Author Bio

I’ve been hearing a lot of comments about different sites that enable traders to display their performance to the entire world. The comments were mostly claiming that these sites have unrealistic performance, and that the calculations are not even close to being right.

I decided to check for myself, and have connected a single real account to both Currensee and myfxbook to measure for myself just how far off the performance is. The reason I chose myfxbook is not to prove anything against them – as all the other sites seem to calculate performance in a similar way – but because myfxbook seemed to have the most complaints against them for inaccuracy. This is probably due to the fact that a lot of amateur traders and non-professional money managers use them.

The first picture shows the performance as recorded by myfxbook; the second is the performance as recorded by Currensee on the same account.

Performance on myfxbook

Account Balance vs. Account Equity
Currensee receives its price feed from hundreds of brokers, and we compare the open positions of any user at any given point of time to the open prices that their broker has for the instrument they are currently trading. By doing that we prevent traders from logging their profits while holding large losing positions for a long time until the market changes. I couldn’t find any site that does what we do. The others, myfxbook included, log the closed positions against the account balance and completely disregard any open positions. The risk in doing that is that, as you can see, performance can be presented in a much more attractive (and wrong!) way, making it impossible for any trader or investor without the proper tools to evaluate the actual performance.

Measuring Risk 
Most amateur performance sites measure risk as either the max drawdown or the max losing trade. We measure three parameters for risk:

1. Daily Standard Deviation – This is for us the most important measurement, and represents that volatility of the performance. In other words, does this trader advance his account in a gradual and consistent manner, or is the ride choppy and risky?
2. Percent Days Losing – We measure the percent of the days the account is down to give fellow Currensee members an indication of the short- and long-term risk in the account. Having a high percentage of losing days usually means that the account would achieve performance on a long-term basis, while having a low percentage of losing days usually means that the account growth would be more gradual and consistent.
3. Max Drawdown – Like others, we measure the max drawdown in the account – the only difference is that we measure it on the equity and not on the balance (See section “Account Balance vs. Account Equity” above).

Displaying a Risk Adjusted Return Parameter
Currensee uses a unique algorithm that measure a trader’s performance and risk, and displays a single number that evaluates the trader. Lately Tradency has replicated the concept we have been advocating for more than 6 months, calling their version the T-Score. Like Orli wrote, we are always flattered by others copying our concepts.

Currensee’s TAI (Trade Authority Index) takes the following parameters into account:

• Performance parameters, including return (based on equity, not balance),
• History in the account,
• Number of closed positions, and
• Volume traded in the account and the consistency of the trader (consistency is calculated based on deviation from a strategy).

Risk parameters include:

• Daily standard deviation (or as we call it, daily volatility),
• Max drawdown, and
• Percent days losing.

We take all these numbers, crunch them together, and give you who has the highest return for the lowest risk.

As you may know, I was also shocked to see the performance of some of the traders on myfxbook, and now that I know this is fake, I am relieved. I hope you are too.

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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.

Author Bio

There are times when the major FX rates present problems for a trader in that the fundamental backdrops appear to have drivers that are negative or positive for both pairs. I feel we are currently at that point for most of the major pairs (cable aside). My previous posts highlighted the potential turning point in the dollar and there was nothing in last week’s price action last week to question that view.

What has changed is that the euro received a boost this week due to the 1 year refunding, which did not tap the full allocation. However, reading between the lines showed that while the absolute tap was lower, the number of institutions participating nearly halved. This means that each one took nearly double the amount of funds as a year before. I can think of two reasons why this may be. First, they need the funds, or secondly, they feel the need to raise their capital base as a result of concerns over future counter party risk. Neither scenario is positive, and points towards further banking woes later this year.

French and German banks are said to be particularly exposed to peripheral Euro Zone sovereign debt. When analyzing comparable price action, what is clear is that there is a divergence between equity markets and the currencies that are most correlated to it. We have already seen the dollar fail to get benefit, but looking at the Australian and Canadian dollars show that both are still some distance from making new breaks of this year’s high or lows.

A more surprising pattern is the Aussie/Yen which normally tracks equity weakness slavishly. That has also yet to make new lows. This means that for the equity to break to be confirmed the currency markets must follow.

The other main area of interest is the emergence of vertical trends in the euro and pound cross rates against the risk currencies. The reasons for the fundamental bullishness I have on the pound have been documented before, but last week I received strategic weekly and monthly positive signals as well with similar signals on the euro. Even the traditional weak relationships for the euro against the yen and Swiss francs have posted positive signals as well.

However, one of my mantras is buy the strongest, sell the weakest. My bias remains to be positive towards the pound and euro against the risk currencies. Any breaks of those to new highs or lows against the dollar would provide another positive argument that the cross rate trends could have considerable longevity.

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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.

Author Bio

It can sometimes be pretty lonely standing on our soapbox, waving the transparency flag and calling out passersby who get in Jack the FX Trader’s way (StockTwits, are you listening?). Then we heard about FXBees.com through a review on FX Magnates, and we’ll admit, we were curious. Whenever we hear the words “Forex” and “social network” in the same sentence, our ears perk up a bit (see photo of our Currensee Pips, upon hearing about FXBees.com).

Photo by Erik Veland

FXBees.com is fresh to the Forex social scene, so we’ll cut them some slack, but we do have our reservations:

1. Demo accounts. Demo traders and real traders are the ammonia and bleach of the FX world. In real collaborative trading, every player needs to have something at stake. Want to short the EUR/USD? Well put your money where your mouth is, whether it’s your annual bonus or your lunch money. Any tips or advice from a demo trader should be followed by the disclaimer, “Favorite pairs include Monopoly money and chocolate gold coins.”
2. Blind ignorance. Sounds like FXBees.com lets you scout out the pseudo-shining stars who may be trading in demo accounts and blindly follow them because you trade similar pairs, but you don’t know what their trading strategy is – Fibonacci, Nonfarm Payroll, or cloud formations?

Currensee members share their trading strategies, years of experience, favorite pairs and techniques so you know who you are “getting into a [trading] bed with,” so to speak. Bragging about your performance in pips by itself doesn’t tell a fellow trader much. That’s why Currensee measures individual member performance against the greater Currensee community and the S&P 500.

One of our feature, the Currensee Social Indicators widget, aggregates the Currensee community’s stance on all the major pairs, allowing members to see where our real Forex traders stand on the NZD/JPY.  Whose advice are you going to take – thousands of Forex traders with real money on the table, or the guy “just playing around”?

You already know what we’re all about: real traders, real trades, real time. If we could figure out how to fit it onto a license plate, we’d have them made. In an earlier post, Michelle talked about why we’re having all the fun in this new, democratized Forex market. But with this freedom also comes great responsibility. In a world and a market that is stricken with scams and schemes, we strive everyday to be the voice of Jack (or Jill) the FX Trader who isn’t backed by the big-name banks and attorneys when things turn sour.

FX Magnates sums up the newcomers by saying, “Overall I would say FXBees has promise, but it needs to eliminate demo accounts, and it needs to stress the dangers of blindly following other traders.” We agree on both counts. That’s why Currensee is all about real trades from real traders.

We’re not trying to be harsh on the new kids on the block. In fact, in the spirit of collaboration and transparency, we welcome them to the Forex social media arena. We’ll be watching. Always watching.

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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.

Author Bio

I remember my job at Fidelity back in the late 90s. We were cooking up this revolutionary new way for people to trade…online. It was back in the day when you sometimes paid hundreds of thousands of dollars for a URL and every website had a little worker guy image on it because it was under construction.

I remember how many people at that time said it would never happen, this Internet fad. It will never take off. Who wants to go on the Internet to shop? Who would ever give their credit card across the world wide web, into the ether? Why would people rather talk online than on the telephone? Well, friends, if you are living in the year 2010, you are living the Internet dream. We are connected 24/7 and it’s getting easier and easier to shop, communicate, browse and work.

But there always has to be someone who doesn’t believe it. Along comes Prince, who I love dearly. My first album that was banned from my record player by my parents was Purple Rain. I think I know every word to every song on that album. The man is a musical genius and has millions of fans around the world but refuses to embrace technology and went so far as saying the internet is over in a recent interview picked up by Mashable. And, he went on to say:

“All these computers and digital gadgets are no good. They just fill your head with numbers and that

can’t be good for you.”

It is hard to believe that there are smart, influential, talented people out there who believe that the Internet is the root of all evil. What about all of the great things the internet has does to open business and commerce? To connect people around the world? To create access to information? To make music available to fans everywhere? To give Forex traders access to each other (shameless plug)?

Maybe we’ve all fallen prey to the cult of Steve Jobs, and Facebook, and iTunes and Twitter and the many gadgets and websites we use every day to help us do our jobs better, live better, learn more and be more productive members of society. Maybe we should go back to our pre-Internet days and forget all the gizmos, gadgetry and websites.

…on second thought, I’ll stick with the cult. Sorry Prince, I ain’t buyin’ it.

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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.

Author Bio

There’s a poll on the Currensee Facebook page which asks the question, “As a trader, which of the following psychological factors do you find the hardest to overcome?” The possible options are:

The two most common responses I saw among the traders who left notes along with votes were Patience and Fear. Casting back in time (way, way back!), I think I can remember my own progression. Here’s how it went.

Greed
Let’s face it. Most of us get into the market because of the potential to make a lot of money. Generally speaking, this doesn’t end up being the thing which keeps people there, though. Most folks who stick it out over the long run tend to have additional reasons. They enjoy the intellectual challenge. Or maybe it’s the “game” perspective. For some it’s the competition. These additional reasons give a trader purpose when the realization hits that they probably aren’t going to make 1000% returns every year.

Of course there’s also the micro greed that can take place on a trade-by-trade basis. It’s a definite trap to think mostly about how much you can make. Folks who do it too much don’t last very long. I can certainly attest to what can happen when the risk side of things is ignored. Fortunately, I think I got passed that.

Fear
When I got my start in trading, back in the Jurassic Era, there wasn’t much in the way of demo trading. What we had then was literally paper trading – keeping track of buying and selling in a notebook. When I got to the point of needing to develop trading on live prices I had to do it with real money. I was all of 18 at the time and not exactly flush with cash. The money I traded was all that I could scrape together. On top of that, I didn’t have experience actually putting in orders, so you bet there was a fear factor.

Practice tends to reduce the fear aspect of things. As time went by, I got comfortable with both entering trades (over the phone!) and having money at risk in the markets. The fear factor faded, except on the occasional instance when I goofed something up and had a position I didn’t mean to have. That can get your heart rate going pretty quick!

Patience
Once you get over the hurdle of being afraid to pull the trigger, the pendulum can definitely swing in the other direction to being overly eager to do so. I have definitely gone through periods where I just let things run away with me. This sort of thing often happened after a good string of results. Can you blame me? If you’re on a good run you want to keep it going. That tends to make you forget your trading rules, though, which is never a good thing.

Actually, some folks get caught up in revenge trading which can also be a lack of patience situation. This comes about when you take a hit in the market – often one bigger than you probably should have – and you’re eager to make that money back. There’s a scene in the Trader video where Paul Tudor Jones takes a hit in the markets and talks about making the losses back with interest. The difference between him and the rest of us, though, is that he clearly didn’t get impatient, though he certainly did make the money back, and then some.

Lack of Confidence
Once I got over the three previous issues (mostly, at least), confidence became the thing which did the mental damage. I am not primarily a rigid system trader. That means my own discretion weighs heavily in my trading decisions. As such, when trades don’t go well, it can be a confidence shaking situation.

System traders have a simpler path to evaluating their trading and do discretionary traders because there is no human element (or at least there shouldn’t be).  It’s just a question of whether the system is working properly. With a discretionary trader, though, the methods employed have to be evaluated as well as the trader’s application of them. For those inclined to be hard on themselves (as I can be), a period of underperformance can create a crisis of confidence. If you’re prone to shaky confidence, you might be better off being a system trader rather than a discretionary one.

Charting Your Own Forex Path
The progression above was my own path through the comment mental pitfalls of traders. There was certainly overlap, and some things supposedly put behind me reappeared at different points to trip me up. Your own path may be quite different. It’s good to know what’s underlying your mental hurdles, though. It makes them that much easier to overcome.

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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.

Author Bio

Last week I concentrated on the fact that Mr. Obama had far more to worry about than BP – namely poor fiscal policy and the impending debacle in housing. Last week’s shocking stats were a brutal reminder of what’s in store, and no one should be soothed by those who point to the small year on year rise in the median house prices. Both new home sales prices and the 4-week average of mortgage applications dropped sharply. It was also alluded to that Mr. Obama would continue to believe that fiscal stimulus was the answer, and this week he has politely castigated his European counterparts for doing the opposite. He forgets one key difference – the fact that the dollar remains the reserve currency of the world, which allows a buffer against the plague of worries that have hit Europe.

I have long been bullish on the pound, especially once the election was out of the way. It is clear to me that those countries which have both political will and mandate from the population to do what is necessary to cut deficits will benefit. The question now is whether the markets will finally shift their focus further to those that propose no intention to. This last week, during which I have been away on business, I took a step back from the day-to-day hurly burly, and it is clear now that in this last week’s price action – for the first time in many months – equity weakness has not equaled dollar strength. I find FX the hardest asset class to trade, as I am a directional trader and every FX trade is a spread. It is about working out where the relative movement will come. However, what is clear is that the risk is that focus will turn on America’s huge deficits and begin to exact a toll on the dollar. Carry trades can quickly unravel and any further equity weakness and a lack of positive dollar reaction to it, or equity strength, which should see the risk currencies over perform. These highlight how a shift in the dollar’s dynamic over the coming months could just be beginning.

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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.

Author Bio

There’s been discussion around trading for a living going on in the Currensee forum area. It’s not the first, of course, and it certainly won’t be the last. A recent informal pool on BabyPips indicated that more than half the folks there have it in mind to replace their jobs with trading (it also indicates that something like 75% plan on making at least 50% per year on average, so take it however you like). I’ve written on this subject before in my own blog in the post Trading for a Living vs. Trading for Wealth Building, and others as well.

The question “Should I quit my job and trade full-time?” is one that was answered by several experienced traders and market pros in the recently published New Trader FAQs book. A common thought from those answers is that trading for a living requires two things:

1. Having enough capital to produce returns large enough to pay our expenses, plus pay for your outgoings for some period of time without having to rely on income generated from your trading;
2. Having the proven ability to make money consistently from the markets.

To the first point, think on this: consider the scenario where you need to make $5000 per month to cover all your expenses and provide for some savings. If you can consistently make 10% per month (no mean feat!), then using 5% gives you a very good safety cushion in case of an off month or whatever. In order to make your monthly expenses on a 5% rate of return you would need $100,000 in base capital. And that doesn’t account for the cushion suggested in case of a string of tough months.

As for the second point, one of the FAQ contributors has this to say:

To become a full time trader is at least a 3 year apprenticeship, and you must be prepared for some serious tests of character along the way. You will place trades and have some wins, some losses and some break evens, finding the difference between these three outcomes is what makes or breaks a wannabe trader. Some traders will discover the difference and then go on to prepare a solid foundation of rules and requirements to ultimately become a consistent winner. Others will desperately try to devise a plan and will fail, while the final and most common outcome will be to simply give up after losing too much money and being unable to determine why.

If this sounds like I’m suggesting you shelf your dreams of trading for a living, I wouldn’t go quite so far. I would, however, caution you to really think through things before making that kind of move. It’s not just about the money. It’s not just about getting out of having to work for The Man. There are other issues like quality of life to be considered. I have told people on many occasions how I’ve long known that trading full-time for a living is not for me. I trade to grow my assets and do so on a part-time basis because there are so many other things in my life I enjoy doing, and my salary suits my needs and comes with a minimum of stress (usually).

Just some food for thought. Feel free to discuss!

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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.

Author Bio

There is nothing like a steamy, sticky, rainy night in Beantown to run 3.5 miles with your colleagues and another 12,000 people who all signed up to run this year’s J.P. Morgan Chase Corporate Challenge. The Corporate Challenge is the largest road race held entirely within Boston’s  city limits. It’s a fun run through the city and a great way to do something healthy for your body, and good for the community to boot.

We were excited to participate in this year’s race for a few reasons. First off, healthy Pips are the best Pips in town. We love encouraging exercise and healthy living. You know, out there in the fresh air and doing something good for your body. Second, we love doing something good for the community. This year’s race proceeds fund Camp Harbor View, a summer camp located on Long Island in Boston Harbor that provides an opportunity for children from Boston’s at-risk neighborhoods to spend time at summer day camp in the city. At the camp, kids get a chance to learn about life options that they may have never considered while receiving exceptional support from a caring staff. Now that’s a great cause. Third, we are all about team building and love a good team competition. (Personally, I like my competition a bit better in the air conditioning but, hey, it’s only once a year.)

We had the best t-shirt design, by far, thanks to our super-talented designer, Elliot, and we ran that last tenth of a mile extra hard at the thought of a nice cold beer with friends. I am already beginning to plan our t-shirts for next year’s race.

Check out the Pips at their finest in our team album!

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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.

Author Bio

My first internship was working for Bear Stearns long ago.  I was cold-calling potential clients for stockbrokers trying to spread the news on the attractive offerings that we had to offer.  One day, when I was tired of pitching Paramount as takeover target, I was perusing the Wall Street Journal and stumbled on to some interesting story.  I don’t remember the company that the WSJ was mentioning but I do remember what my respective stockbroker said that day when I showed him the article: “It’s yesterday’s news, kid. Who cares. Find me the company that will be making headlines tomorrow”.

I didn’t take any offense to what he said as he is right because when you are trading equities you should not be trading ‘yesterday’s news’.  Equities gap, and they gap quite sizably from day to day.  When a story comes out, the market-maker will adjust the price accordingly.  Thus, if you are trying to buy or sell a security that just had news, you will not be receiving yesterday’s closing price.  Not even close.

Luckily in the currency markets there are no individual market-makers that control the spot prices.  Just imagine if you were a trader this week and wanted to buy EUR/JPY after the China central bank announcement regarding the CNY.  If you had to go through a market-maker you’d probably pay an additional 30-50 pips as the market initially saw this as a reflection of confidence on the global economy.    Of course in the end the announcement from China was considered not such a big deal and EUR/JPY would eventually collapse.  Luckily you probably figured this out and would have gotten out of your trade close to even.  If you had paid the market-maker the additional 30-50 pips then it would have been similar to buying a house in the US in 2007 and trying to sell today. Ouch. Similar to the real estate market trading equities is far from always being a liquid and transparent market.  If they could offer liquid equity markets throughout the day then don’t you think they would do so?

I harp on another instance where all markets were caught by surprise which is on February 18^th of this year.  This is when the Fed raised the discount rate by 25 bps to 0.75%.  They did this action 30 minutes after US equities closed their normal trading session.  So as an equity trader if you wanted to be involved you had to stray outside your favored market as your market was closed!  Hopefully you didn’t buy or sell too many futures contracts as those become very expensive in a hurry.  Currency traders could have just clicked “Mine” or “Yours” and if you felt your trade had gone to its limits you could have closed it out at any time.

There is nothing like trading the markets profitably when the market-makers have all gone home or are stuck on a subway and may be oblivious to current market events!

If you want to trade a market on a short-term basis there is only one market to trade which also happens to be the world’s largest market, the foreign exchange market.

This report is for your information only and does not constitute investment or business advice or an offer to buy or sell securities.

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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.

Author Bio

The question of whether someone really should not be a Forex trader is one that’s not often brought up in discussions between market participants. It’s almost as if the baseline assumption is that the sole criterion is that you want to trade. While I’m a believer in the view that just about anyone can learn, there are limits to that. Ignoring the obviously physical and mental disabilities, here are the ones I think are most important.

Lack of Impulse Control
If you cannot keep yourself from acting on impulse – meaning making snap decisions without a plan – then you’re likely not going to do well in trading. Successful trading means applying a consistent edge. That, in turn, requires a plan that is being followed, not making random trades when the mood hits.

There is probably some confusion here when the subject of gut instinct comes into play. Here’s the deal, though. If you’ve only just started trading, you have no gut instinct. That comes from long experience. If you’re a rookie making gut trades, for your own good you should stop now. Any success you’ve had to this point is almost certainly a function of luck, not skill.

A Troubled Emotional State
We all go through periods when we’re in a mixed up emotional state. It could be relationship issues, family difficulties, the death of a loved one, stress at work, or any number of other things that put you off your game. These are not good times to trade. Granted, trading can be an escape from the emotional strains in some cases, but that’s only if the trader can consistently execute their normal work and strategy without it being impacted by what’s going on in the rest of their life.

Trading has a way of really exposing emotional problems, even among the most stable of individuals. If you’ve already got some mental strains going on, trading is likely to either make it worse, or to see you feed on that emotion in destructive ways – like trading angry. It is best to stay clear of the markets when these sorts of things happen if there’s any chance of spill-over or distraction.

Looking for a Quick Buck
Trading is not a get rich quick program. Any systems or broker ads that lead you believe otherwise are being deceptive. As any trader who’s been around more than a year will tell you, trading is a marathon, not a sprint. If you come into the market looking to make a fast killing you are almost certainly going to blow your trading account up because you’ll end up taking much too much risk. Basically, you’ll be a gambler rather than a trader.

I could probably toss in “those who think trading is going to be easy”, but that might rule out almost every new trader.

That all said, though, the things I’ve noted above can all be viewed as changeable. Lives can calm down. People can learn to follow a plan rather than just do whatever occurs to them at a given time. The gambling impulse can be replaced by a more long-run view. That means there’s hope for just about everyone, so long as they do right by their expectations.

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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.