My multi-currency trade journal

Dave ,

With this small account your margin used/margin available may need to stay this large until the account grows; when it grows, you should increase the margin available/used ratio to give greater security. The other two measures you mention sound like reasonable steps to take to lock in your profit, when that situation applies, or lock down your P/L size, when that situation applies.

As long as the account is making the good progress it is, I certainly would not let the the used margin grow appreciably, would consider its shrinkage an improvement.

Regards,

"I've become so risk adverse that having my %Margin Used at 40% is a bit disconcerting...below 25% would be much better! The current floating %DD (~12%) is slightly above my objective of 10%, but nothing that concerns me. If need be (%DD ceiling of 20%), my plan will be to close losing positions that match percentage-wise to open winning positions...this will prevent my account balance from decreasing. Also, if the sum of ALL positions (positive & negative) achieves a minimum of 1% gain of the account balance, then ALL positions will be closed.... wash, rinse, repeat..."


Account balance means nothing when it comes to the profitability of trading.
If account equity doesn't improve, you're not making any progress.

When brokers talk about margin-to-equity(M/E) level, notice they're talking equity & NOT balance. Your broker doesn't care about balance when they watch for margin calls. In your last report, the "margin used" + "margin available"= $105.05 which is the account value (equity). Has nothing to do with balance. "prevent my account balance from decreasing" shouldn't be a concern. If you're still closing & immediately re-opening the same position, you're just handing spread money to your broker while trying to improve the balance but making it harder to turn a profit.

agreed:
Account equity is the true size of the account. If you trade with the long term trend, Then eventually account equity will grow along with the Account balance.
Equity is a live, moment to moment signal and as such is noisy; but eventually if equity does not go your way, you must change something.

I posted the comments above only so you're aware of the difference & don't spend the next 3 months continuing to add to balance while the equity stays the same. I've been following your results from day 1 since I'd like to get a similar system to work also. I tried once for about a week it went better than expected then a high-impact number came out & all the profits were gone in a couple hours. The only way to avoid that would be to close all positions prior to any market news but that would be pretty difficult so I haven't tried since.

As Rap said, "if equity does not go your way, you must change something."

I'll keep following & wish you luck with your system.

Hi Rap & srt,
thanks for your comments, and I wholeheartly agree about the equity increasing being more important than the balance. What I found during my back testing was that my equity continued to increase month end to month end while the drawdown fluctuated between 0-15%. As an example, in my backtest I started with an equity of $100 USD. At the end of month 1, my balance was $112 (~12% gain)with a drawdown of 8% (~$9 USD) leaving me an equity of $103. At the end of month 2, my balance was $121 (~9% gain from the ending balance of month 1) and the drawdown was ~7% of the balance leaving me with an equity of ~$112 USD. So my equity increased month end to month end (from $100 to $112) while the %DD float was relatively constant. What I found throughout my backtest was if I focused on increasing my balance (not my equity) by ~1%, kept my drawdown constant at 10-15%, AND closed losing positions by balancing with winning positions, my equity consistently increased from month end to month end. Definitely not the holy grail but it worked for me...

Dave

Hi Dave,

I don't know how long you hold your winning positions but when I was testing a similar method I found it's better to hold all positions for bigger wins since I was trading about 20 pairs some of them had spreads that would really eat into profits if I had to close & open them too often. If you're doing quite a bit of trading with all pairs, then you're doing pretty good considering the amount you need to make each time just to cover all the spread costs. Just 1-3 pips may not seem like much but when I traded 20 pairs I needed over 50 pips just to cover the spreads. In your backtesting, did you allow enough for the spreads?
I also think that if you did some checking on the correlated pairs you might be able to trade less pairs if some are highly correlated therefore reducing spread costs. As an example, you should not have EurUsd & UsdChf in your basket since they're about -99% correlated so you're either doubling down in a position or offsetting a position depending upon if you're long/short. Chf is pegged to Eur so you should remove all Chf pairs if you already have the Eur paired with that currency. (Example: EurAud & AudChf, keep 1 but not both)
Since balance serves no purpose, don't close & immediately re-open the same position just to add to balance. Close only to take profit or cut losses.

Just suggestions :-)

Update as of 8:00 pm EST....
Current month start date:6/23/14
Current month end date:7/18/14
Start OF MONTH 2

Account balance (6/23/14): $119.33
Account balance (6/23/14): $119.33
%gain = 0%
Floating P/L = -$15.02
Net Asset Value = $104.31
% Floating DD = 12.6%
Positions open: 28
Average No. units per position = 46
Margin used = $30.78
Margin Available = $73.52
% Margin used = 42%
RISK = ~$2.30 per 500 pips draw down per position (= ~$65 for all open positions)
%RISK = $65/$119.33 = 54%

Update as of 8:00 pm EST....
Current month start date:6/23/14
Current month end date:7/18/14
MONTH 2, Day 2

Account balance (6/23/14): $119.33
Account balance (6/24/14): $119.33
%gain = 0%
Floating P/L = -$16.41
Net Asset Value = $102.91
% Floating DD = 13.8%
Positions open: 28
Average No. units per position = 46
Margin used = $30.71
Margin Available = $72.19
% Margin used = 43%
RISK = ~$2.30 per 500 pips draw down per position (= ~$65 for all open positions)
%RISK = $65/$119.33 = 54%

NOTE: Post #45 Edit (bold): What I found throughout my backtest was if I focused on increasing my balance (not my equity) by ~1% whenever I was able, kept my drawdown constant at 10-15%, AND closed losing positions by balancing against winning positions when the %DD approached 20%, my equity consistently increased from month end to month end. Definitely not the holy grail but it worked for me...

Update as of 8:00 pm EST....
Current month start date:6/23/14
Current month end date:7/18/14
MONTH 2, Day 3

Account balance (6/23/14): $119.33
Account balance (6/25/14): $119.33
%gain = 0%
Floating P/L = -$16.20
Net Asset Value = $103.11
% Floating DD = 13.6%
Positions open: 28
Average No. units per position = 46
Margin used = $30.79
Margin Available = $72.32
% Margin used = 43%
RISK = ~$2.30 per 500 pips draw down per position (= ~$65 for all open positions)
%RISK = $65/$119.33 = 54%

Update as of 8:00 pm EST....
Current month start date:6/23/14
Current month end date:7/18/14
MONTH 2, Day 4

Account balance (6/23/14): $119.33
Account balance (6/26/14): $119.31
%gain = 0%
Floating P/L = -$16.38
Net Asset Value = $102.92
% Floating DD = 13.7%
Positions open: 28
Average No. units per position = 46
Margin used = $30.84
Margin Available = $72.07
% Margin used = 43%
RISK = ~$2.30 per 500 pips draw down per position (= ~$65 for all open positions)
%RISK = $65/$119.33 = 54%

Update as of 5:00 pm EST....
Current month start date:6/23/14
Current month end date:7/18/14
MONTH 2, end of week 1

Account balance (6/23/14): $119.33
Account balance (6/27/14): $119.84
%gain = 0.4%
Floating P/L = -$17.70
Net Asset Value = $102.14
% Floating DD = 14.8%
Positions open: 28
Average No. units per position = 46
Margin used = $30.87
Margin Available = $71.27
% Margin used = 43%
RISK = ~$2.30 per 500 pips draw down per position (= ~$65 for all open positions)
%RISK = $65/$119.33 = 54%

Update as of 9:00 pm EST....
Current month start date:6/23/14
Current month end date:7/18/14
MONTH 2, week 2

Account balance (6/23/14): $119.33
Account balance (6/30/14): $119.84
%gain = 0.4%
Floating P/L = -$15.82
Net Asset Value = $103.99
% Floating DD = 13.2%
Positions open: 28
Average No. units per position = 46
Margin used = $30.93
Margin Available = $73.06
% Margin used = 42%
RISK = ~$2.30 per 500 pips draw down per position (= ~$65 for all open positions)
%RISK = $65/$119.84 = 54%

Update as of 9:00 pm EST....
Current month start date:6/23/14
Current month end date:7/18/14
MONTH 2, week 2

Account balance (6/23/14): $119.33
Account balance (7/1/14): $121.36
%gain = 1.7%
Floating P/L = -$16.29
Net Asset Value = $105.08
% Floating DD = 13.4%
Positions open: 28
Average No. units per position = 46
Margin used = $31.25
Margin Available = $73.83
% Margin used = 42%
RISK = ~$2.30 per 500 pips draw down per position (= ~$65 for all open positions)
%RISK = $65/$121.36 = 54%

Update as of 9:00 pm EST, 7/2/14....
I couldn't post this last night due to family emergency...
Current month start date:6/23/14
Current month end date:7/18/14
MONTH 2, week 2

Account balance (6/23/14): $119.33
Account balance (7/2/14): $121.54
%gain = 1.85%
Floating P/L = -$15.63
Net Asset Value = $105.91
% Floating DD = 12.9%
Positions open: 28
Average No. units per position = 46
Margin used = $31.22
Margin Available = $74.69
% Margin used = 42%
RISK = ~$2.30 per 500 pips draw down per position (= ~$65 for all open positions)
%RISK = $65/$121.54 = 53%

Hope all is well with family. Family comes first.

Six weeks into it and still going strong. You have the summer doldrums to go through ( if they actually exist), then into the fall. You are probably feeling confident now; wait until then!

Regards to you and family,

Update as of 9:00 pm EST, 7/3/14....
Current month start date:6/23/14
Current month end date:7/18/14
MONTH 2, week 2

Account balance (6/23/14): $119.33
Account balance (7/3/14): $122.91
%gain = 3.0%
Floating P/L = -$17.60
Net Asset Value = $105.31
% Floating DD = 14.3%
Positions open: 29
Average No. units per position = 47
Margin used = $32.60
Margin Available = $72.71
% Margin used = 45%
RISK = ~$2.35 per 500 pips draw down per position (= ~$68 for all open positions)
%RISK = $68/$122.91 = 55%

Thanks Rap...it turned out to be a minor emergency, but we were at the hospital until well into the wee morning hours.
The trading is going as well as expected...patience and a watchful eye throughout the day is the key. I may only be trading a hundred bucks, but its amazing what continuous compounding of small gains over time can achieve.

Update as of 4:00 pm EST, 7/4/14....
Current month start date:6/23/14
Current month end date:7/18/14
MONTH 2, end of week 2

Account balance (6/23/14): $119.33
Account balance (7/4/14): $123.00
%gain = 3.1%
Floating P/L = -$17.92
Net Asset Value = $105.07
% Floating DD = 14.6%
Positions open: 29
Average No. units per position = 47
Margin used = $32.59
Margin Available = $72.49
% Margin used = 45%
RISK = ~$2.35 per 500 pips draw down per position (= ~$68 for all open positions)
%RISK = $68/$123.00= 55%

I have found in this kind of trading, when you compare the change in balance to the change in equity, that sometimes the equity changes more than the balance and sometimes vice-versa. I would suggest that there is a return to mean at play here. Over time, the change in equity will tend to come back to equal the change in balance. ( If you are doing things right, of course), and exceed it , and then come back.

Because of this Sashay in your day-to day readings. It doesn't pay to keep too close an eye on this ratio.