Introduction.

I've been a trader for most of my adult life. I've traded mainly derivatives and stocks. About 20 years ago I stopped trading derivatives. I use to trade Bunds. I've had varying degrees of success and varying degrees of losses. As for stocks, I wouldn't say that I traded those. Mainly invested. During my time, in stocks, I've seen through various systematic crisis and other non systemic exogenous crisis.

Reason for blog.

I've decided to start this blog mainly as a log to my trading in FX. The first question that springs to mind is why trade FX now? In truth, I have no idea why the sudden urge to dabble in FX arose. It could have been due to the lock-down that is occurring over Covid19. May be, I just got bored and decided to do something to fight the boredom. To begin with, it takes my mind of the pandemic crisis. The constant reiteration on the news that seems to loop endlessly on the same stories.


The start.


Well, I started FX about 6 weeks ago. I decided to focus on the EUR/USD pair as it's the most heavily traded and, therefore, "transparent". It's not the first time I've dabbled in FX. Through the years I went in and out but never in a serious manner. In any event, this partial interest has meant that I am not truly novel to FX. I take some experience with me. Even so, I don't expect to discover the Holy Grail in FX trading. To begin with I will, in summary, note down the 6 weeks experience from memory.


Initial research.

I researched various brokers and opted for a well known raw data ECN FX broker. I would rather see the market as raw and pay fees per round turn. It puts me in a similar position to that experienced whilst trading derivatives. My reactions are not as fast as they used to be and this implies that I could more than match reaction times by use of trading robots. The beauty about trading, today, is that technicals can be exposed as fortune telling. Fundamentals as disconnected from the market over the short to medium term. You build an algorithmic robot and strategy test. That process exposes long held myths which at one point was regarded as cornerstones.

I could have gone to various trading houses who for a small fee would place funding in a trading account and test my trading. Over time the promise is to place more funds and more funds means more earning potential. However, being old school, I know that if you can't make it trading small you won't stand a chance trading big. Plus, the leaps from small to big in terms of size are psychological hurdles. So, I just pumped my own money into a broker and decided to try that method first.

First profit blowout.

Within a week I was intra-day trading making a daily profit target and stopping. If I was losing, during the day, I worked to breakeven and then stop. The next day it would either be breakeven or profit. 3 weeks into trading I managed to blow away my profit and lose two thirds of my account balance. The only solution to avoid the constant margin calls was to pump more funds in and trade back losses. Sure enough, I traded back the losses and went back into profit.

Algorithmic trading.

At this point, I abandoned trading without an algorithmic robot. I developed a robot which closely corresponded to the methods I use to trade. I always respect markets so when switching on the trading robot I started small size gradually increasing size as the robot went into profit. Using the same methods a trading house would use with a new trader. Plus, through the robots I was trading 24 hours a day. The problem with trading robots is that they are simple. They lack the capacity that the human mind has in recognizing the 3 main dynamics that appear on a data time series. Switching between those 3 dynamics is easy for the sharpened mind but hard to program into a trading robot. Most robots can do 2 dynamics or 1 dynamic and this is the reason why the overwhelming majority always fail to make money. Plus, they can't handle the fog of war at the point where buyers and sellers interact. The human mind struggles in the fog of war and the robots just ignore.

Second profit blowout.

Yesterday, the robot failed. Its parameters were being picked off. No matter what position it took it got it wrong. Within a day my account balance had lost 30%. My profit went to the ether and my hard funds were being eaten into.

Log form.


What follows from this point on is the log. The form of this log will be time and note.