Introduction:
I want to share a trading approach that has worked fairly well for me of late. I started trading fx in 2008 and was a break even trader for a long time. Back when I started trading, my approach was mostly technical- lot of indicators, volume, fancy systems etc. I lost money some months, I made money some months. Overall, nothing spectacular. I ended the year where i started if not worse.
Approach:
Needless to say a purely technical approach did not work for me. Beginning April of last year, I came across this feature that Forex Factory calls "Positions / Live accounts". The link is here - http://www.forexfactory.com/trades.php
This is a free tool Forex Factory provides to its users. It basically states how many lots are long or short a pair. You can also choose how many traders are long or short a pair. This in my opinion is invaluable information.
Now this is how I trade this information- I start by looking at pairs that have an extreme positioning imbalance. For example, this image is from todays snapshot of positions. You can see that 91 % of lots on Forex Factory are long USD/JPY. Only 9 % lots are short. I start by assumption that most people who trade are wrong and they will lose money. So these 91 % lots are going to lose money. I want to bet against the majority. This is the basic premise of my approach. Now that I have identified the pair and direction i want to trade, i will open Sell orders.
Where to Place orders:
I open 3 orders each order representing 1/3rd of the total size i want to trade at different price levels (dependent on how volatile the pair is). So , in this example, I will sell 1 standard lot each at levels represented by 0.25 % , 0.5 % and 1% of the current price respectively. If USD/JPY trades at 101.40 today, I will have 3 sell orders at below levels -
Order 1 : Sell 100 K at 101.65 (0.25% of current price)
Order 2: Sell 100 K at 101.90 (0.5 % of current price)
Order 3: Sell 100 K at 102.40 (1 % of current price)
Stops and Targets:
I use mental stops based on price action. If I am bearish USD/JPY but it behaves like bullish (goes thru major resistance etc) I will close the positions manually.
For targets, I take off positions at round numbers, like 101, 100.5, 100 etc.
Risk Management:
For any trade, my maximum risk is 5 % of equity in account. So on a 100 K account, I will risk not more than 5, 000.
Results so far:
For the year so far, I had only one losing month (February). For this year, my account is up 56 % .
What to expect from this thread:
I work 12 hours a day. I am in management consulting business and on road 24X7 so I don't get a lot of time to post on FF. I trade a max of 2-3 times a week and most weeks 1-2 times. I will try to post my trades and rationale behind them here but i will not be very frequent.
The only reason I post this thread is that I want to demonstrate that a nontechnical approach can work (and in my case only thing that worked). I hope this can help people struggling with their trading. It will also be nice to hear similar experiences from other traders on FF.
Disclaimers:
I do not have any rights to Forex Factory's trade explorer or position ratio tool. I just use it as a trading decision support tool. All rights belong to Forex Factory. Also, this is not meant to be trading advice for any one. Just my own experiences. SO, trade at your own risk.
Happy trading!
- 5ABI
I want to share a trading approach that has worked fairly well for me of late. I started trading fx in 2008 and was a break even trader for a long time. Back when I started trading, my approach was mostly technical- lot of indicators, volume, fancy systems etc. I lost money some months, I made money some months. Overall, nothing spectacular. I ended the year where i started if not worse.
Approach:
Needless to say a purely technical approach did not work for me. Beginning April of last year, I came across this feature that Forex Factory calls "Positions / Live accounts". The link is here - http://www.forexfactory.com/trades.php
This is a free tool Forex Factory provides to its users. It basically states how many lots are long or short a pair. You can also choose how many traders are long or short a pair. This in my opinion is invaluable information.
Now this is how I trade this information- I start by looking at pairs that have an extreme positioning imbalance. For example, this image is from todays snapshot of positions. You can see that 91 % of lots on Forex Factory are long USD/JPY. Only 9 % lots are short. I start by assumption that most people who trade are wrong and they will lose money. So these 91 % lots are going to lose money. I want to bet against the majority. This is the basic premise of my approach. Now that I have identified the pair and direction i want to trade, i will open Sell orders.
Where to Place orders:
I open 3 orders each order representing 1/3rd of the total size i want to trade at different price levels (dependent on how volatile the pair is). So , in this example, I will sell 1 standard lot each at levels represented by 0.25 % , 0.5 % and 1% of the current price respectively. If USD/JPY trades at 101.40 today, I will have 3 sell orders at below levels -
Order 1 : Sell 100 K at 101.65 (0.25% of current price)
Order 2: Sell 100 K at 101.90 (0.5 % of current price)
Order 3: Sell 100 K at 102.40 (1 % of current price)
Stops and Targets:
I use mental stops based on price action. If I am bearish USD/JPY but it behaves like bullish (goes thru major resistance etc) I will close the positions manually.
For targets, I take off positions at round numbers, like 101, 100.5, 100 etc.
Risk Management:
For any trade, my maximum risk is 5 % of equity in account. So on a 100 K account, I will risk not more than 5, 000.
Results so far:
For the year so far, I had only one losing month (February). For this year, my account is up 56 % .
What to expect from this thread:
I work 12 hours a day. I am in management consulting business and on road 24X7 so I don't get a lot of time to post on FF. I trade a max of 2-3 times a week and most weeks 1-2 times. I will try to post my trades and rationale behind them here but i will not be very frequent.
The only reason I post this thread is that I want to demonstrate that a nontechnical approach can work (and in my case only thing that worked). I hope this can help people struggling with their trading. It will also be nice to hear similar experiences from other traders on FF.
Disclaimers:
I do not have any rights to Forex Factory's trade explorer or position ratio tool. I just use it as a trading decision support tool. All rights belong to Forex Factory. Also, this is not meant to be trading advice for any one. Just my own experiences. SO, trade at your own risk.
Happy trading!
- 5ABI
Attached Image
Its all in the mind.