The Process of Forex Trading Forex Crunch

Two Blokes Trading | Forex Trading Community

What is Two Blokes Trading? Two Blokes Trading is a fun and informative podcast and website for new and experienced home financial traders. It follows us, Tom and Owen, as we learn to trade profitably and consistently. We interview leading traders and trading industry insiders every week on the Podcast to give our listeners the best chance of becoming profitable traders.
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Why I switched to crypto after I traded 10 years with forex

I recently noticed that the Forex trading market is insanely regulated which means that the middlemen are present everywhere in this world, therefore, I decided to make my analysis about the so-called wonderful world of Forex trading.
Starting with unresponsive brokers and ending with smartly hidden fees and costs, the Forex trading process can become very expensive very fast and this can happen even before a trader can turn a dollar into profit.
This means that traders need to have a considerable amount of capital before they can begin trade. I also believe that institutional involvement is another significant aspect of Forex trading, unlike crypto, Forex traders are competing with established banks, high-frequency traders, and other specialized companies.
In a nutshell, I have found that this institutional involvement makes it very challenging to compete.
Here are some very interesting and productive facts as to why cryptocurrency trading is better than forex trading:
1) Your safety, your money
Unlike the Forex market where there are many suffocating regulations, as well as many cases of identity theft, crypto traders that use digital currency are in direct control of their transactions which makes everything much safer. Another important thing here that I’ve noticed here is that the transactions are made free from the identities of the parties involved. This grants a considerable amount of help in protecting users from all forms of identity theft.
2) There is no inflation
Every traditional currency experiences different inflation fluctuations because of the ongoing movement of global economies which shifts prices continuously. In response to this, countries print more money, therefore, increasing capital inflation. Cryptocurrency does not experience this issue. That’s why it is more predictable.
3) Cryptocurrency trading is a clear process
Unlike forex trading crypto trading uses a recorder which is called a blockchain, it is here where all transactions are recorded and monitored. In other words, when a transaction is completed it is automatically transcribed on the ledger. These transactions can be verified by anyone anytime. No person or organization can modify this ledger this is why this is considered to be the biggest security feature.
4) Fast and solid transactions.
Probably the best advantage, when compared to the forex market, is that the crypto market is free from any type of central banking regulations and control as well as other third-party vendors, that’s why transaction fees are extremely low.
5) Availability
The crypto investment funds bring many opportunities between parties anywhere in the world. These enable individuals to use and trade cryptocurrency even if they are from harsh countries without solid banking institutions.
What are crypto funds and why they are beating forex?
In the complex world of cryptocurrency trading, a user is required to have plenty of crypto assets.
Those who are new to this practice are already mining an abundant quantity of cryptocurrency, without the help of an investment fund this can be rather difficult due to the growing complexities of the prospecting process.
So I ask myself how can novices build up their assets?
This is when a crypto fund comes into the picture!
I’ve discussed with trading specialists who specialize in creating crypto funds to give you all the characteristics of what the crypto funds are as well as the new outcomes in this field.
A crypto fund is the regulated asset of a digital currency that is accessible to the investors for replication, it also works as a connection between a trader, who is producing the crypto fund, and the one who would gladly invest in that supply.
The concluding goal of engaging in a crypto fund is to augment crypto assets for both the winning participants.
In the year 2020, the crypto funds have evolved as the digital translation of fiat currency. Because this is an independent form of currency, it enables anyone to inaugurate a fund solely by adding a new cryptocurrency.
As a consequence, several types of crypto funds have developed aiming to gratify the desire of investors and traders so that they can ultimately increase their digital assets.
Many currencies are regulated by their governments making them sensitive to financial and pecuniary procedures as well as other geopolitical developments. On the other hand, cryptocurrencies are managed instantly by clever algorithms and are only influenced by the actions of those using them. This makes the crypto market more engaging for investors who do not want vulnerability to inflation or state administration policy arrangements.
Why did I invest in crypto funds instead of trading or mining
Here are the major advantages that you may experience after you invest in a crypto fund:
Ending Ideas
In conclusion I feel confident that Forex is now becoming a trading process of the past and it will continue to remain affixed in the 2000’s but now in the year 2020 the future resides in the crypto investment fund because it is a highly suitable method to earn money without getting stuck in any difficult mining algorithms. I have also created a guide about the top 50 most popular mistakes in crypto trading. Hope you find it useful
submitted by kodjima33 to StockMarket [link] [comments]

Why I switched to crypto after I traded 10 years with forex

I recently noticed that the Forex trading market is insanely regulated which means that the middlemen are present everywhere in this world, therefore, I decided to make my analysis about the so-called wonderful world of Forex trading.
Starting with unresponsive brokers and ending with smartly hidden fees and costs, the Forex trading process can become very expensive very fast and this can happen even before a trader can turn a dollar into profit.
This means that traders need to have a considerable amount of capital before they can begin trade. I also believe that institutional involvement is another significant aspect of Forex trading, unlike crypto, Forex traders are competing with established banks, high-frequency traders, and other specialized companies.
In a nutshell, I have found that this institutional involvement makes it very challenging to compete.
Here are some very interesting and productive facts as to why cryptocurrency trading is better than forex trading:
1) Your safety, your money
Unlike the Forex market where there are many suffocating regulations, as well as many cases of identity theft, crypto traders that use digital currency are in direct control of their transactions which makes everything much safer. Another important thing here that I’ve noticed here is that the transactions are made free from the identities of the parties involved. This grants a considerable amount of help in protecting users from all forms of identity theft.
2) There is no inflation
Every traditional currency experiences different inflation fluctuations because of the ongoing movement of global economies which shifts prices continuously. In response to this, countries print more money, therefore, increasing capital inflation. Cryptocurrency does not experience this issue. That’s why it is more predictable.
3) Cryptocurrency trading is a clear process
Unlike forex trading crypto trading uses a recorder which is called a blockchain, it is here where all transactions are recorded and monitored. In other words, when a transaction is completed it is automatically transcribed on the ledger. These transactions can be verified by anyone anytime. No person or organization can modify this ledger this is why this is considered to be the biggest security feature.
4) Fast and solid transactions.
Probably the best advantage, when compared to the forex market, is that the crypto market is free from any type of central banking regulations and control as well as other third-party vendors, that’s why transaction fees are extremely low.
5) Availability
The crypto investment funds bring many opportunities between parties anywhere in the world. These enable individuals to use and trade cryptocurrency even if they are from harsh countries without solid banking institutions.
What are crypto funds and why they are beating forex?
In the complex world of cryptocurrency trading, a user is required to have plenty of crypto assets.
Those who are new to this practice are already mining an abundant quantity of cryptocurrency, without the help of an investment fund this can be rather difficult due to the growing complexities of the prospecting process.
So I ask myself how can novices build up their assets?
This is when a crypto fund comes into the picture!
I’ve discussed with trading specialists who specialize in creating crypto funds to give you all the characteristics of what the crypto funds are as well as the new outcomes in this field.
A crypto fund is the regulated asset of a digital currency that is accessible to the investors for replication, it also works as a connection between a trader, who is producing the crypto fund, and the one who would gladly invest in that supply.
The concluding goal of engaging in a crypto fund is to augment crypto assets for both the winning participants.
In the year 2020, the crypto funds have evolved as the digital translation of fiat currency. Because this is an independent form of currency, it enables anyone to inaugurate a fund solely by adding a new cryptocurrency.
As a consequence, several types of crypto funds have developed aiming to gratify the desire of investors and traders so that they can ultimately increase their digital assets.
Many currencies are regulated by their governments making them sensitive to financial and pecuniary procedures as well as other geopolitical developments. On the other hand, cryptocurrencies are managed instantly by clever algorithms and are only influenced by the actions of those using them. This makes the crypto market more engaging for investors who do not want vulnerability to inflation or state administration policy arrangements.
Why did I invest in crypto funds instead of trading or mining
Here are the major advantages that you may experience after you invest in a crypto fund:
Ending Ideas
In conclusion I feel confident that Forex is now becoming a trading process of the past and it will continue to remain affixed in the 2000’s but now in the year 2020 the future resides in the crypto investment fund because it is a highly suitable method to earn money without getting stuck in any difficult mining algorithms. I have also created a guide about the top 50 most popular mistakes in crypto trading. Hope you find it useful
submitted by kodjima33 to CryptoCurrencyTrading [link] [comments]

Why I switched to crypto after I traded 10 years with forex

I recently noticed that the Forex trading market is insanely regulated which means that the middlemen are present everywhere in this world, therefore, I decided to make my analysis about the so-called wonderful world of Forex trading.
Starting with unresponsive brokers and ending with smartly hidden fees and costs, the Forex trading process can become very expensive very fast and this can happen even before a trader can turn a dollar into profit.
This means that traders need to have a considerable amount of capital before they can begin trade. I also believe that institutional involvement is another significant aspect of Forex trading, unlike crypto, Forex traders are competing with established banks, high-frequency traders, and other specialized companies.
In a nutshell, I have found that this institutional involvement makes it very challenging to compete.
Here are some very interesting and productive facts as to why cryptocurrency trading is better than forex trading:
1) Your safety, your money
Unlike the Forex market where there are many suffocating regulations, as well as many cases of identity theft, crypto traders that use digital currency are in direct control of their transactions which makes everything much safer. Another important thing here that I’ve noticed here is that the transactions are made free from the identities of the parties involved. This grants a considerable amount of help in protecting users from all forms of identity theft.
2) There is no inflation
Every traditional currency experiences different inflation fluctuations because of the ongoing movement of global economies which shifts prices continuously. In response to this, countries print more money, therefore, increasing capital inflation. Cryptocurrency does not experience this issue. That’s why it is more predictable.
3) Cryptocurrency trading is a clear process
Unlike forex trading crypto trading uses a recorder which is called a blockchain, it is here where all transactions are recorded and monitored. In other words, when a transaction is completed it is automatically transcribed on the ledger. These transactions can be verified by anyone anytime. No person or organization can modify this ledger this is why this is considered to be the biggest security feature.
4) Fast and solid transactions.
Probably the best advantage, when compared to the forex market, is that the crypto market is free from any type of central banking regulations and control as well as other third-party vendors, that’s why transaction fees are extremely low.
5) Availability
The crypto investment funds bring many opportunities between parties anywhere in the world. These enable individuals to use and trade cryptocurrency even if they are from harsh countries without solid banking institutions.
What are crypto funds and why they are beating forex?
In the complex world of cryptocurrency trading, a user is required to have plenty of crypto assets.
Those who are new to this practice are already mining an abundant quantity of cryptocurrency, without the help of an investment fund this can be rather difficult due to the growing complexities of the prospecting process.
So I ask myself how can novices build up their assets?
This is when a crypto fund comes into the picture!
I’ve discussed with trading specialists who specialize in creating crypto funds to give you all the characteristics of what the crypto funds are as well as the new outcomes in this field.
A crypto fund is the regulated asset of a digital currency that is accessible to the investors for replication, it also works as a connection between a trader, who is producing the crypto fund, and the one who would gladly invest in that supply.
The concluding goal of engaging in a crypto fund is to augment crypto assets for both the winning participants.
In the year 2020, the crypto funds have evolved as the digital translation of fiat currency. Because this is an independent form of currency, it enables anyone to inaugurate a fund solely by adding a new cryptocurrency.
As a consequence, several types of crypto funds have developed aiming to gratify the desire of investors and traders so that they can ultimately increase their digital assets.
Many currencies are regulated by their governments making them sensitive to financial and pecuniary procedures as well as other geopolitical developments. On the other hand, cryptocurrencies are managed instantly by clever algorithms and are only influenced by the actions of those using them. This makes the crypto market more engaging for investors who do not want vulnerability to inflation or state administration policy arrangements.
Why did I invest in crypto funds instead of trading or mining
Here are the major advantages that you may experience after you invest in a crypto fund:
Ending Ideas
In conclusion I feel confident that Forex is now becoming a trading process of the past and it will continue to remain affixed in the 2000’s but now in the year 2020 the future resides in the crypto investment fund because it is a highly suitable method to earn money without getting stuck in any difficult mining algorithms. I have also created a guide about the top 50 most popular mistakes in crypto trading. Hope you find it useful
submitted by kodjima33 to cryptotrading [link] [comments]

Do you know what separates the winners and losers in Forex trading? It's their routines. Winners do have one and it makes their preparation process easier. Want to be a winner? Then add these routines to your daily life. https://wetalktrade.com/5-pre-trade-routines/

Do you know what separates the winners and losers in Forex trading? It's their routines. Winners do have one and it makes their preparation process easier. Want to be a winner? Then add these routines to your daily life. https://wetalktrade.com/5-pre-trade-routines/ submitted by Wetalktrade to u/Wetalktrade [link] [comments]

Rush now and get the next-gen #forextechnicalindicator! The “#VelocityFinderNeuralTrader” processes a huge volume of data in seconds and gives you accurate entry & #exitpoints for your #trading. https://wetalktrade.com/velocity-finder-best-forex-trading-strategies/ See proof of 70 #pips in #AUDNZD

Rush now and get the next-gen #forextechnicalindicator! The “#VelocityFinderNeuralTrader” processes a huge volume of data in seconds and gives you accurate entry & #exitpoints for your #trading. https://wetalktrade.com/velocity-finder-best-forex-trading-strategies/ See proof of 70 #pips in #AUDNZD submitted by Wetalktrade to u/Wetalktrade [link] [comments]

Not able to make the right entry & exit in your #forextrading? Start to use “#VelocityFinderNeuralTrader”, the #indicator that swallows a lot of data, processes it in seconds and gives you the best inputs. See 70 #pips in #AUDCHF.https://wetalktrade.com/velocity-finder-best-forex-trading-strategies/

Not able to make the right entry & exit in your #forextrading? Start to use “#VelocityFinderNeuralTrader”, the #indicator that swallows a lot of data, processes it in seconds and gives you the best inputs. See 70 #pips in #AUDCHF.https://wetalktrade.com/velocity-finder-best-forex-trading-strategies/ submitted by Wetalktrade to u/Wetalktrade [link] [comments]

Simplifying the Process of Forex Trading

Simplifying the Process of Forex Trading submitted by Veoncoforex to u/Veoncoforex [link] [comments]

#VelocityFinderNeuralTrader works with a unique proprietary algorithm and a state of the art #neuraltechnology.It processes more than 200 calculations in seconds and gives you more accurate inputs.The quality justifies the price! https://wetalktrade.com/velocity-finder-best-forex-trading-strategies/

#VelocityFinderNeuralTrader works with a unique proprietary algorithm and a state of the art #neuraltechnology.It processes more than 200 calculations in seconds and gives you more accurate inputs.The quality justifies the price! https://wetalktrade.com/velocity-finder-best-forex-trading-strategies/ submitted by Wetalktrade to u/Wetalktrade [link] [comments]

FXGO - all in one system contains popular trading platforms as Forex, Crypto, Binary Options, with embedded clients portal that included important features as full money processing and helpdesk

FXGO - all in one system contains popular trading platforms as Forex, Crypto, Binary Options, with embedded clients portal that included important features as full money processing and helpdesk submitted by tradetoolsfx to u/tradetoolsfx [link] [comments]

Profiting from Extreme Processing: 5 Ways Financial Trading needs Speed to Succeed #fintech #trading #algotrading #quantitative #quant #quants #forex #fx #banks #hedgefunds #hft

Profiting from Extreme Processing: 5 Ways Financial Trading needs Speed to Succeed #fintech #trading #algotrading #quantitative #quant #quants #forex #fx #banks #hedgefunds #hft submitted by silahian to quant_hft [link] [comments]

What is your biggest struggle when it comes to profitable Forex trading? What is your biggest struggle when it comes to profitable Forex trading? I do ask because I'm in the process of coming up with a free cheatsheet and want to make sure it's useful.

Hey, I'm a full time software engineer, Forex software developer, and 6+ years Forex trader. I do build algo trading programs on the side but that's not today's topic.
What is your biggest struggle when it comes to profitable Forex trading?
I do ask because I'm in the process of coming up with a free cheatsheet and want to make sure it's useful.
submitted by ThatForexEngineerGuy to investing [link] [comments]

We tried to list down the top Binary Option sites on the basis of their offered trade and Forex options. First of all you need to understand that all the Binary sites do not give you the same trading options. Also every site has its own policy for funding and withdraws process.

submitted by adaviritin to binaryoption [link] [comments]

Successful Forex Trading is a Process, Not a Project

Successful Forex Trading is a Process, Not a Project submitted by dailypriceaction to ForexPriceAction [link] [comments]

World's leading markets operator ICAP to process forex trades on blockchain

World's leading markets operator ICAP to process forex trades on blockchain submitted by mightymous95 to Bitcoin [link] [comments]

ICAP Looks to Process Forex Trades on Blockchain

ICAP Looks to Process Forex Trades on Blockchain submitted by davispolkreg to BeyondSandbox [link] [comments]

Bitcoin Breaks $790 - ICAP Looks to Process Forex Trades on the Blockchain - Bloomberg Report: Bitcoin Topped All Other Currencies In 2016

submitted by cryptocompare to cryptocompare [link] [comments]

World's leading markets operator ICAP to process forex trades on blockchain

World's leading markets operator ICAP to process forex trades on blockchain submitted by BitcoinAllBot to BitcoinAll [link] [comments]

Charts confusing? Here's how I trade without ever looking at a chart.

Charts confusing? Here's how I trade without ever looking at a chart.
Been getting PM's about how I trade without looking at charts. So here it is guys.
Say EUUSD is down -0.20% and -20 pips on D1 and -0.15% and -15 pips on H8. I now have a trade opportunity because I know two things. The price is low and the price is starting to go back up. I can buy.
TP/SL is simple. I'm aiming for zero and I take a long position. 15 pips for TP & SL and size my lot according to my risk management tolerance. Since Forex ranges more than it trends I know odds are I made the right trade. I don't touch the trade and it'll close with a profit or loss. When that happens I repeat the process having never looked at a chart.
To demonstrate here are a few charts as I get most are thinking I'm crazy. But this is what you're doing when you follow the trend. Hoping for uncharted territory to make a profit.

https://preview.redd.it/8ryw5lvqkjy51.jpg?width=2337&format=pjpg&auto=webp&s=456efdeeb838fe0f5c5aa8aac405f7c776f08e62
Here's what you're doing when you aim for zero. Buying low, selling high & selling high, buying low. Price almost always will go back to the middle which takes all the guess work out of trading.

https://preview.redd.it/z79symlskjy51.jpg?width=2209&format=pjpg&auto=webp&s=fb945390f2f3c031ae81680689eb7c30730ad9a7
If your profits depend on prices flying off into the vast unknown you're not going to make money because that's not going to happen often enough. If your profits depend on prices that happened just hours ago there's a much better chance people will want to make a deal at that price again.
Try it out. Trading really is as simple as buy low sell high. But you're not buying low and selling high when you follow a trend. Then you're buying high and hoping it goes into uncharted territory.
submitted by EvidenceRemote to Forex [link] [comments]

How do you guys backtest a strategy?

I'm new to the forex trading and one of the advices that I often come across is to always backtest a strategy first.
First thing that came to mind is to just go through the chart and start moving forward, simulating a trade and logging if the strategy wins or loses. I actually did this in a 15M chart for a range of 3 months, and while the results were enlightening (my strategy sucked only 36% win rate for that pair and strategy), I found the process very tedious.
So my question is are there automated ways to back test a strategy? Like maybe excel or an application?
I was looking into mt5 and expert advisors the other day, and I tried the strategy tester using a free expert advisor. Should I create a script that mimics my strategy and test it using mt5? I have a bit of programming but I don't know where to start.
submitted by Ogre-kun to Forex [link] [comments]

Former investment bank FX trader: some thoughts

Former investment bank FX trader: some thoughts
Hi guys,
I have been using reddit for years in my personal life (not trading!) and wanted to give something back in an area where i am an expert.
I worked at an investment bank for seven years and joined them as a graduate FX trader so have lots of professional experience, by which i mean I was trained and paid by a big institution to trade on their behalf. This is very different to being a full-time home trader, although that is not to discredit those guys, who can accumulate a good amount of experience/wisdom through self learning.
When I get time I'm going to write a mid-length posts on each topic for you guys along the lines of how i was trained. I guess there would be 15-20 topics in total so about 50-60 posts. Feel free to comment or ask questions.
The first topic is Risk Management and we'll cover it in three parts
Part I
  • Why it matters
  • Position sizing
  • Kelly
  • Using stops sensibly
  • Picking a clear level

Why it matters

The first rule of making money through trading is to ensure you do not lose money. Look at any serious hedge fund’s website and they’ll talk about their first priority being “preservation of investor capital.”
You have to keep it before you grow it.
Strangely, if you look at retail trading websites, for every one article on risk management there are probably fifty on trade selection. This is completely the wrong way around.
The great news is that this stuff is pretty simple and process-driven. Anyone can learn and follow best practices.
Seriously, avoiding mistakes is one of the most important things: there's not some holy grail system for finding winning trades, rather a routine and fairly boring set of processes that ensure that you are profitable, despite having plenty of losing trades alongside the winners.

Capital and position sizing

The first thing you have to know is how much capital you are working with. Let’s say you have $100,000 deposited. This is your maximum trading capital. Your trading capital is not the leveraged amount. It is the amount of money you have deposited and can withdraw or lose.
Position sizing is what ensures that a losing streak does not take you out of the market.
A rule of thumb is that one should risk no more than 2% of one’s account balance on an individual trade and no more than 8% of one’s account balance on a specific theme. We’ll look at why that’s a rule of thumb later. For now let’s just accept those numbers and look at examples.
So we have $100,000 in our account. And we wish to buy EURUSD. We should therefore not be risking more than 2% which $2,000.
We look at a technical chart and decide to leave a stop below the monthly low, which is 55 pips below market. We’ll come back to this in a bit. So what should our position size be?
We go to the calculator page, select Position Size and enter our details. There are many such calculators online - just google "Pip calculator".

https://preview.redd.it/y38zb666e5h51.jpg?width=1200&format=pjpg&auto=webp&s=26e4fe569dc5c1f43ce4c746230c49b138691d14
So the appropriate size is a buy position of 363,636 EURUSD. If it reaches our stop level we know we’ll lose precisely $2,000 or 2% of our capital.
You should be using this calculator (or something similar) on every single trade so that you know your risk.
Now imagine that we have similar bets on EURJPY and EURGBP, which have also broken above moving averages. Clearly this EUR-momentum is a theme. If it works all three bets are likely to pay off. But if it goes wrong we are likely to lose on all three at once. We are going to look at this concept of correlation in more detail later.
The total amount of risk in our portfolio - if all of the trades on this EUR-momentum theme were to hit their stops - should not exceed $8,000 or 8% of total capital. This allows us to go big on themes we like without going bust when the theme does not work.
As we’ll see later, many traders only win on 40-60% of trades. So you have to accept losing trades will be common and ensure you size trades so they cannot ruin you.
Similarly, like poker players, we should risk more on trades we feel confident about and less on trades that seem less compelling. However, this should always be subject to overall position sizing constraints.
For example before you put on each trade you might rate the strength of your conviction in the trade and allocate a position size accordingly:

https://preview.redd.it/q2ea6rgae5h51.png?width=1200&format=png&auto=webp&s=4332cb8d0bbbc3d8db972c1f28e8189105393e5b
To keep yourself disciplined you should try to ensure that no more than one in twenty trades are graded exceptional and allocated 5% of account balance risk. It really should be a rare moment when all the stars align for you.
Notice that the nice thing about dealing in percentages is that it scales. Say you start out with $100,000 but end the year up 50% at $150,000. Now a 1% bet will risk $1,500 rather than $1,000. That makes sense as your capital has grown.
It is extremely common for retail accounts to blow-up by making only 4-5 losing trades because they are leveraged at 50:1 and have taken on far too large a position, relative to their account balance.
Consider that GBPUSD tends to move 1% each day. If you have an account balance of $10k then it would be crazy to take a position of $500k (50:1 leveraged). A 1% move on $500k is $5k.
Two perfectly regular down days in a row — or a single day’s move of 2% — and you will receive a margin call from the broker, have the account closed out, and have lost all your money.
Do not let this happen to you. Use position sizing discipline to protect yourself.

Kelly Criterion

If you’re wondering - why “about 2%” per trade? - that’s a fair question. Why not 0.5% or 10% or any other number?
The Kelly Criterion is a formula that was adapted for use in casinos. If you know the odds of winning and the expected pay-off, it tells you how much you should bet in each round.
This is harder than it sounds. Let’s say you could bet on a weighted coin flip, where it lands on heads 60% of the time and tails 40% of the time. The payout is $2 per $1 bet.
Well, absolutely you should bet. The odds are in your favour. But if you have, say, $100 it is less obvious how much you should bet to avoid ruin.
Say you bet $50, the odds that it could land on tails twice in a row are 16%. You could easily be out after the first two flips.
Equally, betting $1 is not going to maximise your advantage. The odds are 60/40 in your favour so only betting $1 is likely too conservative. The Kelly Criterion is a formula that produces the long-run optimal bet size, given the odds.
Applying the formula to forex trading looks like this:
Position size % = Winning trade % - ( (1- Winning trade %) / Risk-reward ratio
If you have recorded hundreds of trades in your journal - see next chapter - you can calculate what this outputs for you specifically.
If you don't have hundreds of trades then let’s assume some realistic defaults of Winning trade % being 30% and Risk-reward ratio being 3. The 3 implies your TP is 3x the distance of your stop from entry e.g. 300 pips take profit and 100 pips stop loss.
So that’s 0.3 - (1 - 0.3) / 3 = 6.6%.
Hold on a second. 6.6% of your account probably feels like a LOT to risk per trade.This is the main observation people have on Kelly: whilst it may optimise the long-run results it doesn’t take into account the pain of drawdowns. It is better thought of as the rational maximum limit. You needn’t go right up to the limit!
With a 30% winning trade ratio, the odds of you losing on four trades in a row is nearly one in four. That would result in a drawdown of nearly a quarter of your starting account balance. Could you really stomach that and put on the fifth trade, cool as ice? Most of us could not.
Accordingly people tend to reduce the bet size. For example, let’s say you know you would feel emotionally affected by losing 25% of your account.
Well, the simplest way is to divide the Kelly output by four. You have effectively hidden 75% of your account balance from Kelly and it is now optimised to avoid a total wipeout of just the 25% it can see.
This gives 6.6% / 4 = 1.65%. Of course different trading approaches and different risk appetites will provide different optimal bet sizes but as a rule of thumb something between 1-2% is appropriate for the style and risk appetite of most retail traders.
Incidentally be very wary of systems or traders who claim high winning trade % like 80%. Invariably these don’t pass a basic sense-check:
  • How many live trades have you done? Often they’ll have done only a handful of real trades and the rest are simulated backtests, which are overfitted. The model will soon die.
  • What is your risk-reward ratio on each trade? If you have a take profit $3 away and a stop loss $100 away, of course most trades will be winners. You will not be making money, however! In general most traders should trade smaller position sizes and less frequently than they do. If you are going to bias one way or the other, far better to start off too small.

How to use stop losses sensibly

Stop losses have a bad reputation amongst the retail community but are absolutely essential to risk management. No serious discretionary trader can operate without them.
A stop loss is a resting order, left with the broker, to automatically close your position if it reaches a certain price. For a recap on the various order types visit this chapter.
The valid concern with stop losses is that disreputable brokers look for a concentration of stops and then, when the market is close, whipsaw the price through the stop levels so that the clients ‘stop out’ and sell to the broker at a low rate before the market naturally comes back higher. This is referred to as ‘stop hunting’.
This would be extremely immoral behaviour and the way to guard against it is to use a highly reputable top-tier broker in a well regulated region such as the UK.
Why are stop losses so important? Well, there is no other way to manage risk with certainty.
You should always have a pre-determined stop loss before you put on a trade. Not having one is a recipe for disaster: you will find yourself emotionally attached to the trade as it goes against you and it will be extremely hard to cut the loss. This is a well known behavioural bias that we’ll explore in a later chapter.
Learning to take a loss and move on rationally is a key lesson for new traders.
A common mistake is to think of the market as a personal nemesis. The market, of course, is totally impersonal; it doesn’t care whether you make money or not.
Bruce Kovner, founder of the hedge fund Caxton Associates
There is an old saying amongst bank traders which is “losers average losers”.
It is tempting, having bought EURUSD and seeing it go lower, to buy more. Your average price will improve if you keep buying as it goes lower. If it was cheap before it must be a bargain now, right? Wrong.
Where does that end? Always have a pre-determined cut-off point which limits your risk. A level where you know the reason for the trade was proved ‘wrong’ ... and stick to it strictly. If you trade using discretion, use stops.

Picking a clear level

Where you leave your stop loss is key.
Typically traders will leave them at big technical levels such as recent highs or lows. For example if EURUSD is trading at 1.1250 and the recent month’s low is 1.1205 then leaving it just below at 1.1200 seems sensible.

If you were going long, just below the double bottom support zone seems like a sensible area to leave a stop
You want to give it a bit of breathing room as we know support zones often get challenged before the price rallies. This is because lots of traders identify the same zones. You won’t be the only one selling around 1.1200.
The “weak hands” who leave their sell stop order at exactly the level are likely to get taken out as the market tests the support. Those who leave it ten or fifteen pips below the level have more breathing room and will survive a quick test of the level before a resumed run-up.
Your timeframe and trading style clearly play a part. Here’s a candlestick chart (one candle is one day) for GBPUSD.

https://preview.redd.it/moyngdy4f5h51.png?width=1200&format=png&auto=webp&s=91af88da00dd3a09e202880d8029b0ddf04fb802
If you are putting on a trend-following trade you expect to hold for weeks then you need to have a stop loss that can withstand the daily noise. Look at the downtrend on the chart. There were plenty of days in which the price rallied 60 pips or more during the wider downtrend.
So having a really tight stop of, say, 25 pips that gets chopped up in noisy short-term moves is not going to work for this kind of trade. You need to use a wider stop and take a smaller position size, determined by the stop level.
There are several tools you can use to help you estimate what is a safe distance and we’ll look at those in the next section.
There are of course exceptions. For example, if you are doing range-break style trading you might have a really tight stop, set just below the previous range high.

https://preview.redd.it/ygy0tko7f5h51.png?width=1200&format=png&auto=webp&s=34af49da61c911befdc0db26af66f6c313556c81
Clearly then where you set stops will depend on your trading style as well as your holding horizons and the volatility of each instrument.
Here are some guidelines that can help:
  1. Use technical analysis to pick important levels (support, resistance, previous high/lows, moving averages etc.) as these provide clear exit and entry points on a trade.
  2. Ensure that the stop gives your trade enough room to breathe and reflects your timeframe and typical volatility of each pair. See next section.
  3. Always pick your stop level first. Then use a calculator to determine the appropriate lot size for the position, based on the % of your account balance you wish to risk on the trade.
So far we have talked about price-based stops. There is another sort which is more of a fundamental stop, used alongside - not instead of - price stops. If either breaks you’re out.
For example if you stop understanding why a product is going up or down and your fundamental thesis has been confirmed wrong, get out. For example, if you are long because you think the central bank is turning hawkish and AUDUSD is going to play catch up with rates … then you hear dovish noises from the central bank and the bond yields retrace lower and back in line with the currency - close your AUDUSD position. You already know your thesis was wrong. No need to give away more money to the market.

Coming up in part II

EDIT: part II here
Letting stops breathe
When to change a stop
Entering and exiting winning positions
Risk:reward ratios
Risk-adjusted returns

Coming up in part III

Squeezes and other risks
Market positioning
Bet correlation
Crap trades, timeouts and monthly limits

***
Disclaimer:This content is not investment advice and you should not place any reliance on it. The views expressed are the author's own and should not be attributed to any other person, including their employer.
submitted by getmrmarket to Forex [link] [comments]

Python for Finance: Mastering Data-Driven Finance

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submitted by amralaaalex to ProgrammingPals [link] [comments]

Interactive Brokers: Brexit account migration = insurance drops from 500k USD to 20k EUR

Is anyone else concerned about this? They are migrating from UK to Hungary, Ireland or Luxembourg: https://ibkr.info/node/3515
Main reason I used IB was safety/regulation. After this migration we lose FSCS & SIPC protection, compensation will be the same as e.g. DeGiro or Trading 212 (20k EUR), for me there is no point to stay on IB any longer as I much prefer Trading 212's modern platform. What are your thoughts?
In 2018 IBKR established Interactive Brokers Luxembourg SARL (“IBLUX”) which received regulatory authorization in November 2019. In addition, we are in the process of creating two additional brokers based in the European Union: Interactive Brokers Ireland Limited (“IBIE”) and Interactive Brokers Central Europe Befektetési ZRt (“IBCE”).
We expect the majority of the clients based in Western Europe will be migrated to IBIE, those in Central and Eastern Europe to IBCE and a select group of clients to IBLUX.
Currently, provided they meet eligibility requirements, IBUK clients may be protected in relation to investment services under the UK Financial Services Compensation Scheme (“UK FSCS”) at an amount of up to £50,000. As IBUK clients are carried by our US broker, IBL, the securities segment of their account may be eligible for insurance by the Securities Investor Protection Corporation (“SIPC”) at an amount of up to USD 500,000.
Under the EU Brokers IBLUX, IBIE and IBCE eligible claimants may be entitled to claim compensation up to a maximum of EUR 20,000.
Later update - currently for IBUK, the protection amount depends on what you are trading with:
As a side note, in their article they state £50,000 FSCS protection, but that's just outdated. It's been increased to £85,000 since April 2019 - fscs.org.uk/media/press/2019/aphigher-protection-limits.
submitted by _amc_ to eupersonalfinance [link] [comments]

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