Morning spent reading and learning afternoon once the markets open will be spent trading. A few interesting things I learned today that may be worth trying out over the course of the week.
• Watch Market Volume. As volume increases, so will volatility. This is a great time to catch a moving trend – When volume is averaging higher. This is also a great time to lose your shirt, so extra caution must be exercised during times of increased market volume. Don’t use intraday charts for comparing volume averages. Try 1 hour charts for this, or longer. One recommended approach suggested using ‘the 27% rule’. This means that when volume increases by 27%, a position size is reduced. Once the volume increase hits 40% the position is fully exited. The idea is that as volume increases, so will volatility, and therefore the chances of sustaining losses are much higher. Futures Magazine also recommended taking the opposite approach on the other end – when volume decreases by 27% to increase your position size, and to continue increasing the position size 20% for every 10% decrease in volume. This sounds like the strategy of a more long-term trader than me and I am unsure if it would work with my system, nonetheless I am going to be watching and utilizing volume indications to better correlate volatility and movement with my positions.
• Although I have heard much about it before and it is a widely used trading strategy, one technique I want to try to play with this week is scaling into positions. Rather than making an initial purchase of my entire position, I’m going to try it in half’s. Enter half of my position (say 2 lots on a 5 lot order) and once my directions is confirmed after a correct directional movement of 5-10 pips, enter the trade with my remaining lot order. One thing I am also planning on experimenting with is to use this same strategy on exit orders. Once the take profit order hits, I will exit the trade with half of my position I will hold the remaining half and reset my stop/loss orders at that time. I will set the loss end to be my profitable exit point for the first half, and will set a new take profit higher to let half the position ride. This way, I will still be stopped out at my same 50 Pip profit order regardless, but will also open myself to gaining potential larger returns from some momentum trades to generate more revenue and minimize the impact of losses.
• I also need to be more aware of the correlation of different currencies and how they affect each other. A different article I read today made me more aware that even though I may have 4-6 open positions at any given time, I may not be truly diversified because of the way the global economies’ can work in tandem. This is an action item for me: To better plot and correlate how movement of one currency affects another. This is something I have only a little grasp on currently.
• Another action item for the week is to set up a monthly calendar with all scheduled pertinent news releases. I also need to be aware of all reports that are released which will affect my trading, and which will not, so I may be more aware of the sectors I am investing in.
Sunday, July 25, 2010
Friday, July 23, 2010
Friday, July 23 Trades - -3.25% Loss
3.25% Loss
My first big losing trade of the week happened today. It was such a large loss, my 6 other profitable trades didn’t make up for it, but rather only dampened the effect. If I am holding a 50/200 pip spread for my exit orders, in theory every 4 winning trades should average out to a zero profit for one looser. I got stopped out at my 200 pip limit order. My loosing order was 10 lots and the rest of my trades today were 5 lots, so technically it’s like I won six trades and lost two. A 6:2 ratio averages out to be a 3:1. Therefore they didn’t calculate out to my 4:1 ratio and I took the loss. I still made quite a few profitable trades but the day came up being a loss because the markets closed for the weekend and I ran out of time to trade up into the profitable zone again. At least I was able to minimize the impact loss by averaging it out with profitable trades. I learned today that this is an averages game. I need to play the numbers and averages to my advantage to win. This means in the future I will keep all orders equally sized, and no more than 80% of my account equity to be tied up in trades at any given time. This means no single order should take up more than 27% of my account equity. It is the weekend now, so I’m going to relax, enjoy thoughts of having a very profitable week in the market, and forget about trading until Sunday evening.
Despite the loss for today, only traded 4 days and made a total of a 9.66% Profit this week!
Suck it Wall Street!
Not a bad week. I’m looking forward to replicating those results next week.
Thursday, July 22, 2010
Thursday, July 22 Trades - +3.7% Profit
7/22/2010
3.7% Profit!
If you make a 3% daily return, this means you can double your capital every month. This means $5,000 invested, after six months would turn into $28,600! 1% a day will double your money every three months. This is the goal: To average 1% profit each day.
Today was another good day. That makes 5 profitable days in a row. I learned today that I must better calculate take profit orders before placing them. I made that mistake while shorting the USDNOK currency pair. This caused me to unnecessarily be stopped out at a loss, all the while the price dropped quickly into the profitable zone. This should have been a 100% profitable day. I would negate this trade, but if this were my live system I would have lost that cash from my pocket for such a mistake. Therefore I will be including everything in my analysis. First month of testing is complete in a week. Once I have 6 months of profitable results, the real fun begins…
Wednesday, July 21, 2010
Wednesday July 21, 2010 +5.28% Profit
7/21/10
5.28% Profit!
Continuing to use a 50/200 Pip Stop-Profit for my trading which held true again giving me all winners today. I will give this another go tomorrow. My system is becoming consistently profitable generating almost a 30% return in a week’s time. Now the trick will be to maintain these returns and do everything possible to minimize losses.
Tuesday, July 20 2010 +3.93% Profit
7/20/2010
3.93% Profit!
Got off the regular job early today so I decided to spend the time making more trades to get a more well rounded idea of how my system is shaping out. And its looking great! Made 10 trades with only one being a looser. I have adjusted my Take profit from 20 Pipe to 50 Pips and have reduced my stop loss to 200 Pips. This was a successful strategy giving my orders enough room to move before executing. I will try this again tomorrow and see if it may be viable to my money management.
7/13/2010 +3.32% Profit
7/13/2010
3.32% Profit!
Still experimenting with Stop Losses. I am getting quite good at identifying correct trends. I need to continue to focus on the financial management side of my system.
3.32% Profit!
7/6/2010 -40% Loss
7/6/2010 
40% Loss! OUCH!
The 5th and 6th were major looser days. Such heavy losses that I took almost two weeks off. I get far too emotional when I take losses. I sustained such heavy losses from falling asleep with out setting up proper stop losses. This is something I need to play with and adjust – Stop Loss and Take Profit orders, or im going to be out of money in no time.
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