Forex Made Easy: Money Management Is Everything

Day 20

2007-08-08T19:37:00.001-07:00

Test

Day 19

2007-08-07T19:44:00.000-07:00

Tuesday, August 7 Account Balance: $1,063.28

Trades for today:

4300 GBP/USD sell@ 2.01940
5100 AUD/JPY long@101.217
4300 EUR/USD sell@1.376

Results of those trades:

GBP/USD: -25 pips
AUD/JPY: -24.7 pips
EUR/USD: +4.7 pips

Total for day: -45 pips, -$18.99, -1.79%

So today finally broke the losing streak at 14, though the win was pathetic and purely symbolic.

Since I have pledged to keep this experiment going until the end of the month, I will look upon today's puny 5 pip single trade win as a sign that the highly improbable barrage of losses, (odds are 1 in 16, 384 against it occurring) is over, and that the Propooko system has managed to survive 5 days in hell, and still come out with a 4.5% profit.

So here's hoping for a brighter tomorrow, and may a barrage of TPs break upon this system and drown it in profits:)

Good Night and Good Luck to all Traders

Day 18

2007-08-06T19:27:00.000-07:00

Monday, August 6 Account Balance: $1,094.44

Last night EUR/GBP took profit of 50.9 pips and $23.23

Today's trades were:

5200 USD/JPY long@ 118.879
5200 EUR/JPY mailto:short@%20163.874
4400 EUR/USD mailto:short@%201.37869

Results of those trades:

Disastrous: all 3 stopped out for combined loss of -75 pips, -$32.88

That makes 4 days of 0-3 trades, 12 losses in a row that has decreased the cumulative profit to 6.44%.

I think part of the reason for such terrible luck goes beyond statistics and can be explained by correlated pairs.

Today for example 2 of the trades were betting on the EURO weakening.

Due to a very strong German Manufacturing report, the EURO strengthened and 2 of my trades stopped out.

I will run continue to run this system at least to the end of August and hope that the laws of probability improve my performance through the rest of the week.

Day 17

2007-08-05T20:38:00.000-07:00

Sunday, August 5 Account Balance: $1,106.15

Today trades:

5200 GBP/JPY long@ 240.264
4400 NZD/USD long@ .7593
5200 AUD/JPY long@ 100.662

Results: all 3 stopped out for combined loss of 72.6 pips, -$32.2, -2.91% for the day.

Open trade:

EUR/GBP Long: +26.6 pips, SL is now set to +10.

Overall this pair is a very slow mover, but the 1 day charts look good, so hopefully this trade can TP and break the stunning 9 in a row losing streak.

Odds of that are 1 in 524, so hopefully tomorrow the system can begin climbing out of the hole.

It's certainly possible, since a 3-0 day tomorrow, along with EUR/GBP TPing would mean 4 wins in a row, which would bring the system back to +15%.

Here's hoping for some stunning statistical irregularities, this time to the winning side:)

Good Night and Good Luck to all Traders.

WEEK 3 SUMMARY

2007-08-03T20:48:00.000-07:00

% winning trades for week 3: 44.44%
% Cumulative winning trades: 50%
Pip Profit for week 3: -6.2 pips
Cumulative pip profit: 240.8
$ Profit for week 3: -$5.16
$ Profit Cumulative: $106.18
% Profit for week 3: -.46%
% Profit Cumulative: 10.62%
% Weekly Gains so far: 3.42%/week

Annual Returns extrapolating over 52 weeks, 475.16%

Overall this was a bad week, though -.46% is a fairly good "bad week" to have.

Hopefully the full power of statistics will soon come into play and the recent down trend will reverse and we can have some 2-1 and 3-0 days.

Also note that, as expected, 50% of trades were winners, and 50% were losers, yet a decent profit has been had.

As the experiment plays out more and more trades means a larger sample size and thus the % of winning trades should stay pretty close to 50%, and 50% winning trades means consistant profits for the system.

What this basically means is that , 3.42% weekly performance matches perfectly with what one expects in the long term, meaning that this system should be able to double after 21 weeks.

Day 16

2007-08-03T20:34:00.000-07:00

Friday, August 3 Account Balance: $1,137.76

Trades for today:

5400 AUD/JPY long@ 102.144
4500 GBP/USD short@ 2.03607
5300 CAD/JPY short@ 112.738

Trades from yesterday:

USD/JPY long, stopped out for 24 pip loss
USD/CHF short, stopped out for 25 pip loss

Results of today's trades, very bad, all stop outs

Total for today:

Pip profit: -119
$ profit: -$54.07
% profit: -4.75%

Trade still open: EUR/GBP long, up 8.9 pips

Overall the last two days have been horrible, however, when one compares the results of all days one finds, 3 out of 15 0-3, 2 out of 15 3-0, 6 out of 15 2-1 and 4 out o 15 1-3.

Each should be about 25%, so 1-3 is about right, while there will be more 3-0 days in the future, so the system should be able to set new records no problem.

Day 15

2007-08-02T20:46:00.000-07:00

Thursday, August 2 Account Balance: $1,148.56

Today's Trades:

5500 USD/JPY long@ 119.159
5500 AUD/JPY short@ 102.185
5500 USD/CHF short@ 1.20376

Results Today:

Closed Trades:

AUD/JPY short: stopped out for 23.4 pip loss
EUR/USD long: Take Profit of 50.1 pips

Open Trades:

EUR/GBP long: -4.2 pips
USD/JPY long: +10.1 pips
USD/CHF short: +6.9 pips

Total for day:
pip profit: 26.7
$ profit: $11.70
% profit: 1.02%

Projections on open trades: (Note has no bearing on the system whatsoever, I just want to hone my technical skills in case the Propooko system fails, though it appears to be solid)

Looking at the 1 hour charts, here are things as I see them going into the night:

EUR/GBP long: RSI 54.28 and headed up, indicates a moderate upward trend
Stochastic: 77.86 headed up, indicates good volume of buyers vs sellers but warns that this pair is becoming overbought, trend may soon reverse.
CCI: 87.51 and still inching up, indicating a strengthening upward trend,
Pair has recently broken through 34 day ema, which verifies a moderate upward trend that may continue for another day, and perhaps bring this pair up to 20 pip profit where I will change SL to +5 and thus gurantee a win.

USD/CHF short:RSI is 42.84 and not moving up or down, stochastic 10.87 and looking as if it will swing upwards, indicating this pair overbought and will soon rise, CCI -90.46 and starting to climb, indicating this pair will soon reverse and thus bad news for the shorted position.

I can only hope that it dosn't rise 30 pips or more and stop out, but rather move against me a bit, and then start a prolonged trend in my favor, like EUR/GBP did last night. Unfortunately I can't touch this pair unless they get to 20 pip profit or higher, at which manual trailing stop loss rules go into effect.

USD/JPY long:

RSI 57.08, not moving up or down, stochastic at 65.77 and headed down, CCI 70.99 and headed up slightly.

Overall trend is long, so this trade is looking good in terms of its chances at taking profit.

So overall of the trades I still have open it looks like there is a good chance that 1 will TP, 1 may reach 20 pip profit and become a guranteed if not smaller profit, and 1 may stop out.

So based on how the 1 hour charts look I project an additional 30 pip profit on top of the additional 26 that executed today.

This should put the Propooko system at about $1,173.00 by the end of week 3, a new record and thus a great place to end the week.

Of course tomorrow morning around 9-10 Eastern, I will have to make 3 new trades, which may all stop loss, which would be a set back, especially if my projections turn out dead wrong.

Or I could experience a hat trick and see 3 TP on top of TP from all my current positions which would put the system at $1,280.00, 28% profit in 3 weeks.

Well, here's hopeing for a good, profitable and record breaking end to week 3.

And please don't forget to take part in the poll, its the only way I can get some idea how many people are reading this blog.

Good Night and Good Luck to all Forex Traders.

Day 14

2007-08-01T19:38:00.000-07:00

Wednesday, August 1, Account Balance: $1,136.96

Today's trades:

4500 EUR/USD Long @ 1.36605
5300 AUD/JPY Short @ 100.945
5400 GBP/CHF Short @ 2.44122

Results so far:

GBP/CHF short stopped out for -23.8 pips
AUD/JPY short took profit for 51 pips

Both EUR/USD and EUR/GBP Long are still active, with EUR/USD u-.1 pip and EUR/GBP down 9.5 pips as of 10:47 PM eastern.

So for today I am up 27.2 pips, and hoping that the Euro strengthens during the night.

Looking at the 1 hour EUR/GBP chart, I see 20 day CCI is -99, full stochastic 19.2 and headed downward, and RSI is 38 and headed down.

Looking at the EUR/USD, 1 hour chart, CCI -2 -46 and headed up, stochastic 14.85 and headed up and RSI 44 but headed up.

So EUR/USD might survive but EUR/GBP looks like it will stop loss, so sad, but what can you do?

At least 1 take profit offsets 2 stop losses which I have today, and perhaps the EUR/USD can TP as well, which would be nice.

On a seperate note, please feel free to comment on the expirement or on how to imporve the blog.

Good night and good luck to all traders.

Day 13

2007-08-01T11:26:00.000-07:00

Tuesday, July 31 Account Balance: $1,159.02

Trades for yesterday were:

2250 EUR/GBP long@ 0.67358
4600 NZD/USD long@ 0.77088
5500 EUR/CHF long@ 1.64788

Results of those trades:

EUR/GBP: still open and down 2.5 pips
NZD/USD: stopped out for loss of 24.8 pips
EUR/CHF: stopped out for loss of 23.8 pips

Total for day: -48.6 pips, (only counting closed trades)
-$22.19
-1.91%

Some notes:

1. Today, August 1, is day 14, I will post today's trades this evening, (It is 2:35 PM eastern as I write this). So as of today this blog is caught up.

2.I apologize for giving the incorrect name of the system, it is propooko, much easier to pronounce than the gibberish I gave in the introductory post.

Day 12

2007-07-31T11:22:00.000-07:00

Monday, July 30 Account Balance: $1,122.06

Trades for that day:

5300 EUR/JPY long@ 162.04500
4500 NZD/USD long@ 0.76153
5300 CAD/JPY short@ 111.21800

Results of those trades:

EUR/JPY: stop out profit of 20.5 pips
NZD/USD: take profit of 52 pips
CAD/JPY: stop out profit of 5 pips

Total for day: +77.5 pips
Total dollar gain for day,(It just now occurs to me you may be more interested in this than pips, my apologies) $34.74
% gain for the day: +3.1%

Day 11

2007-07-31T10:45:00.000-07:00

Sunday, July 29 Account Balance: $1,111.34

Trades for that day:

2200 EUR/GBP long@ 0.67448
5300 USD/CHF short@ 1.20665
5300 EUR/CHF long@ 1.64650

Results of those trades:

EUR/GBP: stop loss profit of 5.2 pips
USD/CHF: take profit of 50 pips
EUR/CHF: stop loss of -25 pips

Total for day: 27.2 pips

An important note, in the introduction post I said there are 15 currency pairs that have spreads of 4 pips or less, I was wrong there are 16, GBP/JPY is usually 4 pips but when I checked on Oanda it was 6 at the time, so I apologize for the mistake.

The good news is that this change will not effect the expirements, since from the beginning I have actually been useing 0-15 for the random number generator, and GBP/JPY (10) hasn't ever come up.

WEEK 2 summary

2007-07-30T17:27:00.000-07:00

% profitable trades this week: 61.1%
% Profitable trades cumulative: 53.3%
Pip Profit this week: +248.4
% Cumulative gain: 11.11%
%/week: 5.4%
Annualizing cumulative weekly performance to extrapolate annualized performance: 1,541%

Note: This week was a very good week, though I know that extrapolating the 2 week performance for a whole year is insane, wouldn't it be a pleasent surprise if it turned out to be true;)

Day 10

2007-07-30T17:23:00.000-07:00

Friday, July 27 Account Balance: $1,098.26

Trades for that day:

5300 USD/CHF short@ 1.21071
5200 CAD/JPY long@ 112.74600
5200 CHF/JPY short@ 98.23000

Results of those trades:

USD/CHF: stop loss profit of 5 pips
CAD/JPY: stop loss of -24.8 pips
CHF/JPY: take profit of 52.4 pips

Total for day: +32.6 pips

Day 9

2007-07-30T17:18:00.000-07:00

Thursday, July 26, Account Balance: $1,139.34

Trades for that day:

6700 EUR/JPY short@ 163.44900
5600 AUD/USD long@ 0.87649
6700 AUD/JPY long@ 104.52900

Results of those trades:

EUR/JPY: stop loss of -23.9 pips
AUD/USD: stop loss of -24.9 pips
AUD/JPY: stop loss of -24.9 pips

Total for day: -73.7 pips

Day 8

2007-07-30T17:10:00.000-07:00

Wednesday, July 24 Account Balance: (I apologize for the confusion of how I wrote up the previous Account Balances, I copy the Account balance from Oanda each day before I place the trades, so actually each previously stated balance was from after all trades closed and interests were paid. From now on I'll report what the balance was prior to placing the trades) $ 1,094.02

Trades for that Day:

5200 GBP/CHF short@ 2.49115
5200 USD/CHF short@ 1.2142
5200 USD/JPY long@ 120.33000

Results of these trades:

GBP/CHF: take profit of 52 pips
USD/CHF: take profit of 50.5 pips
USD/JPY: stop loss profit of 5 pips

Total for day: +107.5 pips

Day 7

2007-07-30T17:05:00.000-07:00

Tuesday, July 23 Account Balance: $1,082.84

Trades for that day:

5300 EUR/CHF short@ 1.66532
4600 EUR/CAD short@ 1.43099
5300 USD/JPY short@ 120.64000

Results of those trades:

EUR/CHF: stop loss -25.3 pips
EUR/CAD: stop loss -24.6 pips
USD/JPY: take profit of 50 pips

Total for day: +.1 pip

Day 6

2007-07-30T16:58:00.000-07:00

Tuesday, July 23 Account Balance: $1,071.00

Trades for that day:

4200 EUR/USD long@ 1.38140
5100 CAD/JPY short@ 115.61500
4100 USD/CAD short@ 1.04612

Results of these trades:

EUR/USD: stop loss profit 5 pips
CAD/JPY: take profit of 50 pips
USD/CAD: take profit of 50 pips

Total for day: +105 pips

DAY 5

2007-07-30T16:53:00.000-07:00

Monday, July 22 Account Balance: $1,018.01

Trades for that day:

4900 EUR/CHF long@1.66075
5000 AUD/JPY long@ 106.79000
5000 EUR/JPY short@ 167.76500

Results for those trades:

EUR/CHF: take profit of 50 pips
AUD/JPY: stop loss of -24 pips
EUR/JPY: take profit of 50.5 pips

Total for day: + 76.5 pips

WEEK 1 summary

2007-07-30T15:33:00.000-07:00

% profitable trades: 41.7%
Account value: $1,018.01
% profit/week: 1.8%
% profit/year: 52.94%

Day 4

2007-07-30T15:28:00.000-07:00

July 20, Friday Account Balance: $1,031.24

Trades were:

4100 NZD/USD long@0.79790
4900 GBP/CHF short@2.46671
4100 AUD/USD short@0.88011

Results of trades:

NZD/USD: stop loss -24.2 pips
GBP/CHF: stop loss -24.9 pips
AUD/USD: stop loss profit 17 pips

Total for day: -32.1 pips

Day 3

2007-07-30T15:22:00.000-07:00

July 19, account balance $1,000.43 (Note that you earn daily interest on your account balance)

trades were:

4900 EUR/JPY long@168.55300
4900 CHF/JPY short@101.58200
4000 NZD/USD long@0.79293

Results of these trades:

EUR/JPY: stop loss -25 pips
CHF/JPY: take profit 50.2 pips
NZD/USD: stop loss profit 5 pips

Total for day: 27.2 pips

Day 2

2007-07-30T15:15:00.000-07:00

July 18, account balance $1,000.03

Today's Trades:

4900 AUD/JPY long@106.93800
4900 CAD/JPY short@116.65000
4200 USD/CAD short@1.04313

Results for those trades:

AUD/JPY: take profit of 50.5 pips
CAD/JPY: stop loss of -25.8 pips
USD/CAD: stop loss of -24.7 pips

Total for day: +0 pips

Note: Forex trading is all about patience, days in which you break even are important because the preserve capital for when luck turns your way.

DAY 1

2007-07-30T15:06:00.000-07:00

July 17, account balance $1,000.00

Today's trades:

4800 USD/CHF short@1.20305
4200 EUR/CAD short@1.43770
4000 NZD/USD short@0.79093

The results for that day:

USD/CHF: take profit of 49.5 pips
EUR/CAD: stop out loss of -24 pips
NZD/USD: stop out loss of -25 pip

Total for day: +.5 pips

Greetings!

2007-07-30T14:34:00.000-07:00

Greetings to all who want to become rich, and who believe that Forex trading can help them do it.

The purpose of this blog, as the name implies, is to prove that making money trading Forex requires no grand knowledge of fibronnaci retracements, trend lines, elliot waves, stochastic, MACD, RSI, CCI, ADX or any other indicator, only of money management.

By this I simply mean managing one's risk and making sure that one's wins are greater than one's losses.

Thus I propose the following system to making a fortune in forex: I dub it "Propritripooko" after Bazooko, the brilliant person from forums at babypips.com who inspired the basic idea, and "prop" the prefix for three which is the number of trade/day this system executes.

Here is how the system works:

Each day 3 random currency trades are made. Each trade is of a different and random pair.

Stop losses are set at 25 pips, Take profit at 50 pips for a Reward/Risk ratio of 2:1

There are 15 currency pairs with pip spreads of 4 or less, these are the only ones I will be using.

They are:
AUD/JPY: 1
AUD/USD: 2
CAD/JPY: 3
CHF/JPY: 4
EUR/CAD: 5
EUR/CHF: 6
EUR/GBP: 7
EUR/JPY: 8
EUR/USD: 9
GBP/CHF: 10
GBP/USD: 11
NZD/USD: 12
USD/CHF: 13
USD/CAD: 14
USD/JPY: 15

Note I numbered them 1-15 in alphabetical order for the purpose of random selection.

This is accomplished by going to random.org and using the random integer generator to pick 3 numbers between 1-15.

The decision whether to go long or short is also made at random with the same random integer generator, choosing 3 numbers 1 or 2, with 1 = sell, 2= buy.

That's it, the whole system, no time frames, no technical indicators, no charts of any kind.

The key to this system is money management, which in this case means risking 1% of my demo account, (I will be testing this system for several months before I dare risk real cash) per trade and risk management, meaning that all my profits are 2X the size of my losses.

The specifics of this experiment are as follows.

I will be using Oanda as my broker since they allow trades of any lot size, which means I can adjust each trade to risk exactly 1% of my account each time.

I will also be using a manual trailing stop loss to lock in profits at certain points:

20-29 pip profit, change stop loss to +5 pips
30-39 pip profit change stop loss to +10 pips
40-49 pip profit change stop loss to +50% profit, so for example if I'm up 44 pips, I change my stop loss so that I make a minimum of 22 pip profit.

I will follow the above rules for manual trailing stops whenever I happen to be able to check on my account.

Now a final word of note: I have been running the above stated system since July 17, 2007, and will post each day's outcomes in individual posts that will lead up to today's live trades, 1 of which is still open as of 6:01 PM eastern, when I am writing this.

So enough of the introduction to the Propritripooko, and lets see random trades and money management stack up in real life.