maxr

[accidental duplicate post removed]

In relation to choosing tick chart periods, it seems to me that using Fib numbers blindly (as many appear to) has no logical basis. I can see the sense of trading e.g. the tick number which most closely corresponds to a 15, 60, or 240 minute candle period for that instrument at that instant (because everybody else is trading on those), but why would Fibs produce useful numbers to create tick charts with? Max

We read about 'stop hunting' on FX edu sites. To what extent do you think this is the reality of what is happening, and to what extent is it just price overshooting S&R due to other causes, resulting in false breakouts which just happen to catch a lot of stops? Max

GTNew wrote: Thanks - so what kind of protective stop do you find works best with your methods? Max

ScottB said: Can you expand on that a little please? Thanks, Max

That's an interesting idea, Alan - if you entered a trade with an OCO of Stop/Target 1/Target 2, then if you got target 1 filled and stop to breakeven, you could trail target 2 outside price on technicals. You could then exit the second half manually on your regular trail stop at a bar close if it appears to be running out of steam (e.g. extreme of last 3 bars / n x ATR / 2 closes wrong side of 5 EMA, or whatever you use), but otherwise have a limit order in the book waiting to catch a quick spike if it happens intrabar when you're not looking. If you also trailed the stop loss manually at better than breakeven, you'd eventually either get stopped or spiked out for a profit. Could possibly reduce those DAMMIT! moments when you look at your 60 min chart 55 minutes after the last time you looked, only to find it's spiked in your favour then retraced again. If you programmed it rather than trailed the take profit manually on technical targets, would the take profit order not always be ahead of price? Max

Southerncomfort - we're all learning here all the time, so welcome to the club. I've been studying trading here in UK for years, and I'm just starting for real (it may not take you that long though). The first problem is that it's such a huge area, and the next one is that the professionals who know how to make money for real are mostly busy working for other people, or too busy trading for their own accounts to teach what they do. Relatively few of them post on trader forums, and it can be difficult to work out who is for real (as on any forum) - so I wouldn't recommend taking anything you read (including this!) at face value unless you find confirmation elsewhere. Many trading coaches either don't trade themselves (some tried it and failed), or have worked for institutions but not traded full time for themselves, and not all will tell you the truth about whether their methods can really make money. It's often fairly safe to give them credibility in inverse proportion to how loud they shout and how good they say they are. Promises that sound too good (i.e. get rich quick) almost inevitably are. In one area - FX - background info on all the basics of how the market works, explanations of common indicators, and basic trading concepts, patterns and terms, is readily available free from websites. Some educators charge $'000's for this same info in relation to equities, and you still don't have a good trading plan at the end of it. The reason there are so many FX trading info sites giving away this stuff is that they're covered in ads for retail FX brokers who give them commission or pay advertising - the trading educational and retail FX world is full of cross-commissions taken from your money. Spread betting - many spread betting companies are just bookmakers really (that's what they're supposed to be) - and your chance of success with a few is about the same as putting your money on a horse, because they're often trading against you one way or another (increasing the spread, phantom transactions, have a look on the forums). There is at least one spread better in UK who operates a different model and has no incentive to behave like that, but you have to trade large size with them, which probably isn't what you have in mind to start with. Some retail FX brokers are little better, because most make their money from the spread (difference in buying and selling price). They're effectively making the market you're trading in (or using the market of a larger broker), and in some circumstances they may also have to trade against you. There are FX brokers who make their money by charging you commission on your trade value, and you'll find some of those discussed on this forum - they mostly have either what is called an ECN system or operate a Currenex platform. Their interest is mostly for you to trade heavily, so they have no interest in you blowing your account out (unlike other retail FX brokers - that's why those offer such large leverage). However, most have a minimum account size of $10,000. FX brokers are better than equity and futures brokers at providing free 'training' or 'simulator' accounts, which can be more or less realistic (some fill all your orders immediately with no slippage, which is unrealistic), but at least you're learning without losing real money. If you can't make money consistently with a simulator, what's the point of trading with real money? You can also trade FX with Futures, which is a real zero-sum market (ie if your broker is trading against you, it's by accident, not design). Equities - 'direct access' trading accounts can put you right in the real electronic market (e.g. NASDAQ or NYSE) with the professional traders. They're mostly fast platforms, and the liquidity you're trading (ie whether you get filled at the price you want) is coming from THE real market. not 'a' market made by the broker as so often in FX. Incidentally, almost all FX broker sites will cite the fact the FX is the biggest market as a reason for trading it. That's only true in aggregate, but irrelevant if you're only trading the part of it your broker controls. Professionals usually advise against trading stocks from 'tips' - often the tipster is a journalist who has never traded, or if he is a professional (eg your stockbroker report, or a mercheant bank upgrade), he may be selling you the shares (or whatever) he has been accumulating at lower prices for a while. If I was starting again, I'd try to find someone who is actually making real money consistently for sure (don't take their word at face value, some people lie about this), and ask them where they learned what they do. There is a great deal of counter-intuitive but vital psychology involved in trading (I'd suggest starting with Trading in The Zone by Mark Douglas). All professional traders I've spoken to say that good psychology and money management plus simple logical reasonably effective trading methods works better than the 'Holy Grail' of complicated trading schemes and indicators on its own. I've been there and bought the latter - they're very pretty and make you think you must be trading right, and most are an expensive waste of money. Trading plans that involve buying the author'sd expensive indicators are usually a waste of money, because there's little that's new in the world of indicators - some are just dressed up overpriced versions of open source indicators you could get for free on this site (and some indicator writers are kind enough to post their indicators here for free). One other thing - if anyone calls themself a 'Master', or a 'Guru', be very careful, some are very persuasive people, but only masters at emptying your wallet. If you're a natural gambler, or at the other extreme, find losing money very painful, you may find trading isn't for you. Be aware that everyone in the market, and a high percentage of those around it, wants YOUR money, and many are well equipped to take it. Everyone I've met who trades for real says it's one of the most difficult things they've done, but it's fascinating. Hope that helps, and good luck, Max

Do you prefer to exit successful swing trades (intraday or longer) by placing profit target order/s in the book, or trailing your stop behind price (and maybe taking some profits on the way), till you get stopped out? I can see things to be said for both methods. If you set one or more profit target limit orders, you might get them filled on a quick spike that doesn't hold. On the other hand, targets are at best guesstimates (or we'd all be rich), so trailing a stop until it closes you out may enable you to get more out of a runner and avoid the 'wish I'd held onto that' feeling. Also, with just a position and a stop order there's less to remember, and it's not possible to accidentally leave orphaned orders in the book if your platform doesn't offer a good OCO system (worst overnight scenario - e.g. go long, price falls to take out your stop loss, then rises again, and your orphaned take profit order gets you in short when you don't want to be ). My own current preference is to get the stop to breakeven as soon as practicable, take profit on 50% on any weakness or at a conservative technical target, then move the stop to breakeven or better on the rest and trail till it closes out. Any views? Max

Thanks for the info on IB guys, that sounds good. I also just spoke to a long term professional stock trader who said he never has any problems with IB - and he trades the NASDAQ open every day on 1-2 minute charts. Max

Yes, the costs are very real - take Cable. The FXDD demo account (which happens to be the only 'straight spread' feed I have) currently quotes a 4 pip spread on Cable, which means $40 to buy one standard lot. IB UK's highest commission (they give volume discounts) appears to be $2 per $100,000, minimum $2.50, but their spread is currently often 1 pip on Cable. At 1 pip, buying 1 lot would cost $12.50 rather than $40. The difference is more on EURGBP - a 5 pip spread currently on FXDD is $50 per lot, vs. same $12.50 (or maybe less as IB spread is currently sometimes<1 pip). That's $37.50 more for just one entry, why would you want to pay that? Even if you do get good fills and service, you'd have to be doing very much better from the big spread broker to justify using them. Max

Having originally trained to trade stocks, I find FX traders have a very 'relaxed' approach to spread compared to stock traders, who will try to avoid paying it when they can (by e.g. joining the market rather than taking what's offered). However, if you calculate position size with % max risk per trade, you're effectively using a compound interest method to build your account (particularly so if/when your broker adopts the 'any size' fractional lot model). An extra 4 pips spread could make a large difference to your account balance over time, unless your high spread trades are consistenly much more profitable than your trades on low spread pairs. Given that high spread pairs also tend to be more volatile (which may reduce the success rate), I'd suggest you'd want to ensure that is undoubtedly the case. Max

Thanks for that info guys - sorry, I've been away for a while. Does IB give the full book 'level 2' style info on CME futures, or just 5 levels like TradeStation? Also, can you trade across all instruments with one IB account, or do you open separate accounts for FX, Futures, Stocks, etc? I had an IB account at one time, but closed it because their UK tech support staff didn't know the answers to relatively simple questions - they were pleasant and helpful, but not much use. Has that changed? Max

Can anyone suggest a good UK broker for FX futures? I'm based in UK, and looking primarily for fast execution and good service, with OK commission rates. I have TradeStation for charting. Also, I'd appreciate advice on the current liquidity of CME FX futures other than the 6 major USD pairs. Does anyone have experience of RY(EURJPY), RP(EURGBP), and the two e-minis E7(EURUSD) and J7(JPYUSD)? I'll be trading low volume initially, mostly around the Europe/UK and USA morning sessions, on 15 or 60 min charts. Thanks, Max

www.finfx.fl is a broker based in Finland, which is an EU member, so should have whatever client guarantees EU membership provides. They do normal accounts and ECN style accounts via Integral from US$2500. NO, I'd never heard of them, but they appear to be advertising specifically to attract US clients, because they list the things you guys can no longer do with a US broker, but can with them, on their front page. Max

I've been watching the Oracle news trading room recently. They have people trading news releases using futures, but most have spot FX accounts. They reckon spot FX spread widening 5-10 pips on major news releases is workable, but some of the reports from the spot FX account holders are scary - dealing desks holding their 'market' order back to enter them 30 seconds later at the extreme of a spike, then slipping them again when they exit that, spreads widening to 30 pips, and all kinds of 'no we won't let you trade news' shennanigans from requotes to refusal to accept entry orders at news times. Many of the traders in that room have entries open on multiple spot FX accounts simultaneously just so they get a fill from somebody. I'm interested in finding out more about news trading the futures, because if the liquidity is OK, at least it gets the wild card of the dealing desk out of the equation. Watching CME FX futures time & sales at news times, it seems like the spread widens nothing like as much as spot FX broker quotes - of course, that's OK only if you get a fill. Does liquidity dry up at news times on the major CME FX full futures (like 6E, 6B etc), or is it OK? Max

I don't think l'll worry about paying tax when I'm making so much money I don't need to worry about it :haha: I got seriously off topic there, anyone care to get us back on it? Max

I'm researching UK FX accounts myself (I'm a UK citizen based in UK), so I just phoned IB's UK sales office to see if there are any changes to their UK operation - voicemail on all 3 lines. Why is overseas US retail FX such an issue when Futures and Stock trading appears not to be - is it much bigger? Off topic, we Brits were used to feeling overtaxed, but with a 28% Capital Gains Tax rate (over a £10,000 annual tax free allowance), plus tax free financial Spread Betting (if you can find a broker who allows you to make any money), I don't think we do too badly at the moment. Max

CME Globex futures (ie 6B GBPUSD etc) are different from ES, here's the contract spec market hours: 'Sundays: 5:00 p.m. – 4:00 p.m. Central Time (CT) next day. Monday – Friday: 5:00 p.m. – 4:00 p.m. CT the next day, except on Friday - closes at 4:00 p.m. and reopens Sunday at 5:00 p.m. CT.' i.e. shut 4-5pm CT Mon-Fri and 4pm Fri-11pm Sun CT. As you say, not a high liquidity period, but long enough for the occasional significant gap. CME do e-mini JPYUSD and EURUSD and E-micros on the major pairs, but the e-minis aren't very liquid and the E-micros don't seem to have caught on at all. Max

There seem to be two main schools of adaptive position sizing (i.e. varying trade size with trade details) so far as I can see: a) Variable Percentage Risk methods often use technical stop and potential gain figures to work out a Risk Reward Ratio figure, and thereby decide what total % of the account to risk on that trade - they might decide that e.g. RRR of 1.5-2.0 trades 0.5% max risk, RRR of 2-3 trades 1.5%, RR over 3 trades 2.5%, or whatever. b) The Fixed Percentage Risk method simply sets a figure for max % risk on all trades, and calculates max total allowable loss per trade from account value. The trader sets an individual technical stop for each trade, and works out trade size by dividing max total acceptable loss per trade by the potential loss on 1 unit of whatever he's trading. The Variable Percentage Risk method initially appeals because it allows that some trades have higher potential gain than others. However I remain to be convinced of the practicality of estimating potential return using most common methods (Fibs, channels, swing H/L, symmetrical price patterns)- it often appears to be an exercise in wishful thinking. The Fixed Percentage method still allows variable position size based on the individual trade details (ie smaller required stop = larger position), but avoids guesstimating potential reward. Also, would you feel more confident taking e.g. 50 trades at 1.5% fixed maximum risk, or 50 trades at random max risk of 0.5% to 2.5%? I'm leaning towards the Fixed Percentage method based on technical stops - I can see the appeal of the Variable Percentage method, but not how to estimate potential Reward with confidence. What do you think, and/or what do you use? Max

As sptraderric says above, FX futures appear not to be covered by this legislation. Perhaps that will give a boost to the FX futures market liquidity - does anyone know why the electronic CME FX futures have to close for an hour per day? It would be more convenient if they didn't. For those who may be thinking of opening accounts to start FX trading and aren't up to speed with the changes, here's a quick summary by an introducing broker (usual disclaimer - I have no connection with this firm and I'm not recommending their services): http://www.traderschoicefx.com/broker-newsletter/newsletter5.html Max

That's interesting, how do you do that - trade FX with an offshore (from USA) bank? I wonder how easy it is to find a big, well capitalised, well regulated FX broker outside USA with some sort of account guarantee, which isn't either are an offshoot of or affiliated to US brokers. Max

Iversonne - do you mean you can't get that link to work? The video plays automatically, I've just checked it - but they do seem to have a problem with the sound up to about 1 min 35 seconds. If you're saying funds will not have to be repatriated or it can't be done, then have a look at the info on the CFTC website http://www.ctft.gov, here's the FAQ on the new 'Final Retail Foreigh Exchange Rule'. http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/forexfinalrule_qa.pdf Here's a link to a page on another site with a copy of a letter sent out to forex.com clients telling them what will happen to their accounts: http://www.forexhedgingstrategy.net/meta-trader-repatriation-part-two.html Max

They've archived it at: TradersChoiceFX - Newstrading Webinar Recording Just want to make it clear that I have no relations with http://www.traderschoicefx.com who are an introducing broker, and that they obviously have their own agenda in providing this webinar (ie to sign up FX traders to their services) - however it's quite informative. Seems to be an issue with sound for the first minute or so, should be OK after that, click on the icon for full screen or it plays in a tiny window on the web page that opens from this link. Max

Hi: I watched in interesting webinar last night on the forthcoming US FX changes, which as I understand them correctly, are: * US traders with spot FX accounts outside USA must repatriate their accounts by 18th October. * US FX brokers will stop allowing their clients to hedge - i.e. you will no longer be able to have opposing positions in the same pair. * FIFO order sequencing will be put in place. *Introducing brokers must be registered. *Leverage changes - discussed in another thread, so lets leave that. Apparently, banks providing spot FX trading acccounts are not affected by this legislation, and CitiBank has an account called FxPro which appears designed to allow clients to do many of the things the legislation sets out to stop - with a $250K guarantee. What changes do you see resulting from this - do you think traders will move to bank run trading accounts like the Citi offering, do you think some traders will move to Futures instead of spot FX (as I understand it, US traders can still trade Futures offshore), and will these changes affect you personally? Max

Thanks for all that info guys: ScottB - how do you deal with the evening shutdown on CME? If the issue is how to avoid price gapping over stops when it reopens, I guess not trading something that needs a tight stop through the shutdown would make sense? Hlm and Kiwi - thanks for the info on MB and IB. Are these systems truly 'no dealing desk/no requotes', and how have you found them at news times? From their website, it looks like IB routes any trade over $25K through their ECN style system and anything below through their small trade system. Max