Thursday, October 20, 2011

Triple Convergence with trends

The order of the day is to reduce reduce reduce. But never more than necessary. I find the most common theme running through effective systems are the use of Triple Convergence trends. Take the obvious element, direction. Which way are we going. Often times we seek out the largest time frame and hone in on it.

But this is missing the point. It is not where we have been, it is where we are going that matters. We also need to consider the stagnation of trend. One of the best ways to observe this is through divergence. 

  • Divergence comes mainly from oscillators. But of course they are merely reflecting the king of all indicators, price itself. Higher highs and lower lows are the foundation of a trend, and divergence will demonstrate immediately if the trend is in agreement with current price or if it has stalled. 

  • On a fractal level each and every completed bar, regardless of time frame. Surely by now it is obvious to anyone with any sense that markets are infinitely fractal and this fact shall never change. It is immutable as price trends itself. 
So here you have the symmetry, the undeniable theory that viable systems are based off of a triple convergence of 3 things, price, the tenor of trend and the fractal behavior of price intervals. With these three elements under control in your trading, the only thing preventing your system from making news highs is YOU! Good trading my friends.

Saturday, October 15, 2011

VPS Forex Solution

A lot of brokers these days offer VPS or Virtual Private Server solutions for their account holders. The idea is pretty simple. If your Metatrader 4 platform is on a stable internet connection and computer, your automated trade strategies will not suffer disconnects or fail to execute in market conditions which are faster than a mere human can execute in.

I think it's important to compare apple to apples in this case. Most brokers who offer VPS service offer you the smallest possible package. Your server space will be crowded to the gills and it is possible, although unlikely, that your signals will still reach their trade server slowly. Workstations can get overloaded just the same as your own pc. So it is prudent to take all risk factors into consideration. After all, what is the sense of simply transferring risk from your PC to a VPS? Your aim should be to reduce it as much as possible.

I prefer to use VPS providers completely off the map. Small and responsive to each and every customer.

Even if you are not trading an automated EA strategy, a VPS can provide you with an added backbone of security and execution efficiency. Reduce your risk.

I have set up my current Forex accounts with Hostwinds VPS. Downtime is non-existent and the customer service is extremely responsive. Mainly because the company is so tiny. I wonder if recommending a VPS provider for Forex accounts is really such a wise idea in this day and age of hyper-competition to stay ahead of the pack in execution and risk management. Nonetheless, I think there is quite a bit of healthy room for this boutique VPS  provider to grow into a formidable service provider. It is safe to say this recommendation won't affect my bottom line anytime soon.

Give them a try. If you sign up through me with the COUPON CODE: meantrade,  you can get 25% off your first payment. You can sign up for a month or a year and you will get the same percentage discount. In addition if you should find that their Forex VPS solution is not for you, they offer a 60 day no questions asked refund. So no reason not to give it a try today.

   Coupon Code: meantrade

Trend Trade

Ok so I went evangelical last week and made a fool of myself without posting any proof that I have been, yes, trend trading.

So here it is. The newest intraday trend method.

Pay close attention because this is a pretty powerful method.

First and foremost, you have to trade with constant range bars. Do not even think that this will work as well on a standard intraday chart. You will get chopped to bits and blast me as a system serialist. Which I probably am, but this is really not the case this time.

Second you need two ways to mark the intermediate trend. I have chosen Supertrend and a rather quirky rsi like indicator named after its creator the YangTraderMain.

The settings I use on the constant range bars are based on a 24 hour ADR rating (Average daily range). For example, EUR/GBP had a range of about 97 pips yesterday. if you divide 97 by 24 you get almost 5 pips an hour. So I would trade EUR/GBP with 5 pip constant range bar.

The settings on Supertrend are 10 period and the multiplier 1.5. This is very similar to an ATR rating but there is some updated voodoo. This is probably one of the most popular revisions on the moving average crossover because it integrates the crossover with a measure of volatility. Which is pretty much the foundation for robust trend trading methods.

The bars should be set on OHLC not candlestick. This is extremely important to determine entry and stops. The stop method employed here is a huge advantage over any other stop method I have attempted before.

Since it's so important, let's start with stops then.

Take the swing high prior to the signal and place a horizontal line 1 pip beyond this  level. If price trades at this level AND BEYOND. Do not exit. Not yet. Wait. Yes, wait. Wait for a OHLC bar to CLOSE outside this horizontal line. Occasionally a bar will OPEN outside this level but it will trade back into the range. This is the precisely why this stop method is so useful. It allows you to take a slightly larger loss by waiting to see if the market makers are simply blowing stops and mean reverting or if the market has really broken out. I should mention that this stop method is extremely risky using time based bars. A close of a time based bar gives you no measure of volatility. A 5 minute bar could be 1 pip or, as in the case of  EUR/CHF a few weeks ago HUNDREDS!

This is only a few trades. I still cannot get over how well AUD/JPY trends. The range is phenomenal. Yesterday it signaled for more than 175 pips and still going. Sweet Moses!

Entries are a much tamer affair and probably familiar to most trend traders. Price should close in the direction of the Supertrend indicator. The price bar should also close in the direction of the supertrend. In addition, the yang trader must be signalling with the trend as well.

I particularly like the staggered effect that Yang trader creates. There are quite a few signals which you should not even consider taking. Think of them more like a divergence indicator than a directional indicator. Once all 3 of these factors are in sync, a trade should be entered.

Now, normally we would use targets. But with trend trading, there are so many reasons why we shouldn't trade in this manner. There is just so much profit to be made in the trades you EXPECT to reverse at 20 pips and they drip drip drrrrrrrrrrrrrrip on for another 100 leaving you to do nothing but bank pips the whole session. This is the ONLY part of trading which gives you an edge. Predictive methods just cannot compare to this kind of trading. They will lose over the long term if left on their own. I should mention something that I have felt for quite a while. I honestly believe Fibonacci, Gann, MurreyMath, Astrology, etc. work well. BUT they do not work because of some secret order to the universe. They simply work for the same reason that trend trading fails for short periods of time. Markets revert to the mean. Randomly mark horizontal lines on a chart and trade your method based on them. I have discovered that for a short period of time, they will outperform almost any world famous support and resistance level. This includes daily pivot points. This is not a knock on support and resistance trading, it is just a fact and it still justifies trading in this method, but trend trading just makes more money over the long term.

So we trail our entries.

The trailing stop, at least for now, until I find something more ideal, will be the pip difference between the swing high and the entry.

That's it.

I would recommend you trade the less volatile pairs at the beginning. This system needs to be watched for the stops as we cannot enter a firm price in the market. But once you are in profit, just walk away and wait for the next Supertrend crossover.

This week profits have been good if not great. I made about 350 pips on 4 pairs. Maximum price excursion was running at about 45% of gains. That is, prices went against me about half as much as profits. This is primarily due to a few big trends on Monday. I would expect this to revert more towards a negative mean over time. Mainly because we are trailing exits. The frequency of small gains will outweigh the occasional meaty loss.

Good trading.


For a while now I have been eyeing this site with no more than a passing curiosity. The time has come though to mention this undeniably good deal they are offering. Sign up with your normal broker, the list of partners is quite long and most are very well established, and get rebates on your trades.

No artificially inflated spreads, no re-quotes, nothing but what you normally get with your broker.

I thought for sure it would be a way for a middle man to get their hands on my spread and just make it even more difficult to trade profitably.

Nothing could be further from the truth. Cashbackforex has become a broker of brokers. They create so much free press for their broker list that the brokers are happy to pass on the rebates.

I signed up with FinFx for personal reasons although they are probably not the best choice for most as they are not regulated in the EU. But their execution is flawless. I mean spot on to the micro-pip flawless. I have not had a single requote or suspect spread widening the entire time I have been with them. There have been a few who said that they did suffer some excessive spread widening which caused their EA's to go a bit haywire but FinFX promptly credited their accounts no questions asked.

Your mileage may vary and you might require someone more established in the broker biz, but this is the one for me at present.

They even allow you to sign up with previously existing accounts which you opened up direct with the broker.

What is there to lose?

Take a look at the comparison between the most popular brokers at Cashbackforex and see how much more money you can make if you sign up here.


Thursday, October 13, 2011


It might be a little late in the year for a book review on seasonal trading but I'm pretty excited to have discovered this.

Did you know there is an entire field of forex market research entirely devoted to finding historical dates where prices moved in binary patterns of either a bullish or bearish fashion? I was pretty startled to discover these patterns were often 100% historically accurate.

Talk about an edge.

The problem is this year in the forex markets it has failed MISERABLY. It has been so consistently wrong that I think there is an options strategy hidden within. Create a covered call to collect the interest paid by the +swap and walk away with a huge gain in the option you sold.

You can take a look at the historical accuracy of the system in the book faithfully published by Jeffrey Hirsch and family for god knows how many years. Historically speaking, the theory has considerable merit but this year would have been a blood bath.

This years edition could go down in history as one of the best arguments for black swan trading ever.

Wednesday, October 5, 2011

Trend Trading Intraday

I probably drank something to make me so batty about trend trading lately but I think I have finally found something worthwhile to pursue in real-time trading. An amalgamation of hours and hours of screen time. Employing every subtle filter for price action I have seen these variable elements only seem to add to the hit ratio increasing in my favor. Over the coming days I will begin to post some of these trades and eventually the evolving method. My mean reverting tendencies have finally begun to evolve into trending price action.

It's not the first time I have said this, but I believe it's the last:

I'm on to something.
96 pips of something