Diversification in Forex

June 12, 2009

The week is coming to a close (already!). It started off (mon, tue, wed) with strong trending, then yesterday and today (thu, fri) we had some whipsaws in some pairs, maybe due to some news about the upcoming G8 meeting this week-end ? All in all, here is our winner for the week, GBPJPY at +400 and our loser for the week (in terms of open trades) GBPUSD currently at –115 (but closed at +231 earlier) along with GBPCHF at -29. You can see gbpusd whipsawed.



EURGBP is also still showing good strength at close to +200 and USDCHF which came close to crossing but continued its down-movement, currently at +35. GBPAUD fooled around a bit on Wednesday and Thursday, but seems to be back on track at +58.

Some of you are trading just one pair, others a few pairs and others all pairs. The important thing is to keep all pairs going in your observation platforms. Since you’ve got 10 pairs showing you if they’re biased one way or the other, you’re benefiting from diversification which is as important in forex as elsewhere. This also helps in developing an eye for correlations and influences by some pairs on others and can enlighten your decisions about exits or moving SLs.

I wish all a peaceful week-end and hope to see you back Sunday evening !

Why are my trades different from yours ?

June 11, 2009

You'll sometimes notice small discrepancies between 2 platforms. These are due to any of several factors for which we can't do much.

You'll notice that some trades are sometimes omitted because of error messages or other technicalities like your broker doing maintenance (and disconnecting you for a short period) at the time a trade should have been taken. Or sometimes, if I hear the alert but no trade is automatically taken (for any reason) I'll enter it manually, so the price might be off a few pips. If I'm not near my computer (sleeping for example), well no trade will be taken (see 2nd screenshot). There are also the broker "requotes" which will make the price a bit off of when the alert went off. Also,depending on your broker, the entry or exit prices might be slightly different.

Here is a screenshot I just took a few minutes ago.


If you count the pairs, you'll see that there are 9 and that EURGBP is missing. I had some technical problem last monday with this one, but I hope you didn't because look at this:



Do you see the red triangle? (this is my real account, by the way). This is where you should have entered. I got out at some point, as you can see, but if you're still in, you're about 150 pips in the green which equals about $262 USD since this pair's pips are worth approx. $1.75.

Variations in spreads from broker to broker may also make a difference, along with which deposit currency you're trading in.

Other possibilities include trades not being taken for various reasons. Go here to read about what to do/check when this happens.

Eurusd and usdchf and Hedging

June 10, 2009 EURSUD & USDCHF

These 2 pairs are inversely correlated at about 97%.

What does that mean exactly? Well it means that if they were inversely correlated at 100%, they'd be like mirrors and every time eurusd went up a pip, usdchf would go down 1 pip. But it’s 97%, so there’s a slight discrepancy there which I investigated in extensive detail last autumn and which might be one day the subject of another blog (you can download a correlation table from the download page, if the subject interests you).

But I want to you to focus on something which happened today, and it’s the first time I see it happen. Look at those 2 pairs in the pic below, taken a few minutes ago:

What you’re basically seeing is a hedge (or a 97% hedge, if you’re picky).

What happened is that a sell eurusd happened at the same time as a buy usdchf earlier today (this was an anti-hedge). Then usdchf recrossed, the trade was closed and retaken as a short. So basically, now it's become a hedge, so we can’t win here with 2 shorts. One of the 2 is going to start going long, but not both because it’s impossible. And at the same time, the other will be losing money. Doesn’t really matter which one wins/looses. But we’re stuck in a hedge. There are worse things. A hedge means you’re not “makin’” and your not “losin'”. At some point, one will hit its SL but the other will be almost exactly the same amount in profit.

It’s the first time this happens because the moving averages for the 2 pairs are quite different. Ok, so we won’t be making money with these 2, but let’s have some fun and take bets. Which one do you think will win, eurusd or usdchf ????

We're still A TRENDING !

Well things are still going great at 4am (my time) and I'm off to bed and hoping you're part of this great action. See you tomorrow.

What do I do if the EA doesn't take a trade

June 9, 2009

Let’s say you clearly see that a cross has happened, but your bot doesn’t enter a trade. You need to check for a few things:

1 - Make sure the EA activation button (Expert Advisors)is green (or click on it to make it active):



2 – From the top menu, choose TOOLS then OPTIONS. The Experts tab should look like this:



3 - Right click on any pair, choose Exert Avisor, Properties, Common, and make sure everything is checked like this:



4 - Try shutting down and restarting your MT4 platform. Alternately, do a Clean-Up of your computer using your preferred software, completely close Windows, count 30 seconds (so the memory is completely erased)then restart your computer.

5- When you hear a signal alert (bell) and/or you see the alert pop-up window and no trade is taken, wait a few minutes, then look at the Experts tab, at the bottom.



If you see something like this(Alert: Moving Average Cross Down!), the EA has recognized a valid cross. Then look at the Journal tab next to it. Here is where you will see error messages, if any.



An error which sometimes occurs is "No Error". I don't know of any “cure” for this as of now. Simply enter the trade manually if you wish or wait for the next signal.



Something else which can happen, and is broker-related, is the message "Trade Context Busy". Again, enter the trade manually if you wish, there is nothing any programmer can do about this, it is broker related.

Everyday, a log file is created for all trades/activity and stored on your computer. You can access these files and look for any anomaly. The files are located here:
c:\Program Files\mt4 Ob Trend\logs\*.* and looks like this:



You can see the "trade context busy" in this example about at mid-page.

Finally, try opening a demo with a different broker as (possibly) some brokers are not EA friendly (or so I've heard).

If all else fails, fly me an email, and we'll see what we can do.

Current open trades

June 9, 2009

It's been a slow day apart from gbpusd and audusd being on a roller coaster but fortunately I came out at a bit over BE. Here are the trades in my live account which I still have open:



usdchf was just recently taken and I upped my SL for audusd to .7999 to make sure I secure some nice pips, should it start losing steam (you can see it came very close to being hit in the last hour). We're still seeing strong trending, so I'm still in for the upcoming days.

Happy trading !

Center of Gravity indicator mq4

June 8, 2009

I just realized I hadn't uploaded the indicator Center of Gravity as I said I would back in April and I completely forgot about it. Sorry about that. It is now on the download link.

If you want more info on how to use it, go to "Articles 22 to 29 "

GBPJPY

June 8, 2009 - Later

GBPJPY has been playing games with us recently as you can see in the pic.





There was a long taken where you see the green arrow (that's Friday afternoon). Then after a few bars there’s a blank followed by my broker finally opening 1.5 hours late (at 17h30 my time). I had put an SL on Friday at 8 pips, and when my broker opened, the SL was hit (a pip is a pip). Later there was a recross (short) where you see the red arrow, but gbpjpy decided it wasn’t feeling short at all. I didn’t move my SL and went to bed and at noon today, upon recross up, the trade was closed at a loss (it happens). There was no re-entry for me in my real account because of “trade context busy” and I didn’t enter manually because I was away from the computer. But as you can see below, it’s currently up 25 pips and here I would put my SL to BE+1 (break-even plus 1 or at 157.72).






Most of the others are doing great at a current total of +2000.



(I’m trying to post smaller images because of space availability, but these are, respectively:
gbpusd, usdjpy, eurusd, gbpchf, audusd, eurjpy, gbpjpy)

Later

I wrote the above around 3 o'clock this afternoon. It's now 17:06 and GBPJPY is up at +35. I'll post a pic a little later.

Update: June 15, 2009

Well, that trade finally closed today at noon at a very nice +300 pips !!!

Manually managing trades taken by the EAs

June 8, 2009

I thought I had clearly illustrated that I sometimes let the EAs do everything and sometimes I just let them Enter but I then manage my trades manually. This means you can always manage your trades after they have been entered by the EAs. Some of you thought that once the robot takes a trade, it has “full control” over the rest of the destiny of the trades and you can’t do anything but watch it. It isn’t the case at all.

You can ALWAYS manually modify ALL the trades that the EA has taken. For example, you can modifiy the stop loss, you can put a trailing stop (of x pips, of your choice), you can modify or put a TP (of your choice) or you can simply exit a trade when you want.

To do so, in the TERMINAL WINDOW right-click on the trade you wish to modify:

SL & TP

Choose "Modify or delete order". You will have the choice for SL and TP. You can use the defaut which is suggested or put in your preferred numbers manually.

Trailing stop

Choose "Trailing stop". You can use the suggestions or "custom" and put in your numbers (minimum 15 pips).

Exit trade

Choose "Close order”, then “close” to confirm.

Markets Open

June 7, 2009

My broker finally opened at 17:20 (!) and here is what my screen looks like. We closed Friday at +1,256, a bit over what I had posted earlier in mid-afternoon, so there wasn't a lot of "profit taking" at closure as I had anticipated.



This looks impressive (and it is!) but don't forget about the gap closing. The gaps aren't huge, but still, if they actually close, we should be back around 1,256 in an hour or 2.

5-digit brokers

June 7, 2009

Well markets open in 5 hours, I hope everyone's ready.

A user brought up the fact that his broker (Alpari) uses 5 digits instead of 4 (I don't know why, but it's something we're seeing more of). So I have asked a programmer - one of the best - to make the necessary changes in the EA for those of you whose broker also has 5 digits.

In the meantime, simply make the changes in your EAs, that is, multiply by 10. For instance, if the SL for a pair is 150, this will come out to 15 on a five-digit broker. So set the SL to 1500 and you should be fine. Also adjust TPs in the same manner.

As far as I know, all the other settings should not be affected, but please fly me off an email if I'm wrong.

Psychology and Trading Tip

June 6, 2009 – Tomorrow, another trade

There are many things that we traders don’t do well. At least me. One of the things I find the most difficult (but I’m working on it) is patience, or rather lack thereof. This can lead to overtrading or in taking trades just for the sake of being in a trade so that you can watch it evolve. Bad mistake.

I have learned over the years, however, a grand secret of trading which I will share with you today. You’ll probably come to that conclusion yourself one day if you haven’t already, but if you haven’t yet, believe me because it’s true: tomorrow, there WILL BE another trade opportunity. If you don’t have a good set-up (when trading manually) in front of you right now or if your bots haven’t entered a trade today YET and you get impatient, tell yourself that you can’t stop time from going by and eventually time will pass and you’ll be 5 or 10 hours from now and your charts will look much different than they do now and you WILL get another trading opportunity. There’s always an opportunity, specially in forex. There are every day. So don’t enter a trade if you don’t “feel” it right (manually) or go do something else rather than wait for your bots to take a trade.

Also, tell yourself there will be other opportunities if you just had a bad trade. It’s part of the game to have some losers. We’d all like to have only winners, at least I would. But it’s just not possible. And the important thing is to have more winners than losers. Forget that “bad” trade and move on. Tomorrow there will be another great opportunity.

Try to stay positive, but also prudent. Greed is a human trait we have to live with, but put a lot of effort into trying to be the least greedy you can. Take some profit early or move your trailing stop or stop loss so that you can secure some profit. If a wick hits your stop loss and then price continues in your direction, don’t start cursing. Be happy with your current actualized profit. This is real money, not potential money. And tell yourself there will be another great chance to make another great trade tomorrow. Why? Because there will always be another trade opportunity tomorrow!

(Well, ALRIGHT! - you can't say that on Fridays........... ;-) )

Happy Saturday to all !

Incredible Friday!

Well this Friday turns out to be an incredible day. I told you that some Fridays are “yawn” days when nothing much even MOVES 2 TICS but then there are Fridays like today that totally rock and your balance keeps going up and up and up. I just took this pic a few minutes ago. Amazing, I tell you.


Things might close a bit lower because of profit-taking at the end of the week – or not, who knows? (As I’m writing this, it’s still going up !!!!!!!)

Another + 200 pips in a few hours

June 5, 2009 - About to go to bed

I'm just about to go to bed, here's it 1:30am. Checked the account before leaving the computer and just a few hours after my last post, look at where we're standing:



This is just amazing! Over 1000 pips right now. This is a live photo (print screen) taken a few minutes ago, go check your charts if you're not convinced. They'll give you the exact same numbers, yippeeee !

Who wouldn't love trading forex I ask you ?

Another +100 pips in less than 2 hours

June 4, 2009



Quite amazing, frankly. Less than 2 hours and we're now up to +842 and counting...

Interest rate statements

June 4, 2009 – Interest rate announcements

Today, there were 3 interest rate announcements: GPB, EUR and CAD. I will never understand the whole news trading thing as today was quite messy although the three interest rates were (1) anticipated to stay the same and (2) in effect, did stay the same, respectively at 0.50%, 1.00% and 0.25%. So why all this movement?

And tomorrow is the NFP, as usual on all the 1st Fridays of every month, and that one is always messy as well. Actually, all the news which are in “red” (in the Forex Factory calendar for example) are messy, followed by interest rate statement (double messy) and finally the NFP (triple messy). So I’ll be turning off my bots in my real account before going to bed tonight.

Our account did well in spite of the news and apart from a GBPAUD trade hitting its stop loss, the open trades are currently at +724 at 17:30, as you can see below:

When to exit a trade

June 3, 2009 – Exiting a trade based on the fast MA

There are multiple answers to this question “When should I exit a trade”? You can let the robots decide for you, you can set a predetermined TP (Take Profit) based on the daily range of a pair divided by 2, for instance, you can use a trailing stop, or trail manually or you can move your stop above and below support and resistance zones, like I did yesterday.

And you can also exit a trade based on the fast MA (aqua line).



This is AUDUSD. I had put my SL above the resistance (red dotted line), but when I looked at the graph later (pic above) I saw that price was crossing the fast MA. Based on this, I decided to exit where I put a red line at 82.12. You can also see at the bottom that I took in a profit of +35 pips at 0.8212. You can see what happened next:



I’m not saying it works all the time, but it can help you decide to exit early when a pair shows early signs of being « exhausted » and secure some profit while you wait for the next cross in the other direction.

Support and Resistance in Forex

June 2, 2009 – Support and Resistance in Forex

As you can see in the last picture, we can use support and resistance to decide on various stop levels. I use an indicator (called, of all things, support and resistance !) which calculates and draws everything automatically. I uploaded it to the DOWNLOAD link, so feel free to use it, if you’d like.

But there’s one thing that I’d need to clear up. The words Support and Resistance, I believe, come from the world of stock trading, where one hopes a stock will go up rather than down, in a “normal” market. Shorting in the stock market is very complicated and not used a lot. So the Support line (bottom) is called this because it supports the price, which is going up. And then once it reaches a certain level, it hits some resistance (top) to continuing its ascension.

However, in forex, it isn’t the same thing at all, as we don’t really care if a pair is going up or down, as long as we’re in the right direction. So in a sense, you could call the blue and red lines both resistances (or supports, your choice) but they’re really equal in Forex, they’re zones or areas where price tends to stall and revert and if the zone is broken, then usually we’ll see strong movement in the direction of the resistance break.

Trending continues

June 1, 2006 - Trending and trending...

This is a pic taken a bit earlier. Look at the balance !



+2,200 pips !

In there, we've got a trade from last Tuesday, 4 trades from Thursday, 1 from Friday and 3 taken today. EURJPY isn't there because of technical reasons (trade context busy) but if you didn't have technical issues, yours should currently be up over +300 pips. So add 300 to the number up there if you didn't experience technical problems or decided to enter manually.

Here's a close-up of GBPJPY in my real account taken a few minutes ago:


You'll notice I've set my stop loss a bit below the support (blue dots). This was taken while I was sleeping... I'll tell ya, there isn't a better job in the world than trading forex. OK, see you laterz.

UPDATE UPDATE UPDATE JULY 30, 2009 OK, I finally put up a FAQ yesterday, so you don’t need to go through the WHOLE blog to understand the system (the blog IS getting pretty big!). I’ve made a selection of the most important things I speak about, so it’s like a filter of all the less important information. It’ll help you gain a quicker view of the approach. Simply click on FAQ in the right menu.

Forex Market Hours

May 31, 2009 - Market Hours

As you may know, forex is open 24 hours, from 17h (EST) Sunday to 17H (EST) Friday. That’s 7 hours for Sunday from 17h to 00h, 4 x 24h Monday through Thursday and 17 hours for Friday, from 00h to 17h, for a total of 120 trading hours or the equivalent of 5 days.

However, the various market centers open and close at various hours as you can see below.

This table is in EST.

Frankfurt is open from 2am to 10am.
London from 3am to 11am.
New-York from 8am to 4pm.
Sydney from 6pm to 2am.
Tokyo 7am to 3am.

In pink, I put the periods where 3 markets overlap:
From 2am to 3am: Frankfurt, Sydney, Tokyo
From 3am to 3am: Frankfurt, London, Tokyo
From 8am to 10am: Frankfurt, London, North America

In blue, you’ve got the periods when 2 markets overlap. And in green, only one market is active.

If you want to make yourself a table like this in your own time zone, simply convert your time from EST or go to this time zone converter:
http://forex.timezoneconverter.com/