Every year brings with it 365 opportunities to make a difference, so did 2018 and so will 2019. The last was very exciting and challenging. Since going live with my algorithmic strategies to the public, it a was a roller coaster. As soon as you expose your ideas and start getting an inflow of investors it's a whole new and different experience.
The challenge we face as FX traders, specifically as retail ones is that we don't have enough equity to make a living out of the trading, which drives us to take more risky positions with insane leverage hoping this will make us overnight rich. Of course, in reality the market has its own rules and most of the traders gets punished for acting foolish, seeing their account gets blown. This is one of the reasons that 80% of retails traders lose money on average, a figure which can be seen on many FX brokers sites:
In 2018 I learned the hard way how risk management is critical. I got burnt with GBPUSD crash in Q1. So, if you don't want to end underwater, make sure you manage your risk properly, that's the number 1 killer to accounts. A simple calculation to check if your risk makes sense is to multiply your margin with your account leverage and divide with your equity, if the result is above 10, you better think carefully, if its over 50, one wrong move and your account will be wiped out...
For example, say my broker offers me a leverage of 1:200 and I currently have margin equals to 57.25$ with equity of 1,753.07$. Making the above calculation of 52.25*200/1,753.07 = 6.53 teaches me I am in the right risk area. Unless I am on the right side of the trend, I make sure this value stays within the 10 boundaries. Otherwise, the higher the leverage, the higher the change per pip which is happening. It could work for me, but most likely it will work against me due to volatility.
My lessons from the previous year are:
- To focus on a single currency, get to know it inside out, understand clearly what is the impact of news events on it, what are the different dependencies and so on. Forget about trading multiple currencies in a single account, the orders gets mixed and the management becomes challenging.
- Have a clear open and close strategy and stick to it. The main problem with the market is the volatility, that noise that surrounds the trend and prevents us from seeing clearly where the currency goes. There are so many moments the market goes against what I think and I get tempted to close my position and move on with my life, but that's exactly the problem, that's where the amateurs are separated from the pros. As Nassim Taleb says in his brilliant book "Fooled by Randomness", the less you look at the market, the better. The more often you check the positions, you will get turned off by volatility and what it does to your positions and P&L.
- Don't over trade! If you reach your daily, weekly, monthly goal stop trading and do something else with your time. The more you trade, the higher the risk the strategy will miss and you'll incur losses. Sometimes, I have a take profit taken already at 10:00, which leaves me free the whole day not to worry and look at the market, it's amazing feeling.
In 2018, I was operating two strategies with EURUSD as the underline:
- Day trading strategy - Focusing on short term opportunities with using scale in approach, this strategy achieved 52.26% return. It outperformed every index out there and provided myself and my investors brilliant return. December especially was remarkable, while the equities were hammered, my strategy managed to grow 16.05%.
Volatility trading strategy - focusing on volatility and momentum opportunities, this strategy had a 22.31% return. As these opportunities don't come so frequently, there were months where almost nothing happened and months (like August) where the strategy enjoyed the high volatility of the Turkish lira crises and made 8.04%.
As part of new investors, Relton Captial which is a Zurich-based private investment company operating an array of tailor-made investment strategies added my strategies to their offerings and had them published on their homepage - http://www.reltoncap.com/investments/index. These investments will help me to refinance the DARWINs I sell, so the equity grows larger and the VAR goes lower, thus ensuring better return to the investors.
This year, I am planning to introduce a grid trading based product. A strategy which is independent of market direction and driven by fixed spaced grid. Thus, making profit no matter where the market heads whether its trending or ranging. It is in a final stage of testing and about to be turned into a real account soon.
With that, I will have three different products which have no correlation between them to make up a portfolio. I normally divide my funds equally along my products, even I am tempted to put it all on the day trading one. But as they say, don't put all of your eggs in a single basket...
Besides that, I want to increase my investors streams, either by having visibility on the social media, or by letting Darwinex do their magic and show case my success on their front page. For me, ending 2019 with three DARWINs with a return of above 10% and total investment of 5 million will be considered a success.
I opened up a telegram channel to show case my day trading strategy, it is limited to 100 actions per month, where open or close order is considered a single action, so in total around 50 trades you get for free if you join t.me/ForexAlgotrading. Otherwise, for the full strategy you can either register to the signal available here - https://www.mql5.com/en/signals/450569 or invest in the original DARWIN where you can get a leverage of 1:4 as an investor.
For example, assuming you had an investor account with 25k $ in Darwinex with a leverage of 1:4, it would have translated to 100k $ investment in the strategy which will have a return of 16.05% which is 16k $. That is more that 50% on your original investment!
So, happy new year everyone and I hope you'll make it big time in 2019!