help you as well.

You can always contact me on skype at mezameo for more details.

Happy trading

Wednesday, October 10, 2012

Anemic Volatility

Here we are into the homestretch of the trading year and volatility is frighteningly anemic. Meantrades just doesn't perform well on an intraday basis without those sharp swings between support and resistance. Taken about a 20% hit the past 2 weeks and am considering waiting it out a few days, even weeks, until the volatility returns. I feel fortunate I can see a link between the system results and a precise metric. However it still does not change the fact that market conditions are not ideal for a system which buys volatility.

Until I see a decent uptick in the 3 month ATMF volumes, I am going to trade the weekly version of meantrades where at least I know the markets can trend long enough to see some gains.

Thursday, September 6, 2012

Keeping the switch on

Looking back at the previous post so many months ago I am pleasantly surprised at how much my attitude towards automation has changed. Since the end of June I have been on an automated version of my system and the results have been nothing if not impressive. Some takeaways over the past few months in my transition from mechanical manual trading to automation include:

  • Accepting drawdowns with a more passive attitude. The roll-out of the EA conincided with a technically poor Forex market. There was no volatility or serious volume coming into the market this summer--which is to be expected with many large traders off for the summer months. However I kept the controls on and sat passively while the system took it's lumps. It was perhaps the first time ever in my trading career where I allowed my account equity to drop without any attempt at hedging or removing stops. Ironically I feel I have grown as a trader by becoming less involved in my actual trades.

  • Having a healthy expectancy. By knowing how meantrades has performed in the past, keeping the switch on during drawdowns enables me to avoid missing the huge upswings in account equity. At the moment my expectancy is only around 1.3 for every dollar risked. Most long term systems tend to float around 1.5 to 2 for really huge returns. There are a few considerations on the lower expectancy such as trailing supertrend exits too closely during flattening volatility in the Asian session. Widening the supertrend stop as well as taking Friday afternoons off are two of the ideas I am toying with currently. Generally speaking though, 1.3 is enough for things to get very interesting in the long term. Currently meantrades is running at about 60% accuracy on the 3 markets I am trading everyday (those are EUR/USD, GBP/USD and the cfd for oil). I am thinking like a trend trader on this matter and would probably like to tighten the stops more, reduce the drawdown and get larger returns less frequently. All in due course. For now it's about keeping the switch on and maintaining a healthy expectancy.

Wednesday, May 23, 2012

Weekly Meantrades

The past few weeks have been nothing short of frustrating. Automation with constant range bars on Metatrader 4 seems futile. With a single disconnect from the brokers server, the constant range bars are immediately scrambled and thus any reversal patterns are suspect. Somehow this had me thinking about how I can get this very decent system called meantrades running without a hitch. I came up with a version which uses 240 minute and 60 minute bars.

The only major difference (there is one minor variation however) between this system and the constant range bars version is that it is restricted to only 1 profitable trade a week. "Profitable trade" as in it will enter up to 2 unprofitable trades in the same direction per week. This is similar to the intraday meantrades which only takes two consecutive unprofitable intra-day trades in the same direction.

The results thus far are quite respectable. Considering the time invested versus return on capital, the weekly version of meantrades is a better deal for smoothing out the all important equity curve.

I realize these numbers probably seem absurdly high and I am just as skeptical as anyone else would be. But it's been backtested for several years and all trades are based on a closed bar basis so it is pretty hard to fudge the results.

Currently the XAU/USD weekly version of meantrades is running at 75% for the year with a total of 698 pips employing a trailing stop. With a fixed 100 pip target it's coming in at 871 pips. Let's say we are in June already, since we cannot take another trade until next week, that is a very tough return to beat of 145 pips per month trading no more than 1 winning trade per week.

The results for the EUR/USD market are also quite respectable. Coming in at 69% for the year trading only once a week the supertrend exit works out to 963 pips thus far while a fixed exit of 63 pips has yielded a return of 335 pips. Winning percentage is based on a total of 26 trades so far this year.

I initially set out on this discovery using the AUD/USD. My thinking was that somehow if I ever got around to getting meantrades automated I should probably try it out first on some less volatile pairs. I have never traded AUD/USD seriously as it seems rather dull market. In fact it's almost as profitable as any other market I looked at. The results came in as follows: 70% winners out of 27 trades taken. Most impressive are the drawdowns to achieve profitability. The market just seems to trend better than others when applying the lens of meantrades. Average losing trade was 67 pips while the average winning trade was 55 pips. This is the only serious issue for me trading less frequently. The average winner is normally larger than the average loser in a robust system. However when you are applying a trailing stop methodology for exits, the out sized returns of just a handful (or even a single yearly trade) can outpace the averages quite easily. As the Black Swan movement has attested to, the market does not reward those who seek the average return on equity as a benchmark, it obliterates them every few years with massive crashes and bubbles. I'm not a fund manager and I'm not seeking an average return so I will keep doing what I'm doing until something comes along which makes more sense.

For now, meantrades with trailing stops seems like the best way for me to trade these volatile and incredibly profitable markets for the foreseeable future.

Some of the inner workings for setting up the weekly meantrades method:

  • The ratio levels need to be set off of the first 4 hour bar of the week or the second bar. This is slightly subjective in that I prefer to use the smaller of these two bars, unless it is just too small a range. In that case I will use the first 4 hour bar regardless of how large it is.
  • Stops are usually an hourly close beyond the swing high of the trade entry. However in some cases this bar closes inside the Keltner bands (even though it is outside the highest high or lowest low for the trade setup). It is best not to take the loss until price has also violated the Keltner bands. There have been many cases where price makes a minor new high or low inside the Keltner bands only to reverse immediately. 
Here is the only trade currently open with Weekly meantrades. An EUR/USD short currently sitting at +110pips. Stops are already at break even since price has already touched the opposite Keltner band from where the trade originated (as per the original rules of meantrades).

Wednesday, April 4, 2012

Trending or Ranging? Stops or Cost averaging? Zero loss trading? Wake the fuck up.

There are a few basic unanswerable questions in intraday trading. Is the market trending or ranging? Do I use hard stops or average in? Has the market volume dried up for the day? Only the left side of the chart can give any clues. I've tried at various times to achieve some semblance of a complete system. One which avoided the draw-downs necessary in institutional standard systems popular in the trading community but I have never succeeded in achieving any level of certainty about my trading.

Last week I modified one of my basic exit criteria from using swing high extreme price levels to relying on a very good but nonetheless, delayed indicator called "supertrend." This resulted in disaster for my account. Instead of having a fixed stop loss range in place (because fills can be dubious in the forex world), I was giving myself back to the fate of the markets. Huge fuck up. Markets don't "respect" indicators. They are just tools to help confirm what you are already positioning for. Once you let indicators decide your sole entry and exit you are fucked and feeble. That's not trading, that's more like tossing a chinese star in the air with your bare hands below it. A bad idea set in motion. Sometimes I wish I had a very close trading ally. Perhaps this is why most great traders don't actually pull the trigger, they have clerks who do the "dirty work" for them.

March was a decent month. I only traded 2 weeks but came out with a 20% return on equity. Very pleased. But then I went and messed with a sound risk metric, employing "supertrend" as a stop loss rather than simply a trailing stop. This caused me to give it all back to the market. Back to humble pie for me grandma.

In addition to battle tested methods of meantrade, I have always been focused on finding a way to trade ORB (opening range) breakouts on the same chart as reversals. I finally discovered that using a trailing indicator such as the cci, stochastics or rsi on a larger time frame as a directional indicator of the current market (yes, still a lagging metric but trends tend to persist in forex for at least a few hours which is all I need to take profits on a weekly basis) creates very robust breakout trading opportunities on my constant range charts. I have been using 10 pip ranges for both my EUR/USD and GBP/USD charts as of late as I find the market is as whippy as ever and the 20 crb's were giving back far too many pips.

I am now taking the pre-London range as my two trade levels (long and short). I only trade in the direction of the 4 hour indicator (in this case the 4hr reading of the CCI should be above the 0 level). The results are not bad. With this method it enables two trade opportunities per market per day. If the market breaks out I can enter at first break and if it pulls back to a trade level I am watching, I can enter for a nice reversion trade. Now I have both sides of a good market on my radar and on the same chart. This is somewhat encouraging for me as I was often sitting staring at the screen waiting for a meantrades setup to occur while the market just takes off without any retrenchments. Not a particularly useful way to trade the forex market these days.

So I will take this massive hiccup in stride. I will stay the course, I won't take this as an indication that I have failed once again. But a very sound reminder that I have a decent system, which works but requires that I take my medicine. And everyone knows a traders medicine is their stop loss.