My multi-currency trade journal

www.oanda.com

NOTE: Moving forward, a trading "month" will consist of exactly 25 trading days (Sun-Fri). This will make it much easier to calculate my month-to-month parameters based on a fixed number of trading days rather than the actual calendar month-to-month variation of trading days.


Update as of 7:00pm EST, 8/10/14
Current month start date: 7/21/14
Current month end date: 8/18/14
Month 3, Day 18

Account balance (7/20/14): $164.68
Account balance (8/10/14): $171.88
%gain = 4.4%
Floating P/L = -$30.43
Net Asset Value = $141.45
% Floating DD = 17.7%
Positions open: 40
Average No. units per position = 51
Margin used = $48.98
Margin Available = $92.46
% Margin used = 53%
RISK = ~$2.55 per 500 pips draw down per position (= ~$102 or all open positions)
%RISK = $102/$171.88 = 59%

Update as of 8:30pm EST, 8/11/14
Current month start date: 7/21/14
Current month end date: 8/18/14
Month 3, Day 19

Account balance (7/20/14): $164.68
Account balance (8/11/14): $172.25
%gain = 4.6%
Floating P/L = -$31.73
Net Asset Value = $140.52
% Floating DD = 18.4%
Positions open: 39
Average No. units per position = 50
Margin used = $47.11
Margin Available = $93.42
% Margin used = 50%
RISK = ~$2.50 per 500 pips draw down per position (= ~$98 for all open positions)
%RISK = $98/$172.25 = 57%

Update as of 8:30pm EST, 8/12/14
Current month start date: 7/21/14
Current month end date: 8/18/14
Month 3, Day 20

Account balance (7/20/14): $164.68
Account balance (8/12/14): $172.30
%gain = 4.6%
Floating P/L = -$31.89
Net Asset Value = $140.41
% Floating DD = 18.5%
Positions open: 39
Average No. units per position = 50
Margin used = $47.09
Margin Available = $93.32
% Margin used = 51%
RISK = ~$2.50 per 500 pips draw down per position (= ~$98 for all open positions)
%RISK = $98/$172.30 = 57%

Update as of 9:30pm EST, 8/13/14
Current month start date: 7/21/14
Current month end date: 8/18/14
Month 3, Day 21

Account balance (7/20/14): $164.68
Account balance (8/12/14): $172.63
%gain = 4.8%
Floating P/L = -$34.71
Net Asset Value = $137.92
% Floating DD = 20.1%
Positions open: 40
Average No. units per position = 51
Margin used = $47.95
Margin Available = $89.97
% Margin used = 53%
RISK = ~$2.50 per 500 pips draw down per position (= ~$102 for all open positions)
%RISK = $102/$172.63 = 59%

Update as of 9:00pm EST, 8/14/14
Current month start date: 7/21/14
Current month end date: 8/18/14
Month 3, Day 22

Account balance (7/20/14): $164.68
Account balance (8/14/14): $173.37
%gain = 5.3%
Floating P/L = -$36.03
Net Asset Value = $137.34
% Floating DD = 20.8%
Positions open: 41
Average No. units per position = 51
Margin used = $49.21
Margin Available = $88.14
% Margin used = 56%
RISK = ~$2.55 per 500 pips draw down per position (= ~$105 for all open positions)
%RISK = $105/$173.37 = 61%

Update as of 9:00pm EST, 8/15/14
Current month start date: 7/21/14
Current month end date: 8/18/14
Month 3, Day 23

Account balance (7/20/14): $164.68
Account balance (8/15/14): $173.70
%gain = 5.5%
Floating P/L = -$36.09
Net Asset Value = $137.34
% Floating DD = 20.8%
Positions open: 41
Average No. units per position = 51
Margin used = $49.29
Margin Available = $88.31
% Margin used = 56%
RISK = ~$2.55 per 500 pips draw down per position (= ~$105 for all open positions)
%RISK = $105/$173.70 = 61%

Still doing well, I see. I had a surprisingly profitable Friday. I have not yet opened another account to continue a multi-entry form of trade but I think I shall have to to get back to the 60%/annum level you are getting with a similar method. Odd to think that 20-305 return on investment isn't enough. ...

I am also looking to open the a/c for the same way of this trading |

Hi Rap,

Thanks for the comment...I think "doing well" is a subjective term though, because even though the account balance has gained 4-14% per month over the last three months, my equity is actually down ~5% from the initial starting point. A bit different from the results of my back testing, but not totally out of alignment with the back testing results either. Three months of live trading is not sufficient time to accurately assess the system. With that said I continue to test to improve the system. Shown below: screenshot 2 is a graph of the Equity vs. Balance when the $40 deposit made at the beginning of month 3 is excluded from the balance. Screenshot 1 is a graph of the month-end to month-end %gain vs. the month-end to month-end %drawdown. As always, a work in progress..

I could be wrong, but one effect of adding to an account is the desire to see the additional monies get into play. The first thing to increase then, is the P/L which serves to hide the equity. Until that comes back (with trades in the long run trend it will) your equity will appear to be going the wrong way. The sashay of your P/L increases because of the increase in trading volume, and you have to be patient until you see it come back and reveal the increase equity.

That is a difficulty anyone holding on to a trade for a while should be aware of. It is somewhat akin to drawdown, with the exception that it comes back to you, naturally without you having to do anything.

Your hefty margin is an indication that things are healthy and will go your way.

Good Evening (Morning),

this is actually my very first message, and I have just created a profile on FF because I find your thread very interesting and quite fun actually.

Like you I have followed with interest and open mind the posts from Rap, NanningBob... a few others and obviously Bilstein.

I like your journal because it is actually quite clear, and does “make sense” to me.

I have absolutely no experience in Forex or trading, so my apologies if my post is stupid.

Before I carry on, I would like to assure you that if it bothers you that I (a noob) post on your journal, please just let me know, and it is no problem at all. No offence would be taken.

OK after all that blabla (I did put a few basic infos on my profile so won´t say more), I would like to ask you just one challenging (in a very very positive way) question:
after nearly 3 months do you still feel “trusty” in the way you manage your drawdown?

A- so far and despite the quite big total leverage you use, we can see that by spreading your position (all opened positions = one big position) within all the pairs (especially buying all of them), you are actually quite efficiently hedged: your equity doesn´t go up as you would like so far OK, but neither does it fall like a rock (which is good for sanity I guess . So far it seems to cycle up and down, very gently going down. This hedging did make sense “on paper”, and it does happen on reality it seems. So all is good so far on that point. Cool!

B- it seems to me (and I am probably wrong because I obviously do not know anything on how you possibly micro manage the trades, so big assumption here ) that so far, you just “let go and see”. I guess it is what you did in your manual back tests.
In your back tests, you said that your drawdown reached 27% at some point.
What happened from there, if I may asked?
27% real drawdown is quite big to get back to +1% of equity on any day with all opened positions.

Huummm, not sure I am really clear. Sorry I probably don´t use the right terminology.

I explain: you said that at some points, time to time, in your backtests, the equity was catching up with your balance and you would close all opened trades because the total of equity at the end of that day, with all of opened trades was 1% of your balance. That would obviously give you a MASSIVE equity gain, and definitely a big smile I guess!!
Then you would restart a cycle.

Just that +1% at the end of the day, seems quite unlikely to happen (but I am very often wrong!!! ;o) from where you are right now in drawdown, with the way you SEEM (and I haven´t got a clue!) to manage it.
I repeat it is just an assumption, a feeling, because I haven´t done your backtests, whereas you know what you have seen and tested!
And 20% is less than 27% from the backtests!!!

I find it really interesting to see how the equity goes up and down, and at some point you were (by memory, I haven´t rechecked in your thread) at + 6% equity from your deposit (it was 100$ at the time, so around 106$. It was before the +40$ added to the account, that I am sure).
Would it be better to close at that point (well... at some “positive equity” from "starting" balance point check, because obviously you do not know how far in the positive it will go) all positions, and restart a cycle (a bit like some of Samer´s crazy ideas).

Or is it just a question of averaging down (or up, why not, but you would have to change your +1% take profit of the positive trades, to let them run and add to them. Or close them and reopen with bigger lot) at some possible imbalance points from the chart, to try to bring back the drawdown up?
But by doing that you:
1- have to guess direction (up), which goes away from the simplicity of this simple position management method
2- possibly will eat a lot of margin if it turns sour, and you really do not want to get stuck on free margin if you want to keep your sanity and account!!;o)

You obviously do something by the number of positions you have opened, compared with the number of pairs you trade.

By buying all pairs, you are reasonably hedged but there is no way you are with the actual long term trend (long term trend, what is that!?? You see what I mean I hope anyway) in all of them (it is just logic) so something needs to be done I feel. NanningBob and Rap are not in all of their pairs at the same time I think, and even Bilstein said that he might reverse some pairs if he feels the need (sell) even if he tries to buy them all. He has his 3 days stop as well.

That being said, and it seems so logic: on your backtests, it shows that at some point the equity would catch up: fascinating!

Anyway, I am talking faaaaaaaaaar too much, and I probably do not make sense on everything.
So I better stop there.
I hope I do make some sense on some points at least, and I repeat I am no trader, so I know nothing really and the above is just from my slow mind, and what I have worked out so far from reading FF.

May be it is completely stupid, so please, if it bothers you, then no worries just tell me.
No drama.
You don´t even have to answer!!! No worries.
If you did manage to read the whole post, it is already an accomplishment in itself lol

To conclude:
I do like your thread. It is cool, different and more important, does make sense to me.
Even if you do not have a lot of people posting, I am pretty sure I am not the only one, far from it, to follow it!
So thanks a lot for your sharing

Have a good day (night)
Cheers,
J-F

Update as of 9:00pm EST, 8/18/14
Current month start date: 7/21/14
Current month end date: 8/18/14
End of Month 3

Account balance (7/20/14): $164.68
Account balance (8/18/14): $173.62
%gain = 5.4%
Floating P/L = -$34.91
Net Asset Value = $138.71
% Floating DD = 20.1%
Positions open: 41
Average No. units per position = 51
Margin used = $49.23
Margin Available = $89.49
% Margin used = 55%
RISK = ~$2.55 per 500 pips draw down per position (= ~$105 for all open positions)
%RISK = $105/$173.62 = 61%


Summary: Month 3

1. Monthly %gain (5.4%) is slightly above the average monthly %gain obtained during my back testing (7-year monthly average = 4.5%, range: 3% - 14%, Ave p.a. = 54%).
2. Floating %DD is at 20%, still within the range found during my back testing (0 - 27%; average = 15.4%).
3. Overall, if I subtract the $40 deposit made at the beginning of Month 3, the month-end adjusted equity ($98.71) is down ~6% from the initial balance at Month 1 ($104.58)

I fail to understand the thinking of those who advise you to avoid the news. That appears to me to be when I make the most money!
I suggest that you continue with your schedule of contributing to the account, but restrain any extra trades until the equity stops hiding behind the P/L

I do not like the fixed percentage of balance approach to determining lot size. I think one should shade that some. These figures are not to worry about.

J-F,

Here are the answers that I promised you (highlighted in red)...

I like your journal because it is actually quite clear, and does “make sense” to me.

1) Thank you...

Before I carry on, I would like to assure you that if it bothers you that I (a noob) post on your journal, please just let me know, and it is no problem at all. No offence would be taken.

2) No problem at all...asking/answering questions is how we all learn...

After nearly 3 months do you still feel “trusty” in the way you manage your drawdown?

3) Yes.. Only because I just have to trust my back test results. And those back tests results were over a seven year period of high and low market volatility. During my back testing, I had extensive periods of times (i.e. months) where the drawdown ranged between 18-27%, but then there were also considerable periods of time when the drawdown was <10%, It really depended on how the overall market was moving. I monitor a composite index that I built which encompasses all 28 pairs (7 majors + 21 crosses); when the index is trending up I know that this is now the most opportune time to work on substantially reducing my DD while still achieving my month-end to month-end %gain objective of at least 4-5%. When the index is trending down, I know that in order to achieve my month-end to month-end %gain objective of 4-5% I will have to be extremely aggressive in taking short-term profits even if the profits are substantially less than my desired 1% of the balance, and this in turn will cause my %DD to rise. There were a few times that I achieved double-digit monthly returns, but those occurred rarely and only after I was able to close out ALL positions with a net gain of 1-2% (during periods of a strong uptrend of the composite index). So, managing my positions is very much a balancing act depending upon how the market is moving, but importantly this approach works for ME. Remember, I've only been trading this “system” live for three months, so for me to be overly concerned at this point about my equity vs. balance is just not prudent. Currently, my composite index is trending down, so I know that I need to be patient (albeit hard for me to be) and ride it out. I may not like it, but that’s part of trading... Patience and.... well.. Patience.

A- so far and despite the quite big total leverage you use, we can see that by spreading your position (all opened positions = one big position) within all the pairs (especially buying all of them), you are actually quite efficiently hedged: your equity doesn´t go up as you would like so far OK, but neither does it fall like a rock (which is good for sanity I guess .

4) Yes it is!!! Sanity is all important!!!

B- it seems to me (and I am probably wrong because I obviously do not know anything on how you possibly micro manage the trades, so big assumption here ) that so far, you just “let go and see”. I guess it is what you did in your manual back tests.

5) Yes... I generally trade with a “buy all” mentality and manage my positions using the pseudo-hedges that are set up. Mind you, some pseudo-hedges are “better” than others mainly because of the degree of positive/negative correlation between the pairs, and not all pairs can be effectively hedged due to their low correlation of price movement to other pairs...those are the hardest to manage. During my back testing, I found that when the composite index was moving up, balancing the hedges (i.e. changes in the number of units bought for each pair in the hedge based on their volatility) became less important, and the hedges generated more profit, than when the index was trending down (then the balancing of the hedges became REALLY important). As I alluded to above, for each hedge, the number of units I buy for each pair is normalized by their long-term volatility to one another (ATR over 12 weeks) and this helps to manage my risk. I do close out losing positions in a hedge, but those are offset by the gains made by the hedge counter pair. Please keep in mind that this method of hedging doesn't always “work” since the price correlations that I monitor can be stable on a long-term weekly basis (lookback period of 12 weeks) but can be very volatile in the short-term, and this uncoupling of the price movement between the hedged pairs can last weeks. So this means that more often than not, I will need to ride out a DD from a losing hedge position. But on the other hand, this volatility also affords me the opportunity to profit. In many cases I will close out a losing hedge pair against a profitable hedged pair if the net gain of both pairs is at least 0.5%. I will say that I didn’t factor in the swap costs during my initial back testing but swap costs will be considered moving forward - I'm still testing the effect of swap costs into my overall trading style and how this might change my approach. I know that Rap and others trade only in the direction of the positive swap and I might very well be adjusting my trading approach to trade in the direction of the swap.

In your back tests, you said that your drawdown reached 27% at some point.
What happened from there, if I may asked? 27% real drawdown is quite big to get back to +1% of equity on any day with all opened positions.

Please see answer #3...

...you said that at some points, time to time, in your backtests, the equity was catching up with your balance and you would close all opened trades because the total of equity at the end of that day, with all of opened trades was 1% of your balance. That would obviously give you a MASSIVE equity gain, and definitely a big smile I guess!!Then you would restart a cycle.

Yes...but please remember, moving from a 20% DD to a SHORT-LIVED 0-5% DD was really rare and it happened in stages that took many months to achieve, AND depended upon the trend of the whole market (as indicated by my composite index). Also keep in mind that my duel objectives were to achieve a month-end to month-end gain in the balance of 4-5% while maintaining a “reasonable” drawdown (<20%). But as was explained in answer #3, the approach that I had to take to obtain those objectives was dependent upon the trend of the market.

I find it really interesting to see how the equity goes up and down, and at some point you were (by memory, I haven´t rechecked in your thread) at + 6% equity from your deposit (it was 100$ at the time, so around 106$. It was before the +40$ added to the account, that I am sure). Would it be better to close at that point (well... at some “positive equity” from "starting" balance point check, because obviously you do not know how far in the positive it will go) all positions, and restart a cycle (a bit like some of Samer´s crazy ideas).

That’s a very good workable idea... At the end of the month, if the month-end to month-end %gain + %DD is equal to or greater than, lets say 5%, then close ALL positions.. hmmm.... Very similar to my closing of all positions at anytime when the net %gain is ~ 1%.
BTW, I’m not familiar with Samer or his ideas..

Update as of 8:30pm EST, 8/19/14
Current month start date: 8/19/14
Current month end date: 9/16/14
Start of Month 4

Please note that I deposited $40 this morning as explained in post #83.

Account balance (8/19/14 AM): $213.60
Account balance (8/19/14 PM): $213.60
%gain = 0%
Floating P/L = -$36.85
Net Asset Value = $176.75
% Floating DD = 17.2%
Positions open: 41
Average No. units per position = 51
Margin used = $49.04
Margin Available = $127.71
% Margin used = 38%
RISK = ~$2.55 per 500 pips draw down per position (= ~$105 for all open positions)
%RISK = $105/$213.60 = 49%

Thanks Rap for your advice... I don't pay attention to the news and I definitely don't use a fixed percentage of balance approach for determining lot size... it's volatility-based, and as you know, I trade in nanolots in order to spread the risk over multiple positions (right now, each position is ~$0.005 a pip)

Hi Dave,

thank you very much for your answer.
I know it takes a looooong time to write in such a fluid and precise way (let´s say "PipEasy style"), so please do really know that I appreciate the effort.

It makes things a lot clearer by the way you explained it.

I had completely misunderstood the use of the index, because I thought that you were watching all indexes of all 8 major currencies (so really quite a lot of possibilities/guessing in the decision making), but actually you were talking about your "own" composite index built from all 28 traded pairs if I understand well. And at the moment it is trending down, very interesting.

Be sure that I´ll follow the "long term story" told in your journal with great interest, and probably will post again (don´t worry I´ll keep it SHORTER ;o)))

Have a nice day,
Cheers,
J-F

Hey J-F,

You're right. As I stated in post #1, I do have an index for each of the majors and I do look at the trend of each index that makes up a pair in order to determine if I'll be adding to an existing position (averaging down - but not in a Martingale type manner).... for example, if I have an open position of 50 units of EURJPY and the pair is currently down 400 pips**, I will look at the trend of the index of the quote currency (JPY) and the trend of the index of the base currency (EUR)... if, on the weekly chart, the JPY index shows weakness AND the EUR index begins showing strength, then I will add to the EURJPY position (e.g. 55 units - to bypass Oanda's FIFO rule, I need to have a slightly different lot size then the first position). I should note that when I add to an existing position, I'm aiming for the potential of a short-term gain (essentially, the added position is not hedged and yes these positions can also go into draw downs); the original hedge is still in place. The trend of the composite index basically dictates how aggressive I can trade (i.e. balancing the hedges - taking profit, reducing draw down) in order to reach my month-end objectives of %gain while maintaining a reasonable draw down... hope this makes sense....

Addendum
**I would be remiss not to say thanks to Sherpa for pointing out (in a private message) that instead of assessing a relatively fixed draw-down of pips to all pairs, that a better approach would be to use volatility (possibly a fixed multiplier * ATR) to determine a specific "draw-down number (DDN)" for each pair... once a pair hits its DDN, then I would assess whether to add to the position using the strength/weakness of the base & quote currency indices as described above. I'm currently testing this idea....

Dave