Probability of staying within a range ~ forex trading oil

10:01 PM in 14, 8, a, Forex, market, nadex, of, probability, range, recap, staying, weekly, within

Clients,

Today I will discuss a topic that is so great. I I wish it was talked about more in the industry but as of yet, it is still a hush hush topic. I cant speculate as to why but here goes.

Based upon past performance of various securities, there can be calculated a probability of a price range move within a specified amount of time. For instance, If the US Tech 100 has moved X points per hour, day, or week over the last X bars, there can be a calculation to figure out the average range as well as a probability of it staying within or moving outside of a range over the next hour, day or week.

Let us take a look at a live example as of today.

Now look at the chart. The expected range is etween 10 and 18 points of movement between 11am and 12pm eastern on the US Tech 100 for today.

There is a 68% chance it will stay in this range and a 32% chance it will move out of this range.

If price moves toward the top of the range and you can sell it for $32 at the top of the range, you will be using a break even strategy. If you can sell it for $50 at the top of the range, you will be using a profitable strategy.

Look at it this way....

Over the course of 1,000 trades, If you are selling for $32, then you will make $21,760 n 680 wins. Likewise, you will lose $21,760 on 320 losses.

Now look at the difference of selling for $50

680 wins = $34,000
320 losses = $16,000
Total P/L = +$18,000

Here is another way to play. If you are comfortable losing a lot and making gigantic winners, you can reverse it.

Lets assume you buy for $10 or sell for $90 to try to capture gains if price moves outside of the range.
Now remember you have to sell or buy back at $50. Let us look at 1,000 trades.

320 wins = $28,800
680 losses = $6,800
Total P/L = $22,000

So it is 10:30am eastern right now. Lets see what price on the US Tech 100 does before 12pm. Let us observe if this time period will be a 68% day or a 32% day.










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Weekly Nadex Market recap 8 8 14 ~ forex trading on the weekend

11:24 PM in 14, 8, a, abbreviations, and, few, for, Forex, guidelines, market, nadex, our, recap, signals, weekly

We had another profitable week. If a trader took every signal as posted, below are the results

Monday +21
Tuesday +20
Wednesday +11
Thursday -15
Friday (No Trades)

We took a DEMO trade on Thursday evening that carried over into Friday. As of right now, that trade is at a floating loss of -29. It has fluctiated between +20 and -35 for the past 16 hours now and I suspect it will expire about -15 or so.

Had we taken that trade live, our weekly P/L would be (with the current -29 trade) around +8, which is what I would consider a slightly better than break even week.

Since we are discounting the demo trade, our week will end at +37.

I have talked about this before but +37 may not sound like a lot but it all depends on the amount of contracts you are trading.

$37 on a $1,000 account is still a great return. 3.7% for the week.

Trading 10 contracts, this is $370. On a $10,000 account, this is a 3.7% return for the week or 192% per year. Compound interest is a grand thing if you use it right.

To my Clients:

I have had conversations with people this week and want to relay my thoughts to you about an issue. Many, many future clients all told me the same thing which is this, " You signals only trade 1-3 times per day. I cant make any money that way." I am sorry but they dont know what they dont know....yet.

Trading is a long term business model. It can compound your account into unbelievable amounts in a relatively short amount of time, over months and years. It can also be a great source of extra income. Treat this like a business and not a hobby and your account will stop taking giant hits. If you are unsure about something, DEMO trade it until you are sure. The market will be here tomorrow and the next day and 100 years from now (in some form) so just relax and stop trying to push trades through in the hopes to make more and more. Sit back and think to yourselves, "Are these signals, if taken correctly, making a profit?" If the answer is yes, then relax, be patient, enjoy the ride, and take a look at the tab above, entitled "compound interest".

Clients, you are all great and have had some awesome feedback this week from you. I am listening and if all goes well, next week I will be offering the bull spreads and also will be offering a lot more binary trades throughout the day.

Have a great weekend!!!




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Getting Ready for the Future Metatrader 5 ~ forex trading jobs in bangalore

3:23 AM in 5, about, depth, for, Forex, future, getting, is, it, market, metatrader, not, only, ready, spread, the, understanding

Finally on June the first we saw the first official release of the Metatrader 5 trading platform which has the mission to replace one of the most popular and widely used trading platforms in retail forex trading. Definitely the task for Metatrader 5 is not easy since its predecessor is very powerful and has become the "industry standard" when dealing with automated trading systems for the regular investor. On todays post I want to talk to you about Metatrader 5, some of its pros and cons as well as the journey that I will be taking to produce mql5 versions of all Asirikuy trading systems. Is there anything good about Metatrader 5 ? Is it bound to be a great improvement over metatrader 4 or are we talking about a windows vista Vs XP type change ? Keep reading to find out.

I have to be honest with you and tell you my honest opinion about this new trading platform. I think that the people at metaquotes have done a good effort but I think they have neglected some key aspects that needed to be changed which could have brought an enormous benefit to the retail trader and their platform. Definitely there are several features I wanted to see on metatrader 5 that never got to be implemented like renko charts, tick charts, etc but perhaps the most important feature that wasnt implemented was real tick data logging and accurate backtesting.

Certainly the Metatrader 5 backtester has significant advantages over its current Metatrader 4 counterpart. Amongst these are the fact that data is downloaded and update automatically, there is support for several cores (multi-threading) and there is the ability to remotely login into your computer to see the progress and results of your backtesting results. Overall this will make the Metatrader 5 backtester much faster and robust, however the fact that tick interpolation algorithm is still used will make exploitation of backtesting reliability problems still a significant issue, we will probably still see the regular 97 USD expert advisor based on unrealistic profit targets taken from absurd backtests. However I have some hope in the sense that the interpolation algorithm was actually improved with the objective of removing these problems but we are still to see if this will or will not be true. The ability to use multiple pairs on backtesting- something that was previously not possible - is bound to be one of the greatest advantages of the Meatrader 5 backtester over the current backtester implementation.
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I am also excited about the Metatrader 5 new language- mql5 - and the included debugger within the Metatrader 5 platform. Any serious developer out there will tell you that the mql4 editor was a piece of garbage since no debugger was included and an extensive use of the Print function was needed to see where things were going wrong. However, the new debugger will make developing much easier and the actual addressing of problems in coding much easier. However I think that it was a very big and absolutely awful mistake not to include back compatibility with mql4 in Metatrader 5. Even though the new mql5 language is much better, including support for previous code seemed like something important to do since many people already have their strategies or efforts coded on the language of Metatrader 4. People will now have to pay to have their experts recoded or go through the process of learning a whole new programming language to be able to trade with the new platform.

So is Metatrader 5 a huge improvement over Metatrader 4 ? I would have to say that regarding automated trading the answer seems to be - we still dont know. We need to have a few live brokers that will accept this platform so that we can start testing mql5 systems. We will also need to first translate some systems into mql5 to compare backtests and see the actual quality improvements we get when changing from one strategy tester to another. I can tell you that I am excited abou the possibilities and I hope that the Metatrader 5 backtest will be all that it has been promised to be. I think that obviously our evaluation speed will be increased and our ability to use our systems on other currencies will also be expanded.

During the next few months I will start the porting of all Asirikuy systems to the new MQL5 language so that we can start to see some of the characteristics of the strategy tester and some comparisons between the simulations obtained with both backtesters. You can certainly expect some hopefully interesting blogposts about this during the next few months. If you want to learn more about automated trading and how you can develop your own long term profitable systems using sound trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

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What Doesnt Change Talking About Inherent Characteristics of the Market ~ forex trading is easy

12:07 AM in about, change, characteristics, doesnt, ebook, Forex, future, holds, inherent, market, my, of, talking, the, what

Perhaps one of the most important questions you can ask yourself when you start using automated trading systems is : how will I survive in the long term ? This is one of the most common inquiries made by traders new to the field since it seems to be evident that the market is an ever-changing beast that does not allow the mechanical exploitation of any inefficiency for too long. New traders often experience this when they first begin to use automated trading systems. Their systems do very well, then fail or they never do well at all. Besides the fact that many of these systems dont have adequate evaluation- leading with inadequate and unrealistic expectations to long term loses - traders almost never ask themselves : what doesnt change ? It is obvious that if you want to exploit a given characteristic of the market for long term profitability you have to look for characteristics of the market that remain constant as a function of time. But are there any ? On todays post I want to share with you my view about market changes and why - even though the market changes- some characteristics of the market remain constant.

When you start to trade the market seems like an invincible beast that behaves in a very unpredictable manner. I remember that the first few months I traded I used to think "I got it" only to discover that the market would rip my strategy apart the next few months. I used to behave erratically - like most new traders behave- modifying my strategy every week in a desperate attempt to "adapt" to changes in market conditions. Of course, my focus at that moment wasnt the understanding of market inefficiencies but the massive multiplication of my money from 500 USD to a few million in a few years.

It wasnt until much later that I decided to stop my journey and build an understanding. If I ever was going to make money from this seemingly chaotic thing, I would need to find the "science" behind it. It became important for me to understand how the market behaved, what changed, what didnt and what strategies could be built that would most likely work for the next 20-40 years. I needed strategies that could work for long enough to build myself a decent income and NOT strategies that would put my capital into excessive risk or work for a year and then wipe my account.
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The question becomes : what doesnt change ? After reading a lot of books and watching market behavior for many months, I started to realize that the only thing that doesnt change in the market, is the specie trading it. The market is traded by humans and therefore any aspect of the market imprinted with human behavior should remain fairly constant. As many traders have discovered I started to see that - although individual human behavior is very different - crowd behavior doesnt change very much. I then read a few papers on game theory experiments applied to economics on groups of people across very different cultures and the results started to match up as the groups became bigger. I then realized that - what doesnt change - is simply the way in which crowds react to price action.

How do crowds react to price action ? You see manifestations of this everyday - not only in the form of market trends - but in the form of long term reversal and continuation patterns, support and resistance levels, etc. There are some characteristics of the market that simply do not change, characteristics which have appeared time and time again during the past 30 or 40 years. Evidence of this is present on almost all market instruments from the GBP/USD, to gold, to the DOW index. However you will notice when you do a close analysis that - even though these objects are ever-present within market instruments - their AMPLITUDE and LENGTH changes as time evolves. A trend that may have been only 200 pips long in 2004 can be 1000 pips in 2010 and the reason why this happens is related with the markets trading volume.
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As time evolves and there are more people in the world, the amount of money being moved in the markets becomes larger and therefore the extent of inherent characteristics of the market caused by crowd behavior also become larger. Through different market conditions, there may be larger or smaller movements of money, causing overall changes in the extent of market moves that appear like "large changes in market behavior" but that are no more than the same old characteristics viewed under the looking glass of a different volatility. For this reason, the key - I believe- to the exploitation of long term market inefficiencies seems to be the use of an inherent market characteristics that changes only with market volatility. Trends are a perfect example of this fact and there are many examples of successful trend following systems that achieve their long term profitability through adaptive criteria based on market volatility.

If you would like to learn more about automated trading systems and how you can build your own likely long term profitable systems with sound risk and profit targets please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

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It is NOT Only About the Spread Understanding Market Depth ~ forex trading jargon

7:18 AM in about, commandments, depth, forex, is, it, market, not, of, only, spread, successful, system, the, three, trader, understanding

Maybe the first thing that people new to forex learn about brokers is the fact that better brokers have better spreads. Since the spread - the difference between the bid and ask price - is the fixed cost per transaction then any given broker that offers you a better cost per transaction will ultimately be better from a profit wise perspective. This becomes critical when you are using systems that take profit in areas lower than 10 times the spread since the contribution of the market spread to your trading costs is very significant. However what traders often fail to notice is the fact that the spread is not enough to tell a brokers quality from another, often new traders will get involved with brokers who have "the best" spreads only to find that their execution is no where near what they expected. How can you judge the quality of different brokers besides the spread ? On todays post I want to talk about marketp depth, the nature of order execution and what you should look for within a broker besides an excellent spread level. This article will also further pinpoint the difficulties in achieving long term profitabilities with scalping systems and why great care is needed when choosing a broker for such systems.

What ? I thought that the spread was the only cost per transaction, determining broker quality - you might be thinking. However reducing broker performance to their spread level is simplistic and does not give you a full picture about the whole quality of your brokers trading operation. When you buy a given contract in forex trading, you are - ideally - filling a transaction from someone who wants to sell their previously held contract. For example, if you want to buy EUR/USD at 1.2345 you are actually buying a contract from someone who is selling it at 1.2345+spread. The dealer hands the contract over to you and keeps the Bid/Ask difference -the spread- as a comission.

However the problem comes when you realize that the number of contracts available at any given price level is not unlimited. Of course, not everyone wants to sell EUR/USD at a given price level or buy it at another and therefore the amount of liquidity available in the market is very limited. The consequence is that you might have a broker with a GREAT spread but it might have a very dry liquidity pool so you might be unable to get your orders filled at the price levels you want.
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Of course, the problem now comes to the difference between brokers with and without dealing desks. When a broker has a dealing desk it will try to fill all your orders, regardless of liquidity but it might not want to fill your orders at a certain price level if your orders are too large or too fast for them. The solution of the broker to this exposure you cause it is to simply requote you until you get a price level in which the broker has enough liquidity, hedging positions from other traders, etc. The end result is that you feel absolutely tricked because you are unaware of the true causes of why all this requoting has happened.

On the other hand, ECN brokers allow you to have second level market depth, which means that you are able to directly see the orders that are being placed and you can actually SEE how much volume is available for you to get. Of course, there are simply no requotes on ECN brokers because the transactions are done from peer to peer and everything is much more transparent to you (of course, someone can beat you to a transaction but then there is no requote but simply you "failed" to capture the transaction first) . Using an ECN broker allows you to see exactly how the market is moving and what volumes at what price levels are available for purchase.

For systems that need to trade fast having this added volume information and having transparency over execution is absolutely vital to have any chance of long term success. The fact that liquidity at different price levels is limited also points out why scalping systems may not have such a great chance at achieving long term profitability. Many people are fighting for very narrow price ranges with very limited volumes and the people who fail to get their desired price levels will definitely lose a significant portion of their profits. However, systems that swing trade and use very wide targets might no be affected by this fact simply because they can have a lot of flexibility around their entry points and deviations of +/- 5 pips are not bound to cause any disastrous effects in the long term.

So to sum it up, the quality of a broker is not only given by its spread levels but by the quality of its liquidity pool. When you use a regular dealing desk broker you will not be aware of this pool while on ECN brokers you will see all the action directly through second level market depth. Having brokers that allow you to see deeper is vital for people who trade scalping systems while it adds little value for traders who use swing and longer term systems. Nonetheless traders who use long term strategies but trade high amounts of volume may also need to see their brokers liquidity pool to catch better entry and exit points.

If you would like to learn about mechanical trading systems and how you can code your own automated trading systems with sound trading tactics to achieve success in forex trading please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

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Alternative Adaptive Criteria Introducing a New Feature of Teyacanani ~ forex trading jobs in uae

6:26 AM in a, adaptive, alternative, any, are, bad, conditions, criteria, feature, forex, in, introducing, market, new, of, teyacanani, there, trading

One of the main problems Teyacanani has faced from the moment of its release is the use of a daily ATR indicator with small period values (3 to 6) which are extremely sensitive to the presence or absence of Sunday candles within the brokers feed. The fact that these periods are small makes the presence of these candles extremely influential, something that doesnt happen with the turtle system or Watukushay No.2 which use much longer ATR period lengths (14-20). In order to solve this problem we have implemented an EA that generates an offline chart without Sunday candles but this system does not work on some brokers for reasons pertinent to each brokers particular software implementation. On todays post I want to introduce a new solution to this Teyacanani problem showing you a new type of adaptation that uses the ATR indicator but does not rely on daily indicator data, effectively eliminating the problem of Sunday candles for this EA on brokers where our non-Sunday solution does not work.

What is exactly the problem with Sunday candles ? When you calculate the value of a daily ATR indicator, the code calculates the value of the ATR assigning the same weight to the values of all daily candles. On brokers where Sunday candles exist these candles are treated - within the calculation of the ATR - as if they were regular daily candles when they usually have only 10-20% of the regular volume of a complete weekday. When you calculate the value of the daily ATR for a small number of periods you will often get a very significantly smaller value for the indicator when compared with an indicator where no Sunday candles are involved.

Many people - me included - will think here that the best and easiest solution would be simply to decrease the values of the filters on the EA to compensate for a "lower overall" ATR value. However the main issue here is that no accurate 10 year backtesting data with Sunday candles is available to test the strategy and this therefore makes any modification done impossible to evaluate with metatrader 4. Possibly diminishing the value of all filters might work, but there is also a very important possibility that this will simply not work as - when low ATR periods are used - you might get days where the ATR is calculated without the Sunday candle. For example, a 4 period daily ATR on Friday only counts Friday, Thursday, Wednesday and Tuesday, leaving outside Monday and Sunday. Introducing a modification that decreases all overall ATR related variables will probably have an adverse effect on these days.

What is the solution then ? The easiest thing to do here was to find a way of removing the Sunday candles from the chart, merging Monday and Sunday candles to get a "clean feed" that simulates that of a broker without Sunday candles. Using an EA called "without Sunday", available from the mql4 code database, we were able to eliminate the problem for most brokers. However, due to limiations inherent to some other brokers - particularly Forex.com - this solution wasnt able to work correctly in some cases.

My solution for this case was to find another adaptive criteria that could avoid the usage of the daily ATR indicator. I thought that if you could simply take a lower time frame and "extrapolate" you could maybe obtain the same results as you would with the regular daily-ATR solution. So my implementation was therefore really simple. Take a given hourly-ATR period indicator and then multiply it by X so that you reach a magnitude similar to that of the daily ATR indicator. You would still get evolving adaptability as market conditions change but of course, the speed and character of the adaptation would change.
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In the end I found the results showed above for the EUR/USD and GBP/USD currency pairs using Teyacanani (Jan-2000, Jan-2010). The trading results - after following the same optimization procedure as with the original Teyacanani version - were very similar to those obtained with the daily-ATR solution, showing that a given hourly-ATR could in fact extrapolate to a daily-ATR without great changes in the effectiveness of the adaptation against volatility. However it is clearly notable here that this approach does not tend to work for all currency pairs. Some instruments like the NZD/USD and AUD/USD tend to have larger and more changing hourly volatilities that do not provide an adequate reflection when extrapolated towards daily volatility. The results obtained for these currency pairs are therefore poorer than when using the regular Teyacanani EA.

In the end, what this exercise has taught me - and I hope I have transmitted to you within this article - is that volatility adaptation can be carried out successfuly through many levels and that alternatives to daily-ATR based adaptation are clearly possible but may prove to be different for instruments with different characteristics. Right now this new version of Teyancanani - now available within Asirikuy - provides users of brokers that could not implement the WithoutSunday solution with a version of Teyacanani that can run on the EUR/USD and GBP/USD with similar profit and draw down targets. Volatility adaptation has always been one of my great areas of interest in automated trading and hopefully within the next few months and years I will be able to develop some robust and creative adaptive criteria :o).

If you would like to learn more about automated trading system development and how you too can develop systems that adapt to changes in market conditions please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

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Are there any Bad Market Conditions in Forex Trading ~ forex trading kit

11:31 AM in advice, any, are, bad, conditions, forex, in, market, see, some, there, trade, trading, what, you

It is not uncommon for traders to refer to certain trading conditions as being "bad". In particular, during the past few weeks I have heard people calling current EUR/USD market conditions this way. Why do traders refer to some conditions as bad and to others as being good ? Is there an inherent quality of a given market that makes it good or bad to trade ? On todays post I will try to address this issue and explain to new traders why you cannot call any given market conditions good or bad since this makes no overall sense. I will attempt to explain why traders look into when they talk about market "quality" and why there is simply no reason why certain systems should be stopped under different market conditions as the future development of the market is never known with certainty. I will also highlight some example about the way in which this judgment is costly and many times makes traders lose significant opportunities due to the overall misconception that the market can be "bad".

First of all, we must understand the way in which traders look at market conditions and why some traders - usually inexperienced ones (no offense :o)!!) - judge the markets quality by calling it good or bad. The conception usually arises from the use of mechanical trading systems. When a mechanical system starts to fail under a given market condition, users of a system usually call the current market conditions "bad" and stop trading this mechanical system because it simply "doesnt work" around current market conditions.

There are several wrong things about this approach. Certainly we can say that market conditions were bad for a given trading system in the sense that it had a bad trading week, month, year, etc but we cannot know if future market conditions will or will not be favorable for a system. What I am saying here is simply that the fact that we cannot predict the future makes us unable to judge the currently developing market conditions as we have no idea of how the market will behave with good certainty. Users of a given mechanical system that stop trading it during "bad" market conditions may be surprised when they miss substantial periods of profitability due to their deductions based on past trading.

An example of such a case is easily taken from most long term profitable systems. For example, a 1 month losing period may mean that market conditions were bad but to stop trading the system could mean that a very profitable period would be lost as market conditions develop. When people wait for market conditions to improve they may start trading their system when a good period of profitability has already passed. A real life example showing this can be seen with the Ayotl trading system. The system had some unprofitable trades in February and March but if you had stopped trading the system in April you would have lost an entry that granted a profitable trade of nearly 3000 pips, showing that although you can judge the quality of market conditions after they happen, attempting to forecast future conditions and modifying an automated trading systems behavior this way is nothing but detrimental.

In the end, in my opinion it simply makes no sense to attempt to judge the quality of developing market conditions as no one truly knows the way in which the market will develop. The best thing you can do is to build a trading system with limited market exposure that attempts to minimize loses when market conditions are unfavorable and cash on the market when market conditions allow it. In the end, the ability of a trading system to adapt to changes in market conditions and minimize its loses will allow you to trade it along very varied market conditions with confidence that your system will be prepared. Attempting to judge the quality of conditions that have not developed by calling them "good or bad" before they happen does not have a place in mechanical trading. My advice is to focus on limiting the market exposure of your trading system and increasing its adaptability.

If you would like to learn more about mechanical trading and how you too can build your own long term profitable systems based on sound trading tactics please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

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