Real Forex Trades

I'd like to see the FX market completely standardized, but that won't happen given the nature of the market. It is a Global market with differing standards in several areas and no real "market open or close". So, brokers and market intermediaries have to create their own timing for bars of data. Most try to follow their respective broader equity market timelines in their respective countries, but this has built-in conflicts as well.

 

Thanks a lot for sharing that, I had no idea.

 

RFT,

Hey, just checking in. I won't be posting too many messages here to interfere with your journal, but I will be watching the trades from afar and wanted to say keep up the good work as always!!

 

General Note:

I’ve been seriously considering either the outright removal or heavy modification of the “First Day Trade” profile in the system. As stated in an earlier reply to someone asking questions about the system, it is driven by its own little “engine” that sits next to the larger engines inside the system core. To put this into some perspective, it is like trying to develop a GPS Navigation tool for single session events. With GPS, you can navigate a course from way-point to way-point and that is what I’ve tried to do with this system. A difficult task, but that was my design goal.

The idea, is to attempt to splice the hyper-short-term trend into two (2) segments every 24 hour period. Without getting into all the minutia, it involves basically running a “smaller” system within the larger system that looks at different aspects of the trend and that contains its own probability/predictive components (indicators, signals and probability calculations) and then allowing it to do its own “thing” while integrating its output into the system GUI so it appears on screen as a unified view of the day’s projected price action. Tough nut to crack and in all honesty, I’ve been working on splitting the atom (so to speak) on these “spliced” HSTT’s (hyper short term trends – what I call them) for several years now.

At one point, I simply removed the concept out of the system because it was simply too unstable. A few months ago, I developed a new set of signals that seemed to boost accuracy of the “First Day Trade” engine. It worked well in most of the Beta and Test trials, but it did exhibit some of the same anomalistic tendencies from time to time. This was the last component of the system that was ever built – there has been no additional code added to the decision support module since, nor will there be.

So, I’m down to my last straw with this component and I really only have two choices left given its unstable characteristics:

1) I can proceed to “squeeze it”. That means coding tighter restrictions into its trigger release mechanism. Right now, it is allowed to fire-off when it sees a minimum of 10 pips to its target. I’ve noticed that when it projects a smaller number of pips, its overall accuracy drops significantly. But, when it projects a larger number of pips, its accuracy joins the reset of the system in the low to mid 90% range. So, that could be clue that I might have missed during Beta and Testing. The solution there would be to create a logical switch using code that shuts “Off” the trigger mechanism and prevents it from releasing whenever the pip projection is less than a certain number of pips. The system would then automatically display only one Day Trade and auto-set the Entry to its original location. In this case, that would have been Short from the Open at 2107. The Day Trade Limit and Stop and all other system measurements would have likewise switched to their original settings in the absence of two Day trades in opposing directions. So, this is one possible solution using code.

2) I can just remove the spliced trade from the system altogether. I try to splice the trend because I like to maximize revenue potential anywhere and anyway I can. But, to continue to do this against an unstable signal, does not make much long term sense. The primary Day Trade is the heart and soul of the system and that is functioning better than expected. The problem I run into occasionally is when the system starts to splice 24 hour trends. When it works, it works very nicely and the pips are augmented nicely by the “First” Day Trade and that profile flows nicely into the primary or “Second” Day Trade. But, when it fails, it typically recovers nicely – like today – but it does waste valuable time. So, completely removing it from the system is a possible solution as well.

I’m a little torn between the two choices, however, knowing the benefit of maximizing ever opportunity to net pips and knowing that on these spliced trades typically the worst that happens is a Break-Even result, or a small profit at the end. The fact of the matter is that on these types of set-ups, I can basically trade in any direction and either see the target struck, a small net gain achieved, or a break-even result. But, still, I don’t like the wasted energy and time. There was a nice little pick up of 39 pips Short that was missed because of the hanging “First” Day Trade profile.

Decision, decisions, decisions. O’ the joy of such decisions. After all, that’s what this business is about – making good decisions.

I’d just really dislike giving up those extra spliced-off pips just because there was some small “variable” that I was missing. Apparently, I’m still missing a piece of the puzzle on all this splicing equation.

Slicing and dicing the market – that’s what makes trading so much fun!

Dilemma: Re-code it – or dump it. Hmmmm.

 

Won't be here that long, Brabed. Forgot about this board a long time ago and my desire to "set the record straight". You know how I am about rumor, speculation, innuendo and out right lies - I don't like them or the attitude that initiates them.

Sometimes you just have to clean-up after some people and their mess and there is plenty of that going around.

 

No problem - the "standards" will get tighter when more equities traders make the industry broader by their shift into the retail Forex space. Right now, a lot of people over on the equities side are still testing the waters with their demo accounts. Eventually, business will pick-up on a much larger scale, I hope! When that happens, it will create more competition in the Retail side of the business and that should in-turn tighten some aspects of the industry as a whole – I hope. Still, there are infrastructural problems with getting everybody on the same “global clock”. It is just not physically possible to do so. When Europe is trading, I’m sleeping and their high/low won’t match the US segment high/low – same for Asia, etc. But, that IS what makes the Forex, the Forex and not a local equities market.

So, overall – expect many advancements and improvements in this business in the future, but when it comes to exact pricing to within a single pip, that’s probably pushing things a bit beyond what’s possible given the nature of what we are all dealing with here.

 

yes, I know. FX markets are very immature. They have only been trading over a trillion a day for two decades and had their glory days in terms of volatility 15 years ago. But yes, just waiting for the equity guys to get there and set it straight.

 

Yes – good morning to you, too. Actually, right now – it is late morning where I live. Thanks for the intelligent questions.

Yes – the DNA stuff (which I technically define as a TCD – Transequential Contiguous Delta, a term I created) can be seen in all bars of data right down to the 1 minute bar. Now, I trade above that in the daily, weekly and monthly bar range (now exploring the creation of 4 month and 6 month bars as well), so I work with the “dynamic structures” at that level. The basic TCD the system uses is extremely simple to understand. It is the distance between the High of one bar and the Low of another. The trick is in finding out which bar combinations to use. There are also a lot of other TCD combinations that make up this system, but that is the most basic in use. How they are used in the system is stone cold proprietary and I cannot get into that here. But, “that” they are used is what’s important to know.

These are what I call the foundations for Trajectories. A Trajectory is a segment “of” the trend and not the trend itself. I don’t believe I trends the way most traders do – nor do use them in the same way. My system’s primary focus is on the TCD concept and the power of analyzing the delta between them. This system, to a very large degree, is all about Delta Measurement, Delta Management and Delta Projection. Going any further than that would break my rules for how far I can go in talking about this aspect of the system. Just know that the system constantly analyzes the delta between multiple OHLC configurations across multiple bars of data. That’s the crux.

Good question. Take any hourly chart on any currency pair in the world, any stock in the world, any tradable instrument in the world that has the OHLC format extending over more than 20 periods and you can see these “dynamic structures” with your “bare” eyes. I’m totally amazed that people can look at the above chart and never once see them! I’m blown away by that, entirely. Once you learn to see them, you can then know what to look for in the smaller bars, or in the larger bars as the case may be.

Yes – and a ton of other inputs as well. The fact of the matter is that the “trend” can be your friend until it stops trending! Then what? What does one do next? The question that I had a long time ago, was “when will this trend come to an end?” That is the most important question that I can think of, for me as a trader. If I can know in advance when the trend has the highest probability for ending – then by automatic default, I ALSO know when the “next” trend has the highest probability for initializing. That is beyond the horizon vision which is priceless. I cannot know this by looking at the trend. I have to go inside the trend down to the level of the Trajectory (TCD) to find a better answer to this question. Once I get inside the trend, I’m basically looking at the DNA of Price Behavior. Or, what I call the Price Structure. From that point, I work on trying to map the genome of the trend using custom delta pattern analysis method that I developed.

This puts the system slightly “ahead” of the market at all times. However, I have also designed the system such that it weights higher level trending components over lower level opposing trajectory components (trajectories going against the trend) under certain conditions and I reverse that code under another set of conditions. I do this trend component –vs- predictive component weight shifting in order to establish a harmonic balance between the two such that the system appears to be “in sync” with all market turns in the bars that I’m interested in trading.

I just made a post that deals with this question regarding “splicing” the daily bar into two segments every 24 hours. It is a very difficult thing to do consistently to the high degree of precision that I’ve become accustomed with and I’m considering simply not doing it anymore. It has been the most difficult aspect of designing and engineering this system. Essentially, it requires the system to be “everywhere” at “all times” and that is just flat out difficult to accomplish. I don’t have the word impossible in my vocabulary – other people use the word – I don’t. However, I will say that splicing the 24 hour Trajectories on a consistent basis to a high degree of precision is very hard for me and I don’t know that I have the human intelligence (brains) to pull it off. I’ve tried, but it is just a very tough nut break open. I think that if I were to hand the concept over to someone in the upper echelons of the Academic Physics Community at the Professor level, the problem might get solved. I don’t know that I’m going to be able to do it, however.

I don’t need it – everything works find with out – but it sure would be nice to be able to capture another 10 to 20 pips per day using it!

Yes – it is 280 bars of data and it does roll-down dropping off the last bar each day. The 280 number is both long enough to provide the empirical data I need and it just happened to be where I got tired and wanted to go to sleep on night! So, it remained at the “default” test period – lol. It is way more bars than I really need for the way I trade. I just don’t need that many, but it was a function of needing to move on to other development issues once I had built a table big enough to give me the return data (results) that I needed. I could make it 100 and given the nature of this system, that would still be enough – but 280 is overkill.

So far, some of the most intelligent, on-topic and relevant questions ever asked. Hope that helps a bit. Thanks!

 

Yes – as we move further down the road of “economic globalization” (I could make many political comments here, but I won’t – lol!), you will see the Forex becoming even more active for a myriad of different reasons. Interbank, has been around for a very long time, but the so-called “Forex” has not been available to the average “joe” trader for nearly as long. In the old days, if you wanted to participate in currencies, for the most part, “joe” would have to go visit his Bank and get involved with the Bank’s trading of the international currencies on the spot market. However, with the advent of “pairing” one currency as the “base” and the other as the “counter”, it opened up a new realm of trading and “competition” against other forms of investing/trading. Many large scale institutions now engaged in the currency “pairs” market, do so in order to gain some kind of compensating balance that they hope will off-set losses, or potential losses in other non currency related portfolios. So, for some larger scale funds, the market is used as a tool for “hedging”.

It is a very dynamic market with many different players of varying sizes, shapes and colors and many of the have different reasons for being in the market. But, I think its future is bright in the short to medium term. If you are a long term “investor” or “position” player, then you really don’t need a technical system to trade the Forex – it is pretty simple – just follow the global rates as they apply to the counter or base currency within the pair. This is why I really don’t understand what happened to Warren Buffet with his super large loss last year. It makes no sense at all – you could clearly see where US long term rates were headed, yet he was Short the USD almost the entire time. I was blown away by that, completely. In the super long range, this business is super easy.

However, down in the trenches, in the super short cycles, I believe that you really do need some technology to participate in this business and grow consistently on a daily and weekly basis given the speed with which this market can turn on a dime and the leverage in use these days. However, having said that, I would “day trade” this market any day of the week, before I would go back to “day trading” equity options. If somebody slips and falls in a store in Idaho and you hold that stock and don’t know about the civil liability lawsuit that’s coming down the pipeline for $1 billion in damages and you happen to be Long that stock on Monday morning when the news comes out, then bingo – your out of there. The unexpected news vector that can and often times does hit the stock market, combined with all the pump and dump, market maker jigging, floor trader, jigging and basic noise, all combines to create a huge unknown variable ever present with each 6.5 hour session.

In the Forex, somebody slipping in Idaho, has no effect. It takes real market moving news to permanently or on a long term basis, alter the normative price behavior of a major pair (not the thinly held minor pairs). The thing I like about it so much, is that the vast majority of those major market moving “news” events (really not news at all) are mostly covered on an events calendar and known ahead of time! That’s like having your cake and being able to eat it too in many cases. Eventually, the pair will fall right back into the behavioral pattern that tracks the expectancy of global rates. So, it all comes full circle in the Forex for the most of the Major Pairs.

The other real beautify thing about the business is that when I was a Stock Options trader, I had to maintain a small database of stocks on a daily basis and then filter through the best option contracts while making a trade decision in real-time! In stark contrast, I’ve been trading the EURUSD, a single pair, for what has to be the past 6 years straight – no instrument research needed. In fact having studied, traded and worked with the EURUSD for so many years, I don’t need any research before every trade. All I need to know is whether or not there is market moving news on the horizon for the EURUSD that opposes the trade signal – that it! The rest is academic.

So, I expect that eventually the old-time and experienced equity guys/gals will one day get serious about the FX and do the preliminary research necessary to make the transition – but when they come, they are going to need to bring some tools with them, because this market can move fast and you really do need to fully understand the Magnitude of the pair that you trade on a daily basis – so you don’t end up too far on the wrong side of a trade.

Cheers!

 

RFT,

One question, I noticed you closed out your Outlook trade a bit early. Do you still expect it to hit its target?