Fx Money Management and The Investor Mentality

I trade pennies .02-05. I stay out of trouble that way most of the time. So while some may trend like crazy for a while others are taking some profits along the way. I trade so I can go 1000 pips in the hole but I have never gone that far. My profits are by percentage of the account I am doing. I try for 20% a month, 5% a week, which investment wise is a phenomenal return. If you are going for more than that you will eventually run into margin trouble. So if I have a 500 dollar account, 80-120 bucks a month is about normal. If I try for more than that, sooner or later I will run into serious trouble. The last 10 days of August were a wash, in fact I lost some money during that time. The first week of Sept. was decent and now I am sitting on some interesting trades but nothing seriously effecting my account. I still have less than 15% of my account committed so I have plenty of room to maneuver. That is really the key being able to maneuver when difficult trades come. I managed to wiggle out of the Eur/Aud trade which I am talking about in the 4H system section. I will write about it in the morning there. Think small, grow slow, give yourself some room to trade. Think like a long term investor. If you have a 1000 dollars and can grow it about 100 dollars a month you double your money in a years time. That is not a bad investment. If you have 10,000 ……… well you can do the math.

You really have to discipline yourself into thinking that forex trading is like investing not an income. I give my money to a bank and get 2-4%, other companies like insurance or investment firms 3-7%, there are bonds, treasury bills, etc. The stock market maybe 7-20% a year. My IRA doubles about every 5-7 years except this last year and then loses it all in 3 months. If you conservitively trade the Forex you can easily do better than other investments. The problem is we are drilled with all the hype, “trade the eur easily, double your money every month, make a 1,000,000 in 24 months, etc.” It is a war out there. Subconsciously we accept their arguement that we can make an income off of the Forex. I have come to the conclusion that I should treat it more like a long term investment. Grow slowly and keep my account out of trouble. YOU WILL NOT BECOME A SUCCESS until you accept that some trades are just going to lose. The day you can accept that 5% or 10% loss instead of praying and hoping it will turn around AND accept a small percentage gain every week or month, you can become successful. Just some thoughts. In other words, your not going to make an income on 1000 or 2000 dollars, to do that you will need 10,000 or 100,000. So tone down your expectations. Like I wrote last year, if I can make enough money to pay for my plane tickets to travel around the world, I would be very happy. Maybe some day I will be good enough to trade 25,000 dollars and make a modest living off of this but I am willing to wait to get that good. Worked too hard all my life to give my money up to a broker. Oh yes, I do think I am getting close to that point.

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How To Set Up a Corporation For Your Forex Business

Incorporation has many advantages for traders who want to grow their
wealth by reinvesting profits and deducting trading expenses with a
firm conviction that there is tax law standing behind a corporation
that is not available to someone trying to trade as a “trader in
securities”. For some traders, this is the perfect tax-efficient way
to use a combination of a corporation and an LLC or Limited
Partnership to both receive money to live on while maximizing the
amount of deductions including “perks” that the closely held
corporation can maintain.

The C corporation in this combined entity structure operates as the
management company, its business purpose is to manage the trading
business; paying the bills, entering into agreements for itself and
the LLC, and making all of the trades through the LLC, which acts as
the trading company and owner of the securities traded by the
corporation. You and your family members hold the C Corporation’s
stock; the LLC is a partnership that includes you, your family members
and the C Corporation. Generally the corporation will act as the LLC
manager, or the Limited Partnership General Partner.

In this arrangement, most of the expenses are paid through the C
Corporation, while the LLC is used strictly for holding the brokerage
account. Because the C corporation manages the LLC’s trading activity,
the only expenses incurred by the LLC are commissions, margin and
management expenses.

You and your family, as LLC members, may take distributions from the
LLC instead of salary, and thus avoid payroll taxes. Because an LLC is
a flow-through entity, you’ll only pay income taxes on the profit
generated by the LLC.

Here’s another savings: because the C corporation manages your trading
and deducts all trading expenses, including the medical expenses for
the corporate officers from its management income, before taxes are
calculated for the corporation these deductions are netted out. At
that point, the corporation’s profit will be taxed at the lower
corporate rate, currently 15 % for the first $50,000 in income.

If you elect to leave retained earnings in the corporation there is a
dilemma. How to get the money out. You have two choices, payroll on
which income tax and payroll tax would be owed. The other would be
through issuing a dividend.

The dividend recipients would be taxed on the dividend amount that
they received. Dividends have a cap of 15% federal income tax with no
payroll tax on them at this time, and therefore can be an inexpensive
way for many traders to get their money our of the corporation.

Of course, you’ll still enjoy the full benefits of a C corporation,
including personal asset protection, fully deductible fringe benefits,
and clear corporate tax laws.

Is a combined C corporation/LLC entity right for you? It may be if you
want to use a legal entity for trading, take money out of your
business without paying payroll taxes, and make fewer than 200 trades
per year. Consult our experienced Traders Accounting tax professionals
to see which entity structures are best for your business.

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FX Account Management

I really, really recommend you withdraw your original funds out so you are playing with free money. I also withdraw money regularly so I actually have made real money. :) You have not made any money until the check clears the bank and you can actually spend the funds. That is the real reward. Some guys have built their accounts in the past only to have a freak spike, news, broker gone bust, etc. in the forex and take most of their profits and original capital. Reward yourself and enjoy the money you made. The safest place for your money is your own bank account. Glad you are doing well. Once I transfer the money to another account and I have made money, I transfer the money back to the 3rd account and keep it well funded. I do trade that account but with very small lots so I never have to worry about seriously damaging it.

Another thing I do is I have 3 accounts with IBFX. I trade two accounts heavily and have a third as a buffer in case I need to transfer funds form one account to another. I put some of my winnings into that 3rd account so if I ever blow up one account instead of taking funds out of my bank I just transfer some of my 3rd account funds back into the blown or damaged account. I started this last year and now I dont add to my account at IBFX I only transfer. There is something good about only asking for checks and never giving my broker more money from my bank accounts. This has worked out very well for me.

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OrderSend Error 131 – MT4 expert advisors

OrderSend Error 131 is a very popular problem that is usually encountered when testing MT4 expert advisors. What causes this error? It’s called ERR_INVALID_TRADE_VOLUME in the MT4 code. That means that your expert advisor is trying to send an order with invalid trade volume. On the absolute majority of the MT4 brokers setting some EA to open an order 0.123 lots will generate this error. But sometimes it’s generated when the EA, created for mini or micro accounts, is used on the standard account. If you stumble on OrderSend Error 131 during your testing, you can quickly find out the wrong settings of your EA — find the standard init() function inside your EA’s code and insert these lines of code there:

Print(MarketInfo(Symbol(),MODE_LOTSIZE));
Print(MarketInfo(Symbol(),MODE_MINLOT));
Print(MarketInfo(Symbol(),MODE_LOTSTEP));
Print(MarketInfo(Symbol(),MODE_MAXLOT));

The first line will give you the information regarding how many units one lot holds when you trade in this account (100000 would mean a standard-sized lot). Remember, that in your expert advisor’s log this line will be first starting from down to up, not vice versa. The second line will tell you the minimum amount of lots you can trade (this is the most usual error; you’ll probably just need to fix the amount of lots your EA trades from 0.1 to 1). The third one will give the minimum step for the trade volume in lots. The fourth line will tell you the maximum amount of lots that your EA can trade.

For example, demo account at FXOpen generates this info when I insert those lines into the code:

2008.07.10 15:13:37 MACD Sample EURUSD,H1: 10000
2008.07.10 15:13:37 MACD Sample EURUSD,H1: 0.01
2008.07.10 15:13:37 MACD Sample EURUSD,H1: 0.01
2008.07.10 15:13:37 MACD Sample EURUSD,H1: 100000

That means that 1 lot is 100,000 units (a standard size), minimum trade volume is 0.01 lot (so, one can trade starting from $10 on 1 position in a dollar-based currency pair), minimum trade volume step is also 0.01 lot (one can trade 0.33, 0.4 or 1.25 lot volumes, but can’t send orders with 0.333 lot size) and the maximum volume one can use to open a position is 10,000 lots.

You can incorporate the MarketInfo() function at a more complex level into your EA, so it could automatically check the allowed values and correct its settings. But if you don’t want to code much, you can just use the code above to find out the right values and correct the settings manually.

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How to Test EAs on a Live Demo Account

I have a test account running all pairs with a 21 day ATR of greater than 200 pips.

All of them are running the daily chart. That one seems to have the steadiest and most reasonable range, so I’ll stick with it.

For now, it looks like GBPJPY is the best, so I’m trading that. I think that the 40 pip stop loss/move to breakeven is optimal for this currency, I’m still trying to find better values. If you’d like to help morse, here’s what I need you to do, everyone else can pitch in too, the EA is attached somewhere on this thread, it should be working well.

  1. Open a 10 million dollar demo account.
  2. Pick whatever currency pair is your favorite pair.
  3. Open up as many daily charts as possible, and place the EA on each of them.
  4. Track the profit/loss of each EA (in pips) on each individual chart and optimize the stoploss/max trades/etc until you reach the highest profitability.

The whole point is to forward-test this strategy to death. If we all have google, we can collaborate using google spreadsheets to collect data, so I can use that to find a formula that will work to determine lot size, stoploss, max trades, etc.

I’m purely a quantitative trader, which simply means I look for mathematical relationships in the market. The news doesn’t matter too much. (Unless the market for the pair is closed xD). This system is partially based off ATR and if I can derive a formula to easily determine the optimal stoploss for each pair, then it should be fairly easier to make money. Think of this more as an open source project. I’m sure we can use the collaborative efforts of the members of this forum to help optimize this strategy.

Leverage

Leverage determines profitability. As many experienced traders will tell you, higher leverage equates to higher chance of blowing up. I don’t understand the reasoning behind that, but hey, I’m no experienced trader. As I see it, higher leverage means higher potential returns which means relatively easy short-term money, but certainly not consistent livable profit.

I set up the leverage at 500:1 so that I can play with the minimum amount and still trade with moderate lots. At 500:1 leverage with my very conservative system, (.1 lots per trade on a $1000 account), I can expect a daily 9% return on investment assuming 100 pips closed profit per day.

With a 400:1 leverage account, I would expect 7.2% per day return on investment,

and 1.8% per day with 100:1 leverage all assuming 100 pips net profit per day./

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Forex Trading Styles: EA for Different Market Conditions

In my trading, I have 37 different systems working for me, 34 of them through EAs.

The EAs are categorized into 6 different trading styles:

  1. Trending
  2. Ranging
  3. Breakout
  4. News
  5. Counter Trending
  6. Scalping

I turn groups of EAs on and off as I see fit.

I use them all.

They each enter a major trend at different points and using the systems collectively, helps compound my gains with minimal risk.

My trading strategy involves turning EAs on and off based on how I perceive the market. I’m trying to remove me from the equation and come up with a mathematical way to determine trending/ranging. The ultimate goal I see for myself in forex is to have a super EA of sorts which combines the entry and exit strategies of the 37 systems I trade. And turn systems on and off based on whether or not the market is trending or ranging.

Will it be perfect? No, I doubt it, but as I see it, it just brings me one step closer to automating my trading. Do I ever expect to fully automate my trading? No. But I figure I can automate it enough where I don’t have to be analyzing the market every 5 minutes. Once an hour would be nice.

RR

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MT4 Expert Advisor: Auslanco EA

here’s the same old Auslanco EA (first introduced by Godfreyh) with few things added and some bugs fixed.
Last edited by Obaidah,  Jan  2009

Added:
1. Divergence filter

2. Max bar length allowed based on calculating the average moves for the currenct season for the last x days but we have allowed the user to choose the deviation like max = average*deviation, so if diviation is 2 then the max length is twice as the average.

3. we have added automated-optimization for QQE and GanHiLo parameters so that the parameters are changed according to the market conditions.

in order to set up the automated-optimization you must do the following steps:

1. “copy” the terminal folder that includes the compiled EA to another location on your drive, and then run your “original” terminal, click on expert properties and set the settings as listen in the attached picture.

2. from expert properties check the variables to be optimized with their intervals and save the file in name QQE.set in your original terminal folder

3. do the pre-optimization once and calculate the time needed for optimization to enter it in the settings.

for further information see Automated Optimization of a MT4 Trading Robot in Real Trading

fixed:

1. at least one type of lot size types must be chosen
2. if money management is true then ignore manual lot size.
3. the last peark/bottom price-bar and last peak/bottom of indicator can be different (in case there was a divergence in the last peak, specially when using long periods)

this is all i can think of, due to depending on lagging indicator, it just keeps failing in traps or false spikes, so “in case” there’s a further development it will be on volume and spread.

Comment: automated optimization will not function while using pre-optimization (normal optimization) or while backtesting, it will only function when using it live on real or demo account. hence the attached picture represents the results without automated-optimization.
Click image for larger version  Name:1.JPG Views:14 Size:158.5 KB ID:188206
Click image for larger version  Name:2.JPG Views:9 Size:164.4 KB ID:188207
Click image for larger version  Name:3.JPG Views:15 Size:152.0 KB ID:188208
COMMENT: please remember that EA is adjusted according to historical data and does NOT guarantee success in any way, demo that EA in case you’re planning on taking advantage of it, and remember that any trade taken by that EA might be a loosing one..

Attached Files

File Type: mq4 Auslanco.mq4

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Best FX Trading Strategy: Manage Your Exit Point

I suggest you do this:

  1. Toss a coin, heads long, tails short
  2. Manage the trade and exit when you see fit.
  3. Go back to step 1.

The point is to get you more chart time. Because philosophy is great, but actual chart time is better =P

As for EAs clouding my vision, it actually does the opposite. I’m not spending time poring over charts looking for mechanical signals. I am able to focus on the chart looking for possible reversals, s/r etc.

Since we’re on philosophy, consider this:

Most trading systems take advantage of consistent, repeated, inefficiencies in the market. Example, if price moves 40 pips away from the 5SMA, there is a 80% chance the price will retrace 10 pips. Thus a trading system could be programmed to take advantage of that.

That’s what I’m talking about. Repeated and consistent inefficiencies. It’s nice to think that greed and fear make the market random, and that’s just not the case. Market has patterns. Not the easiest to predict, but they have pattern nonetheless.

RR

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Do Expert Advisor (EA) Work? (MT4 Autotrating)

Profitable set-and-forget EAs are very rare, but they do exist. They won’t make you millions of pips overnight, but frankly, I’ll take any amount of effortless pips. The trick here is effortless. I would rather have a 100% chance of 1 pip than a 50% chance of 1000 pips. If there is a guaranteed win every time, I can ignore moneymanagement.

That does not mean however that there are not other uses for EAs. The system is clearly defined. Ptournis has explained it clearly. The trading system is well defined as it is. The problem is that this system works best in markets which aren’t choppy. This system works best in moderate swing-type trending where a move lasts 20-30 bars before reversing 20-30 bars in the other direction. With that in mind, what do I do? I turn on the EA when I see a market moving in that way. Using an EA for this system allows me to focus more on the market than the system.

I trade with 37 distinct systems in 6 different categories. Do you really think I would be able to do any amount of that manually? No. I definitely cannot. 34 of those systems are coded into EAs. Those EAs are very capable of running completely on their own, but I don’t let them, because they are designed specifically to take advantage of a particular market. I wouldn’t run a trending EA in a ranging market, just the same as I wouldn’t run a scalping EA during news time. The EAs know exactly what a setup looks like, and will use the criteria I programmed them for to find the entry points. Sometimes, the market changes, and that’s when I intervene, close the trades, and turn one group of EAs off and another group on.

The bottom line is: EAs work. But not in the way the vast majority expects them to.

RR

————-

I see from your post that you are not using these Ea’s without judgment and that judgment is as you say, you decide when the market is ranging or trending. If you decide it is ranging, you will use A EA or if you decide it is trending you will use B EA. That is fine but,ultimately you decide when the market is ranging or trending. So, if you decide it is trending, you may just as well jump on the trend until you deem the trend has changed. So, what is the need for an EA if you have to monitor it to decide when to let it loose or cage it?
Also are there indeed as you say, an EA that has “100% chance of 1 pip.

Isn’t it ultimately you who chooses when to unleash the beast?

Please don’t get me wrong, I am not trying to demean you or anyone else for that matter, I personally am going through a newbie transition in trading and Hope to come out of it with at least the common sense that I had when I entered into it and hopefully, a little more knowledge.

—————-

Yes. You’re right, it still requires me to be in front of my computer. But remember, I trade with a lot of systems. I have enough trouble tracking the 3 manual systems I trade on top of checking market direction, let alone 37. The entry is mechanical and consistent, so instead of spending my brain capacity on looking for the entry point as the other systems dictate, I can focus on looking for other market opportunities. Like obvious trading setups which an EA would not find. Bull/Bear traps are perfect examples of those trading setups.

I see myself as akin to a general, and my EAs as soldiers. I’ve trained my soldiers very well. They know what to do. I just tell them when to do it. The EAs know what entry points they were meant for, and they trade those entry points. It’s as simple as that. That frees me up to do other things. I think you’ll agree on this one, the EA gets you into the trade, you just determine when to get out. Because let’s face it, there is a huge disparity between entry discussion and exit discussion on FF. There are very few threads here talking about optimizing exit strategies. Or exit strategies which can make money on a coin toss. I haven’t found a mechanical one yet, so my manual alternative has to do.

Also, another benefit to having multiple EAs trading one type of system? Consider a trending system. Let’s say the market is on a super long trend. Let’s further say that I have 12 trending EAs running. If the trend is strong enough, all 12 EAs will catch it, and I will gain plenty of compounded pips. It’s like the scaling-in aspect of the turtle system, except the additional entry points are far more dynamic than ’2N’. That’s happened twice this year, and is the main reason why I was able to start investing in rental real estate as an accredited investor.

As for EAs with 100% chance of 1 pip. I haven’t found any. I also never said one exists. The comment regarding 100% chance of 1 pip is my dream system. My best EA–coded by me and up here on forex factory–has a 92% win rate with Risk:Reward of 1:1.2 and has been running continuously since May 2008. To date it has made me 4,000 pips net, 4,400 gross.

It works.

EAs are more commonly found as tools to assist a trader. I have yet to find an EA which can replace a trader. (Neural networks included)

And regarding the edited statement. That’s perfectly fine. I have no problem discussing this at all. I just ask that when responding, please don’t sound like your solution/position is the only right one. That’s something I learned very early on. Just about everything works (fundamentals/technical, trending/scalping, EA/Manual). I try to trade with the best from all worlds.

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Period Converter MT4 – How To Trade on Different Timeframes in Metatrader 4

Some strategies work better in a timeframe which is not provided by default in MT4. Until MT4 offers the option for the user to specify his/her own custom timeframe, here’s the next best way to do it. Moreover, this method will update your custom chart in real-time, so it really is just as good as the default timeframes of the platform.

1. Copy the attached indicator (Period_Converter_OPT.mq4) into your /experts/indicators/ directory, double click on it to bring it up in the MQ Editor, and hit F5 to compile it. (By the way, this is an indicator file, NOT to be confused with the script file period_converter, which is provided in your platform.) It will then show up under “Custom Indicators” in your Navigator box.

2. If you want M10, for example, open a normal M1 chart, and apply the Period_Converter_OPT indicator to it (drag/drop it into your chart). In the indicator’s properties box, choose the desired PeriodMultiplier (e.g. 10 for M10). IMPORTANT: In the “Common” tab, check the “Allow DLL inputs” box. Also, keep the UpdateInterval “0″ to allow the updates to be in real-time.

3. On the main MT4 platform, go to File>Open Offline and your new chart will be listed, so simply choose it (e.g. GBPUSD, M10). This will bring up the new chart. Any indicators you apply to this new chart (e.g. MAs, Stochs, RSI, etc.) will be based on on the custom time-frame.

4. IMPORTANT: You must keep the original chart (onto which you had originally applied the Period_Converter_Opt.mq4 indicator in Step 2 above) always open if you want the new non-standard time-frame chart to automatically update with current ticks. If you close that chart or remove the indicator from it, the custom chart will not update. The bid line will automatically move on the custom chart to verify that the chart is being updated with new data.

That’s basically it. All multiples will work. So, if you want H12, for example, use PeriodMultiplier=12 on an H1 chart, keeping that H1 chart open if you want the new chart to be continuously updated. (Remember to always check “Allow DLL inputs”, too.)
Just another thought:

Someone asked me if an H2.5 chart was possible. Not if you use H1 as the timeframe for the base chart. But acceptable equivalents would be M150 obtained in any of the following ways:

PeriodMultiplier
=150 on an M1 chart
= 30 on an M5 chart
= 10 on an M15 chart
= 5 on an M30 chart

All will give you the equivalent of an H2.5 chart

Credits to DaveL who wrote this on the IBFX-Forum

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