Well I am sure we all have heard from various sources that we should risking no more than 1-3% of our account per trade.

Personally I believe that the value or percentage of risk per trade is relative since we all have different tolerances for risk.

In addition, if you only have a few EA’s in your account and have a smaller Risk Per Trade, you most likely will not Margin out your account since the lot sizes will be small enough to accommodate several EA’s in your account.

However if you have too many EA’s in one account and still trading a conservative 1-3% Risk Per Trade, then there is a possibility of margining out your account especially if you are using a lower leverage account such as 50:1.

Therefore you must have a balance between not having too many EA’s in one account and only opening the proper lot sizes according to the balance or available at anyone time.

What that being said, this all seems redundant because in the end we personally should be calculating more or less what lot sizes the EA is ultimately going to open since we are responsible for the inputs and outputs from those EA’s.

Remember GIGO. Garbage In, Garbage Out

I wish there was a better or more positive phrase than this. Maybe you know of a more positive one?

Please post your viewpoints or comments below if you have something different to add for the benefit of the readers of this blog.

Thank you and till next time…safe trading.

Mike Torres

http://WealthSecrets.com

http://MiamiForexClub.com

(305) 389-0170

This information is good to know because some EA’s use Instant Execution and some use Market Execution.

What is the main difference between Instant Execution and Market Execution?

With Market execution the order is opened without Stop Loss or Take Profit. The SL and TP is added or modified later.

Here is a list of my brokers and their types of execution:

ATC Brokers = Instant Execution
FinFx Brokers = Market Execution
Forex.com = Market Execution
ILQ Brokers = Instant Execution
MB Trading = Market Execution

Based on my brokers above tt appears that most are Market Execution.

What type of execution does your broker have?

Hope this information helps you.

Contact me if you have any questions or comments. Or you mayn just post your comments on my blog below.

Have a great year!

Mike Torres
Miami, FL
(305) 389-0170
http://BestForexVPS.com
http://ForexExpertAdvisors.com
http://MiamiForexClub.com
http://WealthSecrets.com
(305) 389-0170 cell

http://www.mt4i.com/users/oandacrescendo

I have learned a few things from this experience.

1) I was trading too large of a lot size of 1 mini for a $10,000
balance on a 50:1 account leverage account.

2) However if I did want to use 1 mini lot for a $10,000 balance
I should have increased the Max DD % to 70% instead of 50%.

3) And most importantly, the fact that we may experience technology
error, broker error or possibly broker abuse. In fact, this point #3
really can affect points #1 and #2 and are really out of our control.

I was looking at my demos using the different versions of Crescendo
and looking at Max DD’s and ROI’s etc. and thought of emailing you
my analysis.  However as I was writing this to you I noticed what
really happened to this Oanda account.

Yes the account lost 50% due to the Max DD setting set to 50%
however there is something more grave than that.  I see technology
error or perhaps broker error.  I can’t really pinpoint it right now.
I suppose I could go to the log files and try to figure it out but the
main point is that we as traders have to prepare for these two
very important aspects of automated trading.

When I started to look at the trades I noticed that there were more
losses than what was showing on the chart. I thought there were
9 loss trades because that’s all I saw on the chart by looking at
the arrows and lines painted on the chart.  However I went to
the MT4i statement and noticed that were 11 loss trades than
and what is more strange is that the lot size on one of trades is
2 minis instead of 1 mini.  And on some of the trades they were
duplicated or doubled.  In other words, two trades entered
essentially at the same time.

Here are the calculations on what happened:

$323 margin requirement for 1 mini of GBPUSD

9 positions margin requirement = $2,916
but really 11 positions were open due to the
double trading = $3,553 for margin

50% of the $5,000 account  – $3,553 only left
$1,447 breathing room for the price to move
and come back and therefore was not enough.

The errors are in bold below:

-707.80 pips or -$1,415.60
-707.80 pips or -$707.80
-628.70 pips or -$628.70
-565.50 pips or -$565.50
-488.50 pips or -$488.50
-392.90 pips or -$392.90
-285.70 pips or -$285.70
-208.60 pips or -$208.60
-208.60 pips or -$208.60 (Double trade)
-139.30 pips or -$139.30
-53.70 pips or -$53.70

Total of -4387.1 pips or  -$5,094.90

If you look below, why is there such a big difference
in transaction numbers between 502 and 523?  Why
did it open it at 2 minis and then open it at 1 mini?

And then on down you will see the double trading
again with transaction # 7464012 and 7464013
Notice how the transaction numbers were back
to back.

If you notice from the screen shot below that all I needed was
to use a tiny bit more of the available equity  to allow the price
to come back up to the 50% fibonacci retracement level in order
to eventually close the basket.  But because I had the Max DD
set to 50% it didn’t allow it.

You will see that in the screen shot below that price moved
700 pips against the very first open Buy positions.  However
notice that the basket most likely would have closed at the
50% fibonacci level or at 1.6171.

Just curious, what’s your opinion on this experience?

And what would you do to help or prevent this from
happening to you?

Thanks for collaborating with me on this.



Dear Readers,

I will speaking at the Retail Forex Traders Summit at 4:30 pm on September, 2011 on Forex Automated Trading.

As many of you know from personal contact and following my blogs that my passion for trading the forex market is through the use of expert advisors.

However not only will you hear me share some secrets and tips to trading forex using expert advisors but you will hear from other top players in the industry as well when it comes to trading forex.

Save the date and plan to come out and learn and network with great traders. I believe that by attending seminars and networking with other traders that you will be able to cut down your learning curve greatly.

Pre-register early now at this link and save off your registration fee.

I look forward to meeting you on September 12, 2011.

Call me at (305) 389-0170 when you get there and perhaps we can meet before my presentation.

Mike

http://www.mt4i.com/users/atclive/stats

Strategy #1 Scalping:

Strategy #2 Breakout:

Strategy #3 Reversal:

All Three Strategies Combined:

As you can see from the above screen shots that the Reversal Strategy #3 is doing the best so far.

By the way, I changed the stop loss for the scalping strategy to -70 pips instead of -100 pips. Let’s see if that will improve the results.

For more information on this expert advisor, please visit: ForexComboRobot.com

Please Contact Me if you would like a copy of my presets.

1. They usually have non Fixed Spreads, all ECN brokers should have non fixed spreads.

2. They usually charge commission with non fixed spreads, if they don’t charge a commission please ask yourself how they stay in business.

3. They have rollover, all ECN’s will have to disconnect for 5-10 minutes at 5pm EST. If you can still place a trade at this time I would be wondering how they are getting quotes through, they are most likely taking the other side so that the trade goes through.

4. Finally, look for “requotes.” I have heard that some market makers or deal desks cancel demo and live accounts due to the trader’s profitability.

If you have anything else to add, please Contact Mike

Not only was the exit of dbFX from the retail market a headline grabber, the transfer of clients to Gain Capital once again brought two powerful industry leaders into a bidding war. The dbFX/FXCM partnership was at one point a source of great pride for FXCM, as the white labeling of the Trading Station platform by dbFX legitimized FXCM’s effort to be a serious player in the currency market. The joint venture represented 2.3% of total FXCM revenues in 2010. We can estimate that to be $8 million based on FXCM’s 2010 end of year reports.

It’s interesting to note that FXCM didn’t end up acquiring dbFX’s clients, although it would have been a very natural deal. dbFX and FXCM share the same platform; hence, shifting from one broker to another here could be as seamless as it gets. It’s not that FXCM doesn’t have enough cash: about $50 million of the proceeds from FXCM’s recent IPO was added to the balance sheet. This is in addition to the $150 million already on the FXCM balance sheet. FXCM CEO Drew Niv has publicly stated that they plan to buy other forex brokers. So with this massive amount of funds available, did FXCM act too conservatively or is it simply standing by for dbFX clients to switch to FXCM anyway because of the Trading Station software?

FXCM management has always stated that they are conservative in their approach and grew the firm debt-free. Let’s take a look at some numbers from recent acquisitions in the industry. March 2011, saw the acquisition of GCI Capital by FXCM for $5 million. In October 2010, Gain Capital paid $7.99 million plus 15% of future net earnings during the next 18 months for the clients of CMS Forex. In May 2010, FXCM acquired the ODL group for $2.2 million in cash and 5.25% of FXCM pre-IPO, valuing the deal at $54.9 million. It looks to me that, compared to Gain Capital, FXCM is very conservative with cash outlay when it comes to acquisitions. While the details of the dbFX acquisition are not yet public, it remains to be seen if the sticker price of the deal was too much for FXCM.

FXCM can certainly take lessons from the CMS acquisition by Gain Capital. CMS clients balked at the idea of giving up their much loved VT Trader for the Forex.com proprietary platform. As a result, Gain Capital has made plans to reintroduce VT Trader exclusively to their newly absorbed CMS Forex clients. Another industry standard, the Metatrader platform has legions of followers that are willing to switch brokers but will not abandon their Metatrader charts. Loyalty to trading platform runs deep in the FX trading community. If Gain Capital is not able to offer a platform that meets the expectation of dbFX clients and clients flee en masse, FXCM will have scored one of the biggest coups of the year.

Deposits tend to be generally larger at institutions that can offer clients safety of funds. dbFX capitalized on its status as a bank by advertising the protection offered by the Deposit Protection Fund of the Association of German Banks. Because of the demographic that dbFX catered to, the average account size is most likely bigger than the average account size at FXCM and Forex.com. In fact, we hear that dbFX’s average account size is well over $100,000 which is almost 15-25 times higher than FXCM/GAINs average account size.

Using data from the CFTC financial report on FCMs and the Q1 2011 client profitability reports the average account sizes can be estimated using a division by 0.6 factor to achieve the total number of active and inactive accounts. FXCM had 20,223 traded accounts (active only) and $140 million in US client deposits (includes both active and inactive accounts) giving the average active account size at $4150 ($140m/(20,223/0.6)). Similarly Gain Capital had 13,937 actively traded accounts and $143 million in US client deposits (active and inactive) which comes to an average account size of $6150 ($143m/(13937/0.6)).

Excerpt from http://forexmagnates.com/the-end-of-dbfx-an-analysis/

As you can see from this screen shot 4xPartner already closed 1/3 of my position once it reached the target of 20 pips. Now it is waiting to go to Step 1 of 20 or 40 pips (20×2) and close out another 1/3 of my position. Once it reaches this Step 1 of 40 pips, the Stop Loss will move to 22 pips (Safe Amount of 2 pips + Step 1 of 20 pips.)

And now it will wait to see if price can go on to my next target of Step 2 of another 40 pips (20×2) beyond the stop loss of 22 which would mean the price would now be at 62 pips and now the stop loss is brought to 42 pips. Either price will retrace and hit my 42 pips stop loss thereby closing out my last 1/3 position or if price keeps moving in my favor it will keep stepping up using the same formula.

Step 2 Formulas:

(Safe_Amount + STEP_1 + STEP_2 + STEP_2)
(2 pips + 20 pips + 20 pips + 20 pips)

Step 2 Formula for determining stop loss = (CurrentProfit – STEP_2)

Since I am so curious and I hope you are too, I just had to calculate what would happen if price kept moving in my favor especially when these TP’s and Step values are so small anways. I have seen quite a few times that the price of the EURUSD can move 100 pips or more so it would not be unrealistic to see prices go beyond the initial Step 2.

So here goes the calculations for the last 1/3 position. If price keeps moving in my favor now it will keep stepping up using the same formula. And here are the formulas:

(Safe_Amount + STEP_1 + STEP_2 + STEP_2 + STEP_2 + STEP_2)
(2 pips + 20 pips + 20 pips + 20 + 20 pips + 20 pips) = 102 pips and the stop loss would move to (CurrentProfit – STEP_2) or 102 – 20 = 82 pips. Either price will retrace and close my last 1/3 position at 82 pips yielding a grand total of 142 pips. (20 pips + 40 pips + 82 pips) = 142 pips.

Or if price keeps moving in my favor, it will keep stepping up using the same formula which would be (Safe_Amount + STEP_1 + STEP_2 + STEP_2 + STEP_2 + STEP_2 + STEP_2 + STEP_2)
(2 pips + 20 pips + 20 pips + 20 pips + 20 pips + 20 pips + 20 pips + 20 pips) = 142 pips

Now the stop loss will move to 122 pips. So if price retraces my grand total will be (20 pips + 40 pips + 122 pips) or 182 pips. And this scenario can happen as long as there is a big move.

As you can imagine, I am not going to figure out the next set of probabilities because chances of price moving in my favor may diminish due to reaching a major area of resistance or support.

Edit 9:30 am – As you can see from this screen shot, the price retraced and hit my 2 pip safe amount thereby closing out the last 2/3 of my position. By the way, I figured I would use a lower target of 20 pips instead of 40 pips because I knew there was more news coming at 10:00 am that could affect my 8:30 am trade.

I will be placing a trade at 10:30 a.m. when the Home Sales figures comes out and see if I can do better and get all 3 profit targets reached.

I have to say for the record that I love using this software because it has made my manual trading so much simpler and effective. I hope you order it and love it just as I have. Click here to order this highly effective tool called 4xPartner.

Email me if you have any questions on using this software or on anything else you want to know.

Happy Trading!

ForexHosting.com
http://MiamiForexClub.com
http://WealthSecrets.com
(305) 389-0170 cell

Quote of the Day:

When You Hear Something – You Forget It.
When You See Something – You Remember It.
When You Do Something – You Understand It!
- Chinese Proverb

My goal for the new year is to accumulate around $20,000 in capital and open 4 accounts with $5,000 in each so I can put the robots that work in them and let them go.

I have tested extensively now in live and demo accounts for the last two years to know which ones are performing and which ones aren’t over the long term.

However my plan will still be to trade using low lots and increase them over time. What I have noticed is that some produce 30% a month however if you use too large of a lot size and the market changes drastically, then the drawdown gets to be too much for the balance and then a margin call is issued.

My conclusion after two years of trading is that I’d rather make
a stable 3-8% a month then 30% for a few months and then loose
it all back to the market.

What happens to most people is they want forex to replace the income from their day job or business with a very small investment of only $1,000 . And frankly that is not realistic. Suppose you are an executive making $150,000 a year and your take home pay after taxes is $120,000 or $12,000 a month. Do you think forex can make that for you month after month with perhaps just $10,000 in investment capital? It just isn’t realistic and that’s why people over trade or over leverage their accounts. They get anxious and impatient. I know because I thought like this before until the market taught me otherwise.

I believe you can replace that kind of income with perhaps $100,000 in investment capital and you are trading conservatively. You just have to accumulate the initial $100,000 in capital and have the wisdom to know what you are doing with respect to trading. And that’s not all….it’s still going to require your time, energy, patience, resolve and a positive mental attitude to make it happen. A little luck wouldn’t hurt either!

However you know what they say about luck. “Luck is when preparation meets opportunity.”

I hope this information helps, informs and inspires you.

I know it does for me.

Mike

Some interesting quotes I found the other day that you may like:

“There are only two tragedies in life: one is not getting what one wants, and the other is getting it.” – Oscar Wilde

“Learning preserves the errors of the past as well as its wisdom.”

“It doesn’t matter how efficiently you paddle, you will never reach your destination if you are on the wrong river.”