“There is nothing quite like pre-launch madness. Complete stress & mayhem but I wouldn’t have it any other way:-) #whyilovestartuplife”
I love start-up life and it’s mostly because of days like today.
Moments ago, we launched the Trade Leaders™ Investment Program, an important milestone in Currensee history. As the first social network for Forex traders, our mission is — and has always been — to bring trust to the foreign currency market. We’ve made great progress including growing our social network, partnering with top-tier brokers and expanding to the UK, but we’re not finished yet. The launch of the Trade Leaders Investment Program delivers a new way to invest in the currency market by enabling investors to follow and automatically execute the trades of some of the most successful traders from the Currensee Social Network.
What does that mean exactly? It means that investors in any asset class and on every continent can get involved in the Forex markets, even if they’ve never traded a currency pair themselves.
Here’s the 10-second overview: Trade Leaders are top Forex traders hand-picked from the Currensee social network. We relentlessly assess their performance, risk management, and returns and only the best make the cut. You can see it for yourself by clicking on any of the Trade Leaders on the Trade Leaderboard. Remember, Trade Leader performance is actual performance. Never fake or fluff. No backtesting or demo accounts. Real, honest to goodness performance in a live account.
Investors in the Trade Leaders Investment Program check out the Trade Leaders, select the Trade Leaders they want to invest in and create their very own Trade Leader portfolios. Once the investor allocates their funds, the Trade Leader’s trades are automatically executed in the investor’s account. Best of all, investors see all trades executed in real time and have full control over their account.
Watch The New Way to Invest, and learn about the program in just a few minutes.
Today, Forex is one of the hottest alternative asset classes being traded. While we can’t take credit for all the hype, we’d like to think of ourselves as being on the forefront of innovation in this market. It’s amazing to think what started as a simple idea between a software developer and a Forex trader has turned into an international foreign currency social network with thousands of traders meeting and collaborating in real time. And, now, that social network is a source of top traders for investors around the world to take advantage of this dynamic asset class. Pretty cool stuff.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
Every once in a while, the topic of random trading comes up. Normally, it’s part of a discussion about whether you could go long or short based on a coin toss and trade profitably because of a good exit and money management strategy. Let’s take a look and see if there’s any truth to that assertion by running some tests on EUR/USD daily data going back to when the euro was launched in 1999.
Random in, Random out
As a base line, I’m going to start with a totally random system – one which uses a coin toss to get into a trade and a coin toss as to whether to exit an existing position. The rules are very simple. Start with the coin toss to figure out long/short at the end of the first day’s trading. At the end of Day 2, we do a coin toss to see if we’re going to stay in the position we put on Day 1, or close it out. If we stay, we do the coin toss again the next day. If we exit, we start the process over at the end of that next day (so if we exit on Day 2, we do a coin toss as to whether to get long or short at the end of Day 3).
I ran 1000 tests on the data set to get enough information to make a reasonable conclusion. The results were pretty predictable. On average, the test resulted in a 26 pip loss, which is basically the same as being flat over more than 10 years of data. The standard deviation was 3668 pips, giving you an idea of how wide the distribution of results was over the 1000 test sample.
Random in, Strategy Out
The totally random system didn’t cut it, so let’s look at a random entry system that has a non-random set of rules for exit. I used the same coin toss entry as noted above, but for the exit I tested a reverse break approach. Specifically, the rule was that longs would be exited if the current day’s close was lower than the close from N days prior, and shorts would be exited on a close higher than the one from N days prior. I tested a range of look-back periods of 1 to 10 days. Here’s what it produced.
What the chart shows is the average result (the tick on the bar) and the range containing results one standard deviation above and below the average. So in the first bar we’re looking at an exit strategy which says get out of a position if today’s close is lower/higher (if we’re long/short) than yesterday’s. The average outcome was a loss of 3602 pips, with a standard deviation of 1846 pips. That means the 1-day test was a losing one in all or nearly all cases, and by a pretty sizeable amount, generally speaking.
It is clear from this data that a random entry system can be profitable, though. We need look no further than the middle of the chart to see the performance of the longer look-back periods. The 6-day look-back provided the best result with a 5446 pip average gain and a 1236 pip standard deviation. Eyeballing the 1000 sample test results, I don’t see any negatives among them.
Maybe we’re looking at things backwards
Looking at these numbers, it’s hard not to think that maybe traders need to look at things the opposite way around from how they usually do – to think about exit first, rather than the entry. OK, I’m not really suggesting that we all just start trading random entry systems, but it certainly does provide fodder for further testing and analysis. We can use random entries to test the performance of different exit strategies. One caveat there, though. You have to make sure when you do something like that that you’re getting the same entries for each different exit approach, otherwise the results won’t be comparable.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
In case you haven’t heard, the global Forex market is growing. Actually, more like exploding. As with any growing trend, market researchers seek to study and better understand the motivations of the people participating in this financial phenomenon.
Recently, some 3,000 Forex traders participated in a survey of what makes them tick. The full results (and there are some pretty neat stats in there) can be found here, but here are the bits that caught our attention in particular:
Does this sound like you, Joe Forex Trader?
63% of traders surveyed say they trade currencies exclusively, another 37% throw in other asset classes into their investing mix.
77% of you are new to the game, with 1 to 5 years under your belt.
The overwhelming majority (91%) are individual traders; there aren’t so many institutional or money managers in this bunch.
84% of these individual traders are charting their next moves from home. Which begs the question: what does your boss think about you spend 16% of your workday tracking currencies? We won’t tell.
Just about one-third are following the markets and news using a mobile device. Not too shocking (except that it’s actually lower than we expected). Who isn’t 100% connected 98% of the time these days?
These findings are just one example in a recent move to better understand the inner psychological (and technological) profile of the Forex trader. Identifying these characteristics is crucial in this growing, increasingly social financial market. Need we remind you – $4 trillion traded daily. Everyday. Think about that for a moment.
All this talk about research and insights inspired us to do our own market study. We wanted to explore the Currensee community as a microcosm of the great Forex population, and the results were astonishing:
Photo by Matthew Field
If Currensee were a country, it would be larger than Monaco.
We’d also be just slightly smaller than Liechtenstein. A recount is in the works.
To represent the Currensee population visually, our little social network would fill the Tokyo Marathon. This is great news, because I don’t know if you know this about us, but we’re runners too!
Our research results can be audited here. We believe our methodology to be ironclad.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
This is the first week under the new CFTC rules restricting leverage for holders of US retail forex trading accounts to 50:1 for the major trading pairs and 20:1 for minor ones (see Asaf’s post and an earlier one of mine on the subject). Obviously, there are implications for certain traders because of the change (probably not the vast majority, though), but one of the more interesting aspects of it all is the reporting the brokers must now do regarding the performance of their brokerage customers. They now have to disclose to new account holders the % of customers who have made and lost money. Forex Magnates has gotten hold of these reports for most of the brokers servicing the US customer base and presented the information from them here.
Profitability
The common mantra in retail forex trading is that 95% of all traders fail. Of course we don’t really know what “fail” means or over what timeframe this is meant to cover. The figures from the brokers are equally subject to some “Yeah, but” type questioning. According to the Q3 figures, about 25% of brokerage customers are profitable, if you don’t include Oanda.
The problem we have here is that we really don’t know what these numbers mean in terms of long-run trader profitability. The % profitable figure is very likely to demonstrate a survivor bias whereby traders who crash and burn will eventually fall out of the study, as the reporting only includes accounts where trades have actually been made. Obviously, if you’ve lost all your money or become so disheartened by poor performance that you stop trading all together, you’re not going to be counted.
Then we have the question of Oanda, which shows WAY better customer profitability than the others. Are they using a different calculation methodology? Does the fact that they pay interest on your margin balance influence the reporting? I ask because an account that does no trades but still has a balance will end the quarter profitable because of the interest earned. I don’t know if those daily interest payments are transactions which make an account “active” or not. I’d love to hear from someone at Oanda whether that’s the case. If not, then we have a very significant question as to what makes Oanda customers more profitable. Is it somehow a function of the 50:1 leverage they’ve always had? If so, it starts to make the CFTC decision look a lot better.
The demise of US retail forex trading
The other thing we can look at in these reports is the actual number of active customer accounts each broker has. Folks have been howling about the pending destruction of the US forex business every since the NFA came through with its FIFO and no-hedging rules last year. The broker reports don’t go back that far, so we can’t see what impact was had where folks shipping their accounts overseas might have had, but since many of those accounts are now coming back, and will thus be included in the broker Q4 numbers we may get some idea.
We can perhaps get an idea what the CFTC leverage restrictions may have done to US broker accounts, though. The initial proposal of a 10:1 leverage limit hit the markets at the start of this year, with the announcement of the final 50:1 cap coming in August. The table below outlines the impact.
Notice that in the first quarter of the year there was a 5% reduction in active broker accounts. Thereafter, though, the decline has only been 1% in each of the last two quarters. I’m reluctant to call that any kind of major problem, and it will be very interesting to see if the forced-repatriation of accounts from foreign lands that is happening will actually result in a positive impact on the numbers for this quarter, especially for those brokers who have had the biggest drop in US accounts.
Again, we see Oanda as a major outlier. Rather than being about flat to lower in terms of customer accounts, it has seen a 20% rise in the last year. Considering Oanda does not do any marketing and has only every allowed a maximum 50:1 leverage, these are quite interesting figures. It leaves one to wonder if that reflects the fact that Oanda has no fixed lots, and thus allows very low capitalization customers to take part in the market without having to trade with very high leverage ratios. That’s just speculation at this point, though. We may never really know.
The point is that we probably haven’t seen the end for the US forex business, despite the doomsayers. We’ll want to wait to see the Q4 2010 figures for a better reading on customer accounts, though, because of those who would have moved accounts offshore away from CFTC oversight and those brought back from broker foreign affiliates.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
Here at Currensee HQ we often talk endlessly about the amount of cupcakes and mozzarella we consume because of our location in the “little Italy” of Boston. But a side of us we rarely talk about is our athletic side. As one of the newer Currensee team members I was overjoyed to find out that many of my fellow co-workers were athletes. We have boxers, runners, and cyclists. As a runner myself I found an immediate home with the Currensee team – the workout team that is.
This past Sunday Asaf Yigal, Shereen Shermak, and myself participated in the Scituate Duathalon. What’s a duathalon you ask? Well take the swimming out of a triathalon and it’s a RUN, BIKE, RUN. As firm believers in community, collaboration, and teamwork the three of us decided to sign-up for this race.
As we gathered in the early morning hours we were less than thrilled to get going. Talk of faking illness, ailments, and broken brakes consumed our thoughts. Although we were chilly we forged ahead and each completed our first ever duathalon (and with pretty decent times I might add!).
This morning the office has been buzzing with excitement from our race. Talk of that crazy girl that beat us all, the time penalty someone (cough cough Asaf cough cough) received, and how our legs felt like Jello before our third and final leg of the race. Thank you to everyone who supported us and sent along their good luck wishes. We’ll keep you posted on our next adventure. Happy Running, I mean Trading!
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
Currensee and FXCM present: Learn When to use Range Trading Strategies with DailyFX Quantitative Analyst David Rodriguez.
Thursday, October 14, 2010 at 1PM EST – Sign up here.
Join David Rodriguez to learn about how to use FX Options prices to determine when to use Range Trading strategies. Through this webinar you will find specific resources to use FX Option market volatility expectations to fit particular trading techniques to the market environment. We will backtest ideas and show hypothetical returns of using a volatility filter on the popular RSI trading strategy.
* See how FX Options markets can provide forward-looking volatility expectation
* Use volatility expectations to adjust your trading strategies
* Show hypothetical results using volatility and Relative Strength Index (RSI)
About our guest presenter:
David Rodriguez is a quantitative analyst for DailyFX.com, specializing in statistical studies in currency trading markets and algorithmic trading systems for the Managed Accounts Programs offered by parent company, FXCM. He holds a degree in Economics from Williams College with heavy emphasis on quantitative methods and began trading financial markets in the tech boom and bust of 1999-2001. Since then, David’s primary focus has shifted from equities to currency markets, but he continues to trade futures and futures options on a broad range of asset classes as well as currencies.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
The other day Orli posted a list of links to an array of recent blog posts. They are definitely worth at least reviewing. One of the entries that caught my attention was 5 Points on When to Go Pro. A lot of Forex traders have aspirations to trade for a living, at least as they get started. This blog entry brings up some important things to think about as you contemplate quitting your day job. Here’s the list:
Have at least a year of profitable trading
Make sure you are already able to making enough money to live on each month
Plan for scaling up to trading in larger size
Have a cushion to guard against a rough patch
Have an alternate plan in case things with trading don’t work out?
One could perhaps challenge the first two points in terms of how much of a demonstration of success should be in place, in either direction. I think the other three points are all very good ones. There are a few other things I’d bring up in terms of important considerations for trading for a living. Having read the points made by the author of the 5 Points post, though, I have one question that I think needs to be answered:
If you’re making good money from your trading as a part-timer, why go full-time?
The reason I ask this question is a simple one. If you are a successful part-time trader, especially one who is already making enough to live on (#2 in the list), why would you want to change anything? If you have a regular source of income (job) you don’t hate, you’re better of holding to the course. You’ll end up much further ahead financial in the long run than if you dump that income. And if you don’t like your job, then you have the advantage of trading income to allow you to find something else you actually do enjoy.
There are, of course, times when shifting to full-time trading makes a lot of sense. Topping that list is a situation where you have a trading approach that would benefit from more frequent action. For example, if you are a Forex day trader who makes good money during only a couple hours a day, then spending more time trading (assuming the conditions in the added hours suit your approach) is likely going to mean a rise in your profits. It’s a question of increasing your opportunities.
My overall point is that before you start thinking about the finer points of trading full-time and what that means, you should think about whether your type of trading would actually benefit from spending more hours in front of the screen.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
In the spirit of transparency I must admit that I am not, by anyone’s definition, a Forex expert. I speak the language, I read plenty of news and commentary on it, and I am surrounded by the topic all day, but let’s just say my name won’t be in lights on the Currensee Leaderboard any time soon. One of my roles at Currensee is to serve as the company’s pulse on the Forex world, which means it’s my job to dive into technical analysis and economic news, and deliver to our community the most relevant and interesting Forex articles, blog posts, and videos available. If you want to be in this “inner loop”, look no further than Twitter, where we share the best Forex analysis and news we can find.
There’s no shortage of pointers for amateur and experienced traders out there. I’ve found some of the best insights come in the form of lists. These fortune cookie-sized quick tips have a few things in common. They are typically…
Short and to the point;
Timeless (you can read them today, tomorrow, or a year from now and the point still rings true);
Not experience biased (whether you’ve been trading for a week or a decade, there’s something for everyone to take away);
And best of all, actionable!
So here are some lists I’ve found along the way.
TEN:10 things that separate the pros from the amateurs. My personal favorite tip is to be the contrarian trader. Buy the rumor, sell the news. You know what they say about following the herd…
NINE: These 9 tips will separate yourself from the 90% of unprofitable traders. Ironically, one of the points is about taking every piece of “advice” with a grain of salt.
EIGHT: The 8 most common Forex trading myths. Stop-losses are not a sign of weakness; use them.
SEVEN:7 tips to Forex success. Alright, so some of the tips on this list contradict themselves – take the well-marked trading path, but think like a contrarian; trust your instincts, but don’t get gushy and emotional.
SIX: These 5 reasons + 1 emotion (that’s 6) are the reasons for your margin calls. Ignore them at your own peril.
FIVE: Ready to go pro? Here are 5 must-haves before quitting the day job.
FOUR: The 4 best technical indicators for new (or new to Forex) traders. No need to get elaborate with your charting skills at the beginning.
THREE:3 challenges to conquer for trading success. Some days you’re up, some days down, and sometimes you’re just bored. There’s money to gain (and lose) in each scenario.
TWO: Divvying up the major currencies into 2 categories: risk averse and those with an appetite for risk.
ONE: Every Forex trader had to start somewhere, and they likely wish someone smarter had been around to share with them lesson #1 of trading. It probably would have saved them a lot of pips and heartache.
+ONE: One more tip for the road. Heed this warning: Do not put all your currency pairs in 1 basket. There are seven major currencies, and countless combinations. Don’t pigeon-hole yourself with one pair.
Read any words of wisdom for Forex traders recently, have it saved to your bookmarks, or (even better) write some of your own in a blog? Share it with us!
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
Watch last week’s Forex Trading Psychology webinar with Navin Prithyani below. We hope you enjoyed this unique perspective on Forex trading as much as we did.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
Back by popular demand! Currensee and SpotEuro have partnered up to provide real-time analysis and commentary during the release of this very important economic indicator. Don’t miss out on a great opportunity to learn how to trade this economic report and ask questions while the market is moving.
Tomorrow, Friday, October 8, 2010 8:00 AM – 9:30 AM EDT –> Sign up here.
What will be covered:
- EUR/USD will be emphasized
- Learn how to trade during news events
- See how technical analysis is applied to live market charts
- Support and Resistance levels will be determined before the release
- Ask questions while the market is moving
About SpotEuro:
SpotEuro Forex Trading Signals was established to help novice Forex traders trade successfully. Throughout the first several years of trading, more than 90% of Forex traders fail. Many are not lucky to last that long and blow up their accounts within the first couple of months. Most failure is due to a lack of discipline.
About our presenter:
Alex Kazmarck brings 10 years of market analysis experience and will talk about the price action as it is occurring before, during, and after the release of the Non-Farm Payrolls data.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.
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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.
Currensee is the first social network for forex traders. We bring Forex traders from around the world together to make trading decisions in real time using live trading data.
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