Thursday, October 23, 2008

Outsized Profits Demand Early Exit! -IFCN Wk 46 – Thu – $1,436.16

Due to an extraordinary decision, at 09:31 CST I exited all of my FirstStrikePlus trades at the market. I still have the single XAG position of 100 units @ $9.50, a Non-FirstStrike trade. This week's FirstStrikePlus trades have gained more than 16% on equity with less than 5% total risk.

Early this morning, I had a nagging feeling that there was something that I needed to check. And so I did.

I did some market research about previous extremes I've experienced in forex volatility and the trades resulting from it. Primarily FirstStrike trades. This week has/had profits that exceeded 99% of all previous extreme weeks in the past 25 years. Could my profits get larger? Yes. But the research I worked through indicated that I had a 10% chance of having a larger profit by the time of exiting via a first-profitable-open and a 90% chance of having a significantly smaller profit than I had at the moment I completed my figuring.

My choice was obvious. Seconds later all of my FirstStrikePlus positions were gone. This was definitely a “preemptive-action-because-I-know-my-system” exit. (PABIKMS)

I make no apologies for closing my positions early.

I am executing this Challenge to increase the value of the account, not prove that I can follow a system. To loosely quote one of the famous traders of Market Wizards interviewed by Jack D. Schwager, “It is important to follow the rules of your system. It is also important to know when to break the rules.”

I trade to make excess profits vs. my risks, not win a “World's Best Mechanical Trader” award. It is possible I will give up additional profits by this early exit. I can live with that possibility. If this situation occurs again, I will take the exact same steps. Verify conditions, make an accurate assessment, execute as necessary.

For those of you who wish to continue holding and exit on Monday's open if the trades are profitable, or be willing to be stopped out for a loss, you will be following the system. You will then get the results of the system, which very likely will be extremely profitable after a week with moves of the magnitude we've seen.

I use systems like FirstStrikePlus as tools to get in and out of markets with a statistical edge. If I can improve my odds and average size of profit by knowing the inner dynamics of that system-- I will do so in a heartbeat. I take the ordinary mechanical trades, from exact entry-to-exact-exit more than 95% of the time. The special 5% is when excess profits are possible.

If one doesn't have any additional advantage, trading a system that has a basic edge is the minimum you need. Then you begin to really learn, usually by doing the repetition necessary to trade the method-- putting in orders and getting executed in the market. It then becomes your personal choice whether you will take practical advantage of those things you learn over time-- by improving the average size of your profits compared to the statistical model--- or not.

My exits follow----

Completed FirstStrikePlus trades this week:
  • Eur/Usd: Short @ 1.3367, exited at 1.2805 for 562 pips profit
  • Gbp/Jpy: Short @ 174.07, exited at 1.5660 for 1747 pips profit
  • Gbp/Usd: Short @ 1.7193, exited at 1.6090 for 1103 pips profit
  • Usd/Chf: Long @ 1.1401, exited at 1.2805 for 272 pips profit
  • Usd/Jpy: Short @ 100.95, exited at 1.2805 for 363 pips profit
Total losses: 0 pips
Total profits: 4047 pips
Net profit: 4047 pips ($203.06+)

Current trade equity is: $1,421.16
Silver position equity: $15.00+
(Current XAG price: $ 9.65– 100 unit position average: $9.50)

TOTAL Equity: $1,436.16

This evening is when OneNightStand trades are placed. The markets have moved enough for one week to minimize the potential for even average success for OneNightStand entries.

I will dutifully place my trades, but I will be risking less than .5% of account size per entry.

Have a good 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 to which address you would like it sent. Please do not use AOL, Hotmail or Yahoo addresses. They've been known to filter out more good mail than actual spam. Try a Gmail address. It's free, simple and perfect for traders!

3 comments:

Anto said...

First time leaving a feedback here, I thought you may wanna know that you are not just a voice in the desert. I've been learning a lot, so kudos to you Joel and keep it up my friend.

BR

Ron

The Archiphage said...

Unbelievable moves! In another account, I have a short in GBP/JPY that was showing a profit of over 3,000 pips! (It's retraced a bit since.)I decided to skip the ONS trades... boy do I regret that decision! I don't regret it that much though... anything could happen. That goes especially now that there is so much noise about central banks intervening. I can't wait... central banks are the stupidest traders there are, and they have very, very deep pockets. That's a recipe for big profits if I've ever heard one!

Mats said...

My first visit to this blog.

This week was THE example of a trending week :) but I'm still curious about how this will work in the long term.

So I'm going to give this a try. Looks promising :) with hardly no work at all!? hehe

Going to keep on reading your Blog. Keep up the good work! :)