Forex rebates on every trade - win or lose!

I have spent the last two months or more migrating from day trading UK CFD's over to Forex. I thought I would share my findings with the BB in the hope it might be of use to others contemplating the leap and might give more hardened forex traders food for thought..

Why did I decide on Forex ?

Well, having been caught the wrong side of unexpected news on two occasions last year with UK stocks and seen the profits from about 4 months of trading disappear within minutes I decided enough was enough. What really got to me was that the 'insiders' knew about 10 minutes before I did. All I saw was a sudden price movement which had no explanation. I could accept the fact that I was never going to be the first to hear, but come on now, 10 minutes - you have got to be joking. Fixed or what !

Forex appeared to me as being as close to the perfect market as one can get. $2 trillion or more passes through every single day. Thousands of traders are watching the same chart as I am. When I looked at the charts t/a appeared to work (in hindsight anyway).

News is usually planned in the forex markets. Unlike stocks where you can be faced with an unexpected profit warning or takeover bid, the Bank Of England is not going to raise interest rates without scheduling an announcement. Everybody knows when Bernie, Trichet (The Bore) or Greenspam is talking. Sure, you are not shielded against some sudden catastrophic event but with forex you are always long on one currency and short on another which may (depending on the pair traded) minimise a move. Subscription sites such as Trade The News will keep you up to the minute with developing news that may move the market.

24 hour trading suited me. Sure, there are quiet periods but during any of the sessions from midnight through to about 7pm there is usually some action. The idea of only 1 gap open per week certainly was an added bonus.

I also started doing some sums. It struck me that I would not have to become a wizard of a trader to make a decent living with forex.

There are only about 10 or 12 currency pairs that I would probably wish to trade so looking for a decent setup from the daily charts is a doddle. The daily range of many of the pairs is such that I if I wished I could simply stick to trading one pair, day in, day out.

It started to dawn on me that with such a vast market if I was able to become consistently profitable, managing on average to bag a very conservative number of pips per day, using the same setups on the same currency pairs then by gradually increasing the lot size over time it was possible to make an absolute fortune.

With the size of forex then 25, 100, even 1000 lot sizes are nothing. If I could consistently make a profit trading 1 lot then I could do the very same thing trading 25 or 50 lots.

Great - how to become consistently profitable though !

That's where my time has been spent the past two months. I have tried to ensure that I get the best possible chance of success. I needed the right trading platform, the right charting software, the right tuition, the right trading strategy.

My goal is to attempt to achieve consistency, banking on average 10 pips per day (200 pips per month). That is less than 10% of the average range of some of the pairs. I will start trading with 1 main lot and gradually increase this figure for every 200 pips banked.

The first thing I changed was my trading setup. I used to trade with a single desktop PC with 2 LCD monitors and a couple of old CRT's. I now run 2 desktop pc's each powering 4 LCD monitors and I also run a laptop for the trading platform and one other small application.

My main charting application, having trialled quite a few others, is ProRealTime. I have found it highly reliable and easy to code for my required chart setup. I will also be using MetaTrader 4, more of that later.

The next step was finding a decent trading platform. Well, I reckon I have trialled most of those out there that provide a demo platform and viewed the spreads offered on the remainder.

The short list was small. There were only two, IGMarkets and EFXGroup. IGMarkets have tight fixed spreads on the popular pairs and I opened an account and funded it within 30 minutes online. The platform appears ultra reliable, I have never had a problem with it and some of their constantly updated market analysis is well worth a read.

One problem though. When I spot a setup their software has often spotted it sooner. All of a sudden their 2 or 3 pip spread has widened to 5,6 pips or more as they have moved their prices ahead of the market. Sometimes they get it wrong, but more often than not the odds are stacked in their favour.

So what alternative did I have. All of the spreadbetting style platforms no doubt are the same. Well, a DukasCopy account would be nice but I am not quite in the $50,000 minimum balance league just yet.

I finally stumbled across EFX Group that run their own ECN. The trading platform takes a bit of getting use to, the spreads are variable and you pay a commission based upon $ value on each trade.

However, the prices stick very close to the those in the underlying market, the spread on EURUSD is often zero, EURJPY often less than 1 pip and spreads on pairs such as USDCAD and GBPJPY often 1 or 2 pips. I can trade at market prices or place orders directly onto the ECN trading book (direct access).

I did have connection problems the first week or two with EFXGroup but I have found that if I power up the platform first thing and keep it running all day then it is fine, no problems at all. So EFX Group is my platform of choice, IGMarkets I will use a backup system.

That was the easy bit. Then I had to work out how to make my 10 pips per day. I will exclude all of the sites, e-books (free and paid for) that I have ploughed through and concentrate on what I am actually going to use.

I was given a recommendation by another forex trader to try fxbootcamp. Having visited their site and watched a few of their videos I was impressed. Their strategy is based around 'conservative, repeatable trades'. Music to my ears !

I have been a subscriber for almost 2 months now. It is not a signal service, it is educational. Their head coach Wayne McDonell has an ego the size of Manhattan but I have learnt so much in such a short time that I fully recommend the service to anybody looking to trade forex.

Thanks to fxbootcamp I now run 3 of my monitors displaying 15 minute charts of 8 currency pairs. I have set up ProRealTime to automatically display intraday pivot and fibonacci levels on each of the pairs. Why do I do this ? You try it sometime, but make sure you include the 'M' pivots along with the normal S and R pivots. If you often wonder why a currency has suddenly halted it's move then this chart setup will more often than not give you the explanation.

The fxbootcamp trade setup revolves around an EMA cross on the 15 minute or 1 hour chart in combination with Pivot/Fib levels, Stochastics and Bollinger. The number of times I see a M1 to M3 or M2 to M4 intraday move (or vice versa) is remarkable.

Fxbootcamp now runs live 16 hours a day starting with the open of the Asian session. I shall continue with my subscription. I get to hear the major news live via them and I also get the advantage of many pairs of eyes on the market. It's not only the trading coaches that spot good setups.

This might sound like a fxbootcamp promotion, sorry, but there are two other software applications that I use which are associated with the same stable.

There is News Trade Pro which is a technical analysis database of all major US (and other majors) fundamental news releases. There's too much to explain so if you want to take a peek then visit www.wincorp.net - I think it's a really great product.

The other is AutoChartist. This scans about 12 pairs for intraday (or end of day) patterns, such as triangles, wedges, head and shoulders, channels etc. It shows emerging patterns and completed patterns with a target area for price. I now keep it running all day as it's far better at recognising these patterns than I am.

Something I have found very useful is the free email from the Secret Forex Society. For major news events this gives the consensus view and a figure each side of the consensus with associated target moves (usually on GBPUSD). This is excellent information to trade news events.

Armed with this information along with that gleaned from News Trader Pro I have formulated a news trading strategy.

When I get the live news I decide if the variation from consensus is worth a trade. If it is then I will only trade in the anticpated direction. If the initial spike confirms that direction I wait for a retrace of the initial move back to the 5 or 8 EMA on the 2 minute chart. If price looks to be hell bent on retracing further than I will switch to the 5 minute chart watching for a bounce off of the 5 or 8 EMA. I will then take a trade in the direction of the initial move with a stop at the other side of the initial 5 minute news candle.

This strategy avoids getting hit with a lousy fill and reduces the odds of getting spiked out.

Last but not least MetaTrader. If you are not already using it then you can get it free of charge from various sources. I currently use it with a FXDD demo account. There are literally thousands of indicators and hundreds of expert advisors out there, many of them free.

I have looked at dozens of indicators (I don't really favour the EA's as most of them just give a signal and I don't know why). There are a few indicators that I have found and one in particular that are worthy of mention.

An indicator called Solar Wind appears to outshine the rest of the pack when used as a leading indicator. I wish I knew the logic behind it. I am going to use this in combination with FX-Snipers_T3_CCI as a confirmation indicator. The Bagovino method from the Forex Factory is also well worth a look and I quite favour StealthForex (not free).

I have put up a web page (www.tradeseeker.co.uk/solarwind.html) with a couple of screen shots of EURUSD 5 minute charts so you can see what Solar Wind is capable of. Friday I reckon Solar Wind was just lucky with the NFP move, but take a look at where it signalled the bounce back, it was way ahead of the other indicators. I have looked at it with all time frames from 1 minute through to daily and it appears to work well on all of them.

So. my non news strategy is to use the above indicators in addition to the fxbootcamp style, conservative, repeatable trade logic to obtain my 10 pips per day. I intend to keep stops tight, 10 pips under normal market conditions (unless there is a glaringly obvious reason to exceed my limit, such as a major EMA in the vacinity). I have read the literature regarding 'death by a thousand cuts' by keeping stops too tight, but the way I see it is that if I am 10 pips down then the entry was wrong, full stop, end of story.

I see the 10 to 15 pip profit range as the danger area. Do I grab the pips and run for the hills or let it run. At 20 pips profit I will close half to bag my 10 pip target and let the remainder run with a trailing stop - I can go down the beach ;-)

What else is there. I am keeping an eye on the 'Frankfurt fade' . I am going to plough through a 100+ page e-book containing stats on the movement of currencies. The monthly figures caught my eye. When I see probability figures in the 70% to 80% range I start to get interested. Trading the Chicago Purchasing Managers Index where a select few get the figures 3 minutes before the pack is also worthy of attention.

Web sites that I have found/find extremely useful :

www.dailyfx.com
www.forexfactory.com
www.forex-tsd.com/forum.php
codebase.mql4.com/indicators
www.forexbastards.com
www.fxfisherman.com/forums/index.php
www.piptrader.com

BTW - Friday afternoon I found interesting. Bullish US news, GBP and EUR didn't fall. If good news doesn't make the Dollar rally I wonder what bad news will do ?

EURUSD really cannot stay where it is forever. Perhaps a major move is imminent !

As always, DYOR, none of this is provided as advice. I find the services and indicators mentioned above useful but they may not suit everybody.

Edit - I forgot to mention, if you are trading on a longer timescale you might like to take a look at the Fozzy 4 hour and Daily method on Forex Factory. It's fairly easy to set up on any standard charting package. Appears to give some cracking signals.

qwento - fascinating stuff. Thanks for taking the trouble to post it - most appreciated. I have not seriously concentrated on Forex, just the ocassional dabble in cable or usd/jpy, but have also moved away from the majority of stocks. I tend to focus on FTSE and Dow at the moment and have a 30 pips/day target, usually fairly easily achieved through scalping. I start a new job on Tuesday and will have no time to screen watch, having spent the last 12 months doing just that. I plan to take a more serious look at Forex over the next few weeks with a view to determining if I can trade it via limit and stop orders placed outside the 9-5 working day (actually more likely to be 7am - 7pm working day !). I will certainly be making use of the links you have provided for some background reading.

Quento, great post. I hope all the research pays off for you.
Friday afternnon's US figs were scuppered by:

Metals - Gold gains on ECB announcement, reaction to US employment data muted
AFX


LONDON (Thomson Financial) - Gold continued higher after the European Central Bank said it does not plan to sell more of its reserves of the metal before late September.

The ECB news overshadowed slight gains in the dollar following firm payrolls data. The central bank said it sold 37 tons of gold over the past two months, making total sales of 60 tons -- a figure it does not plan to increase by the year end on September 26.

The ECB announcement earlier in the session sparked a rally on gold that failed to be dented by the dollar's reaction to the US employment figures.

Everyone piled into gold and seemingly sold the dollar, despite the news. This is one of the ocassions where unscheduled news has quite an impact and skews the market. For some reason I didn't notice Big Al posting this 'snippet' on the Trader's Thread and was totally confused as to why Cable was going up when it should have been going down. It just goes to show that you have to be totally aware at all times to what news is in the market.

From a personal perspective I should have realised that something else was having an effect, but I didn't cotton on. Moral of the story - if it doesn't look right, summat else is happening, stop what you are doing until you find what you have missed.

pth

I have had a look at the logic of the Solar Winds indicator. There is not much to it, but extremely fascinating.

It would appear to be detecting changes in momentum based upon fibonacci levels calculated over a 10 period range. Which probably explains why it is such a good leading indicator.

If anybody wants to try out Solar Winds and the FX_Snipers_T3_CCI indicator you can download them from my web site (Metaquotes language files) :

Solar Winds
FX_Snipers_T3_CCI

Qwento, that's a great post. Fascinating reading and a really good insight into how you trade. It's obvious you've put a lot of work into this so to share it with us is extremely kind and generous. I've printed this out and spent all weekend reading it through.

I have stopped trading stocks altogether (although I'm still investing) and have looked at the Fx bootcamp videos myself and liked the idea of aiming for 10 pips a day. As you say, a fraction of some of the daily moves.

The Solar winds indicator seems to work really well after big moves. If you'd asked me to consider an indicator with this name I'd have rubbished it - the very name sounds too ridiculous!

Anyway, you've obviously gone into this in great depth and I've enjoyed your post. Thanks.

Appreciate your input, qwento.

Looked at bootcamp a while back - and I still look in on forexbastards, which as you know, promotes trading Forex on fundamentals (Felix trading the news and all that). This isn't dissimilar to what I used to do, which was trading breakouts - albeit trading the chart on the news ;)

Please do keep posting stuff.

Personally, I haven't traded much since cable got past 2.0130.
It's a combination of waiting to see where the market's really heading and taking a backseat until I've had a bit of surgery in a few weeks' time.
Same difference really :)

Well you sertainly nailed that inital rally to 2.0130 Choccy...

However I would be interested to hear anyones case for higher Cable ...back to 2.01 and beyond or fall to say 1.9550 area during the month of June...

I am long at the moment although not very profitably...

David, email sent. H

Test of 1.9900 for sure.. then 20 and 40 more resistance...

Qwento,

Interesting post, but I think that you're probably reading far too much into it. It's really very easy to make at least a couple of hundred pips each and every week from cable (and the other pairs for that matter) without the need to spend any money whatsoever on fancy equipment and chart setups. It's all there for free.

All you need is a bit of patience with your trades - it's far too stressful imo watching umpteen screens all the time. There's no need for it.

And everything you need to know has already been written on this thread.

Only 8000 or so posts :-)

But most of it keeps on being repeated in answer to various questions.

The repeats trim it down to about 500 posts, Seymour.

Thought I'd paste this. It's struggling to get it up, but the money has still got to be on it seeing 83.5 before 81, imo.

Well at 1.9920 its either turnback time and we will wake with it lower tomorrow am..or its $2 a charm again.

Well seems to be. Are we ready to see $2 cable again? ... and if so what will the catalyst be...any suggestions


9920-40 did indeed turn out to be a conjestion area although another go at 9950 should see us back at 2.0000. That seems an easier question than will it be a summer of over $2 or under it... 20-40 does feel more like a staging post than a destiniation....

Out of the longs now, D.

you know I still see a sprint at $2 on the cards

I may have been a bit premature. Took my signal from the 10-minute chart. I'll see what it's like in the morning now.

Must admit I had my sights set a little higher for a short, around 1.9975/80.
Never mind :)

ECB thingie tomorrow - and a close eye on 1.3560ish.

Cable does look a bit glass 1/2 empty atm but staying long unless / until the rising support line on my 8 hour chart from the start of the month is broken...

Like to give these things every chance...lol