Wednesday, January 2, 2008

Week 4 - Wed- Current Equity: $572.34

-Best wishes on a new trading year!!!!

This is Wednesday, January 2nd. First official trading day of the new year.

Congratulations on all of you making it to the new year intact. This should be a very exciting year. The markets are charging around like wild animals- right out of the gate. That is a very good sign.

The latest newsletter went out Dec. 31st and I got some nice comments about it. If you didn't get yours send a note to and I'll make sure you get one.

Of the five trades indicated by FirstStrike Monday morning, December 31, 3 were stopped out pretty quickly (long GBP/USD, long GBP/JPY, short USD/JPY) and 2 pairs held in there with decent profits for a while before one of them got stopped out today earlier (USD/CHF) and one (EUD/USD) looking like it is about to perish any second

Not so bad financially because I took my own advise and am trading at much reduced size due to the holiday timeframe. Next week, back to full-bore!!

A note about the trailing positions, long EUD/USD and short USD/CHF, from last week. Since the trails (partial positions of very profitable entries from last week) were in the opposite direction of the respective pairs' FirstStrike entries for this week, we exited them at the same prices as this week's FirstStrike entries. (Try saying that fast, 3 times in a row!)

I lost a little on the trails relative to what I would have received by just getting out of the rest of the positions on Friday, but the numbers favor trailing when you have a strong performance like we had last week. And the justification of that math is evident in the continuing impulse like moves we are getting this week, even though we are stopped out of the primary moves in action right now.

The first FS orders that got hit this week were not successful, and the second ones were. That happens, and as mentioned in earlier posts, the numbers indicate much better overall results from taking only the first order indicated in the pairs traded.

A reader wrote in with a question late last week:

Hi Joel,

Are you going to discuss in your blog the market selection aspect of your forex challenge? For example, why did you choose the GBP/JPY cross but exclude AUD/USD or USD/CAD pairs? Was it based on historical performance of individual markets or some other considerations?



Good time to address this.

The 5 main currency pairs that I've chosen, USD/JPY, USD/CHF, EUD/USD, GBP/USD and GBP/JPY are among the largest value currency pairs available. If one considers that almost 90% of all world trade is attached to these markets, it follows that any future major financial shifts should affect the trends of most if not all of these primary pairs. Which is why we are trading, to catch the “alpha” from this large financial shifts.

No adherence to any prior historical performance was considered. If that were the case, I would only be trading a couple of markets and positioning heavily. Anyone who knows me personally knows I absolutely abhor any form of curve fitting and eliminate whatever forms of it that might try to slide into a real trading account.


Dozens of my acquaintances have been destroyed by unhealthy combinations of subtle curve-fitting. After months of adequate trading results, they suddenly spiraled into a “perfect storm” situation where they were risking too much on markets that were too correlated traded by methods that were too weak relative to their “optimized” expectations. Many of these elite traders never were able to regain their previous situations, just because they heard the seemingly innocuous siren call of “optimization”.

I prefer trading the 5 because, by trading a little less size on each of the pairs I should be able to smooth equity a little better than by trading fewer pairs.

By the way: thanks K-  

Right now, the Alpha account's equity stands at $572.34.

I be back tomorrow.

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 which address you would like it sent to.

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