EUR/USD Ranger - Week 3

Greetings fellow Zulutraders. For week #3 of my EUR/USD range trading system, I picked up an unimpressive +21 pips. Even less impressive was than out of 15 trades, I miscalculated the stops of 4 of the 16. For 2 of the 4, that resulted in getting stopped out with a -20 pip loss instead of the full -120 pips. On the other 2 cases, I set the stop at a value greater than 120 pips and ended up winning +50 pips on a trade that went -125 pips against me before coming back for a 50-pip profit. If I figure correctly, I would have been stopped out at -120 pip losses for the 2 that I got out without only a 20-pip loss. So I would have done much worse without those mistakes.

In retrospect, Monday, Tuesday and Thursday were good range trading days, and I closed 100 pips each day on those days. But Wednesday and Friday were strong trending days - to the downside for EUR/USD which caused range trades to buy below the market, and sell even farther below when EUR/USD broke down.

Lessons learned - calculate the stops carefully. How hard is it to subtract 120 pips from 1.3600 - come on, its 1.3480 not 1.3580. Second, don't trade a ahead of big economic reports. Keep on top of the economic events calendar. Big trends can start (or continue) once those reports are released. Range trading works better in the sleepy in-between hours of 12 noon EST and say 2AM EST. By then the London guys have packed it in for the day, and most economic data has been released. Third, I need to start looking at hourly ADX, or some other trend activity indicator to avoid range trading when there's a strong trend in place. More to come on that.

HomerPoet morphs into mmtwta

Greetings fellow Zulu-Traders. By now you must all think i'm obsessed with HomerPoet since I blog about him repeatedly. Well he has made some progress rebounding from some recent drawdowns. Even so, he's down over -1500 pips from his top at +2000 pips which puts him into the risky provider category. Despite these blotches in is record, he still has better than 95% profitable trades. In any case, due to these stains on his record he probably figures its better to make a fresh start to gain a new following. Thanks to the Zulutrade's feature we know when an old provider assumes a new identity. As of last week, Homerpoet re-emerged under the new name mmtwta.

So far he's off to a solid start with 5 straight profitable days picking up +325 pips. Also, he's got 100% profitable trades which should garner some attention. This time he's taking between 25 and 30 pips profit per trade. I would like to see this number much higher - closer to 50 pips. That will help to overcome that occasional excursion beyond -150 pips which would be my expected stop.

I added mmtwta for one lot with a 150 pip stop. I live to regret it, we will see.

High Rollers on the rebound?

Zulutrade provider High Rollers is a great example of how good (and bad) a signal provider can be. Me and a group of other bloggers traded High Rollers signals for weeks with good, profitable results. In fact at one point in mid-march, he had accumulated over 5,700 pips over a 3-month period on Zulutrade without a single loosing trade! Even more impressive, every one of his trades had less than 150-pips drawdown. He seemed to be a money machine, and while he only seemed to come out of hiding on Thursday late in the day UK, time, who cared, he was profitable and in a big way!

Well all was happy in Zulu-land until the fateful day of March 12, 2009 when High Rollers made a series of trades selling GBP/JPY. Those trades went horribly wrong and instead of cutting losses, he went most of them run to the automatic -500 pip stop built into the platform. One some of the trades, he lost nearly -1000 pips! The graph on left really tells the story. He went from +5700 pips to -5600 pips or an incredibly -10,000 pip loss in less than a 2 week period.

This move did some damage to my account and nearly torpeoded by Zulutrade experience. As is stands now, i'm still hanging on by a thread and down just over 20% from my initial $10,000 investment. To be fair, I made some manual trades to try and make up for those losses, and my manual trades went bust also. For the gory details, see my previous post called "Account Blow-out".

Well, High Rollers seemed to snap out of his loosing ways on 3/25 and cleared his books of all the losing trades. On 3/26 and 3/27 he made back about 400 pips in a 2 day period. Granted, I would not have made that much since I would limit him to 2 open positions. But in either case, he seems to be on the rebound. I may add him back this week and see what happens.

2 items for consideration:

1) When a provider seems to go "off the rails" like this, how about adding him in but using the "reverse" button on the Zultrade platform. Does anybody have any comments on this tactic?

2) Since High Rollers still has a relatively high number of subscribed users (236) he still has a high-incentive to trade his way back to profitability. Human nature is to shy away after a large loosing experience and come back only another good track record has been established. But by then, much of the gains have already been made back.

So for now, the jury is out on whether High Rollers has put in a bottom. Let's watch the coming week for additional signs of recovery.

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Oxford Gobal FX Fund is back!

After a one-month hiatus, Oxford Gobal FX Fund is back!

I wasn't paying any attention to my account on Friday and I took a look on Saturday afternoon and was pleasantly surprised to see a 9 pip-winner!

Yes, I know global is spelled wrong, but that's the way its listed. I don't think Gobal is even a real word, tried to look it up and found nothing.

Oxford is now the last provider standing in my account. Perhaps with some monitoring of this provider, I can get my account back on track!

Click here to open a free Zulutrade account

EUR/USD Ranger - 3/23/2009

Monday Morning March 23, 2009. EUR/USD showing excellent range trading conditions with a nearly 180-pip range. Entering an order to sell 1 lot at 137 and buy one lot at 136.

We'll see how it works out.

Zulutrade - Food Chain

Greetings Zulu-Traders-

I said in my first post that Zulutrade is a fascinating on-line economy. Every economy has it winners, losers and more to the point, its food-chain. Its important to understand where you fit into the food chain to surmise your odds of making a profit.

At the top of the Zulutrade food chain in the Foreign Currency Merchants (FCM) themselves. Tops among FCM's is FXCM - by size many times larger than all the other FCM's combined. Their resources, tools, and staff are unmatched in the retail FX market.

The FCM is compensated for making a market in the currency by the spread - or the difference between the rate at which you buy and sell. FXCM originally started with a fixed-spread going down the 1/100'th of a cent per currency. For example for EUR/USD, they would sell to you at 1.2745 and buy from you at 1.2748 or a 3-pip spread or 0.03 of one cent.

After some pressure from the competition, FXCM went to a 5th decimal place and the spread started to look more like 1.36117 by 1.36153. But while they added a decimal place, they also introduced the "dynamic spread." Instead of the spread being a fixed amount, they changed it to a dynamic spread that could be widened when activity was slow and narrowed when activity and competition was more acute. I haven't studied the spread and its variance because it doesn't play heavily into my figuring as to how I can profit from FX. Even so, its good to be aware of the spread and it's always implied as the cost of doing business in FX.

While the FCM can sometimes be your enemy in the FX market, for the small trader like myself they are a benevolent dictator. They are available 24x5 to execute a position electronically. While the market is open, the will honor stops on your positions, even if the market gaps through your price. For example, if you are long EUR/USD at 1.3550 with a stop at 1.3420, and news comes out and the market gaps down to 1.33, they will honor your stop at 1.3420. Try to find that type of treatment in stocks, options or futures! Forget about it, doesn't exist!

The FCM works against you in slow markets when using tight stops. Let's say you see a quiet, low volume and downtrend in EUR/USD and you short at 1.3550 with a stop at 1.3570. Even though there's little activity, and not much going on, it's typical to see a quick (one tick) gap up to 1.3570 to take out the stop followed by a quick return to the downtrend. Bottom line - don't use tight stops especially during slow times, because the FCM will pick you off.

Next in the Zulutrade food-chain is Zulutrade themselves. They are the true pioneers in FX-autotrading and I owe my ongoing interest in FX and this blog to them. Zulutrade takes a part of the spread normally taken by the FCM. In other words, instead of the FCM taking 3.5 pips per trade, FCM gives 1.5 pips to Zulutrade for acting in the capacity of a "referring broker." Zulutrade's cut is the 1.5 pips per trade, and they profit whether the signal provider makes money or not.

Next on the Zulutrade food chain are the Signal Providers. They are the worker-bees the Zulutrade system and they take 1/2 pip per lot or 50 cents per mini-lot or $4 per full-size lot. I suspect a small set of Signal Providers make most of the money on Zulutrade. Their goal is to entice as many Zulutrade users as possible to follow their signals. They make money per-transaction (as opposed to profit earned) so they have incentive to make many trades and show the maximum profit when reviewing their trade history.

Unfortunately, signal providers often stick with losing positions for days, weeks, or even months. Classic example, is provider Auto-fx who has an incredible ROI, and an incredibly high profitable trades (87%). He will put on a trade, and then just wait, days, weeks or months for it to become profitable. Looks good on paper, but its a lousy system in reality. A classic rookie mistake is to review a provider's Zulutrade history, be enticed by their performance, then be unpleasantly surprised by a 300 pip gap down - usually first thing in the morning.

Next on the Zulutrade food chain are the affiliates. These are people who have signed up to promote Zulutrade to their contacts, friends and family. I signed up to be a Zulutrade affiliate and as a result, I would get 0.4 pips (about 40 cents US) per transaction for people I signed up. Not a bad deal overall considering the entry costs are nil. Just sign up as an affiliate and ZT will give you a web site like mine at http://zulumon.zulutrade.com/. It's a great concept in multi-level marketing. But if you can't make money from Zulutrade yourself, referring your friends and family is a sure way to sour relations with your friends and family. As Suze Orman says, People first, then Things, then Money.

Finally on the bottom of the Zulutrade food chain is you the Zulutrade auto-trader. Money from your trades pays everyone else up the food chain - whether you make money or not.

I don't deny that Zulutrade auto-traders have made money However, I haven't found anyone who has actually made money using Zulutrade so I suspect they are scarce. Don't get me wrong, I like Zulutrade and wish them success. Perhaps I have a future as a Zulutrade signal provider - up 2 levels in the food chain from my current spot as a (defunct) Zulutrade investor!

Go slow and be careful!

EUR/USD Range trading - more questions

Hi all-

This week's experience with range trading brought up a few questions I hadn't considered. Here's how I dealt with them:

Question - What happens if the range is less than 100 pips when you wake up ((like it was Thursday AM)?
Answer - Wait for at least a 120-pip range to emerge before calculating any entries/exits. Check back at 10AM.

Question - What happens if you get stopped out on one or more positions? Dealing with a limit of 2 lots max.
Answer - Don't take any more trades that day. Wait for a new range to establish itself the next morning.

Question - What happens if EUR/USD is close to the high (or the low) of the day when you calculate the ranges?
Answer - This might be a trending day, so step back and look at the large time frames. If you suspect a strong trend is in place, don't trade. Otherwise, wait for a 30% range pullback off the high, then add 50 pips and that's your sell signal. In other words, sell above the market or buy below the market.

Never enter close to the high (or low) of the day, since a pullback is likely. Instead, wait for a retracement. Don't take any position that attempts to pick a high or low. Wait for a pullback, you will most likely get it.

Good trading all.

EUR/USD - Range Trading - Week 2

Greeting fellow Zulu-Traders.

It was a wild week in forex, and I had a decent week #2 with my range-based EUR/USD trading system. As you recall, the idea is to pick a range-based entry into EUR/USD and immediately enter a 50-pip limit 120-pip stop. The idea being that if you are going to risk 120 pips on a trade, you have to make at least 50-pips on profitable trades to keep a decent chance of making any money. Keeping that ratio, if you win on 3 out of 4 trades, you will make money.


The week started off well with good range-trading conditions from Sunday evening EST until Wednesday AM. By Wednesday I had bagged 296 pips for the week with with 6 straight winners. I knew the US Fed news was due at 2:15 EST on Wednesday. But since they had already cut rates to 0%, what else could they do? Besides, EUR/USD looked pinned at 130 even. Having made money on both sides of 130, I went both long and short EUR/USD at 130 with a 50-pip limits on either side. Plus I had an order to go short at 130.80 from earlier in the week.


After the Fed news came out, EUR/USD had a huge 1-day rally and printed as high as 135 on Wednesday. I took a profit on the long position from 130, but got stopped out of both the short position at 130 and again on the short position at 130.80. Even so, based on the profit/drawdown ratio, I was still netted 160 pips for the week even after the two 120-pip drawdowns!


Thursday was a consolidation day and I managed to pick up another 50-pips. By Friday, excellent range-trading conditions had returned and I pulled out another winner. What the record doesn't show is that I went long again at 136 and came about 2-pips from taking another winner at 136.50. I stayed with that position and EUR/USD went out at 1.3563, down about -37 pips from my long entry. I'm hoping to see 136.50 (limit) before we see 134.80 (stop). We will probably have an answer by Monday morning EST.

Range Trading EUR/USD

Greetings fellow Zulu-traders.

One thing I learned from my Zulutrade experience is to pay attention to amount of profit taken on trades versus the amount of drawdown as represented by the stop-loss value.

Trading with HomerPoet, I was using a 150-pip stop and HomerPoet would routinely take profits at when was up +15 pips. He later increased it to +20 pips. That means that Homer Poet would have to have 8 profitable trades for every one looser to do better than break-even. That wasn't a problem for the most part and at one point he has as many as 19 straight winning trades.

But it go me to thinking - does it make sense to risk $150 to make only $20? It is reasonable to assume you winning trades are going to outnumber you loosers by 8 to 1?

So I started playing around with a HomerPoet like system in my demo account this past week. I would to is pick an entry point in EUR/USD and immediately enter a 40-pip limit and a 120-pip stop. At times, would go both long and short at the same time and enter the same limit to stop ratio and just let it ride.

The results were impressive. It took 14 trades this past week and got stopped out twice with a -120-pip losses but closed out with a profit 12 times for a total of +600 pip profit. Had I used Homer Poet's 20-pip limit, I would have just broke even. Once I spaced out an took 2 100-pip profits because I miscalculated the stop.

I play around with 2 alternatives later in the week:

1) Increasing the limit from 40 pips to 50 pips

2) Entered orders using thing range-based formula. I would do the calculations when I woke up New York time when the EUR had already been active for a few hours:

Basically calculate the daily range by subtracting the low minus the high. Then add 1/2 the range to the current price to get a buy point and subtract 1/2 the range from the current to get a sell point. Do the same except sell when the price is 1/2 the days range above the days high and buy when the price is 1/2 times the range minus the days low.

Note this strategy is completely range agnostic - it pays no attention to the trend, support, resistance or anything like that.

So i'm going to run a similar system in my demo account for a while and see how it makes out. Let me know if you can think of a smarter entry algorithm. Good luck all!

Account blow-out

Greetings fellow Zulu-traders. I'm sorry to say that my Zulutrade experience has come to unpleasant conclusion.

I suspect the same happens to many other fellow traders/bloggers including our friend over at http://www.zulutradeblog.com/. His last post was on February 25, and we haven't heard from him since. He has probably blown out as well. So rather than leave you all wondering what happened, here's my story. Perhaps you can learn something to avoid a similar fate.

All was going well as of about Wednesday of this past week. My account was standing at about $9200 after an initial investment of $10,000 late last year. I had been through a series of providers with some questionable characteristics. I had been as low as $8600 and was struggling back to even and about 2 weeks ago was back up to as high as $9600. I had settled on the 3 providers listed last week and was holding my own.

Between 3/9 and 3/10 HomerPoet pulled in 4 straight wins and I was looking good. All was well until Wednesday when he went short at EUR/USD at 127.10. That trade went badly wrong and I was stopped out for my -150 pip stop times 2 or a $300 loss. I did a manual trade and tried to go short 2 EUR/USD figuring my stop was just a bit too tight, but that didn't go well either and I lost about 24 pips on that trade as well.

On Wednesday, our friend High Rollers came in a day earlier than usual and sold GBY/JPY in the late morning EST which is his pattern. This time he appeared to struggle and his first 2 trades went -66 pips into the red, but I hung in there and he came back and closed them for a small profit. the same thing happened early Thursday.


He could have call it quits then, but he came back and sold GBP/JPY again at 134.70 and again and 134.85. This time his luck had run out and the dealing desk at the FCM were finally in charge, ready to get their revenge and run some stops. Run they did and by the end of the day I was dangerously close to my 150-pip stop at about 136.25. Figuring this run had to be over, I raised by stop to 200 pips at 136.75 and tried to hold on. It amazing how the charge toward 136.26 seemed to slow as soon as I pulled my stop.

At this point, GPY/JPY began to slow and I was in all-or-none mode because I knew if I was stopped out of High Rollers, I would be down to $8500 and close to my mental stop-loss for this account of about -15%.

So I took one last chance and sold 2 more of GBP/JPY at about 135.98 (this time with -150 pip stop) figuring a move back to the low 131 where it was just 2 days prior would bring me well back into the green. In the midst of the Thursday action, HomerPoet came back in and sold EUR/USD again at 1.2828 and that was going badly also. So at this point, i'm short 4 GBP/JPY and 2 EUR/USD, looking at about a -700 loss if just the GBP/JPY's go bad. At that point, I did what every currency trader must to do at some point - I went to bed!

Friday morning came around and I was nervous logging in because I knew it could be ugly. Sure enough GBP/JPY rallied again and look out my 200 pip stops in addition my 2 additional trades put on. At this point, i'm down at about $8100 and well below my walk-away figure.

At this point I put disabled my account and waited for HomerPoet's trade to stop out. As of Friday, EUR/USD was at 1.2918 with my stop at 1.1978. I expect i'll be stopped out of this before Monday morning in NY and leave my account with just under $8000.

Lessons learned:

- There is no such thing as a safe signal provider

- Its not smart to let other people trade your money for you because you can't tell when they are just being lucky - and when their luck is eventually going to run out which everyone's luck eventually does. Remember these people could be playing with fictional money and can take a whole lot more pain than your live account can.

- Currency trading requires large drawdowns - don't even bother with a stop less than -150 pips. And -150 pips probably isn't large enough.

- Don't try to fight the market and trade your way back to even because the market owes you. It doesn't and it won't pay you back on trades 5-6 just because you lost on trades 1-4.

- Based on a mini (10K) position size, $1,000 isn't enough. In fact, in my case, even $10,000 wasn't enough.

I haven't given up on currency trading, and i've learned alot from Zulutrade, but i've given up on trying to make money by picking signal providers. More to come.

Current Providers - 3/9/2009

Here are my currently selected providers:

Oxford Gobal FX Group - 1 lot 1 Max Total Open trades - 150 pip stop
Homer Poet - 2 lots - 1 Max Total Open trades - 150 pip stop
High Rollers - 1 lot - 2 Max Total Open trades - 150 pip stop

Click here to open a free Zulutrade account

Update on High Rollers

Here's an update on last week's observations regarding Zulutrade provider High Rollers.

As expected High Rollers was idle until Thursday. But this week, he came in earlier in the trading day at about 8:30 GMT or about 3:30 AM EST. He took only 2 trades, one at 8:30, and another at 8:35. He exited both positions at 8:38 and took 22 pips on the first trade and 28 pips on the second trade. I was setup for 2 lots per trade, but limted to 1 open trade per provier per currency, so I bagged 40 pips in an 8 minute period!


In terms of lessons learned, we clearly have the correct day of the week, and the correct half of the day (AM GMT), but we are still missing the entry signal. Taking a look at the chart, we are looking at a triple top pattern playing out over an 8-day period. The sobering part of the analysis is that the entire week's trading activity happened within the single bar under the blue arrow. How's that for selectivity?

The only downside is that good currency trading can be pretty boring most of the time. I am having a similar experience with HomerPoet, but i'll cover that more in another post.

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Providers i've blown out of

Here are a list of all providers I have blown out of:

Auto-Fx
Conciendo el Forex
FxMarkets,
Lost Treasure
JZFX
Pasto Pasto
FxGrandius
Hehehe <- still like him though
ProB5
Probability based Wave 5
FxCompass
LoCuS4ALZ
ScalperGirl
Trendpipeater
New Signall
shorttrade

FxCompass blow-out

I added FxCompass on 3/3. He had a fairly low winning trade rate (41%), but I was impressed with the way he took losses and didn't let a trade go more than 100 pips against him.

He lost on his first 2 trades, and I was surprised he took the losses. Homerpoet would just let it ride. Well take losses he did, on the first 2, buying EUR and GBP in a sliding market. On the third trade, he went the other way on GBP selling and took a loss on that one as well. So now he's trading the same issues in opposite directions the same day and loosing on both sides! That's a red-flag for me.

I figured after 2 straight losses, he was due for a hit. In his history, he never had more than 3 straight loosing trades.

So he went long EUR and GBP again, and this time made some pips. The EUR position was up as much as 80 pips and the GBP position up as much as 40 pips. At this point he had profit, but not enough to make up for the prior losses. But instead he let these positions erode into yet another another loss.

At this point I figure he's broken up with his girlfriend or something and is taking it out in the Forex market. I gave him one more try, and he lost again on 2 trades. At that point I had to pull the plug.

This provider cost my account -356 pips in one 24 hour period. Show again what a minefield picking providers can be!

GBP/JPY - Fascinating Observations

Signal Provider High Rollers once again had an amazing week and has earned by almost 600 pips since adding him back on 1/27 without a single loosing trade. Even more amazing, he's done it without more than 100 pips drawdown on any given trade! This performance begs the question - how does he do it?

Well, as Yogi Berra said, "You can observe a lot by just watching." Looking at trade history, High Rollers came in and sold GBP/JPY on the past 4 Thursday mornings at about 11AM EST. This would correspond to about 4PM GMT, right about the time the UK-based traders are calling it a day - and before the Asia based traders are coming in. For me, that's just too much of a co-incidence.

I took at look at the charts, and for the past 3 Thursdays GBP/JPY topped out late in the morning on a Thursday. Maybe they have to square positions ahead of the weekend? Maybe its options positioning? Maybe its what time High Rollers gets home from work? Who knows, but it seems to work.

This chart shows the last 2 Thursday at 11AM. The prior Thursday 2/12 also had a similar pattern. Even more interesting is that provider No Drawdown has also sold GBP/JPY the last 4 Thursdays late in the day - although much later in the day than high rollers. Based on the action, there's a solid 12 hours of downside action after the Thursday top.

Let's watch for this coming week. If this works out, then we could make most of our money in the trading week between Thursday noon and Friday noon EST.