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We're super excited to be hosting another Webinar, this time featuring Trade Leader Spencer Beezley along with Bill Schneider and Licheng Cai of Currensee.  It's this Sunday, September 22, at 7:00pm New York time (that's 4pm in California and 9am in Sydney)

Currensee's Trade Leader Spencer Beezley and Licheng Cai, Currensee Trade Leader Selection and Due Diligence Manager will discuss Spencer's common sense approach to Forex Trading and why he was selected and chose to join the Currensee Trade Leaders Investment Program. Currently Investors can follow two of Spencer's strategies, TCM and Harbor FX. Bill Schneider, Global Institutional Sales Manager will provide a quick overview of the Currensee Trade Leaders Investment Program.

What you’ll learn by joining us:

  • Insight into Forex trading from a professional money manager
  • How to manage risk
  • The four steps to building and managing a Forex Portfolio

Upon completion of the webinar, we hope we have aided you in deducing if Forex is right for you and key things you should consider before making an investment on your own or with Currensee.  We hope you can join us, please register now!

Based on its strong natural resources, Argentina should, in theory, be a gold mine for investors. With arguably the third-largest shale gas reserves in the world, the Argentinean economy is only one close step behind Brazil for the top spot in South America.

So why did today an analyst quote in a NASDAQ article that on a one to 10 rating for investors, 10 being the riskiest, he would give Argentina a nine? This statement addresses one of the biggest problems with investing in an emerging market: its governance.

Argentinean president Cristina Fernandez has enacted policies that have made foreign investing in this country an uncomfortably volatile thing. Dissonance amongst varying economic growth predictions has raised suspicion of a government that could very well be laced with corruption and in potential need of reform.

In fact, it could also be possible that the Argentinean government is evading Western investment altogether, seen in their nationalization of YPF (Treasury Petroleum Fields). This move sent the only Argentina ETF down over 20 percent since mid-April (NASDAQ) and demonstrated government hostility to the free market principals.

MSCI, an investment tool and index firm, is considering the removal of Argentina from its Frontier Markets index due to the government’s aversions. What’s further unsettling is that due to their richness in mineral resources, the country hosts a few popular stocks, such as Pan American Silver and Yamana Gold. With their removal from this MSCI index, further pressure could be placed on these stocks, as well as their ETF.

Their tempting potential continues to make emerging markets alluring to investors. Its unfortunate that this potential is often overshadowed by less than stable governance, making increasing the chance of risk for investors over that of return. Do these factors make investing in emerging markets more speculation than investment?

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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.

One of Currensee’s newest Trade Leaders, Adantia leads with a smart strategy that puts risk management first. Adantia’s strategy stems from their strong background in software development and is evident in their fully automated trading approach. Their founding team has over 20 years of experience in the software industry, and this is one of the company's core strengths and differentiators.  Their original model was built in 2008, and has seen a wide variety of market conditions since it started to be used for live trading.

The risk management strategy that Adantia has designed is the foundation for their actual trading strategy. They run four versions of the strategy, each with its own defined limitations along three risk measures considering account-wide loss, per position loss, and percentage of margin exposed.  A breach of any of these measures results in closing out of positions.
Adantia Trade Leader
Adantia has built their strategy on the core belief that financial markets are driven by a herd-like dynamic, due to the current-day fluid availability of market information and the balance of traders using similar indicators to respond to the information. After defining the risk measures appropriate to the strategy, Adantia's team built a mathematical model that was focused on maximizing returns within the constraints of the risk management strategy.  Stop-losses and take-profits are calculated based on the current conditions, using a capital-rationing algorithm that is different from the more typical pips-based approaches.

It’s important to point out that 100% of Adantia’s strategy and trading are automated - the software makes all decisions, there are no decisions made by humans.  There have been times in the past where the temptation was certainly present, but the decision to rely on the model has been proven time and time again in the team's experience.

Recently, BarclayHedge ranked Adantia #1 currency trader managing under $10 million and Future’s Magazine listed them as a “Hot New CTA.” A live webinar with Adantia was also recorded to showcase their commitment to risk management and consistent, long-term returns. Adantia’s model also works exceptionally well during times of increased volatility, which seems to be the new norm in today’s market.

Currensee welcomes Adantia to our program.

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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.

I had a chat with a reporter from Smart Money the other day. She wanted to know what kind of impact the big move in EUR/USD on Wednesday following the announcement of improved dollar swap line terms would have had on forex market participants. It was a pretty easy question to answer. After all, a 200+ pip move in either direction is always going to catch half the market in a bad spot. The speed of the appreciation in EUR/USD (and other markets) in and of itself is evidence that a lot of standing orders (stops) were tripped to accelerate things along.

Of course that brings up the subject of risk management.

No matter whether you're an investor or a trader, the current market situation is a challenging one. The market is hyper-responsive to news, especially news that has to do with the Euro Zone.

Witness Monday's market reaction to word that S&P was going to put the EZ countries on negative credit watch. Was that really a significant market development? No. Just as the swap line news from last week wasn't something that altered the fundamental economic and political landscape in Europe. Nor was it something that represented a meaningful change in dollar or euro supply/demand considerations. All it did was ensure that a worst case scenario of a major bank failure due to lack of dollar funding wouldn't happen. That's why there was no follow-through.

 

 

Too often, the headlines we're seeing these days serve as reasons for short-term traders to pile in and out of positions, creating lots of volatility. This needs to be accounted for by participants at every level of involvement.

While it's true that the forex market isn't any more risky than any other market, and is less so than most, it can still hurt you badly if you aren't careful about your exposure. The EUR/USD move on the swap line news was close to 2%. A trader using 50:1 leverage would have been completely wiped out by that if he didn't have protection against that kind of move. Even a position half that size would have seen an account lose 50% of its value in less than an hour.

Whether it's through hedging in some fashion or trading smaller positions (potentially with wider stops), forex market participants these days need to guard against the market's volatility. With volumes likely to drop as we head deeper into the holiday season, the potential for rapid directional moves will only tend to increase in the weeks to come.

 

The other day I wrote about some ideas on trading risk management on my blog, starting a discussion on a couple of subjects. One of those was the idea of increasing risk during periods when you're trading well and cutting it during the rough times. I thought I'd take some time to expand on that discussion here, and maybe get a conversation going on the subject.

The idea of ratcheting up your risk taking when things are going well is something George Soros recommended, which Stanley Druckenmiller talked about in the section on him in The New Market Wizards book. It think it was more in terms of adding to positions where your analysis and trading idea was being proven correct more than just getting more aggressive during a sustained period of good performance, but the ideas are essentially the same. When you're on, go after bigger gains.

On the plus side…

I think it's safe to say that all of us would love to be trading our biggest (relative to our accounts, not just in nominal terms) when things are going best. That, after all, allows for maximizing the returns we make during those periods. Sounds good, doesn't it?

When I think about a strategy like this, though, my first thought is often "Won't you end up taking an outsized loss when your run turns?" After all, if you're taking twice as much risk as you normally do, you've obviously got the potential for losing twice as much when the inevitable reversal of fortune happens. It then becomes a question of whether the excess gains up to that point that are presumably made by being more aggressive offset the larger loss suffered. That's something which each trader needs to evaluate in terms of their own system or methodology.

And on the negative side…

On the flip side, the other part of this idea is that one should cut back during the bad periods. A lot of traders use fixed risk percentages, which means they necessarily reduce their trading size as they suffer losses. This is not the same thing, though. That's trading with the same amount of risk. If you're cutting your risk as your performance suffers you're actually reducing your risk percentage, meaning you cut your position size more rapidly than if you stuck to a fixed risk percentage.

The advantage to this sliding risk is that you will lose less on the way down, but the disadvantage is that you'll also make less on the rebound when things start working for you again. As with increasing risk in the good times, whether decreasing risk during the bad times works well depends on whether the reduction in losses more than offsets the reduced gains when things do swing back in the other direction.

There's also a psychological aspect here. Oftentimes traders who take losses, or who go through rough patches, try to make it all back in a trade or two, or get caught up in revenge trading. Following a plan of reducing risk when going through these periods is a way to avoid making matters much, much worse during spells where emotional trading can really wreak havoc on a portfolio.

It comes down to testing
As with most aspects of trading, testing is really required to determine the efficacy of variable risk. This is easier to do with more mechanical systems where there's no real question of having to try to replicate the trader's ability to pick trades themselves. For discretionary traders it's more of a challenge. My suggestion would be to perhaps run the variable risk approach in a demo account, or at least in a trading journal, to see how it would impact your overall performance.

If you’re anything like me, you like to be in control. Maybe it’s my type A personality. Maybe it’s because I'm a middle child. Maybe it's my background in finance. But, I like to be in control – especially when it comes to my investments. The challenge with many of the financial instruments we invest in, such as mutual funds, ETFs, managed accounts and hedge funds, is that we have to hand over complete control to someone else – a money manager, a portfolio manager – someone else calls all the shots.

Well, I’m happy to tell you about a pretty cool new feature set that we’re releasing to investors in the Trade Leaders program. As you probably know, the Trade Leaders program is different because it’s built to help investors achieve success and profitability in the foreign exchange market – all while giving them complete transparency and control. Here’s the scoop on the new feature set we call “Advanced Controls.”

Today, investors in the program have the ability to control their Trade Leaders portfolio by easily changing, deleting and modifying allocations by Trade Leader. So, at any time if an investor decides they don’t want to follow a particular Trade Leader, they can end the relationship and we automatically close any positions that Trade Leader had open for the investor. Likewise, if an investor wanted to change an allocation in a particular Trade Leader, say, from 30% to 50%, they can do that as well in the click of a button.

The Advanced Controls features take allocation to another level and give the investor the ability to control leverage and drawdown. Don’t want to bother with adjusting these levers? No worries. You don’t have to make any changes. These controls are for those active investors looking for more of a hands-on experience and for fund managers and asset managers who have specific drawdown limitations and leverage caps in their strategy or investment policy guidelines.

What can you do with the new Advanced Controls features?  So glad you asked.

  • Think a Trade Leader has tight risk controls and want to set your Drawdown Protection to something other than 30%? You will now have the ability to set Drawdown Protection by Trade Leader. Now you can decide how much risk you are willing to tolerate and can set this control anywhere between a 1% and 90% limit on draw downs.
  • Concerned about the maximum level of drawdown that can happen across your entire account? You can see the Account Level Drawdown Protection, calculated based on Leader by Leader Protection and unallocated capital.  This feature shows the maximum drawdown that the account could realize. It takes into account any unallocated capital and is based on the overall account balance.
  • Decided that you would like to invest in a Trade Leader but want to scale down on risk? You will be able to set a Leverage Multiplier on a Trade Leader, which allows Investors to reduce the amount of risk on an individual investment.  The Leverage Multiplier may be set to take any level between 10% and 100% of the Trade Leader’s leverage; a 50% multiplier will give you half of the Trade Leader's leverage level on each trade.
  • Worried about over-leveraging and want to limit the leverage that may be taken by your account at any given time? You will have the ability to set a Leverage Cap on the account of up to 5000% (50:1 leverage).  Trades which would put you over this leverage amount will not be taken, but you will start trading again once your leverage is reduced beneath this level.

Many of these controls are customizable per Trade Leader you follow. So, for each Trade Leader in your portfolio, you can set a variety of leverage and drawdown controls based on your appetite for risk. Once again, if you don’t want to set them, you can simply use the pre-set values we’ve determined for you based on the Trade Leader’s strategy and risk management profile.

We’d love to hear from you as you start to use some of these nifty new controls. How is it improving your Trade Leaders experience?

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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.

I came across a post on Baby Pips recently that I think does a great job of showing how sometimes a little more education and a different perspective on things can go a long way in our development as market participants. The poster in question had been trading for some time, but just finished going through a financial advisory training course. Now many financial advisors are little more than sales people. In this particular case, however, the particular course in question seems to have made this trader see the light in regards to his own trading. Here's some of what he shared.

Through my training and education, I’ve learned quite a bit a lot on risk management. Knowing what I know now, would have put me at an incredible advantage in this forex marketplace. I was far too aggressive in trading, as are many of you, and despite any warning from anyone you will continue to be so.

He's hit here on the reason so many new traders – and even quite a few no-so-new ones – crash and burn. Time and time again you hear from those who survive in the business that it was their discovery of proper risk control that finally put them on the right path. I talked about it recently in terms of leverage. No doubt I'll talk about it many, many more times in the future because the poster is right. It very often takes getting severely burned by risk to finally appreciate it.

My trading should have far more balanced. Taking conservative long term approaches with a large portion of my investment, while using a small portion of my investment to take a couple cracks at a home run.

This speaks a bit more toward one's overall investment approach than directly to trading, but it's an important point nonetheless. Remember that you need to Compare Your Trading to Your Alternatives.

I was afraid to take loses. I hated them a lot. Now I understand that it’s purely a numbers game. And if one can eliminate the emotions from the numbers, they would realize that a losing trade is one step closer to a winning trade, provided that they actually have an edge in the market place.

This is a really big one. The fear of losing money underlies a lot of foolishness in trading, like so-called "hedging" when a trade goes against us. The reality of the situation is that you can do very well with a relatively low win rate. And on the flip side, a high win rate does not guarantee results. For example, I saw figures on a group of retail traders indicating that 60% of their trades were profitable, but they were net losers. In other words, winning ain't all it's cracked up to be.

Scalping is stupid. It’s far too costly in relation to the amount of spread paid vs. the amount invested into the market.

Scalping is one of those approaches to trading which begs the question of return on invested effort. Is it worth the time? Also, is it mainly about the action? I've never been a scalper, though, so I'll leave it to others to answer those questions.

Most systems are profitable. However, they are over traded and dominated by fear and greed. Most traders will take a swing at anything that looks good. However, patience is far more important in this industry. Waiting for a high probable pattern is far better than taking a swing at 5 marginal patterns.

Can't argue with this. New traders tend to latch on to anything shiny and new that looks like it might be the holy grail, then dump it as soon as they realize it won't fulfill their dreams of limitless wealth.

You won’t get rich quick. For every story you hear of a guy that turned millions fast, it was either because he was extremely lucky, or that he was a liar. Your 100 bucks won’t make you 20,000 in a year. Sorry. But keep trying if you like. People can only win the Powerball lottery by buying a ticket. Just know that it’s luck you’re hoping for, and not skill and knowledge to dominate the market.

No comment required.

Overall, I was initially a losing trader that eventually learned to turn profits, however, I believe that perhaps those profits may have been short lived based on the fact that I still allowed my emotions to manipulate my trading and I was thinking short term and not long term. And I traded way too many pairs. Master one. Move on and then master another. I had no patience for any of that. I would rather take an entire year to master one pair before moving on to the next.

The short-term view is so prevalent in trading. Too few take a long-term view of their trading. If they did they probably wouldn't be nearly so stressed out and deadest on making millions this week, and by extension wouldn't be taking way too much risk and nearly ensuring their failure.

I’m humored by the fact that I once considered myself an extremely conservative trader, when I know see myself as wild and aggressive.

That might be a bit of hyperbole, but it makes the point. The idea of risk management is harped on over and over and over. Perhaps that's the problem. Maybe new traders hear it too often and become numb to it. Or maybe it's a lack of specificity or impact. Either way, it's up to those of us who seek to be educators to find away to make clear the importance of risky trading.

I came across this blog post and apparently there are trade training programs out there targeting successful online poker players. The main assumption is that playing poker is all about risk management and money management. You never have the certainty that you have a better hand, but with proper money management and risk management you can decide on the better move to play.

It sure seems like trading is providing similar qualities as gambling: “It's easy to participate, difficult to sustain success. Many just play for the thrills of winning and losing; relatively few systematically learn from experience and build skills over time,” or at least according to Brett Steenbarger.

All of this makes perfect sense when I see the success that eToro, a gambling site for Forex traders, is giving traders the thrill they want and the ability to easily participate in the Forex arena.

The big question I have is while there are so many people trying to make a living from trading, is treating trading as gambling the right approach? What do you think?

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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.