Playing with Bollinger Bands A Likely Long Term Profitable Strategy

Last week I wrote a post about the Bollinger Bands indicator and how I thought it could be exploited to achieve good profitability levels in forex trading. After doing a full analysis going through a visual 5-6 year backtest, a mathematical expectancy analysis and the final coding and testing of the strategy I can tell you that I have come up with a likely long term profitable system based exclusively on Bollinger Bands. Asirikuy members would definitely want to checkout last weeks video in which I explain the whole development process in detail showing you all the steps necessary to go from an idea to an actual, coded expert with great possibilities of long term success. On todays post I want to give my regular readers a look into this strategy and the results it finally achieves.

My first idea for coding this Bollinger Band system was taken from the thoughts I had a week ago regarding this strategy. I based the making of this strategy in the fact that when a bar closes above a certain number of volatility adjusted steps outside 2 standard deviations an important "signal" is given that predicts long term movements in that direction to a good extent. As I pointed last week, this strategy also signals a retracement in conjunction with the trend following aspect but definitely I wanted to explore the trend following aspects of the strategy first.

The mathematical expectancy analysis of this strategy wasnt disappointing at all with positive results for almost all period perspectives on the one hour charts. However - interestingly enough - long periods of time revealed a great characteristic of this system which is the predictive power over a singificantly long amount of time with almost no moves into unprofitable territory. This means that the strategy would definitely lend itself to the making of a system that could use an extremely favorable risk to reward ratio. Designing my systems money management around the conclusions of the mathematical expectancy analysis results I came up with a strategy that held a risk to reward ratio of exactly 1 : 4 meaning that the system can take four loses for each winning trade. For me this is quite unprecedented sine most strategies I coded have a risk to reward ratio oscillating from 2 : 1 to 1 : 3 but I had never been able to achieve such a high expectancy for winning trades with success. The results I achieved for a 10 year backtest (2000-2010) on the EUR/USD one hour chart are shown below.
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I have to say that I was very impressed to see that such a simple strategy with absolutely no internal closing criteria besides the TP and SL could achieve such an incredible performance. This strategy definitely shows that it is not complexity what determines the success of a trading strategy but true understanding of the underlying price action. Once you have some idea of how the market behaves and how indicators can be used to exploit an inefficiency a likely long term profitable system from a very simple set of logic can arise. It is important here to say that the above shown results are unoptimized and simply the variable settngs are the result of the mathematical expectancy analysis (for those who are wondering, yes, I tried a trailing stop but a solid TP works much better)

Simulations of this system are also bound to be quite accurate since the average value of the TP is well above 200 pips, meaning that this EA has an incredibly large take profit value that could not be faked by any type of simulation interference. Moreover, the EA only enters trades based on last bars close and therefore explicitely controls bar opening, something that is bound to make trading systems more reliable and back/live testing consistent. Of course, we would need to test this expert to find out but I believe that this system can be improved a lot more before actually releasing it as a Watukushay EA. It is however important to say that GREAT part of this straegys success is based on its volatility adjusted money management that allows it to adjust to changes in market conditions. Using a fixed SL or TP leads to incredible loses showing how adaptive money management is VITAL to achieve profitability.
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As you see on the above image, the success of the strategy is based in the fact that trades are taken almost always after a successful bollinger band breakout. However the fact that we are not focusing on the actual contraction/expansion of the bands but on the statistical meaning of a highly deviated price result makes us enter only meaningful breakouts while others that might have been entered on a contraction/expansion criteria (which is also hard to define) are avoided. The strategy does take a lot of loses (strategies with high reward to risk ratios are often very hard to trade psychologically because of this) however the great thing is that losing trades become evident after only a small move against us, allowing us to preserve the great 1:4 risk to reward ratio.

Currently I have created a forum post within the asirikuy community forum so that we can start improving this strategy and making it become a solid Asirikuy contribution. Of course, the system lacks any internal closing criteria and coming up with relevant ways to improve the systems closing of positions should be vital if this system is to be released for use in the future. If you would like to learn more about automated trading and how you too can come up with and design systems with long term profitability in mind please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Forex Brokers: Assisting You with Your Trading Needs

If you traded in the Forex market before or if you're still trading now, you may have heard the term Forex broker a lot of times. However, as an individual trader, you may want to know what is a Forex broker and what they do.

Forex brokers are individuals or companies that assist individual traders and companies when they are trading in the Forex market. These individuals can really give you that extra edge you need in order to be successful in the Forex market. Although they will be trading your funded account, all the decisions are still yours to make if you want to.

Forex brokers are there to assist you with your trading needs in exchange for a small commission from what you earn. Here are some of the services that a Forex broker can give you:

� A Forex broker can give you advice regarding on real time quotes.
� A Forex broker can also give you advice on what to buy or sell by basing it on news feeds.
� A Forex broker can trade your funded account basing solely on his or her decision if you want them to.
� A Forex broker can also provide you with software data to help you with your trading decisions.

Searching for a good Forex broker can prove to be a very tedious task. Since there are a lot of advertising in the internet about Forex brokers, Forex traders get confused on which Forex broker they should hire. With all the Forex brokers out there that offers great Forex trading income and quotations, you will find it hard to choose a good and reputable Forex broker.

With a little research, you can find the right Forex broker who can be trusted. If you lack referrals for Forex brokers, you can try and do a little research of your own. The first thing you need to find out about a particular Forex broker with the amount of clients they serve. The more clients they serve the more chances that these brokers are trusted. You should also know the amount of trades these brokers are conducting.

Knowing the broker's experience in the Forex market is also a great way to determine if he or she is the right broker to hire. Experienced Forex brokers will increase your chances of earning money from the Forex market.

If you have questions or complaints, you should call or email the company and ask questions regarding their trading system. You should never be uncomfortable doing this. Besides, they will be the one who will manage your money. And, it is your right to know about what they are doing with your money.

When choosing a Forex broker, you should also consider their trading options. You should also know that Forex brokers are different from what they can offer you. They differ in platforms, spreads, or leverage. You have to know which of the trading options is very important to you in order to be comfortable when you trade in the Forex market.

Most online Forex brokers offer potential clients with a demo account. This will allow you to try out their trading platform without actually risking money. You should look for a demo platform that works just like the real thing and you should also determine if you are comfortable with the trading platform.

Look for the features you want in a trading platform in order for you to know what to expect if you trade with them. If you are comfortable with a trading platform, you should consider trading with them, and if you are not, scratch them off your list. This is a great way to test their trading platform and not risk your money.

If a Forex broker is not willing to share financial information about their company, you shouldn't trade with them because they are reluctant to share company information. They should answer your questions regarding on how they manage their client's money and how they trade that money.

Always remember that if you see an offer that's too good to be true by Forex traders, it probably is too good to be true. The Forex market is a very risky place to trade and Forex brokers must tell you that there are certain risks involved when trading in the Forex market. Avoid hiring a Forex broker who says that trading in Forex is easy and a very good money making market with very low risks.

These are the things you should consider when you look for a Forex broker. If you find that right broker, you can be sure that you can really earn money.

Why Trading With Expert Advisors Requires More Education Than Trading Manually

Reflecting upon all the different aspects of both manual and automated trading systems I realized that educational factors are some of the most important topics of both forms of trading. In fact, most traders lose money in the market when weak psychological factors couple with a lack of education and knowledge about both the systems and the inherent nature of financial markets.

First of all, there is a tendency to think that the forex market can be traded with an automated system without any knowledge of the market or trading. This is totally wrong, and specially for automated trading systems because not only do you need to know how to trade and how the market works but you also need to know how automated systems behave. Now I know you may be asking yourselves "why do I need to know all that information if the system trades by itself ?", well, it is obviously not that simple.

While most people believe that trading an automated trading system requires no knowledge of the market whatsoever I am going to say the complete opposite, it requires even more knowledge than to trade manually. Why ? Because of several psychological and rational factors. First, you need to choose an automated trading system. What is your criteria ? If you have absolutely no knowledge of the forex market your criterias will be wrong. Let me say that again, they will be wrong.

Why do you think commercial sellers tarket their systems the way they do ? They show high risk to reward ratios with high winning percentages, to the inexperienced person with no knowledge about forex trading it looks like a great deal. Why do 30,000 people purchased FAP turbo although it has, in my opinion, the characteristics of an unprofitable system ? that is because most people that bought it have a very shallow understanding of the market and automated trading systems, coupled with a deep desire to earn high profits in a short time.

Now, lets suppose you manage to get a grip on one of the few profitable systems out there. If you have no knowledge about the forex market or how automated trading systems work but you have seen the testimonials that most commercial ea sellers bring up then most probably you will think that your system just does not produce enough capital. Well, for me more than 40% a year is outstandng, most new traders looking for automated trading systems are expecting that every month ! Unrealistic. Sadly this feeding of greed is carried on with enthusiasm by most ea sellers out there shoving unprofitable systems down peoples wallets.

Then you have other factors, maybe your profitable system will only win 1 out of every 10 trades and that will be enough to make it very profitable but you are ignorant of this because you lack an understanding of how the system trades so you psychologically feel like a loser after 5 consecutive loses and decide to stop trading the system.

As you can see, almost all of the problems associated with people buying and losing money with unprofitable trading systems is based on people being ignorant and this is a direct consequence of people wating money without effort. Well, as someone said once, if you think education is expensive, you dont know the cost of ignorance. If you would like to learn more about choosing expert advisors as well as commercial and free expert advisors I have reviewed please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Manual Trading With S R Some Pointers for Manual Traders

Thinking a little bit about manual trading strategies and evaluating the way in which I trade support and resistance levels (S&R) it became apparent to me that there were certain modifications I could give to my system that could make it a little bit less discretionary and a lot easier to trade for people new to the trading of support and resistance levels. After a backtesting evaluation of my trading system on the metatrader 4 visual backtester (the strategy is not automated, I just run the backtester on a blank EA so that I could get a "live trading" simulation), I took several notes regarding the way in which the strategy is best traded and I came out with several pointers that will help people who are interested in the profitable manual trading of this strategy.

One of the first things I realized is that taking strictly positions based on a 1:3 risk to rewards ratio often kept me away from positions that could have been profitable and could have increased my profits significantly, for this reason I believe that the entering of positions can be done from a 1:2 risk to rewards ratio although if possible I will still pick a 1:3 risk to reward ratio.

It is also obvious that bounces may occur from support or resistance levels on lower time frames that may cause a bounce towards the SL of our positions and therefore make us end up with a losing trade. I decided that I will move trades from now to breakeven once they reach the first significant support or resistance level in favor of the trade. This will avoid the taking of loses when the market simply bounces of one of this levels towards the SL before reaching our TP which is likely set at a much higher/lower resistance/support level target.

The last thing I wanted to tell you, which is probably the most important aspect I have discovered about S&R trading which is perfectly in line with sound trading principles is that you should NOT trade breakouts of S&R levels. I have found that bounces are the best to trade and the best trades are bounces from S or R levels that end up with a position in favor of the trend. This way you enter the trend at the end of a retracement and therefore with a much more favorable profit potential. I realized that entering on breakouts is usually a bad idea since price seems to bounce from these levels, sometimes a lot, before continuing the trend. So for example, if the EUR/USD has a resistance level at 1.5150, you will not enter on a breakout of 1.5150 but you will enter on a test of a support level that results from a bounce from that support level.
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As the images above show you, you should enter trades on the blue circles, NOT on the red circles. Entering bounces that end up in the direction of the main trend is always the most favorable case. You should definitely avoid entering breakouts as this type of trades generally does NOT offer the best risk to reward ratio and often takes out your SL as price bounces off the support or resistance level. Hopefully this guidelines will help anyone wishing to trade this S&R system, of particular importance is to trade this on Renko charts which offer a crystal clear view of support and resistance levels.

If you are not interested on manual trading systems but in the trading of long term profitable automated trading systems. Especially how you can trade freely available profitable systems or build your own long term profitable systems please consider buying my ebook on automated trading or subscribing to my weekly newsletter to receive updates and check the live and demo accounts I am running with several expert advisors. I hope you enjoyed the article !

Trading from Small Amount Brokers with Low Contract Sizes

Many people want to start forex trading but they do not want to risk large amounts of money. Most brokers offer accounts from very small or no minimum deposits but what people dont realize is that they are risking a very large percentage of their money per trade due to the fact that the broker has a high minimum tradable amount per pip. People dont realize that most broker call their accounts mini or micro in virtue of their minimum tradable lot size (0.1, 0.01, etc) but not in virtue of their contract size per standard lot which is what finally determines the amount of money made or lost per trade. The best accounts a person can use to trade with small amounts of money and accurately handle their lot sizing to risk reasonable percentages of equity are accounts which offer a 10,000 USD (instead of the regular 100K) contract size per standard lot. In todays post I will talk a little bit about the brokers which offer these accounts (which are hard to find !) and their different disadvantages/advantages.

So what is the advantage of a 10,000 USD contract size per standard lot ? On regular accounts offered by most brokers, the contract size per standard lot is 100,000 USD, meaning that even if you can trade down to 0.01 lots you will be trading at least 1000 units of base currency which are equivalente to roughly 10 cents per pip on the EUR/USD. What this means is that if you have a small deposit (100 USD for example) you will have to trade with an SL of less than 20 pips to maintain your risk low. This leaves almost no room for money management adjustements and drastically limits the amount of money you can trade and the positions you can take. For this reason a regular forex account needs to be opened with at least 1000 USD so that money management can be done appropiately and positions with large SL values (up to 200) can be traded.

What is the solution for the really small investor ? If you are just starting to trade or you want to test a large array of trading systems, etc, then the best solution is to use an account with a 10,000 USD contract size. This means that you can trade 100 units of base currency at 0.01 lots, meaning that you can trade 100 USD and have a stop loss value of up to 200 pips without risking more than 2%. This is great in the sense that it allows you to mimic the money management conditions of a 1000 USD accounts with 1/10th of the starting capital.

But who offers these elusive accounts ? It has taken me many hours of internet searching to come up with companies which offer accounts that allow you to trade from 1 cent per pip but I have compiled a list of these companies to make everyones life a little bit easier :o). The brokers which allow these accounts are : IBFX, FXclearing, LiteFX, NordFX, MasterForex, InstaForex and FXopen.

They all have advantages and disadvantages, for example, IBFX is the only of these that is NFA registered and therefore it offers you all the pros and cons of this feature. InterbankFX allows credit card and bank wire deposits but it lacks any form of e-currency payments, something which I dont like since it is fairly inconvenient. Definitely my favorite is FXClearing in the sense that it offers paypal deposits/withdrawals something which is extremely convenient when dealing with these small amounts of money. The other companies listed above also offer additional payments through other e-currencies like egold, liberty reserve, etc. However the fact that I like the most about them is that all of them (LiteFX, NordFX, MasterForex, Instaforex) offer the ability to deposit funds using alertpay, something which is convenient since you can easily transfer money from your bank account to your alertpay account (exactly like when using paypal). By the way, all the above companies offer metatrader 4 as a trading platform something which is important to most people since this is the leading platform used for automated trading.

By using any of the above companies you can open accounts with small investments and yet be able to trade your systems in an accurate fashion, these allows for a reduced-risk evaluation of your automated or manual trading systems, a very important thing that must be done if one then wishes to invest (or manage) large sums of money in forex trading. If you know any other broker which offers metatrader 4 and trading from 1 cent per pip, please leave a comment :o) (also make sure you leave any comments about the above brokers if you have experience with them)

If you would like to learn more about my automated trading systems and how you too can be successful in forex automated trading with realistic risk and profit targets please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Uneven Strategies Working with Different Profitabilities in Portfolio Building Part One

One of the first questions I asked myself when I begun the development of portfolios within Asirikuy was : What if the profitabiliy of the trading systems used is very different ? What will happen if one system is much more profitable than the other one in the long term ? I started to wonder if the most unprofitable system would just drain out the profitability of the best one or if things would improve with time as the systems traded together. Today I will be writing the first part of a two part post which will talk about my finding around portfolio trading of uneven systems and the effect of doing these types of pair-ups in the overall draw down and profitability of a given portfolio.

In order to pair two uneven systems I needed to find two likely long term profitable systems that traded with similar frequency but which had significant differences in profitability that would become larger in the long term. The most suitable system I found was Watukushay No.2 which trades on both the EUR/USD and the GBP/USD. Although both instances are bound to be long term profitable, the EUR/USD instance achieves higher profitabilities in simulation due to the higher presence of the inefficiency exploited by Watukushay No.2 on this currency pair. By pairing up both systems I would be able to see the overall effect in long term portfolio trading allowing me to see if one system would be able to drain the other one or if - despite their differences in profitability - they would achieve a joint effort towards more profitable territory.

To make things even more interesting I decided to increase the Risk used on these tests to 5 also extending the backtests to include 2010 months up until May first. The results - shown below - let us see the big difference in profitability between the EUR/USD and GBP/USD instances of Watukushay No.2 as compounding effects become more pronounced. The contribution of the less profitable GBP/USD instance becomes less significant as time goes by and the EUR/USD instance starts to take a very important place within the portfolio. In the year 2009-2010, most of the position sizes taken are the responsability of the EUR/USD instance while the GBP/USD instance contributes about 5-10% of the trading volume. It is extremely interesting here to note that -in the long term - a portfolio setup eliminates unprofitable strategies by itself, since less account percentage is allocated as the instances fail to accurately perform, effectively protecting the account from the less perfoming strategies.
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However what happens during the whole ten year period ? What happens with the overall losing period length, maximum draw down, etc ? For the Risk 5 tests, the maximum draw down period length and the maximum draw down values for the EUR/USD instance were 658 days and 26.96% while for the GBP/USD instance they were 1026 and 59.41%. However, the portfolio achieves a wonderful effect and achieves - within the ten year period - to reduce the maximum draw down period to 433 days and the maximum draw down to 30.66% just a little bit higher than the EUR/USD instance and much lower than the GBP/USD instance.
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It is also very interesing to evaluate the yearly profits of the portfolio (shown above) which allow us to see how the EUR/USD instance takes over as times goes by. Of particular importance is the year 2002 in which Watukushay No.2 achieves its highest profit on the EUR/USD (note that high risks exaggerate these effects), leaving behind the GBP/USD instance in terms of equity gains. As time evolves even further we note how the EUR/USD instance keeps growing the account and the contribution of the GBP/USD instance becomes very small. In the end, the profitability of the GBP/USD instance achieves a minor increase in average yearly profitability for the account, from 41 to 42% showing that the addition of this instance, eventhough much less profitable did add up to draw down period reduction and increases in profitability in the long term.

Of course, there are still several questions unanswered which will be addressed on the next part, released tomorrow. For example, what happens if we decide to start to trade a portfolio like this just before the worst draw down period of the worst performing system ? Will this expose us to higher risk ? Is the long term risk indicative of the highest possible draw down even when different starting periods are taken into account ? Tomorrow I will try to answer these questions as I continue to research the depths of the world of portfolio trading and combinations of Asirikuy systems.

From todays post we can definitely conclude that the best idea is to combine trading systems with similar profit targets, however if one of the systems does start to fail it is very probable that its trading contribution will be slowly eliminated by the account growth caused by the other systems. This is very powerful in the sense that the portfolio self-manages the profitability of trading strategies and automatically rewards systems that perform better and punishes systems that perform worse.

If you would like to learn more about automated trading system development and how you too can learn to develop your own long term profitable systems please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Making Money with Automatic Forex Trading Software

Money is used everyday. You use it to buy all the things necessary to make it possible to live your everyday life. You use money to purchase food, purchase gas for your car, pay for your utility bills and you use money to get your children the best education you can possibly give them.

It is a fact that money is one of the most important things in life. This is why there are trading systems available that trade world currency.

Forex is the most liquid and largest financial market in the world. This market literally operates 24 hours a day, seven days a week in the whole world with trillions of dollars being exchanged everyday.

If you are a trader, you would really want to consider trading in Forex. Besides, who wouldn't want to trade in the largest financial market in the world? It is a fact that Forex can create the possibility for you to earn high amounts of income.

There is even Forex trading softwares available to help you with your Forex trades. This type of software can really help you make money in Forex by automatically buying and selling currencies for you.

If you are a speculator, Forex automatic trading software is the best software for you. You can choose which kind of software you want. In fact, when you sign up in an online Forex trading website, some of these websites can offer you free automatic trading software as a part of their promo by opening a Forex account with them.

However, this free software that websites offer you can just be a demo package with limited features. The website will usually require you to make an extra payment for the use of the full version of the software.

There are also different Forex trading softwares available in the internet for use or for download. You might want to try out the demo version first before you buy the full version. By doing this, you can try out different Forex trading software for free and determine which software you are most comfortable using. You should consider that as a Forex trader, getting an automatic Forex trading system is essential in today's world of Forex trading.

There are mainly two types of automatic trading software available. One is the web based programs and the other is the desktop based programs. It is up to you to choose which program you want and is also up to you to determine which program is much easier to use in assisting you with your Forex trades.

Whether you choose an online-based or desktop-based Forex trading software, you have to know that the most important factor in using this software is the internet speed. It is recommended that you should have a high speed internet connection as a simple delay in information can cause losses.

In desktop-based software, the trading data is stored in your hard drive. However, you will be responsible for the security issues like hacking, viruses, and crashing hard drives. Therefore, it is essential to devote a single personal computer for trading Forex or using computers that are especially made for trading Forex, which can be expensive.

In web-based software, security issues are a problem the provider should take care of. Since there is no required software for you to download, it is much more convenient to trade. And, web-based Forex trading software is also much more convenient for Forex traders who travel a lot. This is because you can access your Forex account anytime and anywhere you are in the world as long as there is an active internet connection.

However, in web-based software, you have to pay a minimum monthly or annual fee for maintenance unlike in desktop-based software, you usually only have to pay a one time fee for download.

Both types of software has its own advantages and disadvantages, it is up to you to determine which kind of Forex trading software can benefit you most. Try to consider your lifestyle when it comes to choosing which software you need. For example, if you travel a lot and you need to access your Forex account frequently, then the web-based software is the right software for you.

These are the things you should consider when choosing Forex trading software. As much as possible, you should choose automatic Forex trading software to really get the benefits you want. Also, choose software that will include real time data streaming to keep you up to date with the different changes in the Forex market.