Staying Single How to Avoid Falling in Love with Trades ~ forex trading income

8:11 PM in a, avoid, falling, five, Forex, how, in, love, not, reasons, single, staying, system, to, trades, trading, use, with

When we embark ourselves in the incredible adventure that is trading, we quickly find that the worst obstacle to achieve our goals is nothing but ourselves. In all the years I have been trading I could tell you that most of the problems I have had have been caused by my own actions which have been a consequence of my - sometimes - irrational thinking. One of the worst ways in which I affected my own trading in the beginning was what I would call my "love affairs" with trades. When we start to trade we tend to make every position we enter too important because in the beginning we all generally lack focus and perspective regarding trading as a business. On todays post I will talk about this great problem I had when I started trading and I will share with you some of the things I did to "stay single" and avoid this disastrous experiences with my trades.

It was a sunny afternoon several years ago when I decided that everything was set. The stars had aligned, my setup had come true and I finally had a perfect EUR/JPY trade ready for entry. I entered the trade, entered my stop loss and take profit levels and waited for a few hundred dollars to go into my account. However, the market decided that the odds were against me and I was facing a position very close to my stoploss in a few hours. Then I remember that the EUR/JPY had done this to me before and I exit my trade only to find out I would have hit my TP after a few hours. My decision -based on this irrational thinking - was to give my trade "more room", I moved my stoploss to allow the trade to continue. Then it moved even MORE against me and it wiped my trade. I ended up losing almost 4 times what I had initially planed to lose and the position never bounced back to the level I had set as a TP.
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This is only one of the several examples of times in which I fell in love with a trade and refused to let it go. The consequence was not only a significant financial loss in my account but a feeling made up of frustration and anger that had a snow ball effect that made me revenge trade the market and end up at an even worse point. When you trade like this you are operating your business like a 5 year old, good things - profitable trades - make you very happy and euphoric while bad things - losing trades - make you absolutely frustrated and angry. It certainly took me a few months but I finally realized that this was a recipe for total disaster.

To change this is no easy thing because the present - the trade on your screen - has an inevitable effect on you psychologically. It is extremely difficult to stay calm and trade your system like you were meant to trade it, to avoid intervention and to avoid feeling like a winner or loser based on some limited trading results. This was the most difficult thing I had to do to become a profitable trader to remove these emotions and become immune to the short term emotional effects trades had on me.

How did I do it (and continue to do it!) ? What worked for me was simply to change my perspective from a short term look to a long term look. I realized that trading wasnt working for me because I was too focused on short term results (turning a profitable trade today) rather than on long term results (obtaining a good average yearly return). My strategies and trading didnt have any long term focus and this was the reason why I wasnt getting anywhere. I decided that if this was going to work for me I needed to have long term targets and I needed to know exactly how my systems would perform in the long term. How long and deep their draw down periods were, how many losing trades I could be expecting, etc.

The change here was from night to day. When I started to have a long term outlook on trading as a business and I had a clear perspective on the way my systems worked, understanding why they were going to be most likely successful in the long term and when exactly I needed to stop trading them if they werent was a blessing to my trading career. Losing trades just became a characteristic of my systems and intervention became a clear thing to avoid since it was obviously detrimental to my systems results. I became a very cold-minded trader and I have successfully managed to avoid "falling in love" with my trades.

To me a trade right now is simply a very small part of what constitutes my long term goals and therefore it simply makes no sense to get happy or sad about the outcome of any single one of them. Certainly if you are a new trader my advice for you is simple, write down a plan that is extremely clear and that has all the detailed characteristics of your trading system laid out (draw down periods, expected loses, expected profits, etc). Know exactly what you are getting into and gain a LONG term perspective into your trading. Treat your trading like a business with long term goals and you will gain an amazing level of control and discipline that will put you on your way to become a profitable trader.

If you would like to learn more about automated trading and how you can use automated trading systems to improve your trading abilities 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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Strategy Diversification Higher Profits Higher Risks ~ forex trading kindergarten

7:46 AM in an, diversification, do, easy, Forex, higher, not, of, profitability, profits, proving, risks, scalpers, strategy, the, thing, to

If you look into the Asirikuy website, one of the main objectives around my development of automated trading systems is to develop experts we can use to makeup a successful porftolio of long term profitable trading systems. Most traders - new and experienced - believe intuitively that adding several strategies to a portfolio will diminish risk in the sense that the possibility to attain significant draw down levels will be reduced. However, through my experience and analysis of portfolio diversification I have found that - although portfolio trading is great - great care must be taken in both the makeup of the systems and the evaluation of the actual risk levels used to avoid catastrophic loses due to a "massive" portfolio failure. During this post I want to talk a little bit about the things you must take into account when designing a portfolio and how risk must be carefully studied to come up with a reasonable "worst case" scenario.

Why is portfolio trading great ? Well, we all know that having all our eggs in one basket is not so good. When we use a single trading strategy we are exposed to several problems which can be avoided when many different strategies are used. For example, we are not subject to the "hard hand" of the market as when one of our strategies is unable to profit from its set market inefficiencies another one will most likely be able to. So in the end what we get is a diminishment in our market exposure without a reduction in our profitability since - in the end- we will reach the same profit levels on all systems as if we had if we had run them by themselves. There is also a very positive psychological effect of running portfolios in the sense that "someone" will be winning and you will have something good to look at almost all the time. A shield you wont have if you have to endure the draw downs attained by a single trading system.
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However, new traders generally take portfolio design too lightly. It is simply not a matter of putting all the systems you can within an account, put a very high risk level and hope for the best. No, it is not about that and that strategy usually leads to account wipeouts and other such problems. You need to make up your portfolio with a very clear plan and knowledge of what you will do when certain scenarios present themselves.

First of all, each separate system must have its OWN risk projections and its own worst case scenario (the point where the system has simply become to risky to continue trading). You need to know into how much draw down each system will go because each draw down will contribute to the overall loses of the account. Second - and most important - you need to calculate your portfolio risk accurately. To do this you need to calculate the sum of all the projected draw downs and have this as your worst-case portfolio scenario.

In the end each system will be able to reach twice its historically worst perfoming point (the worst case individual scenario) and the portfolios worst scenario will be the addition of all the systems historical maximum risk levels. In the end, systems have a flexibility to reach higher than expected draw downs (which are likely going to happen in the future) and the portfolio will be able to reach larger than expected risk additions since its "worst point" is an addition of draw down. This in turn means that portfolios have a lower risk thresehold than the systems, mainly because they need to reduce risk through diversification -if this doesnt happen - the portfolio is simply not working.

In the end doing this analysis will ensure that you have CLEAR targets for your risk and clear "stops" in your accounts loses (since you know when to stop individual systems or the whole portfolio). One of the most important things in trading is to have a plan and trading a portfolio with a previous risk analysis is VITAL for survival. Of course, making sure that each one of the systems used is long term profitable is also of extreme importance and something which will make the success of a trading portfolio much more likely. (for those of you who are Asirikuy members a video will be out this Sunday better explaining a lot about portfolio makeup and analysis).

If you would like to learn more about automated trading systems and how you too can build trading systems to achieve long term profitability 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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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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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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Five Reasons NOT to Use a Trading System ~ forex trading in usa

2:53 AM in a, advisors, an, expert, five, forex, galactico, not, reasons, review, system, to, trading, unbiased, use

Yes, it is true. We all want to find a profitable trading system that produces money in the long term and we get easily excited with anything that might look promising. This is especially dangerous for new traders as most of them still dont have the ability to recognize the potential of a trading strategy or the actual defects that will make it very hard to trade or simply impossible to succeed with in the long term. Some people new to forex trading are easily convinced with a few trading setups and a week of results while others venture into using systems that dont even offer clear entry and exit setups that have been proved to succeed in trading. On todays post I will give you some advice regarding this subject, I will talk about the characteristics you should look for in a system and the five main reasons why you should NOT use a given trading strategy.

If you go into any of the currently available forums with a section on forex trading systems you will find people using some trading setups that experienced traders would never use. Often these threads will continue until the system faces a draw down period, time after which the rules are changed and the cycle is repeated. This often continues until the general users loose interest and the thread dies, moving onto the next "new technique". How could you know which systems have the possibility to succeed and which ones dont ? Keep reading if you want to learn the FIVE main reasons why you should run AWAY from a trading system.

1. Lack of Statistically meaningful testing. Any system worth using must be evaluated through a statistically meaningful period. The length of this period - if you want a system that has a fighting chance against future market conditions - is of AT LEAST 5 years. This doesnt mean that the system has to be automated and backtested but that the system needs to be evaluated, even if only visually and a record of these simulations MUST be kept. I have seen HUNDREDS of systems on forums that have just been evaluated for a few months or a year and the result is obvious, they simply fail as the market changes.

2. Lack of risk and profit targets. This is perhaps one of the main reasons why I consider people fail with the thousands of systems proposed in forums. There is simply NO clear idea of what the risk and profit targets of the strategy are. What is the longest expected draw down period ? What is the average yearly profitability ? If you go to any forum and ask these questions about a system you will - most of the time - get no answer. This makes people use a system whose risk characteristics they dont understand, usually leading them to failure. If you want to succeed with ANY system, you need to know its risk and profit targets and these targets must be inferred from periods of at LEAST 5 years.

3. Lack of adequate money management. This aspect is very important as money management includes both the exit criteria plus the lot sizing technique. Money management is not simply "only risk x% per trade" it is the lot sizing plus its complex interaction with exit logic mechanisms that allows you to achieve a profitable outcome over long periods of time. If the system you are trading does not have CLEAR exit rules and CLEAR evaluation that shows over a period of at least 5 years of simulations how the closing logic benefits the system and how the overall money management reduces risk then you are not going to succeed with this strategy. Generally systems on the internet developed my inexperienced traders are filled with very complex entries and a vague and unevaluated money management concept. A weak money management strategy that has not been evaluated adequately is definitely something you should RUN away from.

4. Lack of reproducibility. A trading system cannot succeed for everyone who uses it if it cannot be reproduced accurately. Often you will see that systems proposed or shared online fail to have clear exit and entry rules that allow you to follow or evaluate them accurately. It is fairly common to find very vague descriptions of exits like "exit at the next significant support or resistance or Fibonacci level". What does the author interpret as significant ? How does he plot the Fibonacci levels ? This excessive level of discretion is very bad and it usually leads to systems that are extremely hard to evaluate or use successfully. If the systems lack reproducibility it is a definitive signal to run away.

5. Changes every 5 minutes. Perhaps the thing I dont like the most about many forums where systems are shared is the fact that changes are suggested and made very frequently. You will often find that the first post suggests a 50 pip TP only to find 30 posts later that they changed it to a 20 pip TL and then 50 posts later to a 100 pip TP. This is usually the consequence of LACK of confidence, lack of adequate evaluation, lack of adaptability and a general lack of understanding of draw down periods. Every time some loses come by the users build up a correction of the logic based on a few trades without a statistically meaningful evaluation. If you find that the systems characteristics are changed every now and then, you should move on.

I hope that the above information will be useful if you have been looking for a reliable system to use on some of the forums available online or on the internet in general. It is easy to see why the above criteria isnt met by most of the systems found online. It takes a long time to do 5 year evaluations, figure out profit and draw down targets come up with a robust money management system and a robust overall logic, however by doing this you ensure that you KNOW and understand how the system performs and this will be your ONLY weapons against the draw down periods that will certainly come. Having an understanding that bring confidence into your trading is what separates most successful traders from those who fail.

If you would like to learn about automated trading systems and how you can develop your own with a true understanding of their logic and their risk and profit characteristics 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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Proving the Profitability of Scalpers Not an Easy Thing to Do ~ forex trading losses

7:29 PM in advisors, an, do, easy, expert, forex, gun, machine, not, of, profitability, proving, review, scalpers, the, thing, to, unbiased

One of the things I get most criticized about is my evaluation of trading systems which have small TP and SL targets. People often do not understand the reasons why I do not recommend products that seem to be generating "a lot" of money for traders using them. I have been sent from time to time statements from several EA vendors and from third party users showing the excellent results of some commercial and freely available scalpers and they all look surprised when my replies all say the same thing : "your results are not statistically significant", "your results are not reliable", etc. Today I want to explain a little bit more the problem with scalper profitability and why there is currently no scalper available which has statistically significant and reliable evidence of profitability. For the purpose of this article I will define a scalper as any system that has an average profit target of less than 10 times the spread or which closes positions - in average - in less than 5 minutes.

What is the deal with these scalpers and their profitability ? The problems are several and may not be evident to people who are new or inexperienced in the field of automated trading. As a matter of fact, even people who have been trading automated systems for years may not see them clearly if they have never applied a strong mathematical analysis to what they are doing. However these problems are real and they affect all scalpers - as defined above - equally.

What I see as the two most important problems faced by scalpers are the unreliability of their simulations and their unfavorable risk to reward ratio. In metatrader 4, scalpers cannot have reliable simulations mainly because of one minute interpolation errors. These errors which are generated because of the lack of real tick data in metatrader 4 cause both signals derived from price action and position profit targets to be faulted by a significant percentage. This problem wouldnt be particularly bad if the SL value was of the same magnitude as the TP - as both would be affected equally - but the fact that the SL is usually 4-10 times the size of the TP makes these errors absolutely important since a small overestimation in the number of profitable trades equals a great underestimation of draw down.

For example, if you have a trading system that has a 90% winning ratio with a 5:1 risk to reward ratio, a simple overestimation of profitability of 5% in backtesting would equal a 25% increase in the actual draw down suffered by the system. Through the analysis I have done of several systems with small profit targets it is notable that this overestimation is even more important, usually around 15-20% or more depending on the actual closing mechanisms and shortness of the TP.

The most important problem why profit and draw targets cannot be estimated accurately for scalpers - which arises from the unreliability of simulations - is the fact that live execution problems usually greatly diminish profitability in the long term. Variables such as slippage and spread widening - which are not expressed in backtesting - play a decisive role when dealing with automated trading scalping systems.

It is important to note that I am not making these problems up, they are real and ignoring them will have terrible consequences in the long term. In the beginning these problems may not seem apparent as these systems have very high winning ratios and the incoherence with simulations and the appearence of bad losing periods will usually appear later on, after a large number of trades has already been taken.

Does this mean that there are no scalpers that work ? No, that is not what I am saying. What I am saying here is that currently simulations are not valid - because of metatrader limitations - and extensive live evaluation of a statistically significant period - which in the forex market cannot be less than 5 years - is necessary to prove that the systems have a high like hood of being long term profitable. This criteria is derived from extensive statistical analysis of market cycles, a criteria meant to evaluate the performance of a system under very varied conditions. Otherwise, you may just be looking at temporary profit or draw down cycles that may not let you see the global character of the system. For regular systems - with reliable simulations - six months of live/back testing consistency are enough to validate simulations and grant these performance results but for scalpers this simply cannot be done because simulations have all the above mentioned problems - which again - are very real and well documented.

So in the end - yes - there can be a lot of scalping systems showing positive results in live testing results or simulations. However, the fact remains that none of these systems have tests long enough to be considered statistically significant. These systems simply cannot be considered long term profitable because they havent shown adaptation to varied market conditions and the ability to survive in the long term. So even though they may have positive results, I will never recommend - nor use - any system which does not have enough evidence to consider that I will be able to trade it safely in the long term. Small, statistically insignificant trading results are simply not enough to consider any system likely long term profitable (which means that the system has a high probability to work for the next few decades).

If you would like to learn more about automated trading systems and how you too can code your own reliable 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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