Last week, Forex analyst John Forman hosted a live webinar about autotrading. John provided his perspective on what should raise some red flags for investors when they’re leveraging automated tools and strategies.
In a nutshell, John talked about the seven perils this type of service. While you can hear the entire webinar here, I wanted to give my thoughts on how relying on automated systems can affect your outlook as a trader and what you want to consider as a potential customer of one of these systems.
My interest lies in how these risks relate to currency investment programs such as the Trade Leaders™ Investment Program. The moves of the Trade Leaders, some of the top currency traders in the world, provide trade signals that appear in your portfolio. But, being prudent in your decision-making requires that you understand the process and why some methods can help you succeed, while others warrant more examination.
Briefly, the seven perils John shared were:
1. Trading types (actual versus hypothetical)
2. Knowing your skills and vetting traders/systems
3. Managing risk
4. Identifying fees and expenses
5. Understanding presented performance and returns
6. Accepting transparency and measurement
7. Leveraging investor controls
In my opinion, the three most important of these are 2, 3 and 4. Ultimately, if you are comfortable in your abilities as an investor, are aware of the risks present in trades that might be executed automatically and can accurately understand how your returns and performance are measured, you’ll be well poised to take part in a system that offers you the benefits of autotrading. The biggest caution as you look to take advantage of an autotrading system is to know how the fees work. Are you paying on every roundturn? Is the “expert trader” getting paid on volume? Are you paying additional pips to add to the autotrading company’s bottom line? Buyer beware. Do your homework and know how much the service will cost you. Transparency is one of our key cornerstones of the Trade Leaders program. We made a conscious decision to keep our fee structure simple and straightforward and it’s clearly communicated in our marketing materials, on our website and by our team members who talk to new clients every day. You can see it for yourself here.
I welcome your thoughts on autotrading and the perils – or successes – you’ve experienced. What do you see as the most important consideration as you decide to try an autotrading system? I look forward to hearing from you.
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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 week, my friend, John Forman and the IFR Markets team, won the prestigious FX Week Award for their agenda-setting coverage of the foreign exchange market through a year of great turmoil. IFR Markets is the real-time markets commentary service of Thomson Reuters and provides a variety of real-time news, commentary and market coverage across the globe.
IFR Markets Forex Watch won the Best Vendor for FX Research and Strategy, 2010 award, which is decided by votes from the foreign exchange industry and recognizes the expertise, commitment and flair of the editorial team. Here’s what people have been saying about IFR Markets Forex Watch:
The team consistently provided incisive commentary and winning trade ideas through a stormy year for currency markets that included a yuan revaluation and Japanese intervention, a euro crisis, multiple dollar slides and a surge in emerging currencies. They faced stiff competition from players such as Informa Global Markets and 4Cast who value this accolade above all others.
Here at Currensee, we created our partnership with IFR Markets over a year ago, mostly because of the reasons they won this exciting award. Members of the Currensee social network can take advantage of the IFR Markets news, commentary and analysis for free on the platform and our members find this real-time insight extremely valuable. We also offer much of the Thomson Reuters IFR Markets Forex Watch information through our proprietary Squawk Box, Order Board and Trading Desk widgets. The Thomson Reuters folks have a solid reputation for providing first-class research and market analysis and we’re excited to offer our members access to this offering.
Congrats to the IFR Markets team on a well-deserved award.
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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.
Not everyone can be a Forex Fiend right from the get-go, or sometimes even after years of trading experience. While a lot of trader psychology analysis deals with how to boost your confidence (in Forex anyway) and become that fearless Forex trader you want to be, it is equally important – if not more realistic – to learn how to be a good loser in the Forex game (that covers the other 95% of us, right?).
Earlier this week, John and Tim both made some observations about wealthy traders’ habits, one of them being that “they are patient with winners – and ridiculously impatient with losers”. The key takeaway here: patience is a virtue, but not in Forex. Best tip from Tim: Don’t coddle those losing trades.
Want to become an unsuccessful trader? Yeah, me neither. Elliott Wave International offers up a how-to guide in reverse – how to avoid the 7 most common mistakes made by experience traders. This reverse how-to guide has a little bit of everything – why market trends are not like billiard balls, a wag of the finger on patience, and a little Mark Twain to wrap it up.
Markets (and traders) go through a lot of mood swings. Some days you’re winning, other days it’s all downhill – down a really steep hill. Equally damaging can be those days in between, when you’re just plain bored. Lesson here is to stick to your plan before you get too trade-happy.
As if you need more material for your therapist, you’ve probably heard a lot of advice about how effort and passion will go a long way. What your mother likely forget to tell you was that even your best effort and intentions can cost you a lot of money the first days, weeks, months (close out that position already!) of trading. Perseverance is the greatest lesson you can learn.
Our intention is not to scare the crud out of you, forever intimidating you from investing in Forex. We just want to make sure everyone is aware of the uphill battle that may lie before them, and the significant risk of loss. Now that we’ve traumatized you, here’s some news to make you feel a little more upbeat and curious about Forex, the next mainstream asset class:
If you’re still being as a wallflower in Forex, the beginning of the Forex trading week is as good a time as any to get started. For the visual learners, Raghee Horner offers a video lesson on how to start your FX trading career on Sunday, and then survive the first 24 hours.
Oanda’s take on being a market maker vs. a market gamer is speaking our language: “Transparency is the distinction between making a deal or a market, and gaming a deal or a market. A business that shows its customers how things work behind the scenes is able to prove its operations are honest. Transparency ultimately equates to fairness.”
Somalia's Three Wise Monkeys Coin
Now here’s some news to get pumped about: Forex trading volume is “up and to the right” (Michelle’s favorite expression) the world over. Check out these numbers, and tell us if you don’t tear up a little. FX trading is up 400% in two years in the Middle East (read that again, slowly…400%). Not nearly as impressive, but still brag-worthy, foreign exchange is up 31% in the UK, 15.8% in Japan, 43.1% in the US since April 2009. Up and to the right is right!
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.
Tomorrow afternoon we’re putting on a special free show, a Forex panel discussion webinar called Are you a Scalper, a Swinger, or a Holder? with John Forman, Shaun Downey and Mike Baghdady. Please join us as these experts help us explore the different timing approaches to Forex trading . We’ve got some basic questions for the panel, but the main event will be opening up the lines to your questions, live!
Are you a scalper looking for the rush of that immediate and fleeting opportunity? Do you look for short-term misalignments in price and grab a few pips of profit in positions that frequently last only seconds? Are you a swinger with a more patient strategy to examine patterns over days, or weeks? Or are you a holder, keeping your positions safely stowed away until the broader and more fundamental plays can be made? If you are not any of these, you are probably someone who bets on a good night’s sleep.
Mike Baghdady, SpyGlass Trading: Baghdady is the world’s foremost expert on Price Behavior and a 33-year veteran of the global financial markets, spending the tail-end of his professional career on the NYBOT trading floor until its merger with the InterContinental Exchange.
Shaun Downey, CQG and Currensee: As Chief Market Analyst at Currensee, Shaun brings his extensive knowledge of both the fundamental and technical Forex arena to provide commentary, insight and trading strategies to the Currensee trader network and the Forex industry at large.
John Forman, Thomson Reuters: Forman is a Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading. John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.
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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 member, Thomson Reuters IFR Markets analyst and frequent Forex blogger John Forman has a nice post up today at Forex Magnates called “So You Want Free Forex Stuff?” You can – and should – read the whole thing, but here are John’s main points, well worth contemplating for any purchase, Forex or otherwise:
Think like a pro
Remember that your time is an expense
Know the value of what you’re getting
What are your favorite – or least favorite – Forex purchases lately? We think we have a pretty good lineup in the Currensee marketplace, but we’d love to hear from you about the stuff you buy or get for free that’s been helpful in your 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.
The team here at Currensee towers was pleased to see John Forman from Thomson Reuters IFR Markets writing on DailyForex this morning about yesterday’s Currensee blog post by Tim Mazanec. Both wrote about volatility in the Forex market. Tim was seeking a way to find a currency pair ready to break out of a narrow range, and he looked to the Community Historical Volatility widget for some clues. John added some thoughts – and some charts – on using Bollinger Bands and Average True Range (ATR) to spot developing trades.
A look at the Historical Volatility widget for NZD/USD shows that the first support level (0.68918) and first resistance level (0.70118) are about 120 pips apart. That’s not quite so narrow as spread between the S3 and R3 levels Tim mentioned, but combined with the other volatility readings noted above, it definitely gives us something to think about.
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.
What do you think? Are the days of inverse USD-S&P relations over? Will USD bears start looking like fools with their charts on the ground? Is this a sign of hope in the US economy? As usual, only time will tell. And, if you want more John Forman, be sure to check out his blog, The Essentials of Trading, and his Currensee webinar on using our exclusive Thomson Reuters IFR Markets Widgets.
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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 one of an occasional series of guest posts by John Forman, Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading. John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.
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I mentioned the Commitment of Traders data previously in terms of its usefulness for tracking the positions market participants are carrying in the futures market (see Taking the Trader Positioning Data to the Next Level). The action in the British Pound of late provides a pretty impressive example of how you could have seen ahead of time the prospects for a big reversal were you tracking the COT figures.
Take a look at how short the big traders had gotten in BP futures.
Notice in particular the Bullish column under Large Speculators. See how as of October 13th that group was 88% short (100%-12%). That’s a massively lopsided market. When a market is so imbalanced like that it sets up for some real volatility when things start going in the other direction. We’ve seen that this week in GBP/USD.
GBP/USD rallied from about 1.5850 to almost 1.6650 in 7 trading days. That’s nearly 800 pips and a great deal of the action, especial the October 15th rocket ride, was the result of short stops being tripped. Basically, we saw a short squeeze in sterling. Had you been watching how short the big players were getting as per the COT figures you could have at least been alerted to the potential for something like this happening and strategized for it.
Currensee Social Indicators
Now the big drawback to the COT data is that it is reported only weekly as of the previous Tuesday. That means the data is several days old by the time we can view it. We had another tip-off, though. Take a look at what happened in the positioning of Currensee members.
The data at right shows the percentage of position volume held by members in long positions. Notice how they started October 13 (the same day as the COT data reported above) very long and by the end of it had gotten quite short.
In other words, the Currensee membership traded the market exactly wrong on net. October 13 was a bullish reversal day. It made a new low early then turned to finish higher. That means the members were long and wrong early, then got increasingly short as the market moved higher.
The argument against using futures data in the Forex market, and one that will naturally extend to the growing Currensee data, is how it only represents a relatively small portion of the market (the above open interest figures amount to only about 7bln GBP, which is only a fraction of the whole GBP/USD action – daily). Still, you use the tools and information available to you, and no position data should ever be ignored even if it’s just a sample. When the Currensee data on retail trader positions is added to the prior week’s COT figures showing a very short positioning among the Large Specs we have a situation where one could see things lining up for a meaningful turn higher going against the retail folks and riding short stops by the bigger players.
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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 one of an occasional series of guest posts by John Forman, Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading. John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.
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One of the complaints I hear fairly frequently about trading, especially for those who do it actively on a short-term basis, is how lonely it can be and how easily one can feel they are going it alone. Trading, after all, is in many ways a very individual pursuit for folks in the retail trading realm.
Things are different on the trading desks of banks and institutions. If you haven’t seen the trading floor of a place like Goldman Sachs then think about rows of desks with traders sitting side-by-side. They are generally grouped by market so that information and ideas can easily flow back and forth between the traders, analysts, and salespeople (the latter are responsible for customer-facing activities). Even in places that are smaller operations where there aren’t the big trading rooms, like many hedge funds, interaction and exchange between and among the various participants is built in. In other words, no trader operates in isolation.
I personally don’t work for a company which actually does trading. We instead focus on market intelligence. The bottom line, though, is that we provide the readers of our analysis and commentary with stuff which is aimed to be actionable. Even here we are set up in a trading room type of environment to facilitate information and idea exchange. I cover forex, but I’m surrounded by bond market analysts and frequently talk with them about things impacting both our markets.
Now individual traders not trading from prop shops and the like don’t have the ability to sit in a room full of other traders and have that kind of interaction. Up to this point they have been restricted to exchanges in chat rooms and on forums, but that comes with considerable drawbacks, not the least of which is the inability to know if others are legit. With the introduction of Currensee, however, forex traders now have the ability to interact with each other in a real collaborative way, knowing exactly what the others in their group are doing.
You can work together
Some folks will no doubt be thinking they don’t really want to know what others are doing or thinking. I can appreciate that view as I have long found that reading other people’s commentary muddles my own analysis. That said, however, I have also found that in some cases I have meshed really well with someone else in terms of technical trading and between us we came up with really good trading ideas.
The trick in developing a good trading collaboration is finding people who compliment your style of trading. Obviously they have to trade what you do in the timeframe you trade. Someone focused on day trading EUR/USD isn’t going to do much for someone who swing trades the JPY pairs. Beyond that, though, intermixing different ways of approaching the market can be very rewarding.
For example, you may be very good at fundamental analysis but not so great with technicals. Working with someone who has that complementary skill set could produce a very profitable relationship.
Also, some folks are fantastic market analysts. They can tell you exactly where the market is going on a consistent basis. Maybe they have a problem sticking to a trading plan, though. If they were joined with people who are very disciplined, but not so strong with finding good trading ideas they could developing a good partnership.
Plus the learning
And of course there’s the educational angle in all this. It should be obvious to everyone how much more quickly one can develop their trading abilities by watching others in action. It could be as simple as picking up a new way of trading based on Bollinger Bands or price action. Maybe it’s the placement of stops. Perhaps it’s a way of playing the market in a shorter or longer time frame. There’s always something new to learn in the markets for those looking to do so.
Think of collaborative trading as being like a school study group. You each bring something different to the table in terms of knowledge, perspective, and experience. That feeds into the learning of everyone in the group.
So don’t be shy!
Get in there and find out what trading collaboratively is all about. Take advantage of the tools and methods of interaction Currensee offers now and will be offering in the future. Make new friends and meet fellow traders from around the world. The more you do that the better your chances will be of finding someone (or several of them) with whom you can talk about the markets and trading and work together toward better trading for you both.
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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 Currensee Market Watch widget indicates how the membership of the trader network is positioned. This is both in terms of long/short as well as in the money or out of it. The further the bar goes to the left of the central line the larger the number of shorts, while the further right the other bar goes the more longs there are in that pair. When the bar is green it indicates those traders are in the money. When it’s red, the traders are underwater on their positions.
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This is one of an occasional series of guest posts by John Forman, Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and author of The Essentials of Trading. John is a 20+ year veteran of the financial markets. He holds an MBA from the University of Maryland and a BS from the University of Rhode Island, both concentrating in Finance.
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Using EUR/USD as an example, we can see in the graphic at left how there are a lot of shorts, with relatively few longs. The longs, however, are profitable at this point in time while the shorts are in losing money. This is all based on the average entry price for those trades.
Now, it’s early days yet. The number of traders included and the amount of volume covered in the Market Watch figures hasn’t reached a critical mass as yet. Once it does after the site goes live, however, this widget could provide some very interesting insights.
The most obvious analysis of this data is to use the Currensee trader bias as either a contrary or confirming indicator. Generally speaking, retail traders are not very good when it comes to being right about market direction when taken as a collective. We’ll see whether that holds true with the Currensee membership, though. Volume weighted social indicators may end up being a better confirming than contrary reading.
There’s more to it, however.
What I’m going to be very interested to see is whether the figures are going to be useful in a convergence/divergence sort of fashion, and also in a leading/lagging manner. By that I mean if there is a disagreement between the positioning of EUR/USD traders and USD/JPY vis-à-vis their dollar bias what does it mean? And which pair tends to lead the way when the market changes course? And what does the cross tell us?
Let me tell you, as a professional market analyst I spend a lot of time looking at what is going on around the pair I’m focused on at the given moment. I don’t just look at it’s price action and news events. If I did I’d miss what’s really going on. In particular, I look to see if there’s an element not in line which might tip me off that something new is about to happen. Differences in positioning among related pairs could be one of those tip offs.
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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.
The data at right shows the percentage of position volume held by members in long positions. Notice how they started October 13 (the same day as the COT data reported above) very long and by the end of it had gotten quite short.
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