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Any ideas or suggestions on something I've been considering?
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Posted by: awty
The current 'strategy' I'm playing with in Forex trading-
(This may get long, hope nobody minds)
And, this appears to be so obvious, I'm SURE this has been done, MANY times, so there HAS to be something I'm missing. (Being as I've only been at this about a month, can I claim ignorance?)
One of the obvious flaws is that this would most likely NOT work with large amounts of funding. My personal goal is $5,000.00 a month. Feasible? I have NO idea, I'm NOWHERE near that. So far, with a lot of market movement, I've made around 1%/day. Of course, with the margin used, it's not available, but it is growing...
Most likely, 'beginners unawareness' on my part, I figure it's part of the learning process...
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Note: If anybody is familiar with programming this type of thing into a platform, I'm interested in giving it a try. Should it work out, it would be worth some $$$ to me, negotiable…
I've got a VERY rough idea on what's needed, and am investigating the first possibility. Unfortunately, while 'working' this system, it eats up time when the markets are moving quickly, limiting learning time.
Would seem that an automated solution might POSSIBLY be cost effective. Not nearly enough experience to even take a guess at it yet.
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Taking advantage of volatility in the EUR/USD pair, which appear to be the most volatile at this point.
I've been doing this for about a week so far, some good results, and some drawbacks.
These pros/cons may be platform dependent, I'm only using this on Oanda (the only place I'm trading) so far, at least.
(Automating it might be possible at Oanda, using their 'programming interface', but I'm FAR from paying $600/month just to give it a try.
Another platform might be the best to try this on. Of course, if it proves to be practical long term...
Admittedly, this is CRUDE, definitely NOT eloquent in ANY manner.
I have 2 accounts, 1 primary, and 1 sub-account.
The reason? I can't simultaneously buy and sell the same currency in the same account, the orders cancel each other.
This would seem to be the best way to handle this, gaining on both ups and downs.
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What I'm trying? Please, feel free to pick this apart. I'm SURE I'm missing many factors.
I THINK it's possible, but only have a couple of weeks at it, so NO IDEA how long term performance would be. Should the market 'settle down', effectiveness would be reduced. Volatility is very helpful working this way, it would seem.
Let's just look at the 'buy' side. The 'sell' side works the same, just the other direction. Could be done one-way, if needed, but I figure gaining in both up and down would be better. The maket moves more than the spread plus what I'm using as my 'personal profit spread', either up or down, and profit is made. AT A PRICE! (always is, isn't there!)
Please forgive my terminology, I'm VERY new to this…
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At the price point, place a trade.
NO STOP LOSS, and a take profit place (Let's say the spread plus 5 pips). The amount that goes into the trade I keep constant. Just for example's sake, figure that amount is enough to make 1 penny, if the trade is successful. No, it's not much, but there are usually hundreds a day.
When the price point moves, EITHER up OR down, if there's not already a trade at the 'take profit' point, place another identical trade, *** if the margin exists to support it. (CRITICAL) ***
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Simple. Yet, MANY factors and possibilities to consider…
When the market hits a 'take profit' point, a penny is made. If not, the trade is 'hung' until the 'market price point' hits it. (Possible this will NEVER happen, haven't figured a way around that, but with Oanda, at least I get paid interest on the funds in trade. The only loss is the use of the margin to support that trade. If that trade was set at 2.900, and the current market price is 2.200, a LOT of margin is used to support what's likely a 'dead' trade. A LOT of funds tied up until that penny is made, if at all. That seems to be the biggest risk, but getting paid interest on the trade helps. At least it only costs margin/capital. (Unless the trade is closed, at a HUGE loss!!!)
So, as the market moves up and down, trades are 'left' everywhere, eating up valuable margin/capital. Lots tied up, yes, but in a volatile market, the pennies can come in fast, presuming the margin is there to support it. The more volatile, the more margin used, up to a 'saturation point' (Haven't hit that yet, but close), and the more profits.
What's the the golden carrot? An automated system in MY account, making (hopefully) around .3 - .4%/day, long term. Possible, perhaps? The last few days, this has returned about 1%/day, but, of course, nowhere near all of that is available for withdrawal. BUT, it IS growing! Hmmm. Possibilities...
Ideas?
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Pros: # 1 - The funds are in my OWN account, completely under MY control, and, presuming the platform stays in business, might work.
Profits can be made on a minimum movement of the pairs. With a way to concurrently, 'buy' and 'sell', profits can be made when the pairs move both up and down. No thinking or strategy involved. Could easily be done by machine, with small risk of a loss if the machine interface fails. Since stop losses are not used, that's not a problem. Seems that the worst 'likely' scenario would be that trades would not be placed, therefore no losses, only reducing profits.
NOT dependent on any analysis.
Usage on any currency pair would appear possible.
Risk of 'slippage' would appear to be minimal.
Cons: Exposure is HUGE. Margins are eaten up EXTREMELY quickly, seems best to keep the most in trade as possible, I haven't figured out the 'points' to use yet, just 'playing' for now. Tuning would obviously be needed, I'm not doing any calculations right now, just taking really rough guesses.
Hundreds of trades a day.
*** NO stop losses are used, defeats the purpose ***
Orders can get 'hung' outside of the 'trading range', and possibly never 'hit', using up capital and margin.
On the Oanda platform, interest is paid on certain outstanding trades, so far this little 'problem' is not costing me anythingI'm THINKING that automation, PROPERLY done, might help to reduce the effects, as, manually, I may be going farther 'out of the range' that I need to, and an automated system might be able to keep up with movements, rather than me having to compensate.
***** (I've seen a trade that should have made me 3 cents eat up $100 capital/margin - If I closed it out, It would cost me that $100, and I wouldn't even get the 3 cents. The price of 'playing' this way.) *****
Automation possible? Would seem so.
Margins, and usage of them, would need to be calculated for the worst possible scenario for every trade. This would need to be tracked closely (Best by machine, I'm thinking), and a percentage added in for profit to be taken out, without affecting operations.
Amounts in trade could possibly vary, for several reasons.
Still thinking this stuff over, SEEMS possible. MUCH thinking/planning to do. The 'plan' is still very rough, but appears to have promise...
Any questions, comments, problems, or suggestions are welcomed!
Jeff (awty)