Forex rebates on every trade - win or lose!

Hil: I see you beat the FX Fairy to it this weekend . . .

I don't know where Updata's FX data comes from, but I know a bit about feeds. It looks to me like FXCM may be conflating their feed more than Updata which will give a smoothing effect. It you look at a ComStock Forex feed it has about 600 'contributors' who all supply their price spreads for various crosses, whereas Reuters have about 2,000 contributors. This is a real headache for people who might want to display continually updating prices, particularly to a mobile device, say, with restricted bandwidth. Also, the figures can move so fast that you can't actually read them.

So, some smoothing or conflation is required to make the data usable and meaningful.

Chart sampling intervals present similar problems.

I believe this is my first post on this thread, but have been lurking for a year or so, but having struggled with this beast for all of that time, perhaps now is the time to pass on my hard earned experiences. As far as shares are concerned I admit I am not a particularly patient investor, I have lost count over the last three years, how many times I have closed positions either at a loss or small profit, only to watch with dismay as the SP has recovered or fulfilled my initial expectations. Hence my attraction to day trading Forex, substantial profits can be made in a much shorter time frame and I dont have to sit and wait for something to happen. However, this volatility has a downside, losses can (and have!) be made in a heart beat and it is easy to understand why newbies can lose their pot in a very short period. Although I have yet to master this market (I do wonder if I ever will) I have established my own rules, which hopefully will lead to some measure of success. These are in no particular order of importance, each has their own place and I appreciate you will all have your own views, either agreement or otherwise.

1. Do not even think about this market unless you understand Technical Analysis. Reading the daily papers and such like will provide general market sentiment, but clearly does not provide entry / exit points required for day trading.

2. Draw charts, establish trend lines, (up and down) and areas of support and resistance. Ensure you use Indicators (my own preferences are MAs/EMAs/MACDs). This approach will provide your entry and exit points.

3. Have faith in your chart and indicators, unless it is going badly. If this happens, you have probably got it wrong, so re-draw.

4. Currencies do trend and when they do it is easy to become complacent, it wont trend forever, be prepared for a breakout. Use longer term indicators to resolve when this may happen. If it breaks out of your trend line and you are on the wrong side, then accept, cut the position and start again. Waiting for it to come back may never happen and turn a small loss into a big loss.

5. News releases from various areas (interest changes / jobless figures / manufacturing outputs and a host more) have a significant daily impact. If you are not happy or dont know what effect news is going to have, then stay out of the market. You may miss a golden opportunity to make a quick and significant profit, but you may well avoid a similar loss. Make sure you know when news is going to be released, it is all in the public domain.

6. Just because the papers say that the dollar is going to weaken, it doesnt mean it is going to happen straight away. Use charts to plan your strategy

7. Establish exactly how much of your life savings you are willing to bet. If 20 per pip sends you into a cold sweat or is likely to wipe you out in one go, then bet a lesser amount. You may not make a fortune in a single day, but you will live to fight another day. Personally, I have found the only way to work this one out is by trial and error, but is also subject to change, dependant on what the market is doing. There will be times when all of your indicators are giving contrary information and uncertainty rules. It is probably best to do nothing when this happens, but if you must take a position then lower the risk with a smaller amount.

8. Set stops and limits, especially stops. Your chart will tell you where these should go, although it is an emotive subject. I have lost count of the amount of times I have been stopped out by just a few pips, but at the same time I dont want to suffer a bigger loss than I have to. However, I am sure that as my experience increases, I will make better judgements in future. Unless you have a very good reason (and its hard to think of one) dont move your stop. Your stop should have been set at a resistance / support level and if it goes through this level then it has probably broken out and you will only increase your loss.

9. Never, never believe that, just because it has risen (or fallen) 100 pips that it wont just keep on going. I have fallen into this trap quite a few times, believing that it JUST CANNOT go any further, and it does. Again use your charts and indicators in an attempt to determine when and where it will stop. Eventually it will and if you are trying to catch the top or bottom, this is the time to enter the market.

10. The old adage, the trend is your friend is as applicable to currencies as it is to anything else. Believing that it is about to reverse, just because you think it has gone too far too fast is courting disaster.

11. Watch the Yen and Euro carefully, both of which tend to lead sterling (although not always ho hum). Also, gold, silver, crude and the Dow Jones, make sure they are visible on your trading platform.

12. Do not become obsessed in a belief that a currency is a roaring short or long. Be prepared to change and be flexible. It is awfully hard to change your mind in accepting that something is no longer true, but whilst you fail to do so you will suffer losses.

13. Take profits when you hit your area of support or resistance. That was your target, so take it. Subsequently, it may breakout, but you can always open a new position if it does.

14. As in any form of trading / investment, the most importance discipline is discipline itself! Establish your rules ands stick to them, of course refine as experience grows, but stick to the basics.

I have to admit that part of the reason for this post is to that I am probably the worst person in the world for sticking to my own rules, but now they are in the public domain, I will have to try harder :-)

I am also sure that there are some things I have forgotten or yet to learn, but thats all part of the experience.

For what it is worth I will likely be long Cable this evening with a target tomorrow of 1.7900. Havent quite made my mind up yet where the stop will go, probably close to 1.7800, although because on this occasion it will be a CFD, perhaps 1.7750.

Good luck

pth

Hi pth, Nice to see you on here. Great post and having just started forex myself recently I can certainly empathise with many of your points.

Having spent most of the morning trying to get my head around posting a chart, here it is. I hope it looks ok.

Its a 5min candle chart of cable. It shows a distinct uptrend since the big gap up on the 17th Apr where it reached a peak of 7935. From there it formed a downtrend for the best part of the day. It finally broke out of my bearish resistance line during the evening of that same day and has since developed a new uptrend. Its currently at 7828 in the middle of my uptrend channel.

These are, of course, just my own thoughts.

Harlosh,

As MM suggests, there are several different FX data suppliers including Reuters, Bloomers, S&P Comstock and FXCM. The idea is for those suppliers to use sufficient contributors (ie the banks which provide a quotation) so as to form a smooth representative sample. Insufficient contributors will lead to the erratic action which you see on the Updata feed.

Updata suggest that their price feed comes through the LSE which also might explain the strange terminology they apply to it. It doesn't particularly bother me that they might be a few pips off a tradeable price, because I'm not looking to trade their price. It does bother me though that their P&F chart might not construct properly as it could show an excessive number of reversals which might not be there if the feed was smoother. It would be interesting to see whether or not the P&F charts looked identical using a different data feed.

bakko,

There was no gap on Monday. The FX markets were open from Sunday evening through Monday and cable rose in that time. For some reason the feed on your chart seems to have been switched off on Monday (maybe because of the UK Bank Holiday).

Here's my 1hr effort which shows a clear uptrend for the last month. It would have to break below my bullish support line of approx 7600 before a downtrend could be called.

Hilary, Thanks for pointing out the gap which would have been due to the lack of data on the bank holiday.

Heyyy and then there were three betfair boys ;)

Just a teeny suggestion Bak - although NetDania tends not to plot pre-market activity on a Sunday night, FX Power Chart does. And it's always wise to have a back-up.

So we're all long then :)

et tu, peter !!!

Hilary,

OK, I bow to the superior technical knowledge of yourself and MM re the feeds. I am a little concerned that you describe the feed as inaccurate. I may take it up with Updata and see what they have to say. Personally I have never had a problem with it or the P&F charts but maybe it's a case of ignorance is bliss.

I am still pursuing the disappearing chart issue. I presume your trial finishes this week and you won't be subscribing by the sound of it but I don't know whether I will have an answer before then.

H,

I don't think it's so much a case of the data being inaccurate, rather than the vast majority of the market looking at something different and that could prove costly.

Earlier I was watching the O's and X's form this morning on the 1 minute Updata P&F chart and comparing it to both FX Powerchart (FXCM feed) and FXTrek Intellichart (S&P Comstock feed). The latter two charts were both coming down smoothly and the P&F chart was forming a column of red O's. Suddenly the P&F data spiked up by around 6 pips and prompted a column of blue X's to print while the other two charts didn't show this upwards spike and continued their downward path. A minute later, the P&F chart resumed the down move and started a fresh column of red O's. The effect of this was to introduce two columns unnecessarily into the P&F chart and thereby push the price action closer towards the trend line.

I don't know how often similar events occur, but it strikes me that if it happens a lot, then it will break the trend line before it really should. This could cause whipsaws as I mentioned last week.

As for some data feeds relying on 600 or even 2,000 contributors, I suspect that the likes of Reuters, Bloomers and FXCM only use around a dozen or so of the major contributors within their feed and ignore the rest. I've no way of proving this of course, but as the spot FX market is effectively controlled by around 16 banks, I don't see the significance of relying on data provided by all of the "hangers on". In the case of Updata, I suspect that you count the contributors to their price feed on the fingers of one hand which would explain the roughness of it.

You're also correct in that my Updata trial expires this week. I might ask for an extension or I might simply register under a different name. I shalln't be around very much for a month or so starting next week, however, as I have other commitments, so I might simply leave it for now and come back to it in a few weeks time.

I downloaded the trial with a completely open mind as I didn't really understand it and wanted to find what it was all about. I can certainly see why people think so highly of it, although I'm still not sure that I'd pay for it. I'd really like to compare the charts from a different feed first.

Hilary,

I tend to use the 1 box 1 min chart to time my entry but then change to a slightly longer time frame and box size to follow the trend. The 1 min charts are too sensitive I find and will take you out of a trade uneccessarily.

H,

I've no idea whether I've been doing it right or wrong, but I've been using a half pip to a box with a 3 box reversal and the trend has been tending to hold for quite long periods.

My observations so far are:

Wednesday (when I guess I started to look at it properly) and Thursday last week, the trend held pretty much all day long. Friday was a day of whipsaws although I suspected that would be the case from the outset when my 1 hour MACD was rising but my MA's were still falling. Nonetheless, Friday still had its moments. Today the trend has held since before 7am although it looks like it's starting to come under a bit of pressure now.

On that basis there's certainly some merit in it.

Hilary, are you aware of the + and - figures in the bottom right hand side of your chart?

CMC have reduced their spread on EUR/USD to 2 pips.

H,

Yes, I'm aware of them although I need to get my magnifying glass out to see them.

:o)

Incidentally, what does it mean when it quotes a price and then says CRR: 0.9 or similar? I haven't downloaded the help files or bought the book yet.

Hilary, CRR means current risk reward. I wouldn't use them on small charts though. The chart can change very quickly.

Strange that you think the + and - are very small. But you can increase and decrease the box size with them.

H,

It's more likely just a case that I need some new glasses. Either that or I need to cut back on my daily intake of Chablis by a bottle or two.

:o)

Hilary :-))

Just watched and traded Cable all the way down hugging the bearish resistance line on the 1 min chart and being contained by the line too. Fantastic.

Alongside you, H, although I still think that the half pip box size works slightly better as the price action seems to be currently contained a way off the trend line and is in little danger of giving a false break.

Long at 1.7863 from it around 7:30 this morning, reversed at 1.898 and still going.

MM,

How difficult or easy would it be to take the raw data feed from Reuters or Bloomers or whoever and create a P&F chart from it in Excel? Or could you do anything from it?

I've taken a screenshot of the P&F chart that I've been working to today, but I can't seem to upload to my web server at the moment. I think there's a problem with the firewall blocking the required port.

If either IanT or Derek are lurking, could I mail it across to you please for you to upload and link to? TIA.