I just found this cute overview of the relationship between fundamentals and the DOW over at zerohedge:

GM chapter 11 = PRICED IN
125K+ jobs lost from GM chapter 11 = PRICED IN
unemployment @ 9% = BETTER THAN EXPECTED
unemployment @ 10% = DOW SOARS
unemployment @ 11% = GREEN SHOOT RALLY
unemployment @ 12% = ALREADY FACTORED IN
unemployment = 35% = DOW DROPS 100 POINTS
housing price =1% = RECESSION ENDING
housing collapses = GREEN SHOOT
Housing falls 20% = STABILIZATION
Government spends 1 trillion of OUR dollars = STIMULUS
North Korea fires nuke = RALLY
Israel bombs Iran = 30 MINUTE END OF DAY RALLY
world explodes = ASIA RALLIES
PMI crashes = HUGE RALLY
No jobs are created = RECESSION ALMOST OVER
U.S. debt overwhelming = TOO BUS... [Read More]

In a follow up to my previous posting on the proposed NFA rule change on FIFO, it seems that the more I read the more different interpretations of the FIFO rule I see.

FxSol, for example have an entirely different interpretation to IBFX.  In their view of FIFO, it means that all open trades on a specific pair must be treated as a single position.  Therefore, when you start closing trades because a stop has been hit or profit is being taken you should start closing the first positions first.  This effectively means there is a single stop and profit target for all trades on a single pair.  i.e. all the trades are treated as part of a single position with a single stop and target.

The FXSol interpretation, basically al... [Read More]

At the end of the month the NFA are placing in a new rule on its member forex brokers where they need to manage orders in a similar fashion to equities and futures, based on a First in First Out rule on trades on the same pair.  The benefit of this rule is it makes trading more transparent as the trader knows what to expect in the order of the execution of trades.  For example, if you opened two trades on the EUR/USD, then you can expect the first one to be close first.

The downside of this is that  if you have stops or profit targets on your trades such that it is possible to close the second trade before the first, the broker cannot honor the stop or profit target.  This may mean that many pyramiding, grid trading and martingale strategies will no longer work.

How brokers interpret th... [Read More]

In my last posting I asked “what if I raised the risk level on M5G cyborg“. Well after 3 weeks and tripling my demo account, it did this:

Before you say “I told you so – never get greedy and fool with the leverage settings”, an interesting thing is I am trading the same system with the same settings (except leverage) using the same broker and both accounts opened the same trades. The difference is my live account closed the same trade for a profit and the demo did not hit the target and found the stop instead. Just goes to show the price feeds for live and demo and the order execution are similar, but quite not the same. This is why you should never really totally trust a demo account forward test.

(Another more superstitous part of me knew that as soon as I published the last post on my blog the account would blow up….)

About 3 weeks ago I decided to take one of my demo accounts that I am running M5G cyborg and push it to the extreme by raising the risk level to something obscene (15% instead of the recommended 2%). This is what happened: a 5K account has tripled. In reality the risk of ruin is extreme for this kind of trading and I would never try this style of trading with money I am not prepared to loose, but it is always fun to see what is possible. I might let it run for a few more weeks and see if it blows up.

I am a chronic trading book buyer and long ago I ran out of space on my bookshelf. So I can make some space, I am reluctantly selling off some of my books on ebay. If you want to get yourself a bargain (you know how expensive trading books can be ….) why don’t you go onto ebay and make a bid on the following:

* CFD and Stock Trading Books
* Options Trading Books

If have ever been on the forex factory forums, there is a very popular and long running discussion thread devoted to trading a set of trading strategies by James16. The thread has been running since 2005 and has over 2,500 pages on it. Given the insane length of this thread trying to understand this trading method takes a lot, a real lot, of of hard work. You can pay James a subscription of $129 a month to help decode this massive thread, but as many others have noted, most of the content is on the Forex Factory thread, you just need to pull it apart yourself.

I have not coughed up the cash to find out what happens in the paid group, but I am curious about the James16 phenomenon, so I thought I would bravely try and summarize what little I know about the James 16 trading method. If you are interested, then read on.

Who is James16?

I don’t know who James actually is, but if you read the thread he is a full time trader who has been trading for 25 years. James s... [Read More]

In the last couple of postings on day trading I have been looking at the down side of day trading and a look at a popular system and why it fails. In this third and final posting I want to unpack an example of someone who has made a bucket load of money, how they did and why it works.

Introducing Mystic Genie
In November 2007 Mystic Genie made the following posting on forex factory:

It may sound impossible, but I turned 1k usd to more than 100k usd (126k to be precise) in a wk—I am attaching the statement from my real account (after removing the account no. et al.)–Caution to newbies, please do not trade this way—I call my this account ‘wild thing’ which boosts my overall return—I trade another account conservatively as per proper MM—Btw, I did the almost the same thing last mth as well turning 400 usd to 60k within 2 wks—with some experience in forex trading & a decent trading system, I believe, this feat achievable atleast few time a yr—after all, I am o... [Read More]

Some time ago I wrote a blog entry about why so many traders loose money.  In that entry I pointed to all the usual suspects: trading with too much leverage, trading without an edge, poor trading psychology, etc.

Today I was rereading an old book of mine by Brent Penfold on “Trading the SPI”. His book he offers a much more interesting explanation, which he calls maximum adversity.  In his book he explains that it is the market’s function to disappoint the majority of traders.   Brent does not really say why, other than to say that trading is much harder than we think.

I have been thinking about this myself a bit more and I think that this rule is the outcome of the Pareto Principle... [Read More]

In trying to improve my discretionary trading I have been looking for a solution which will allow me to trade more without necessarily having to spend significantly more time in front of the screen actually trading. Well, I think I might have found a solution to my problem: Forex Tester.

Forex Tester allows you to replay the market at higher speed and lets you place trades manually over the market. This means I can practice trading a system which trades a daily chart or an hourly chart or a 15 minute chart with a bar appearing every 15 seconds. To get an idea of how it works have a look at this video.

The great thing about this is I now can rack up significantly more screen time. So just like as ... [Read More]