Volatility in my currency pairs

Here are my trades this week.

In summary, out of 20 trades, 10 ended in profits.  The account balance is at $3064.  There was a net profit  for the week until trades were entered last night, and 2 out of 3 were stopped out!  Confidence from this week's success clouded my vision and arrogance stepped in.  From +$1 to -$83 or something. A few lessons this week...

It seems like when in a bullish or bearish trend at night, it only continues throughout the night, so trades should be entered early to expect rallies at the beginning of the day.

Nearly all the trades that were losses occurred when not actively engaged in the market, i.e. setting trades and heading into work.  Only twice was the TP met.  Instead of waiting for the TP, trades were closed when positive and a reversion was noted.  

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This week, a chart was developed listing the range of price movements within the currency pairs for different timeframes.  These numbers were eyeballed, rough estimates for my own use.  USDJPY was the least volatile of the bunch, and GBDUSD was the most active. No preference as of yet, because both extremes can be useful. This is shown below.  It's been utilized when setting positions.  

Examining the live feeds, the ranges help with establishing position sizes.  2% is still the norm for now.  At 60% success rate, the risk will be raised.  Another adjustment has been to decrease the pip spread and slide it in the direction expected.  For instance, if EURUSD is averaging 30 pips volatility in an 8 hour time frame, and a 60 pip drop is expected, the 30 pip risk may be decreased to 20 depending on confidence level.  Also, the pip spread is decreased just to decrease the risk:reward to more favorable numbers. 1:1.5 to 1:3 was used throughout the week, but the TP was rarely reached.  

Along with the volatility for position sizing, and multiple time frames, confirmation was looked for utilizing Bollinger Bands mostly.  More attention will be given next week to other strategies.

One note from Getting Started in Currency Trading is "When the entire market expects a move, the reverse must happen." It sounds good, but has yet to be proven through personal experience.  More reading to come before next week, and more of the same purposeful trading.  There must be more research into the different currencies as well.

Week's Trades Review

The snapshot speaks for itself.  Balance: $3147, profit for the week -$341.  Position size is pretty steady, unfortunately it's seen mostly on the losses.  2% was the magic number this week. Results of trades were 4:12 (wins:losses).  That's 33%, reaching the goal of >10% that was set for the week.

Funny thing is that only one of my TPs were reached.  All other trades were exited early when positive.  At least 4 other trades fluctuated high in the positive, but were held in hopes of hitting the TP.  It was sadness seeing the SL reached so many times more. The other problem was the risk reward set ups were always 1:1.5 and up, never settling for 1:1.

Next week, the goal is a higher frequency of positive trades, same position size set ups, and the willingness to jump out early when in the positive.  There were only about 1/4 of the trades that carried over longer than 12 hours.

Getting Started in Currency Trading (2008)

"You have to be so used to failure that you can fail 100 times before you succeed." Here are some notes from the book so far:

The more liquid a currency pair, the smaller the spread (bid/ask).

EURUSD 8pm to 12pm, less volatile, better entrance because you pay the spreads.  Rollover charges are from differences in currency interest rates.

Increasing interest rates negatively affect stock markets, people pull out of stocks, wearing currency.

Important interest rates to follow:

• Bank of England (BOE)
• US Federal Reserve (FED)
• European Central Bank (ECB)
• Bank of Japan (BOJ)

import > exports = trade deficit (-)  "Is deficit greater than market expectations?" If yes, it can cause negative price movement.

Purchasing Power Parity (PPP) - goods' price should equal in terms of exchange rate (arbitrage).  Study competitive markets and tradable goods (not things like real estate).

If i(US) = 3% and i(CAD) = 1%, USD depreciates against CAD; i.e. CAD/USD = 1.5 will drop.

Create and update calendar of economic indicators including CPI, PPI, and GDP.

There are leading and lagging indicators.  Leading change before the economy follows.  Lagging change after economy follows particular trend.

Econometric analysis quantifies qualitative fundamental factors into mathematical models.

RSI = (sum of price rises)/(sum of all price fluctuations) * 100%.  <25 oversold="">75 = overbought.  RSI covers around 25 days.

Use Momentum +RSI +MA +BB for entrance and exits.  

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Balance: $3234

The position I spoke of a day or so ago was kicked out (-$70) as the price did not break through the week's resistance level identified.  Lesson learned there.  One position still remains from yesterday. Bollinger Bands were used (Trend Bounce).  The standard deviations were adjusted to 1.8 last night. The expectation is to have a slightly early signal to follow.  

In MT5, text spoke of limit and stop orders. They are still a bit confusing.  Pending orders seem a useful feature to be incorporated soon.  

Looking for Entrances

It was a great day for trade set ups incorporating position sizes.   Here's a little info gathered today from the four currency pairs. For the week of 09Sep - 16Sep:

USDJPY - 106.895 to 107.812; up 88 pips

EURUSD - 1.10272 to 1.10732; up 46 pips

USDCHF - .98913 to .98831; down 8.2 pips

GBPUSD - 1.22767 to 1.247125; up 194.5 pips!

The information was easy to gather, and it helps to think about this info when entering a trade.  Support and Resistance, for the week at least, can provide some perspective on potential trades.  For instance, a position was just entered in GBPUSD and the TP is just above the week's resistance.  It will be interesting.  Technical analysis like that has to balance with fundamental analysis. What's going on with the British Pound? Trade in the country.  What country anyway, UK? Is this the impact of Brexit shit? That's a weak knowledge area as of now.

A good day of trading all together. 3 positions closed out, a positive net from yesterday.

Balance: $3447. Still looking to incorporate histograms for the 5th Element strategy.  More to come.

Study the Chart

Balance: $3508.

One trade still going on with EURUSD.  It's based off the Trend Bounce strategy.  Most trades thus far have only lasted a few hours. This one is pushing 24 at this point.  Nope, cancel that. As I speak, it just closed. Balance $3432. How about that for up to the minute?!

So, let's review this trade, what was my risk?

(3508 - 3432)/3508 = 76/3508 = 2.2%. That's correct. I only wanted to risk 2% of my account on the trade.  Onto the next.

Throughout today, time will be spent studying the last week of prices for the 4 currency pairs I'm following. The range of prices should be clear, making it easier to track what trends are developing.

The USD interest rates drop on Sep. 28.  That's it for today.  Time to look for an entry point.

Breaking out

Finishing up The Complete Guide to Option Spreads and Combinations, here are some take-a-ways: It's better to sell covered calls/puts than buy them because the pay offs are identical.  Calendar spreads can be combined; after the 1st option expires worthless (the goal) with unrealized profit, it adds with the later expiration option.  Adding in more options between expirations can create "super" spreads.

Long straddles - buy calls and puts, expect high volatility. unlimited profit.
Short straddles - sell calls and puts, expect little/no volatility.  defined max profit.

The graphs are clearer, and so do the questions.  What are average option prices? Which stocks have highest liquidity?  Keep it Simple Stupid!

Strangles are cheaper than straddles, more leverage, less likely to be very profitable.  Collars used in conjunction with positions in underlying stock. They look like vertical spreads.

The book is great and as advertised.  However, a limit has been established on technical jargon in this disciplinary road map.  It is roughly a two week maximum on books like these. The author gives few anecdotes, and the number crunching slows down the reading. More time was spent working on what was read, using examples. That's great if actual trades were going on, but that's not the next step just yet.  A lot was gained from that one.  Now, back to Forex.

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The book is, Getting Started in Currency Trading by Michael Archer. The first half of the book was a quick review of things learned from previous texts. Anecdotes jump out, and this is a refresher from the last text. The MT5 help topics are also still in the works.

Notes from this new book include: Current Price = (Ask + Bid)/2

Transaction Cost = Spread * Units Traded, charged for going in and coming out.

What are the interest rates for the top 4 currencies - JPY, GBD, USD, AUD... 

Balance: $3488

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The power of Vision is immense. Allowing myself to be sidetracked is less and less of an option each day.  Falling asleep in front of my text last night, motivational speeches were playing in the background. It was this fatigue with audio programming pushing my subconscious forward that propelled me during that situation.  Thankfully, it was happening in the midst of planning, preparation, etc.

More questions:

What does a professional trader look like?

• Tried and tested strategies
• Experience... 5+ years
• Disciplined lifestyle
• Purposeful actions
• Strong relationships with other traders
• Healthy routine
• Large bank account(s)
• Investments 

This is harder than I initially thought.  Let's take the other route. 

What does the unprofessional trader look like?

• Emotional - affected by daily losses because of a lack of confidence/understanding of strategies
• Less-disciplined - life not set up to provide profitable returns
• Doesn't research, tries to follow fads
• Less than 5 years experience
• Little network/support in trading community
• Small account (<$100,000) or in debt

This short list of ideas that just came to my head certainly lead me to conclude that time will tell if I can call myself professional at this.  It's a standard I have just set, and it's up to me to reach it.

The quality of questions are impactful to producing results.  The type of questions I ask myself will lead to the type of questions I ask others. It will also impact the quality of people encountered, the purpose of the encounter, and their results. That's enough today.  What am I cooking for dinner?

Watch the candlesticks

Bal: $3560.  Switched from 4% exposure to 2%, so the losses are less discouraging. This is 1st day having trouble placing the orders.  Requotes keep appearing; I mean at least 10 times total with two different currency pairs!

(3560)(.02)/(10)(8pips) = .89 for my lot size. S/L is at EMA 36.  This is USDCHF.

(3560)(.02)/(10*26) = .27 lots.  Again S/L at EMA 36. This is GBPUSD.  Largest pip spread to date.  It seems more probable to trade in the direction of the EMA 12 relative to EMA 36 even if the entry isn't given according to Trend Rider.

Meanwhile, motivation is important.  More time is continuously being spent on finances.  There are 14 expenses monthly that are all being accounted for.  With that, little seems left for investing. Staying mindful of that makes proper trades crucial.

Even now, more requotes, -$71 on last trade. Later, we'll try again. Back to it.

Nurturing the Vision

It is important at this point in development to be keenly aware of the world's influence.  Vision, rather than the world's pressure, should dictate my actions, thoughts, values, priorities, standards.  It gives direction to the leader, and empowers him beyond his capabilities. It gives direction.  It allows one to see not what is, but what can be.  VISION ATTRACTS RESOURCES.


In MT5, entrances are hard to come by for the Trend Bounce and Trend Rider Strategies.  The 5th Element strategy requires histograms. If unable to locate on the mobile app, the desktop version will be used to perform it.  More reading on vertical spreads to come.

MT5 Current Balance: $3697.

More on Vertical Spreads

Slower movement this week. MT5 balance is up to $3797, after 3 profitable trades in a row, 2 negative.  Indicators can be misleading. There is more to see in the progression of candlesticks for the H1 and H4 timeframes.  News updates on the mobile app were somewhat interesting this morning.

Vertical spreads can be confusing unless time is taken to patiently work through the numbers (later today during lunch).  The basic spreads are easy to understand as mentioned in the previous blog. The current subject is "moneyness" of the spread; when one leg is say in-the-money, and the other is at-the-money, the spread is in the money. Only by drawing this stuff out for every situation is it made clear.

Goals for the near future remain the same, with one addition:

1. Learn the 5 swing trading strategies
2. Achieve higher success rate by entering trades more wisely
3. Control position size with every trade
4. Memorize personal budget - number of items and avg. amounts

The last one has to do with preparation for next year. Currently, the budget is visited once a month, transferring bill statements to a spreadsheet, adding receipts and trashing 'em. Now, it's a priority to know inside and out, so that more can be invested on a daily basis.  Big goals require a lot of action. Memorization can eliminate potential headaches later.

Trente Jour recap

I've completed 30 blog entries today.  Since the inception, I've read 2 more books, so I'm still behind from my goal of 44 in a year, but I'll catch up soon.  I've lost more paper money this morning entering trades based on the two strategies Trend Bouncer (Bollinger Bands) and Trend Rider (EMA 12 and 36).  I did enter them with the correct sizes, .7 lots for a 20 pip S/L for example.  I have to review the rules for setting my S/Ls though.  I picked up another -$140 this morning.

I'm thinking of changing the pips based on resistance and support levels, but this will may be come after I pick up the next strategy, 5th element.  There's much to learn to get into this game. Still, I have made some great progress. I can definitely control my position size.  I understand 2 strategies, working on my 3rd, and I have probably around a 10% success rate.

Over the next month, I plan to increase my usable strategies as well as my trade success rate.  I'll continue entering them using swing strategies and hopefully incorporate all 5 by the end of the month. I WILL NOT increase the number of currency pairs I'm using. I WILL NOT go beyond the 5 strategies this month.  I WILL NOT study beyond options and forex for the time being, unless it's a more macroscopic subject.

I do want to continue inserting motivational tidbits, especially in those times I need them. Beyond that, I hope you, reader, are finding the passion and nurturing it.  Here's to 30 days! Happy Labor Day.

Vertical Spreads

You buy a call spread when you buy the lower strike call and sell the higher strike call. You sell a call spread when you sell the lower strike call and buy the higher strike call.

Looking at the graph of a long call, i believe lower strike calls are more expensive because they require less growth to be in the money.

Put spreads are the reverse in that you buy a put spread when you buy the higher strike put and sell the lower. The same goes with the sell.

“If you pay money for the spread, whether it’s a call spread or put spread, you’re buying the spread… if you receive money for the spread, whether it’s a call spread or a put spread, you’re selling the spread.”

"There’s a ceiling above which the value of a vertical spread cannot rise. That ceiling is the width of the spread or simply the upper strike price minus the lower strike price.”

I noticed the value of an option should be distinguished from our profit. For instance the value of a call option can increase, but my profit decreases if I’m selling it.

This next graph is from MT5 Help topics. The "Bull Call Spread" is the same as the graph below. I put them both to help the reader understand. I actually took the time to draw a buy and sell call on the same graph and add them to get the graph in Fig. 3.4 and the bull spread below. In both cases, the buy was more expensive, and the sell was really cheap, leaving a graph with smaller losses than profit potential.  I haven't gotten to the Backspread as seen in the graph.  May be tomorrow.