Experiment - Buy Low, Sell High

This is an experiment by applying Robert Lichello's technique in his book how do I make 1 million dollars in stock market automatically. Since Robert's book was on stock market. I have to tweak it a bit to fit Forex.

Initial investment: $68.00
I took 50% of it ($34) to buy AUD/USD at 50:1 leverage. So on the AIM spread sheet, I enter $34 x 50 = $1700 as "initial investment". AUD/USD is trading at 0.98398, so the spread sheet calculated that my initial purchase should be 1719 units of AUD/USD. I will check once a day, by using the AIM spreadsheet. I set buy safe and sell safe all at 5%.

I use Oanda so I can trade as small as 1 unit.

Let me see how it goes.

I re-think the setup last night and realize I will need to make some further adjustments.

1. I set 50% margin (1:50 leverage) to be used as the initial investment. This is way to large. Because that means AUD/USD only needs move down by 2% that there will be a margin call. So I will adjust down the initial margin used by adding some more funds. I will assume at AUD/USD at 0.90 would be next round number "support". That is about 8%~10% from current price. Then the account should survive from running out of margin if the price drops straightly without any retracement to that level. This means I can only set the initial margin usage not greater than 17% (roughly) - for easy to calculate I will round it up to 20%.
2. How to calculate the sell/buy amount each day? The original AIM method basically determine the raw amount by comparing the current position value with "original position value" + newly added position values. It was designed for stock market without using margin. So here is what i will do for buy/sell amount
delta = current position value - portfolio control
sell/buy amount = 20% x delta x 50
20% is the percentage margin I will use for each incremental margin (delta x 50%)
So becomes an easier calculation every day: input the price into the AIM spreadsheet, check whether it suggest any buy/sell. Then x10 (20% x 50) to execute the buy or sell on AUD/USD.

Sell 280 units AUD/USD at 0.9795, according to the AIM spreadsheet.

Add $100 fund to the account to control the initial margin use at 20%.

So total investment was $168.

Current position: long 2139 AUD/USD
NAV: $158

Buy 170 units of AUD/USD at 0.97045.

The market is close. AUD/USD is up slightly.

Now I have 2309 units of AUD/USD, at average 0.9804

Account Value: 174.24
Unrealized P/L: $6.58
Unrealized P/L: 28.5pip

Margin available: 128.79

AUD/USD is trading at 0.98806~0.98810 right now. I entered the price 0.98810 into the spread sheet and it gave a sell for 230 units. I followed it.

Total units of AUD/USD: 2079
Account Value: $185.04
Unrealized P/L: $16.13 or 78pip

Margin available: $144

AUD/USD goes up at 0.99980

Sold 200 units according to what the spreadsheet suggested.

total units of AUD/USD: 1879
Account value: $210.59
Unrealized P/L: $37.75 (200pip)

AUD/USD drops a bit to 0.99678 versus last update.

Bought 50 units of AUD/USD at 0.99678

Current position: 1929 units of AUD/USD
Account value: $205.61
unrealized P/L: $33.36 (173pip)

AUD/USD goes up to 1.0043 at this moment.

Sold 110 units of AUD/USD at 1.0043

Current position: 1819 units of AUD/USD
Account value: $219.63
Unrealized P/L: $44.6 (245pip)

AUD/USD continues go up to 1.01414

sold 170 units of AUD/USD

position: 1649 AUD/USD
Account value: 238.30
Unrealized P/L: $32.19 (351pip)

AUD/USD goes up to 1.0153

Sold 270 units of AUD/USD at 1.0153

Total position: 1379 AUD/USD
Account value: $239.44
Unrealized P/L: $50.49 (366pip)

As I tweak the original AIM system to fit the Forex trading, which involves leverage, I think, it would be possible that if the price keep moving up by x%, then there will be switch of position from long to short. This should be fine, as long as there would be

1. sufficient margin at the switch point
2. switch point is some where close to historical resistance?

One of the assumptions in AIM system is that prices is within a range in a big scheme of things. This is probably a safer assumption for exchange rates. I need to think about it over the weekend.

Randy

This is Asia session. AUD/USD open at 0.99~1.01, slightly below the close last week.

Bought 640 units of AUD/USD at 1.0104

Total position: long AUD/USD 2019 units
Account value: $233.3
Unrealized P/L: $44.2 (217pip)

Thought over the weekend about the question of position size and how to make AIM work in leverage settings. I will put down some initial thought later.

AUD/USD is in a range today. Now it is trading at 1.0174

Sold 300 units at 1.0174

Total position: 1719 long AUD/USD
Account value: $240
Unrealized P/L: $41.6 (240pip)
%P/L: 42%

AUD/USD is getting stuck there...

Bought 430 units at 1.0124

Total units: 2149 units AUD/USD

Account value: $238.2
Unrealized P/L: $39.8 (185pip)

Sold 250 units of AUD/USD at 1.0164

Total position: 1899
Account value: $246.33
Unrealized P/L: $39.2 (206pip)

I am at the airport waiting for my flight...

AUD/USD is fluctuating down to 1.0 or so.

Bought 190 units of AUD/USD

Total position: 2089 AUD/USD long
Account value: $224.8
Unrealized P/L: $17 (81pip)

I am waiting for AUD/USD's further movement (down) to test how this system can survive.

I closed all AUD/USD position to rethink the algorithm. I will re-open it once I finish the work.

Account value at close: $214.8
Initial investment: $168
P/L: 27%