Friday, December 14, 2007

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

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: and tell me the address you would like it sent to. Feel free to unsubscribe anytime.

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