Week 3 -Sat- $580.41 Total equity.

 It turned out to be a great trading week. It was one of the rare times that a holiday week is an impulse week. The only thing I can say in addition is – what all traders say after a week like this – it would have been great to have more size on. As it was, I can't complain.

On Monday, I exited Friday's ONS trade in USD/JPY for a profit. Then got short GBP/USD, GBP/JPY and got stopped out on both trades for total losses of 119 pips.

On Wednesday, I went long EUD/USD and short USD/CHF. These trades took off an never backed up from entry.

Thursday, I got triggered on the long USD/JPY trade and quickly got stopped out for a 56 loss. My only real regret is that the short USD/JPY trade to the downside wasn't triggered instead of that quick knife jab up to get us hooked long with the stop out.  The short trade for the week would have been a great one and would've significantly added to our bottom line.

None of the potential OneNightStand trades executed on Friday as we suspected.

This week's Alpha account trading recap:
Start of week equity: $ 533.65
Completed trades:

EUR/USD: BUY 1.4437,  -exited bulk of position on Friday- 278 pip profit.
GBP/USD: SELL 1.9789, stop 1.9849. -stopped out 60 pips loss
USD/JPY: BUY 114.53, stop 113.97. -stopped out 56 pips loss
USD/CHF: SELL 1.1503, -exited bulk of position on Friday- 234 pip profit.
GBP/JPY: SELL 225.69, stop 226.28. -stopped out 59 pips loss
Total of 175 pips in losses
Total of 512 pips in profits

OneNightStand Exit(s) on 12/24/07 :
USD/JPY: Bought @ 113.60 on 12/21/07 - exited @ 114.09. - 49 pips profit.
OneNightStand 12/28/07 entries:  -None-

End of week equity:   $ 580.41 (includes unrealized P&L)
Total Gain on Week:  $ 46.76(+) (8.7% increase)
Unrealized P&L:        $ 12.32 (+) Trailing 250 units of long EUD/USD and 250 units of short USD/CHF from their FirstStrike entries with breakeven stops. Will discuss this “Free Trade” situation next week.

See you Monday!
Best wishes on your new year!

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me which address you would like it sent to.

Week 3 -Thu- Current Equity: $557.20

Well, it is turning out to be a decent trading week after all.

This morning I got triggered on the long USD/JPY trade and quickly got stopped out for a 56 loss. That makes 3 total losses, the GBP/USD, GBP/JPY, and the USD/JPY. The short USD/CHF and the long EUD/USD – entered yesterday – are on a tear!

I'm pretty sure that none of the potential OneNightStand trades will execute tomorrow. The long term trends of the non-US currencies appear to be reasserting themselves. That is good for us. Trending markets are easier to make money in.

I mentioned last week Friday that I would suggest how it is possible for you to get additional profits for little extra risk. This situation arises when you have already taken a trade in a currency pair that is subject to a potential OneNightStand trade.

Example:

You are already long the EUD/USD from some other system and then Friday comes along and one of the OneNightStand trades is to go long the euro if the price of yesterday is exceeded. If your exit criteria on your current trade is not triggered and the ONS trade triggers you have the opportunity to take advantage of the additional “new” trade potential of ONS and exit your current trade on Monday morning. Since profits tend to have strong correlation with time in the market, converting a trade that would normally only have a life of around 4 days can safely be converted into a trade with 6 days.

Note: I would recommend making this “trade conversion” ONLY when the ONS trade is in a profitable position by the end of the day of entry. Otherwise, in the case of any other system you might be following..., follow its exit criteria. In the case of the other system being FirstStrike, exit just prior to 3:00 PM CST – Friday. There is strong mathematical evidence that suggests that trades which are profitable on the day of entry have much stronger potential than those which experience longer loss periods before going into profits.

I have a floor trader buddy (now retired) who made more than half of all his lifetime trading wealth only holding exceptionally profitable daytrade winners overnight.  He considers it the greatest secret he possessed.  You didn't hear this from me.  : )

By switching trades you avail yourself of additional edge and potential to increase your return without increasing your risk materially. Feel free to test this concept with any other methods (that have an edge) you wish, and you will be pleasantly surprised how beneficial this can be. I call this effect: The Power of Being In.

Until tomorrow.

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me which address you would like it sent to.

Holiday week - listless markets- Current equity: $528.17

Best wishes on your holiday.

Not many forex traders are trading very aggressively this week, and I don't blame them.

I mentioned to the signal subscribers that I would be trading half size this week and am glad that I am.

On Monday morning, I came out of Friday's OneNightStand trade in USD/JPY for a profit 15 pips less than Friday's close (less than $2.00).

A little later on Monday, I got short GBP/USD, GBP/JPY and have gotten stopped out on both trades for total losses of 119 pips.

Today, Dec. 26th I am long EUD/USD and short USD/CHF for a profit of 46 pips and loss of 5 pips respectively.

Still waiting on an entry on the USD/JPY.

Current equity: $528.17

Until tomorrow....

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me which address you would like it sent to.

Week 2- $533.65 Total equity.

The end of the week has come and we stand at $533.65 total equity.

I exited EUD/USD at 3:00 PM CST, covering Monday's FirstStrike short position from 1.4391 at 1.4358 for 33 pip profit. We definitely could have doubled or tripled the profit by covering at obvious support levels that it just couldn't breakout below. I try not to deviate very often from my entries or exits, because the only reason we get paid as traders is due to the accurate execution of our methods. In the long run, the strong tendencies we trade on overwhelm short term opportunities.

For those watching the trades in realtime-- what did you think about how the USD/JPY FirstStrike came alive right after 7:00 AM? It took off like a rocket after not going anywere for the previous week. It also triggered my Sure-Breakout system that I mentioned last week.

I exited the FirstStrike USD/JPY trade just before 3:00 PM CST for a 59 pip profit. Interestingly enough, the OneNightStand USD/JPY trade entered at the same place as the FirstStrike trade so we had a double position all day, and now only hold ONS over the weekend until Monday morning. I will talk about this type of trading situation next week, about how you can dramatically multiply your trading profits with little extra risk.

Below is the recap. Even though FirstStrike had more pips in losses than profits from the winners, the week turned out to be only a small loss because the money management algorithm placed larger positions on the two winners. Sometimes the beneficial effect is amazing, like this week. It doesn't always work out that way, unfortunately. The benefit of advanced money management is to moderate what can be moderated without getting "cute".

This week's Alpha account trading recap:

Start of week equity: $535.40
Completed trades:

EUR/USD: SELL 1.4391, stop 1.4451. -exit on Friday 33 pip profit
GBP/USD: SELL 2.0134, stop 2.0194. -stopped out 60 pips loss
USD/JPY: BUY 113.61, stop 113.01. -exit on Friday 59 pip profit
USD/CHF: BUY 1.1570, stop 1.1510. -stopped out 60 pips loss
GBP/JPY: SELL 227.81, stop 228.41. -stopped out 60 pips loss
Total of 180 pips in losses
Total of 92 pips profit

OneNightStand Exit(s) on 12/17/07 :
GBP/USD: Sold @ 2.0181 on 12/14/07 - exited @ 2.0284. 3 pip loss
OneNightStand 12/21/07 entries:
Bought USD/JPY @ 113.60. Not stopped out. Exit Monday (12/24/07) morning at Midnight, 00:00 CST.
End of week equity: $533.65 (includes unrealized P&L)
Total Gain on Week: $ (-1.75) (less than 1%)
Unrealized P&L:           $ 6.55 (+) (OneNightStand trades)

See you Monday!  
For those going on trips for the holdidays - be safe!


Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address you would like it sent to.------------------------

Equity 523.10-- Forex Meltdown comes late in week

Hi everyone:

The huge moves in GBP/USD and GBP/JPY to the downside in the last few days brings up a good topic. Whether one, when trading a straddle-type trade such as FirstStrike or some other type of volatility breakout system; should continue buying and selling all breakouts from the beginning of the week until you get profits or the end of the week comes.

This week in GBP/USD, if you started at the beginning of the week and took the original sell, got stopped out for a 60 point loss, then the second sell for a 60 point loss, and the third sell, which also got stopped out for a 60 point loss-- if you continued and took the 4th sell you got rewarded for a move exceeding, at this moment- 268 pips. This seemingly absorbing the 180 points of loss that you would have accrued in the first 3 trades and adding 88 more. Of course, this isn't factoring in that each time you're having a loss, your account size is decreasing, meaning that each succeeding trade has just a little less position than the trade before. More on that in a minute.

The GBP/JPY pair also had a fantastic move down from the open of the week. But if one had continuously taken every FirstStrike straddle trade, the first sell and it's 60 point stopout, the next 2 losing buys, the next losing sell, the next two losing buys, and the next losing sell (seven consecutive losses in a row, totaling 420 pips)--- then you could have gotten to the winning sell at 227.81 which now is ahead 310 pips. Still down 110 pips for the week in GBP/JPY, despite its terrific performance the last couple of days.

A little more about factoring in a decreasing account size affecting your return when you do win.

If you had just been trading GBP/JPY by itself and were risking just 1% of your capital per trade you would be working from a capital level of 93.2% of what you had started the week with. If you were trading the GBP/USD pair too, the two earlier losses in the week would have further reduced your account to 91.3% of what it started with at the beginning of the week before getting to the last two winning trades.

After 3 losing trades, equity loss is very noticable. After additional losing trades from other markets you are trading, like 7 of them in the example above-- your position size may be very severely reduced even trading a small percentage of your trading account. (People trading 5% of their accounts per trade would go screaming out the door)

What this means is, that 268 pip potential profit from the last GBP/USD trade..., doesn't have as much return as a 245 pip trade would have had if it been the first trade.

And who knows if the markets won't rebound.

WARNING: I have traded FirstStrike through periods where I had 19 consecutive losses including the multiple pairs I was trading.

This week was just a good example of the actual dynamics of how volatility breakout methods can be very good but also very difficult for the human to trade.

In my personal trading this week, I did quite well. My best week in a month, actually. I caught the downside breakouts of the GBP/USD and GBP/JPY at 3:00 AM on the 19th. I didn't get the whole move with all of my contracts, but about 200 points on the pound/yen and 150 on the pound/dollar worked just fine.

As a side note, The discipline it takes for me to trade this account "straight up" according to the rules is incredible, since I do trade for a living and have to take dozens of additional trades every week to keep my funds working correctly.

After one knows many good methodologies to trade, trading for this challenge is like being at a smogasboard and only being allowed two things to eat and only eat twice a week. At least the two methods I chose for this blog are good ones.

Until tomorrow.

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address where you would like it sent.

Clarification for yesterday's post--

It was kindly brought to my attention that there might be some confusion about when FirstStrike orders can be executed.

The buy and sell orders are fixed relative to the open of Monday's trading, determined by the price existing at 00:00 Monday morning.

The question from a reader yesterday was as follows:

I read your latest blog entry last night and enjoyed it. One system specific question, are you applying FirstStrike entry signals ONLY on Mondays?
My Reply: 
Monday's only, unless Monday is some sort of major holiday. Then we use Tuesday's open.
I was thinking about the change in opens, while the questioner was asking whether we only are allowed to execute trades on Monday.  

We execute the first trade in a given currency pair, however long it takes within the trade week--for it to get executed.   That is, of course before Friday at 15:00 when you would need to close any existing trades.  

As a practical matter, I am quite certain I wouldn't take a FirstStrike "first" trade past 09:00 on Friday morning.  The situation of not getting executed on a trade within the week happens so rarely as to not be an issue.

Thanks - T - for the clarification.
Have a great evening.

JR
www.infiniteyield.com

Current Equity - $520.24, Forex Challenge Money Management

My trading is done for the day...,

It's a perfect time to talk a little about money management and how it applies to trading, and specifically how it applies to this Forex Challenge. 

There are tons of different schemes that have been invented for trading the markets with "special" money management so as to turn mediocre methods into higher performing methods. Some are better than others.

Why so many? Because of the difference position size can make on your trading outcome. If your winning trades consistently have smaller position size than your losing trades, you have a very hard road to overcome. That is the road almost all fixed fractional followers have to traverse. You lose, lose, and lose-- and each time drop by another fixed percentage of capital. Then, when you finally get a winner, you will definitely be trading a position that has less size than when you started before the losing series.

You will read something you've probably never read before..., right now!

All market methods do not have the same edge. So, why trade them as if they all have the same edge?

You will see people boldly state, "Never risk more than 1% per trade or you will lose all of your money." And that without knowing what you are risking your trading capital on. All trades are not created equal.

What if you were in possession of a special trading system, based on identifiable market tendencies that repeat over and over---that has a true profit factor of greater than 2.5 to 1 (wins $2.50 for every dollar risked) and a win rate over 60 percent? Proven over thousands of 'real' trades, not theoretical ones? Are you going to just risk 1% of your equity on that trade?  (Systems like this do exist!)

If you don't like making money, I guess you could.

It comes down to how much you know about your system or method and the edges available from it. Notice I said "edges".

Even with relatively simple-looking trading models like OneNightStand and FirstStrike, each trade is not created equal. If you just look at the total raw system outcomes (trades) that these methods produce, you could figure out an approximate profit factor, and undertrade that figure to allow for errors in calculations and actual trading costs. In fact, that would be the absolute minimum of due diligence you would have to do to consider trading with real money.

What if you "knew" something extra about a system that most examining traders might miss? "Knowing" that certain subsets of trades definitely had greater potential than others? Wouldn't that encourage your adjusting a larger size for those trades if you could quantify that greater edge?

Think about the game of Blackjack.

The ONLY reason that casinos fear professional blackjack players is because they can determine when they have the advantage over the house..., and monopolize that advantage by putting on larger bets. The professional counters are able to win consistently because they are more likely to win their largest bets and only have to put up with many small losses and small gains when the "house" has the advantage. Professionals only bet small when their edge is small or non-existent.

Traders should too if they can identify higher reward opportunities.

On this topic, I received another nice email from a subscriber: (Below the email is my reply)
----------
One more quick question. With the 50:1 leverage, what is the current (Oanda) unit size that you use?
I understand that you are using your money management algorithm to determine that, but I am just trying to stay close to the result, that you publish. You mention a 0.5% to 4% range for equity risk per trade.
So what % equity risk per trade would give approximately the same result as your blog?
Sincerely,
-M-
----------
Answer:
For you to get exactly the same results as my blog you would have to have my exact money management algorithm. Unfortunately for many, that is unavailable except to my professional clients. (Last year a trading company licensed my money management algorithm. It cost them $17,000, based on the size of their trading operation.  Additional note: They earned $200K more this year with it than without it, and had 20% smaller drawdowns.)

My position size is based directly proportional to the probabilities of the specific trade I am taking. As I am aware of the precise edge of my systems, I can be much more precise than someone who has the rules for the trade, but not the exact figures for its edge(s).

Advantage is in the advantage.

I understand your wishing to emulate my results. (I personally don't think it is a good idea though, for reasons I will mention a little lower) My best advice is to test the methodology to the degree that satisfies you as to having sufficient edge for you to trade, trade very small for a month or two, and then step up your size as you gain experience. Within a short time you will find a percentage that approximates my gains and losses, probably between .75% and 1.5% per trade.

I encourage you to do a lot of research on money management for trading systems. Ralph Vince has written some great books on the subject.

What you don't realize now is how bad future drawdowns can, and likely will be. 60%, 70%, 80% drawdowns or even more from time to time are possible. I would prefer that it wasn't so, but it is. I've been down this road before.

Start small, build up your ability to execute. The markets aren't going away anytime soon.

My Forex Challenge is for my own trading test and proof of concept.

I'm sure you've already realized that I am definitely not running a charity. This trading challenge is also not meant to be an advisory service for me to drag all the world's forex traders into a profitable state.

I am willing to show traders a way to success. It may appear to be somewhat simple, but it is definitely not going to be easy.

Have a great week, and holiday season.

Thanks for the note.
JR
----------
Thanks - M -

Well that is enough for now on this subject.

It would have been great if we hadn't gotten stopped out on the GBP/USD pair. By checking the price action on GBP/USD, if we had kept reinstating the sell side after getting stopped out the first time, we would have been stopped out 2 consecutive times before the big move down. 180 pips in losses before having a slim chance to recoup some of the equity lost. That is the way trading goes. It is all about probabilities.

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address where you would like it sent.

Last Equity Check- $516.42

I received another email today from a reader about FirstStrike:

FirstStrike looks very similar to an idea I saw on the ForexFactory.
Although I haven't booted up my backtesting software to investigate it
yet, the approach certainly 'feels' robust.
Reply:
I have shared FirstStrike with a number of professionals over the last 10 years. I have no doubt the concept has found its way to ForexFactory or other forums.
I read your latest blog entry last night and enjoyed it. One system specific question, are you applying FirstStrike entry signals ONLY on Mondays?
Reply:
Monday's only, unless Monday is some sort of major holiday. Then we use Tuesday's open.
Secondly, in terms of backtesting, did you use intraday data to create the stats?
Reply:
As necessary. I haven't had to backtest it for more than fifteen years. I have been making money from it! Of course, I have tested it (with daily and intraday data) concurrently with my trading to verify its edge. Nothing has materially changed in 15 years. Actually, the British Pound has gotten better in the last 5 years. I'm only showing people what tendency exists. Please feel free to adapt or change whatever you want. All traders do that sooner or later.

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address you would like it sent to.

 

Last Equity Check- $517.52- Still short EUD/USD

Good afternoon everybody!

Not much going on with our trade that is left-- short the EUD/USD. It's been a little ahead and a little behind since it got executed. We may have some fireworks later in the week. If the market can't move up and stop us out, the tendency is then to keep on going down a bit more. We'll see.

A little more about FirstStrike.

It is a volatility breakout method, of course. FirstStrike is based on the proven tendency that markets have some predictive behaviors that can be harnessed because of their moving away from the opening of a trading timeframe. That is what FirstStrike does. It profits from the weekly moves that currencies tend to make after the weekend. A perfect complement to ONS which earns profits from holding over weekends. This way we can earn more with our capital because of trading efficiencies. More about that in later posts.

In the FirstStrike ruleset material I mention Toby Crabel. He is a great trader/investor who operates out of Milwaukee, Wisconsin USA. He wrote a great book many years ago about volatility breakouts, some similar to FirstStrike-- which let the public know more about our secret weapon, and got "discovered". He has done very well for himself and his company in following up on precise market edges and managing larger accounts with extreme discipline.

Check out Mr. Crabel's website and his trading philosophy. He believes that "strategies should capture enduring and explainable market participant behavior". He also thinks that risk is handled best by taking large numbers of small trades instead of making a few large bets on a few trades. (Note: this is not a plug. I like the guy.)

And he does just what he believes. He trades a large number of simple systems, some similar in profile to FirstStrike, and many of them much worse. But all together, with all the trades involved, he is able to accomplish his goals. With relatively uncorrelated returns that are well positioned for risk reward. Not a lot of return on an absolute basis. But making incentive fees and management fees on 4 billion dollars is very profitable. Whatever it takes to hold on to the "money" is what his firms does. You would have to be stupid not to trade with low volatility like him.

I couldn't agree more with his philosophy. The problem is, most people have relatively earthbound sized trading accounts. To do what Mr. Crabel suggests takes lots of capital, which he now has..., and lots of profitable trading methods. (You don't need a huge edge remember, just a sure one!)

The only alternative then, is to trade smaller account sizes, and trade methods that have "enduring and explainable " behaviors that can be traded on markets you can afford. You have been introduced to two solid methods that have this going for them. Because trading in Forex enables you to change your position size to very small imcrements, you now have the ability to in an important way, to trade like a larger hedge fund. I doubt you will threaten Toby's business anytime soon, but you can become a player.

If you have other proven methods, you can trade them in addition to FirstStrike and ONS and drop your position sizing per trade to smooth equity swings. We'll talk tons more about money management in the months and years to come. It is truly the "secret sauce" that makes markets pay you for the risk you take.

Another question from a subsciber:

Questions I have:

Oanda account: What leverage one need to specify/use, the default 20:1 or something else?
My answer:50:1 gives you the greatest amount of options--- I use special money management for my challenge, possibly revealed later in the game. But a simple percentage risk, like .5%, .75%, or 1% or 2% equity risk per trade will build your account. Don't risk over 4% per trade. You won't like the equity swings.
ONS: Buy or Sell, but when, Friday Open, Friday Closed or Friday anytime when the buy or sell condition was met? If Friday is Holiday, trade Thursday?
My answer:Anytime after the Friday open, 00:00 CST when the buy or sell condition is met. If Friday is a holiday for all countries - NO TRADE! --Just 1 continent? Trade. Again--Both continents? No trade!
FirstStrike: If Friday is Holiday, exit Thursday or Monday?
My answer:If Friday is a holiday for all countries - Exit Thursday @ 15:00. Just 1 continent? No. Both continents? Yes

M-
-------
We still haven't been executed on the USD/JPY trade. I'm getting a little curious about it. If we get a strong move this week, maybe we will make some money back!

I'll keep you posted.

Last equity check - $517.52.

Have a great rest of you day.

Joel Rensink
www.infiniteyield.com


PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address you would like it sent to.

New Week--Last Equity Check- $519.78

We are observing typical pre-holiday trading.  Every few years we get something exciting just before the end of year.  I'm always willing to accept it if we get it.  So far, the markets are pretty range bound.

I started off exiting my OneNightStand trade this morning at Midnight (00:00).  On Friday we sold GBP/USD @ 2.0181.  I exited this morning at 2.0184 for a 3 pip loss pluss a little for interest.  That cost me about $1.00.

Shortly thereafter, I had 4 FirstStrike trades executed this morning.  They were:

• eud/usd:  SELL 1.4391, stop 1.4451.    -Still in with a small profit.
  
• gbp/jpy:  SELL 227.81, stop 228.41.    -Stopped out for a 60 pip loss.
  
• gbp/usd:  SELL 2.0134, stop 2.0194.  -Stopped out for a 60 pip loss
• usd/chf:   BUY 1.1570, stop 1.1510.     -Stopped out for a 60 pip loss.

One of my readers emailed me this morning:
From the Oanda chart, it looks as if the short trade on GBP/USD has been opened and stopped out by 7:00 a.m. CST. Is this correct? If so, will you reinstall the reverse FirstStrike order to go long on this market or are you done with GBP/USD for the rest of the week? And generally, are you going to have some rule regarding reverse FirstStrike orders for your challenge or you will rather decide on whether or not to use reverse orders on case-by-case basis? --T.K


Thanks T.K. for the questions.  I'm sure others would like to know more too.

---Yes. No. Yes. No.---
Yes, GBP/USD was opened and stopped out. No, I won't reinstall the reverse FirstStrike order to go long on this market. Yes, I am done with the GBP/USD for the rest of the week. No, there will be no rules added about adding reverse orders. If anyone wishes to do reverse orders, they are welcome to do that of course.

The reverse FirstStrike can sometimes be THE trade of the week, and by not taking a second or third trade, you can miss the largest move of a week.

READ THIS CAREFULLY: If this Alpha account only traded the second FirstStrike trades after a losing first trade, trading this way could still be very successful. But not the best. You would miss the largest and most profitable outliers. Trading "seconds" is not as risk-adjusted, or profitable as taking the very first trade of the week.

The problem many people have is they become action junkies in their trading. I know, because I've had to tremendously modify my own behavior in this area. The more you enjoy trading the greater the problem you can have in this area.

To summarize:
If you know what your systems edge numbers are, trade those numbers.

Does this mean that you can't deviate at all from your trading plan? Depending on who you are, yes, or no. Certain people need to have an absolute plan or system that they will never deviate from. That is their security.

Others understand the cause of the edge behind the numbers, so they occasionally may deviate from a rigid plan because they are after additional return that they may know is hidden behind the scenes.  If you can do this and not hurt your bottom line, "go with God".  I personally ONLY take trades that have proven to have a risk-adjusted edge.  

Long explanation for T.K's questions, but in short:
I plan on making very few deviations from the systems traded here. In the long run, trading mechanically with OneNightStand and FirstStrike should exceed anyone's financial wishes.

One last comment on this subject.  
If I see free money sitting out in the market, I will take advantage of it.  And then I will try to explain to you later why I "had" to take the additional trade.  Deal?
-----------
I still have the following USD/JPY orders working-- 
BUY 113.61, stop 113.01--SELL 112.61, stop 113.21.  OCO (One cancels the other)

• If either of these orders gets elected, the other is cancelled.  
  
• If the elected order gets stopped out for a loss, FirstStrike trading is done for that pair for the rest of the week.
  
• If the order is elected and is not stopped out by the end of the week, I will exit the market just before 15:00 CST on Friday.

So far, we have had nothing but resounding losses this week.

Last week's ending equity:                       $535.40
4 loss trades (1 ONS, 3 FirstStrike:       15.62 -                    
Current total:                                              519.78
  
 I wouldn't be surprised if the week was a complete loser.  It happens.  All the time.

Time for lunch.  

Turkey bagel sandwich and soup.  Trader food.    : )

Best wishes for the rest of your day and your holiday preparations.

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address you would like it sent to.

PPS:  Have you thought about the fact that $500 to more than $150K in less than ten years is the same mathematically as $3500 to $1 million?  

Final Equity for Week- $535.40. Up 7%

To continue on from earlier...,

For this challenge I have chosen to take the first FirstStrike trade of my chosen markets for the week, and cancel the opposite trade when I've executed my position in that currency pair. And I did just that earlier this week.

Until early this morning, on two pairs.

A little background on the FirstStrike method.  

If a trade becomes a loser and gets stopped out, it is completely valid to take the opposite trade (risking additional funds) and manage that trade as if it were the original. Only now, the trade is  in the opposite direction, with the expectation that the first trade direction was false and now you should be trading in the right direction for the week. But, many times these second trades are also losers if the market traded is somewhat rangebound and not trending.

If one does take these additional trades, it does enhance the profitability: but while it doubles the risk, it doesn't double the potential gain. The second trade has a profitable expectation-- about 75% of the average expectation of the first trade of the week. It is for this reason that I only intend to trade the first trades of FirstStrike, to give this account the best raw advantage possible.

Now to my interesting quandry.

After watching for a few minutes this morning at 1 am CST, I realized that a very rare setup just took place in both EUD/USD and GBP/USD.  I've systemized the setup years ago and call it  "The Sure-Breakout Method" (SBM). It mechanically indicates markets that have contracted in a multi-hour timeframe and exist in a low risk trading environment with a high probability of a strong move. Like a coiled spring ready to get loose.

Since SBM indicated the potential in both the EUD/USD and GBP/USD, I decided I would reinsert their FirstStrike second trade sell orders, along with protective stops.

I figured either the orders wouldn't get elected, or (the worst thing) there would be two more risk adjusted losses.

After I placed the additional orders, I went to bed.

You can imagine my surprise when I got up and checked the markets this morning at 6:30 AM CST!  (Note: this is just a small test account.  My regular trading accounts had proportionate gains!!! This was definitely turning out to be a GREAT DAY!)

I found that I got stopped out of my last long GBP/USD trade (now five losses in a row), got short EUD/USD @1.4595 and short the GBP/USD @ 2.0279.  (Above is the chart of the GBP/USD FirstStrike trades for the week.)

My money management algorithm indicated such a low risk potential on the new trades, it dramatically increased the position size (more than 3 times larger) on both of these trades because I was able to place a much closer stop (less than 15 pips). The profits on the new GBP trade easily eradicated the loss I took earlier, and the profits on the EUD/USD were over 140 pips.

Since the market melted down in GBP/USD and EUD/USD, the second FirstStrike trades never backed up a bit.

The market ran with them, and now the market was at unlimited risk. Trading this way definitely beats fading the market. It is always better to be on the receiving end of unlimited return.

This week's Alpha account trading recap:

Start of week equity: $500.10
Completed trades:

EUR/USD: BUY 1.4695, stop 1.4643 -stopped out for 52 pips.
GBP/USD: BUY 2.0379, stop 2.0319 -stopped out for 60 pips.
USD/JPY: SELL 111.26, stop 111.81 -stopped out for 55 pips.
USD/CHF: SELL 1.1148, stop 1.1205 -stopped out for 57 pips.
GBP/JPY: BUY 227.71, stop 227.12 -stopped out for 59 pips.
Total of 289 pips in losses

Reverse FirstStrike trades (see comments above)
EUR/USD: SELL 1.4595, stop 1.4610--- End-of-Week Exit @ 1.4424-- 171 pips profit
GBP/USD: SELL 2.0279, stop 2.0294--- End-of-Week Exit @ 2.0174-- 105 pips profit
Total of 276 pips in profits

End of week equity:   $535.40
Total Gain on Week:  $  35.30
Unrealized P&L:         $    1.08(+) (OneNightStand trades)

OneNightStand Trades:

GBP/USD: Sold @ 2.0181, stop 2.0236- Since it didn't get stopped out during the trading day we will exit Monday morning at Midnight, 00:00 CST.

See you Monday!

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address you would like it sent to. Feel free to unsubscribe anytime.

Last Equity Check- $524.43- Wow!

I've inserted the chart above of EUD/USD that shows one of the trades that changed the week for the Alpha account.  (..., it is the second one that started last night!)

I'm really amazed at the way this week turned out.

It still is around 0 degree,temperature-wise here in Minneapolis. It was even colder last night when I was up trading. But the trading today has been HOT!!!

I thoroughly expected that this week was going to turn out with losses pretty much across the board, with at least 4 out of 5 of the FirstStrike trades biting the dust with 50 - 60 pip losses by yesterday, with only the lone survivor, GBP/USD remaining marginally profitable.

I placed the OneNightStand orders early this morning right after midnight. I sent the ONS signal emails to those who've subscribed to the newsletter. Few of those signals had much likelihood of being executed, but hey-- you still stick in the orders.

I saw the GBP/USD floundering, and as I mentioned before in an earlier post, if the market can go after it gets a signal, it will.  If it doesn't, it is likely going the other way. That statement makes a lot more sense the more you trade..., but that is a benefit of experience. I'm glad there are some benefits to this perverse lifestyle besides money. If "understanding" the nature of the markets is one of them, I'm glad because there are many personal "costs" as well.

I digress.

I was watching the last position of the week looking like it was tired, and then I noticed something I had not expected.  I will tell you what it was in the weekly recap post, in a few hours--- the unexpected thing which changed the fortunes of the week.

Till later...,

Joel Rensink
www.infiniteyield.com

Last Equity check- $492.25

By the way, it is really cold up here in Minnesota this winter.  I'm glad to be inside toasty and warm while the markets are decidedly fickle.  

An old trading saying, "if the market could go up, it would."  Well, our long trades fit that bill and decided that they couldn't stay up after the "bullish?" news from the Fed yesterday.  More downside expected obviously.

We got stopped out of our long EUD/USD position for a 52 pip loss.

We are still long GBP/USD from 2.0379 with a small  10 - 20 pip profit.  If we are not stopped out before then, I will exit the trade at 3:00 PM CST tomorrow (Friday).

I will be waiting until tonight at Midnight when I will place some One Night Stand orders.  Those who get the newsletter will automatically get the ONS orders when you subscribe.

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for this challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address you would like it sent to.

Best wishes.

Forex shake and bake!

Hi everyone:

This week has been very tumultuous. The Fed has made adjustments twice and people are trading their own beliefs and very few have been outright winners.

The Alpha account has been body-slammed more times this week than a typical bout of Jesse Ventura's (another native Minnesotan).

After having a number of significant stopouts, an equity low of $477.55 and an equity high of around $518 after the report today, the account has a current equity of $505.63 at 2:13 PM CST.

• The short USD/CHF at 1.1148, got stopped out at 1.1205 for 57 pips.
  
• The short USD/JPY at 111.26, got stopped out at 111.81 for 55 pips.
  
• The long GBP/JPY at 227.71, got stopped out at 227.12 for 59 pips.
  

 

We are still long the EUR/USD @ 1.4695 and the GBP/USD @ 2.0379, with the market just quivering in a flag.   

It will be interesting to see how the week turns out!

Have a great day.

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for this challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address you would like it sent to. Best wishes. ---I'll never send you any spam!

Live Trading started yesterday!!!!

Our first trades for the $500 "alpha" account were entered yesterday, Monday, December 10, 2007.

• I went long both the EUR/USD @ 1.4695 and GBP/USD @ 2.0379-- and am still in.
  
• I went short USD/CHF @ 1.1148 and got stopped out for 59 pip loss.
  
• I went long GBP/JPY @ 227.71, and am still long.
  
• I have a sell order in for selling USD/JPY @ 111.26, which has not been filled.
  

In each case I have placed protective stops and used precise money management to control size.

At one time yesterday, the $500.00 account was up to $503.26 and then the swinging began. At this moment, 10:55 AM CST, the account stands at $496.41. Volatility rules!!!

The method signalling my trades is called FirstStrike.

It is a durable method I've used for nearly 20 years futures trading the British Pound, Swiss Franc, the Mark (now Euro) and Japanese Yen-- and now forex for the last 3 years. If the trade is a winning trade, it can last 4 to five days. If it is a loser, you are usually out the day of entry and even can be out for a loss within a few minutes after entry.

It is so durable because it's based on never-ending principles that should continue for the rest of your lifetime--- and at least as long as free markets still exist.

December tends to be a rather turbulent time for trading forex, so our results this month could be very good or very bad. Either way, we will be trading every day that is not an official holiday.

Last check at my equity: $494.96. If I get stopped out on everything, we'll be down around $25 dollars. So at least our downside is capped.

Have a great day.

Joel Rensink
www.infiniteyield.com

PS:  To receive the FREE! trading rules for this challenge ($499 value) and  semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me the address you would like it sent to.  Best wishes.   ---I'll never send you any spam.  


 

This is the first official trading day for the $500 to 150K account....

Today is the beginning day of this forex trading challenge.

It also coincidently is the first Friday of the month, making this the day they release the Non-Farm employment numbers.  Usually a very volatile day for trading.

We have no trades that triggered today.  Recap below--

The pairs we will be trading are GBP/USD, EUD/USD, USD/JPY, USD/CHF, GBP/JPY.

The question I can imagine some asking is, "Won't it be difficult to follow all these markets simultaneously, take the trades and follow them to completion?" It would if one were daytrading; the current rage of forex traders for the last 4 years.  (And no doubt for many more.)

The answer is no, it won't be very difficult.

The trades we will be willing to take in the different markets rarely will executed at the same time. The time frame for our trades is based more on daily movements instead of shorter term concepts. Thereby having bigger potential.

In addition, our trades will have precise risk control, so if the trade goes bad quickly after entry, we'll be out quickly waiting for our next trade.

Professionals only trade the market when they have a very good reason to.

They never enter because of "having a feeling".

Professional trading revolves around having a PROVABLE informational edge. Not because they have "news" that others don't have, but because they know something about the market, a bias that is not understood or appreciated correctly by the vast majority of market traders.  

As incredible as it may seem:

You don't need much of an edge to be a winning trader.  

Just the awareness of what that edge is, how strong it is, and a willingness to go through the necessary motions of executing it with the right amount of your capital-- will put you in the top 5% of all traders.  This blog will work at proving that concept.

This forex trading challenge will be conducted trading two primary methods which have a proven* mathematical edge. It is possible that rarely, additional low risk/high potential trades may be taken due to unique market circumstances that occur occasionally.

The first method is a durable breakout method which has worked well over time on major trading pairs.  It is called the "One Night Stand".  It was discovered/promoted by a trading researcher named Joe Krutsinger.  The ruleset for the system can be found at www.infiniteyield.com.  A more complete explanation and current trading stats can be obtained from subscribing to the Infiniteyield Forex Newsletter, free to all those reading this blog.

The second method is another very durable trading method called FirstStrike; my own method based on the time-honored concept of volatility breakouts.  I have been trading this method profitably for more than 20 years.  The complete ruleset for this method and the protocol its application is available to Infiniteyield Forex Newsletter subscribers.  It is based on a market's impulse from the beginning of a significant time frame having predictive power over succeeding timeframes.  Hence, a mathematically provable edge.

That's one of the main reasons for this challenge and blog. People will see both the good and bad of trading, a bit accelerated.  

The good thing is: People will be able to see how trading really works when you are trading with an edge. It takes a lot of determination and personal resolve to stick to a method and trading plan when you are experiencing large losses..., or large profits.

When money is on the line, humans tend to deviate from their "normal" behaviors significantly. Usually when can be most detrimental to their wealth. We'll cover those issues some other time.
-----
12/07/07-Weekly Recap:
(#1271861)
Current Account balance: $500.00
Trades this week:  0

Joel Rensink
www.infiniteyield.com

PS:  If you want to be included in the FREE Infiniteyield Forex Newsletter, send an email designating the email address where you wish to receive it to:  newsletter@infiniteyield.com.

I will never rent or give your name to anyone.  I will provide you with the trading methodologies used in this challenge along with trade recaps at the end of the week.  There will be serious losses at times, and other times with large profits.  

Forex trading is not for everyone.  
---------------------------------------------------------------------
prov·en *
adj.
Having been demonstrated or verified without doubt:



 


 

$500 to $150,000 in 10 years or less-----

I have set up a very small trading account (#1271861---$500.00) with Oanda for a proof of concept for how a person can spend 15 minutes a day (or less) reviewing the markets and placing orders, with proper money management.

My aim is to accomplish an annual average of approximately 50% return over a period of 3 years.  Then, from a higher equity base, I will ramp up the return, with a corresponding increase in risk of deeper drawdowns--- to accomplish what the majority of mankind would consider to be a "fool's errand".

I have absolutely no doubt that this objective can be, or will be reached.
But..., I may be wrong.  We will find that out in due time.


The seemingly insignificant size of the starting account is what makes this private challenge unique.  And also, the resulting financial proof that mathematical edges can be systematically harnessed for personal profit.

Almost anyone can round up $500 or its equivalent. The idea of investing in common currencies, placing precise orders every week and profiting handsomely from such relatively insignificant efforts is what many have come to the Forex market for.  They likely will find out that it may be simple-- but not easy.

What will be the challenge is for interested traders to view over time how this can actually be accomplished, what the overriding concepts are that will be followed and how frustrating the long periods of seeming non productivity can be.  Not to forget the devastation of the inevitable drawdowns that will be experienced.

As long as I've traded, I still never get used to drawdowns. You can get used to the pain of drawdowns, making their necessity understandable; but you still don't get used to them. Well, I haven't. Maybe you will be different.

There are real costs to performance that this attempt will prove. Drawdowns of 60% and 70% will undoubtedly be experienced. In the past, I have discovered that it is the willingness to "trade through" to get to the gigantic profits made possible by a durable method that earns you the final reward.

The trading will begin on Friday, December 7, 2007.

The markets followed will be the following:

GBP/USD, EUD/USD, USD/CHF, USD/JPY, GBP/JPY

As time permits, I will totally disclose the methods used so individuals can paper trade and "Monday Morning Quarterback" to their heart's content.


Joel Rensink
www.infiniteyield.com
infiniteyield@gmail.com

Welcome Forex Traders

Welcome traders, to this new forex trading blog.  It is designed for forex traders who are serious about getting positive returns from the forex markets.  And are willing to do what it takes to take the edges available and execute them, over and over.

While most people might assume that all traders are trying to obtain excess return, in reality most people starting down the trading path get sidelined because they give in to incorrect beliefs about the market.  

Incorrect beliefs cause losses. Often, devastating losses. Since the first rule to success as a trader is: "Survive each trade so that you can get to the winning trades", making sure your understanding of fundamental trading principles is correct is paramount. And shortens your learning curve to success.

As a counter-point, correct beliefs enable success.  

Winning traders want the TRUTH.  Not what is popular.  Truth works.

No less than Ayn Rand (note the quote below) regarded traders as rare and special types of humans, set apart by something unique in themselves that forces them to act in a fundamentally different way from average people.

Trader Priniple

The symbol of all relationships among [rational] men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtues, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt, while honoring the beggars and the looters, have known the secret motive of their sneers: a trader is the entity they dread—a man of justice.

Ayn Rand - Galt's Speech, For the New Intellectual.

A little about me.

I have been trading for most of the last 3 decades in the futures (derivatives) and the forex markets. I have traded successfully in the futures pit environment for 7 years and "off-floor" for more than 2 decades. With the electronic trading frontier we now have, the opportunities for obtaining profits due to individual intelligence and knowledge are unparalleled in the history of man.

I didn't achieve success as rapidly as I wished. I had success, then failure. I had greater successes, and then greater failures.

It took 3 solid years of determined trading and learning until I was certain that I had a mathematical edge that, if exploited carefully and consistently, I could survive and then thrive financially.  I have no doubt that anyone who is determined to have success as a trader has the capacity to obtain it.  

Unfortunately, it may end up being the answer for the popular curse, "be careful what you wish for!"

Learning more is inevitable if one keeps at the business, but you have to survive financially to stay in the business. Run out of capital, and you're done until you can get another stake or give up and do something easier.  Believe me, 95% of the people who are sure that they are meant to be traders could make five times the money they'll end up making from trading by selling used cars!

I'm sure some of you understand what I'm saying.

I'm happy that you can check in on this blog.  Feel free to drop me a line or make a comment.  

As I do trade for a living, and it tends to keep me busy about 5 - 6 hours a day (down from 12, thank-you very much, because of technology) it might take a little while to get an answer from me when conditions are busier.

Joel Rensink
www.infiniteyield.com
infiniteyield@gmail.com