Lost: 350 pips
Trading with Stop Loss. I entered a Long Position via a Limit Buy at around 9.54 am.
The price kept falling and falling and at 10.45 pm, I experience my first Margin Call.
The price had dropped 350 pips in 12 hours. In terms of price, this is a 70% loss and is my biggest lost so far since I started trading in Dec 2007.
To me this is a most unexpected price behaviour for the EUR-JPY which is a ranging pair.
It appears that EUR-JPY's daily peak-to-peak amplitude is far wider than that of the CHF-JPY pair.
Unfazed, I took stock of my trading strategy again. Upon analysis, I find the CHF-JPY pair to have a smaller peak-to-peak daily amplitude and that is where I will focus on for my next trades. However, CHF-JPY seems to have a wider spread this week, today it is 5 pips. For the past 6 weeks it was 2.8 pips. This week seems to be a departure from the norm. However, the amplitude for the M1 chart seems to be about 20 pips as of writing. I figure that, so long as the bollinger band's width is much bigger than the spread, range trading is still possible. In this case, the spread is 5 pips, but the Bollinger Band is 20 pips.
I will still apply the same trading system, ie.
1-pip Range Trading Strategy without SL
Thursday, March 20, 2008
Wednesday, March 19, 2008
Stop Loss-less Trading
Having lost 157 pips in the previous trade, I took a long look at my trading history.
I discovered the following:
1. Almost all my losses since I started trading in December 2007 (last year) is caused by
Stop Losses. Only a handful is caused by my manually closing the trade (when the price was
going the wrong way).
2. In most cases, after the SL was taken out, the price would reverse direction and go the
right way.
3. None of my trades came close to margin calls, even after the SL was taken out.
4. Many of the SL was taken out by sudden price spikes (conversely, a few of the TP hits are
also caused by price spikes).
Based on the above observation, I hypothesise that, my losses are invariably caused by Stop Losses. This begs the question:
How to avoid losses?
And the only logical answer is:
Do not use Stop Losses.
I will now embark on a new revised One-Pip Range Trading Strategy. All of the strategy will
be the same, the only difference is:
Do not put in Stop Losses.
For this to work, I must be willing to accept the following:
1. I must be prepared to lose my entire capital. And I surmise that, I am prepared to do so. Whatever profit I want to keep, I will withdraw from the Oanda Account, and whatever is left in the Account is the amount I am willing to risk losing. That will be my psychological preparation.
2. I should not trade large amounts of units, not more than 1000 units.
With that, I henceforth trade SL-less.
I discovered the following:
1. Almost all my losses since I started trading in December 2007 (last year) is caused by
Stop Losses. Only a handful is caused by my manually closing the trade (when the price was
going the wrong way).
2. In most cases, after the SL was taken out, the price would reverse direction and go the
right way.
3. None of my trades came close to margin calls, even after the SL was taken out.
4. Many of the SL was taken out by sudden price spikes (conversely, a few of the TP hits are
also caused by price spikes).
Based on the above observation, I hypothesise that, my losses are invariably caused by Stop Losses. This begs the question:
How to avoid losses?
And the only logical answer is:
Do not use Stop Losses.
I will now embark on a new revised One-Pip Range Trading Strategy. All of the strategy will
be the same, the only difference is:
Do not put in Stop Losses.
For this to work, I must be willing to accept the following:
1. I must be prepared to lose my entire capital. And I surmise that, I am prepared to do so. Whatever profit I want to keep, I will withdraw from the Oanda Account, and whatever is left in the Account is the amount I am willing to risk losing. That will be my psychological preparation.
2. I should not trade large amounts of units, not more than 1000 units.
With that, I henceforth trade SL-less.
Disaster strikes with EUR-JPY
Lost: 157 pips
My limit long order was fulfilled for 1000 units on the EUR-JPY pair at price 156.22 at 11 am.
My TP was 1 pip and SL = 156 pips.
At 5 pm, the price took out my SL. It had dropped 150 pips in 6 hours which translates to a 25% loss. This was totally unexpected. I had thought that my 150 pips SL would be sufficient.
But apparently I was wrong.
This taught me an important lesson: the SL for trading EUR-JPY should be more than 157 pips.
Maybe 200 pips would be more appropriate. And if, I was not willing to risk 200 pips SL, then, I should stay away from the EUR-JPY pair.
For CHF-JPY, a 100 pip SL was sufficient as evidenced by my 6 weeks' successful trades.
A good idea would be to do a study on intra-day fluctuations (daily peak-to-peak amplitudes) on the Ranging Pairs. This would help us decide the proper SL's to use on the respective pairs.
My limit long order was fulfilled for 1000 units on the EUR-JPY pair at price 156.22 at 11 am.
My TP was 1 pip and SL = 156 pips.
At 5 pm, the price took out my SL. It had dropped 150 pips in 6 hours which translates to a 25% loss. This was totally unexpected. I had thought that my 150 pips SL would be sufficient.
But apparently I was wrong.
This taught me an important lesson: the SL for trading EUR-JPY should be more than 157 pips.
Maybe 200 pips would be more appropriate. And if, I was not willing to risk 200 pips SL, then, I should stay away from the EUR-JPY pair.
For CHF-JPY, a 100 pip SL was sufficient as evidenced by my 6 weeks' successful trades.
A good idea would be to do a study on intra-day fluctuations (daily peak-to-peak amplitudes) on the Ranging Pairs. This would help us decide the proper SL's to use on the respective pairs.
Tuesday, March 18, 2008
CHF-JPY unusually large spread 5 pips
CHF-JPY usually starts off on Monday with spread of 4 and by Tues it will drop to 2.8 right through to Friday. This has been its spread pattern for the last 6 weeks.
But for this week, I notice a change. It started off on Monday with spread of 4 pips, and by Tuesday, it increased to 5 pips. It appears to have broken its spread pattern.
Most of the time its Peak-to-peak amplitude was very wide around 10 to 20 pips and occassionally would compress to around 8 pips.
I noticed that the EUR-JPY is also ranging and its spread was only 2.7 pips.
So I switched to EUR-JPY.
But for this week, I notice a change. It started off on Monday with spread of 4 pips, and by Tuesday, it increased to 5 pips. It appears to have broken its spread pattern.
Most of the time its Peak-to-peak amplitude was very wide around 10 to 20 pips and occassionally would compress to around 8 pips.
I noticed that the EUR-JPY is also ranging and its spread was only 2.7 pips.
So I switched to EUR-JPY.
Saturday, March 15, 2008
March 10 to March 14 : Won 45 pips Zero Losses
Won 45 Pips, No Losses
Second week of March won 45 pips. This is the 6th week in a row with zero losses.
Trading system has been successfully used throughout the 6 weeks beginning Feb first week.
Using this trading system:
One-Pip Range Trading Strategy
It is still too early to say with any certainty that this is a full-proof system however, judging from the success so far, I would attribute the success of this system to its purely mechanical trading characteristic.
Without any system, I would base my trading on emotion - eg, when I see a price go my direction, I increase the TP line instead of closing it after it has gathered a 1-pip profit. Also basing on emotion, if I see the price going the wrong way, I would close it quickly instead of allowing it to run all the way to my pre-determined SL line.
With a Trading System, after a position has been opened, I totally leave the screen alone - and refrain from looking at it. I just let my Forex Alerter system alert me once the TP or SL line is hit.
Second week of March won 45 pips. This is the 6th week in a row with zero losses.
Trading system has been successfully used throughout the 6 weeks beginning Feb first week.
Using this trading system:
One-Pip Range Trading Strategy
It is still too early to say with any certainty that this is a full-proof system however, judging from the success so far, I would attribute the success of this system to its purely mechanical trading characteristic.
Without any system, I would base my trading on emotion - eg, when I see a price go my direction, I increase the TP line instead of closing it after it has gathered a 1-pip profit. Also basing on emotion, if I see the price going the wrong way, I would close it quickly instead of allowing it to run all the way to my pre-determined SL line.
With a Trading System, after a position has been opened, I totally leave the screen alone - and refrain from looking at it. I just let my Forex Alerter system alert me once the TP or SL line is hit.
Monday, March 10, 2008
Wednesday, March 5, 2008
February earned 148 pips ( 30% profits )
For February, zero losses but won:
Feb 4 - 8 : 36 pips
Feb 11 - 15 : 47 pips
Feb 18 - 22 : 35 pips
Feb 25 - 29 : 30 pips
Average: 37 pips per week about 7 pips per day
Percentage earned: 30%
Using this trading system:
One Pip Range-Trading Strategy
and nothing else.
Feb 4 - 8 : 36 pips
Feb 11 - 15 : 47 pips
Feb 18 - 22 : 35 pips
Feb 25 - 29 : 30 pips
Average: 37 pips per week about 7 pips per day
Percentage earned: 30%
Using this trading system:
One Pip Range-Trading Strategy
and nothing else.
Monday, March 3, 2008
Feb 25 to 29 : Made 30 pips profits
WON: 30 pips
4th week in a row with zero losses. Amazing!
Also using the same trading system as the previous 3 weeks.
However the week ended with an unclosed Short Position which was left open throughout the weekend - because the price kept going up and the market came to a close on Saturday. I will lose some money on the carry trade interest since it is a short on the CHF-JPY. (CHF yields higher interest than JPY) However, I wasn't worried about it - the carry trade loss is minimal.
When market reopened today (Monday), the price dropped in the afternoon and hit my TP line and gave me a 1 pip profit after 2 days.
Last week saw a drop in the pips won compared to the previous week, because I was busy with another software Project (writing a Trojan binder & also successfully created a new trojan that can disable Eset Nod32 Antivirus) and had spent less time on trading.
4th week in a row with zero losses. Amazing!
Also using the same trading system as the previous 3 weeks.
However the week ended with an unclosed Short Position which was left open throughout the weekend - because the price kept going up and the market came to a close on Saturday. I will lose some money on the carry trade interest since it is a short on the CHF-JPY. (CHF yields higher interest than JPY) However, I wasn't worried about it - the carry trade loss is minimal.
When market reopened today (Monday), the price dropped in the afternoon and hit my TP line and gave me a 1 pip profit after 2 days.
Last week saw a drop in the pips won compared to the previous week, because I was busy with another software Project (writing a Trojan binder & also successfully created a new trojan that can disable Eset Nod32 Antivirus) and had spent less time on trading.
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