Traders Laboratory Forex Trading Contest!

[optiontimer 10]

That is disappointing, OT - however, you have nothing left to prove, imho.

 

Your consistency is incredible, and I really think if you wanted to, you could come back and street the competition even with the handicap you endured ... unless you have surpassed the DD limit.

 

Well done, regardless.

 

Thank you for the kind words, Ingot. I am sure that the drawdown limit has been quite smashed. I actually left the position open to see how long it will take oanda to close it out due to insufficient margin. I was and am surprised that the platform didn't auto-liquidate the position. My main broker is Interactivebrokers, and let me tell you, they would have closed that thing out before the minimum maintenance level had been breached. So at this point, I am out, and my fxgame account is an experiment in oanda risk management. I sure you and I will both be back at it for the Feb contest.

 

My best to you and your wife during this New Year!

[optiontimer 10]

Ohh Dear Optiontimer, I am so disappointed for you. Shows that market is ready to take it back any time there is any opportunity - even from the best of us. I would still very much like to find out how a +40% is achieved within such a short time. It is an Amazing accomplishment!

 

Thank you Optiontimer for your generous sharing.

 

I agree with Ingot. The contest is only at midpoint.

 

Well, onemove, remember that the market can only take from you what you let it. Without a stop loss, I was a sitting duck. In my regular accounts, every instrument I trade has presets that automatically load a stop loss when I enter an entry order. I usually will adjust its specific level, but I do it so that I am never in the market without a stop loss.

 

As to the +40% that I had managed to put together, it was really quite simple. I traded the eur.jpy only. I selected it because technically it is moving and fundamentally it ought to be moving. I used a 15 minute chart with a 50 period simple moving average. If price was above the MA, I bought pullbacks, and if below the MA, I sold rallies. If the MA went more or less flat and price action choppy, I would stay out until price broke out from its trading range.

 

Yesterday, for example, if you were to look at an eur.jpy chart, I entered short yesterday, 1/3/2013 around 2PM EST. That trade would have been a loser, and price rallied through what was meant to have been my stop a few pips above that 2-2:15PM bar.

 

I would size the position as large as I could based on the margin available to me so long as I could maintain a 2-5% risk on the trade. The difference between a 2% risk and a 5% risk is based on things such as trend or counter trend (daily trend is up so I played long trades much more aggressively than shorts in this case), proximity to support/resistance.

 

Why 5% max? Because in general that was about as large a size as margin would allow.

 

While I did well enough on the counter trend trades to make them worth my while, it is interesting to note that nearly every losing trade I had (and there were a good number of them) were counter-trend short trades.

 

Here is a 15 minute chart that covers most of the last two days. White arrows are places where I think the trades are obvious, and the two colored arrows show trades that I think are obvious, though perhaps not as easy to spot in real time without some practice.

 

 

 

 

In each of these monthly contests I've done something different. But they all share this: I pick a time frame and define a trend, and then trade with that trend by entering short term moves against it. Even my counter trend trades were with the short-term trend, althought they were, without a doubt, counter to the intermediate term trend. In other words, I would only enter short when price was below the 50MA on the 15 minute chart, and I would enter long when price was above the 15 minute 50SMA with the following exception: Since the daily trend was up, I'd consider entering long if price made a quick dip below the 50 MA and had a strong reaction up off support (see the secong colored arrow on the chart above).

 

I know the above could have been written better, but I think some here should nonetheless be able to make some use of it .

[BlueHorseshoe 10]

 

 

 

 

In each of these monthly contests I've done something different. But they all share this: I pick a time frame and define a trend, and then trade with that trend by entering short term moves against it.

 

Hi Optiontimer,

 

Thanks for the insight!

 

I didn't realise that you were daytrading - hence I couldn't understand how you were finding sufficient trading opportunities in a two month competition without swing-trading a huge portfolio.

 

What sorts of orders are you using to enter and exit these positions?

 

BlueHorseshoe

[optiontimer 10]

Hi Optiontimer,

 

Thanks for the insight!

 

I didn't realise that you were daytrading - hence I couldn't understand how you were finding sufficient trading opportunities in a two month competition without swing-trading a huge portfolio.

 

What sorts of orders are you using to enter and exit these positions?

 

BlueHorseshoe

 

Enter at market, with a stop order cut loss and take profit taking limit order. If this were a real market such as stocks or futures, I would enter on a stop also. However, it did not take long for me to realize that oanda's platform is designed to "rake in" stop orders, whether the market actually trades at the price or not. I can't tell you how many times my fill price on a stop order is a price that is often 1-4 pips beyond the actual price extreme. If I get stopped out with a loss because of it, no problem; but what I do not like is when I am filled on an entry order that never should have triggered, and then I take the subsequent loss. So I work the fxgame so that if I see a trade is setting up, I will log into the platform, and I use a market order to enter if and only if price actually trades through and thus triggers my entry.

 

I really despise bucket shop forex, to tell you the truth. In real life I stick to currency futures for the most part, and if I do trade spot forex I do so at Interactivebrokers.

 

Also, when this contest was held in 2011, both of my first two months had returns in excess of +40% for each month. I was not day trading those months. I had very few trades, hit a couple of trends, and let the positions run for weeks at a time. I started to day trade the contest a few months ago when some yahoo came on the thread implying that my success was a matter of luck, and that a real trader would be day trading. So I figured I'd show that trading is trading - you either have it (and yourself) figured out, or you don't. Take away the scales and look at a bunch of charts. You will not be able to distinguish a weekly from a quarterly from a 5 minute from an 800 tick from ... you get the idea. If you believe, as I do, that price action is price action regardless of how you collate the data, then you would see that there is no reason to trade a tick chart any differently than you trade weekly?

 

Also, had I simply entered a long and hold trade on the eur.jpy from jump street, I'd be up a whole lot more than 40%. I've been continuously short 6J futures since October 15, with add-on sell made on 11/13 and 12/4, if I remember correctly without looking at a chart. I would bet that if you looked a chart of the eur.jpy or the usd.jpy you would see that those dates (give or take a day if my memory is off a hitch) would have been great days to go long euro's and dollars and short yen.

 

Ok - I went to the eur.jpy chart. If you had bought and held since the 11/13, you'd be up nearly 1400 pips in two months. If you had then added a few times, you could have easily parlayed a nice amount on top of a relatively modest amount. At IB, for example, it would have taken a bit less than 3K to take a 100K long eur.jpy position in October, and there would have been sufficient profits to add 100K at 106.50 and 100K at 108, so a 3K margin could have been rolled into a +1400, +850, and +700 for +2950 pips and counting. At about $11/pip, that would have you sitting on $32450.

 

I say all of the above because I would not want anyone to get the impression that day trading yields superior returns to swing trading. In real life, I have made most of my profits in my postions that I've held for weeks and months.

[BlueHorseshoe 10]

Take away the scales and look at a bunch of charts. You will not be able to distinguish a weekly from a quarterly from a 5 minute from an 800 tick from ... you get the idea. If you believe, as I do, that price action is price action regardless of how you collate the data, then you would see that there is no reason to trade a tick chart any differently than you trade weekly?

 

Hi Optiontimer,

 

For me, the issue with trading shorter timeframes is not whether to trade them differently - the same patterns of trend with corrections offering low-risk entries occur across all timeframes as you suggest - but rather whether the profits associated with them will overcome the cost of paying the spread (and I'm talking about the single tick spreads of liquid futures, not interbank forex).

 

Using limit orders removes the spread cost, but then you have the issue of unfilled orders, which are always would-be winning trades by definition.

 

The fact that you were able to generate such returns using market orders suggests that I am missing something (and I'm pretty certain it has nothing to do with entries - mine would have been virtually identical to those you have shown) . . .

 

BlueHorseshoe

[Mysticforex 13]

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[onemove 10]

Dear OT:

 

I traded the eur.jpy only. I selected it because technically it is moving and fundamentally it ought to be moving.

 

Will you elaborate a bit more about this pair selection? for example, what make this pair a better selection than eurusd, usdjpy, or gbpjpy and other jpy pairs at that point. Thank you.

 

I would only enter short when price was below the 50MA on the 15 minute chart, and I would enter long when price was above the 15 minute 50SMA .

 

Will you share your exit strategies for the position(s) after adding on to them? In the past I have added on with mixed results, meaning mostly I add on just before the market goes fast against me causing loss of open profits at a greater rate than they were accumulated. I am trying to figure out how to add appropriately as I understand that when the market is moving it is our duty to press the issue.

 

Thank you so much for your generous sharing!

[kuokam 10]

This is the confirmation that OT has hit the DD threshold and is eliminated. Too sad. But just reminds me 2 things:

-Even the wizards never stop learning in this business;

-This trading thing is a very jealous lover that will tolerate not sharing of focus between her and any other occupation.

 

But everybody saw what you can achieve, OT. No doubt you will do it again in the contests to come.

 

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[Perrin 10]

No offence meant to anyone here - but isn't that quite a normal way of going bust?

 

Win, win, win, win, win, complacency, win, win... Then bankrupt, and no one could have seen it coming?

 

Isn't that a standard way that we as traders can end our careers if we're not very careful? I think it should be a lesson to us all that even if a person is way out in front and looks like he's going to win it all, it doesn't necessarily end that way.

 

Also on a different note, I was thinking that isn't one of the best ways to win a trading contest is to bet everything and be reckless - if a trader wins he can claim to be a superstar, if he loses then he could say it doesn't matter because it's just a game?

 

Just throwing a few of my thoughts into the mix

[Mysticforex 13]

No offence meant to anyone here - but isn't that quite a normal way of going bust?

 

Win, win, win, win, win, complacency, win, win... Then bankrupt, and no one could have seen it coming?

 

Isn't that a standard way that we as traders can end our careers if we're not very careful? I think it should be a lesson to us all that even if a person is way out in front and looks like he's going to win it all, it doesn't necessarily end that way.

 

Also on a different note, I was thinking that isn't one of the best ways to win a trading contest is to bet everything and be reckless - if a trader wins he can claim to be a superstar, if he loses then he could say it doesn't matter because it's just a game?

 

Just throwing a few of my thoughts into the mix

 

Optiontimer explained that he forgot to set his S/L. I don't think he would have done that on his Live acct.

 

That's also why we use the 20% DD rule.... try to keep folks from going too Gonzo.

[Perrin 10]

Who knows - we're all only human afterall! (I'm only joking, I know Optiontimer isn't human really)

 

Co-incidentally I'm just about to start reading one of his threads - Optiontimer's Project.

 

This place (TL) is amazing. I could spend years here just reading and reading.

[Mysticforex 13]

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[BlueHorseshoe 10]

Co-incidentally I'm just about to start reading one of his threads - Optiontimer's Project.

 

This place (TL) is amazing. I could spend years here just reading and reading.

 

Optiontimer's thread is excellent, especially if you're able to abstract from the specifics to the general concepts (rather than getting bogged down in nonsense like indicator settings etc).

 

BlueHorseshoe

[BlueHorseshoe 10]

Dear OT:

 

Will you elaborate a bit more about this pair selection? for example, what make this pair a better selection than eurusd, usdjpy, or gbpjpy and other jpy pairs at that point. Thank you.

 

Ditto onemove - although if you can ignore the spot fx limitations of the contest and explain how you'd select the most appropriate instrument to daytrade at any given time from a whole range of possibilities, then that would be enormously helpful (ie why eur/jpy rather than the es, live cattle, gold, or orange juice etc).

 

Thanks!

 

BlueHorseshoe

[optiontimer 10]

The fact that you were able to generate such returns using market orders suggests that I am missing something (and I'm pretty certain it has nothing to do with entries - mine would have been virtually identical to those you have shown) . . .

 

BlueHorseshoe

 

Perhaps the problem is here:

 

For me, the issue with trading shorter timeframes is ... whether the profits associated with them will overcome the cost of paying the spread (and I'm talking about the single tick spreads of liquid futures, not interbank forex).

 

This implies, to me at least, that perhaps you are just not playing for big enough profits. While I would agree that the over the counter bucket shop forex model spread can be prohibitive, especially as your broker can execute you at prices that never occurred "out there," i.e. in the market-at large, I suspect that the fact that you find "paying the spread" to cause short-term trading to be cost-prohibitive suggests to me that your view of what constitutes short term may be much shorter than what I consider short term. Also, and probably more likely, I am very willing not only to let a winner run, but to add to it as it moves my way, assuming I am trading with the trend. I have not found spreads to be much of a concern, other than in this fx game where the spread can be manipulated to cause a trade to occur when price action otherwise had not triggered the trade.

[optiontimer 10]

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oanda finally, and mercifully, closed out my collosal loser with a final loss of 55% of the account's opening balance. I had started the month with $100K, traded it up to a a bit over $140K, and then saw one open loss consume $95K.

 

While I am out of the running, I'm going to continue to trade the fxgame, and I am going to make my goal the recovery of that $95K, without allowing the account to exceed its current drawdown level. Toward that end, I will always double check to make certain I have a stop loss active on any open position before I exit the fxgame platform.

 

FWIW, I actually remember having modified the order ticket on that loser to enter both a stop loss and a profit order, but I must have hit the "X" on the trade ticket window instead of hiting the submit button. Sloppy, sloppy, sloppy, even for a sim excerise.

[optiontimer 10]

Who knows - we're all only human afterall! (I'm only joking, I know Optiontimer isn't human really)

 

Co-incidentally I'm just about to start reading one of his threads - Optiontimer's Project.

 

This place (TL) is amazing. I could spend years here just reading and reading.

 

I'm human, all too human ...

[Mysticforex 13]

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[Mysticforex 13]

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[optiontimer 10]

I would hope everyone was trading eur.jpy today, and that they were doing it from the longside, and adding adding adding as fresh margin from their profits allowed.

[onemove 10]

I would hope everyone was trading eur.jpy today, and that they were doing it from the longside, and adding adding adding as fresh margin from their profits allowed.

 

WOW Optiontimer, that is an amazing performance!!! Please - will you share where you added to your position? What is the best way to exit such a compounded position?

[optiontimer 10]

WOW Optiontimer, that is an amazing performance!!! Please - will you share where you added to your position? What is the best way to exit such a compounded position?

 

Well it ain't over yet ... my stop is now 118 even and I'll probably close it all out by the end of the day if I'm not stopped, and the we'll see how it looks Monday morning.

 

I bought my first position in two parts: The first 1/2 at 113.774 market order/market fill on 1/8/2013 at about 6PM EST (18:00EST), and added the second 1/2 at 113.97 about an hour later. (I don't have time to post a chart, but you should be able to find what I am referring to - use a fifteen minute chart when you go hunting for it).

 

The easiest answer as to why I started buying there is that it is a pattern I have seen across all markets and all time frames from the day I started trading and when I see it I don't have to think about it. It is as close to a sure thing as I know: A retest of a recent pullback low in an overall strong uptrend that reverses immediately.

 

The second entry was what is very commonly referred to as a 123 entry where there is a low followed by a rally high followed by a pullback to a higher low and then the rally resumes and makes a higher high. Not a sure thing by any means, but when it occurs after the successful test of the first low mentioned above, and the overall trend is not only up but strongly up, then odds certainly favor a continued move higher, at least to retest a recent important high.

 

As to further add-on buys, I would check the account once in a while, and as new margin was available as a result of open trade profits, I would buy additional amounts, but always much smaller than my initial trade position. I consider the first two buys combined as my initial position, let's call it X. Each add-on was .10X (1/10th of X). These additional buys were bought without any consideration to chart patterns of indicators or the weather or astrology or anything else. The positions were small, so I did not sweat the stop loss or an inital drawdown. Each position shared whatever stop loss I was using for the base position. As the base position was 10X's the add-ons, there was never any danger of going bust again. This is pyramiding, were the base position is the largest, and additional holdings at higher and higher prices are a much smaller than the total of the positions below.

 

All that mattered was that I had enough open profit to buy a 10% position. All add-ons were bought at the market.

[Mysticforex 13]

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I have resigned from the contest and I suppose I owe some type of explanation.

 

In mid - late November my wife was in an accident at work. She was attempting to stop an altercation between patients. When the dust settled she had a broken Hip.

On December 22nd she underwent a Total Hip Replacement. She is doing very well.

Her recovery is progressing beyond our best expectations. Our lives are returning to normal.

 

Needless to say Real Life comes first. I had 1 trade open on the contest which I closed today neg 40% plus. Didn't do any live trading at all.

 

I should be back up to speed next month if anyone is interested.

[kuokam 10]

Sorry to hear that, Mystic.

Please greet her.

KK

 

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I have resigned from the contest and I suppose I owe some type of explanation.

 

In mid - late November my wife was in an accident at work. She was attempting to stop an altercation between patients. When the dust settled she had a broken Hip.

On December 22nd she underwent a Total Hip Replacement. She is doing very well.

Her recovery is progressing beyond our best expectations. Our lives are returning to normal.

 

Needless to say Real Life comes first. I had 1 trade open on the contest which I closed today neg 40% plus. Didn't do any live trading at all.

 

I should be back up to speed next month if anyone is interested.

[BlueHorseshoe 10]

 

Needless to say Real Life comes first.

 

I wish your wife a speedy recovery.

 

BlueHorseshoe