Trend Following the Intraday FX

I am going to base the following view with a certain definition of trend following: entering trades when the market start to go in a certain way, maintaining the open trades as long as the market still move in the same direction, and finally exit the trades when the expected trend discontinued. Purely following. The purest form of this strategy can be seen in Curtis’ white paper that was able to be downloaded freely in his website several years ago. Another form of a pure trend following system can be found in Michael Covel’s first book.

So..
In my experience, trading intraday in the FX market by purely following the trend like that, wouldn’t work as good as when we do a pure trend following system in the daily timeframe. The volatility behavior of the intraday price movement would kill the system by producing too many whipsaws. Even if we used some advanced entry technique to exploit a running trend by using multiple entry like what the turtles do, the wild volatility in intraday FX market is a beast can not be tamed with that prescription.
Using a pure trend following system to trade the intraday FX market would be like asking Mr. Bean cleaning your office desk. It would be such a terrible mess. lol.

Intraday market has its own characteristic, thus need to be handled with different approach.
Would elaborate more into that in another posts next time.

(*)

ATR-derived Stop Loss Level

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After reading my online buddy’s blog entry about MAE/MFE analysis, i thought it’d be worth posting this note about how we calculate stop loss level based on ATR (Average True Range).

Using a fix n pips distance for SL and/or TP is the simplest way a trader would do. But sometimes, the market would perform differently from time to time. Sometimes the market moves wildly with longer candle body, sometimes it moves very calmly with a very low volatility. A fix n pips SL/TP wouldn’t fit into the always changing market’s volatility behavior.

Moreover, we surely want to test a strategy in several different currency pairs. And because each pair would have different volatility behavior, using an ATR-derived SL/TP level would provide us with a system that can literally self-fit into any kind of volatility behavior.

These are some sample lines from our strategy. It calculates ATR first:

atr_SL = iATR(Symbol(), 0, prm_normalization_atr_period, 1) * prm_SL2atr_ratio;

and then this atr_SL value is used to calculate SL distances as follows:

stoploss = NormalizeDouble(Ask + atr_SL, Digits);

so the value of the SL distance would be based on ATR, not a fix n pips.

(*)

Time Dimension of the Market

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Several short term trading systems we have been developing for the FX market relays heavily on the distinctively unique and consistent nature of volatility behavior between market’s sessions.

We even haven’t found any ways to substitute our time-constraint filters with something purely derived from price-only data. It’s like we actually have a different kind of market for each session that is divided by a rigid time mark, not by some hints those can be found in price action.

This has been bringing some serious thought for us, because we thought that we have to stick to our philosophy to relay our systems purely on price action. But then we realize that the market has the dimension of time along with the dimension of price.

And to our surprise, I found this interesting observation by Mr. Steenbarger, Ph.D. In one of his post today in his blog, he stated a similar conclusion as ours:

What we can see is that these seem to be different markets. Indeed, the daily correlations among the three range from .12 to .18, suggesting that what the market does during one time period is only very weakly related to what it will do in the next one.

Although his research is about the stock market, particularly the S&P, this has put us into believing that time dimension is very truly exists, as we also been observing the same phenomenon in the FX market.

This confirmation from Mr. Steenbarger’s research has put a new item to our research agenda, that we will need to check market’s average range for each session. This would probably be useful for developing a better opening range breakout model, by having a better measurement of the opening range width. And for our range trading model, we might get a better basis for the entry and exit strategy. The keyword would be determining the historical and average range of sessions.

(*)

Mr. Bean and the Volatility

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The intraday volatility pattern in the major currency pairs would likely to stay the same, thanks to these reasons on why London will keep its role as the center of financial world:
(taken from this link).

• (US) Financial regulation: After scandals like Enron, the financial industry is more heavily regulated. The Sarbanes-Oxley Act required lots of tightening of financial controls. As a result, it’s less attractive to do business in a country where every transaction is scrutinized.
• Patriot Act and Dept. of Homeland Security: After 9/11, US security was tightened quite a bit. That means there’s less openness with foreign transactions, travel, and more. In contrast, London is easier to deal with.
• Time zones: Who wants to keep weird hours? London’s time zone is more favorable for many world areas. Investors, generally outside of the US, who want to keep more regular hours trade on London time.
• International flavor: With London’s immigrant financial workforce and relatively open work and travel visas, the city’s financial makeup is very internationally diverse. Last year, a Russian pipe manufacturer chose to list with London’s stock exchange rather than NYSE because it’s “very internationally flavored,” a sentiment that is likely echoed by many others with financial interests.

Mr Bean has probably been adding more weight to the image of London’s openness. Imagine having friends like him for a coffee during the market break. Perhaps I could ask him for some advices on the market. lol.

(*)

Volatility is back! :-)

Dear valued partners of Risenberg,
after a contraction in intraday volatility since the begining of 2007 on all major pairs, we are now observing a convincingly increasing volatility.
Using a 15 bars Average True Rrange (ATR) on 15minute chart, then putting a 100 bars Simple Moving Average off the ATR readings, we can observe a significant increase in intraday volatility.
This phenomenon is seen across all forex pairs, including pairs we are now trading using the RiVER system: the Brit Pound, Euro, Canadian, and the Swissie.

Volatility was very low during November 2006 – July 2007.

And this is the reading we have been having for several weeks now.

A very good news for us.
This should be a favorable condition for the business.
Wish us luck!

(*)

Fwd: Penurunan volatilitas short term: penyebab dan aplikasi praktisnya

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———- Forwarded message ———-

From: Darma
Date: May 10, 2007 10:05 PM
Subject: Penurunan volatilitas short term: penyebab dan aplikasi praktisnya
To: indotraders@yahoogroups.com
Dear traders,

Kalau kita pasang indicator ATR (Average True Range), di timeframe 15 menit, dengan periode 15 bar, lalu dipasang moving average nya dengan periode 100 bar, maka kita mendapatkan suatu gambaran seberapa banyak gerakan rata2 per satu bar di 15 menit.
Nah, ternyata ada fenomena menarik.

Kalau di tahun-tahun dulu, misalnya di tahun 2005, rata-rata gerakan per 15 menit di EUR/USD adalah 13 pips (lihat gambar chart di bawah). Sedangkan di tahun-tahun sekarang ini, semenjak tahun 2006 november, gerakan market menjadi lebih tipis. Rata2 hanya 6 pips per 15 menit.

Hal yg sama terjadi di GBP/USD, USD/JPY, USD/CHF dan lainnya.
Penyebabnya adalah: meningkatnya likuiditas market. Yang tadinya rata2 volume transaksi harian di forex adalah $ 1-2 trilliun per hari, semenjak pertengahan 2006, menjadi $ 3 trilliun per hari. Ini menurut report dari BIS (Bank for International Settlement).

Aplikasi praktis dari hal ini adalah:
Untuk trading di short term, intraday, tidak lagi realistis untuk mengharapkan takeprofit seperti di tahun-tahun sebelum 2006. Yang tadinya di GBP/USD mengharapkan bisa take profit 15-20 point dalam waktu 30-60 menit, kini hal itu agak sulit. Mesti di jam2 tertentu saja yang memang volatilitas meningkat seperti saat ada news. Kalau di jam-jam normal, dalam waktu 30-60 menit lebih mudah untuk bias ambil 10-12 pips saja. Itu contoh angka untuk di GBP/USD. Sedangkan untuk di EUR/USD, mesti dilihat masing2. Pasang saja indicator ATR dan moving average seprti gambar di bawah ini.
Ini tentu sejalan dengan menurunnya spread di retail spot di hampir semua broker di dunia. Yang misalnya saja tadinya spread 5 pips di FXCM dan marketmaker lainnya, sekarang rata2 udah pada turun. Spread 2-3 pips sudah lumrah sekali. Bahkan belakangan ini kita lihat spread aneh 1 pips no commission di marketmaker nekat seperti crown dan fxclearing. Kalau di bntuk2 ecn sih biasa, memang 1-2 pips dari sejak mereka hadir untuk retail sejak tahun lalu.

Segitu dulu. Selamat mengeksplorasi lebih jauh lagi. Kalo ada pendapat atau ide lain, silahkan disampaikan.

Rgrds,
Darma

F is for Final

After the sharing session, I do this small change to the algorithm, where it does the money management part of it.

volume = NormalizeDouble(
(AccountBalance()*prm_gearing_ratio)/
(prm_pair_diversify*MarketInfo(Symbol(),MODE_LOTSIZE)),
prm_lot_resolution);

This will automate the process in determining the position size based on a fixed number of gearing ratio.
I have a 5.33 gearing ratio, this will be the value of prm_gearing_ratio.
prm_pair_diversify will be 2, since the system will be run on two pair: EUR/USD and GBP/USD.
When trading on a mini acct, the MarketInfo(Symbol(),MODE_LOTSIZE) will automatically return a value of 10,000 or 100k when trading a standard account.
With this piece of code, i dont have to calculate some basic arithmetic on waste papers anymore. LOL.
This version is tagged as vy5f. So the version is StealthTrader_vy5f now. I hope F is for Final. he he he..
Good luck to us !!!

The sharing session

The sharing session went well.
Some good and fresh ideas was given to me so I can improve the system to be more robust.
Although several things like building the system based on some rocket-science-kind-of Neural Network is a bit too unrealistic at this stage, but they shed some lights and adds up to my library of knowledge in my brain. he he he..
I had several old friends in the session like Asrul, Adek, Adit, Mey, Andre, Setyana, Ariel. And more new friends like imelda, remmy, nico, oswald, and several others. There were 22 people.
I disclosed the gears and bolts of the 10th version of the simplified Stealth_Trader System (STS), and then I get many feedbacks to improve it. A final touch, if you like. 🙂
For those who are interested in getting the powerpoint presentation file, please contact me.
This time is my turn to share. Next time will be other’s. That way, we’ll move forward faster than if we each work alone.

Thanks, and good luck to us !!
Darma

Volatilitas, milis dan analyst

Beberapa hari lalu gue posting opini dan hasil riset gue tentang volatility di beberapa milis.
Di antaranya adalah milis Indotraders, milis AATI dan milis Berjangka.
Di milis2 itu gak ada satu pun yang menanggapi.
Apalagi di milis Berjangka yg isinya cuman caci maki menghujat dunia bursa berjangka Indonesia itu, parah banget. Boro2 ditanggapai, wong message gue kagak di-approve ama moderatornya. Karena pake english, disangka spam kali tuh, ha ha ha… Judulnya aja berjangka & derivatif, tapi isinya caci maki melulu..
Jarang ada omongan soal market di situ. Kalaupun ada, isinya tuh ramalan2 dan analisa2 market yg isinya menurut gue sih BS semua. Wong market udah gerak kok diomongin, dicari ceritanya. Dikomentarin. Buat apa. Emangnya komentar bisa dijadiin duit ? Trus kalau ada prediksi, ujung2nya biasanya tanda tanya.
Misalnya kayak gini nih para expert/analis/pakar tuh ngomongnya:
“Euro akan mencapai titik tertinggi ????”
“Terjadi bullish divergence, pound akan reversal ke atas ???”
Lha ampun, emangnya kalo pasang posisi di market bisa pakai tanda tanya ? hahahah.
Stop loss ya stop loss. Buy ya buy. Sell ya sell.
Gak bisa kalau minggu lalu bilang pound menguat, trus begitu ternyata sekarang melemah malah berbusa2 ngomong alasan fundamental kenapa ternyata melemah. Kelihatannya sih pinter, jago, ngerti soal2 gituan. Tapi sebenarnya rugi atau untung, kagak ada hubungannya ama busa2nya analisis fundamental berbuih2 itu kan. Apalagi analisa teknikal yg ujugn2nya cuman tanda tanya, ha ha ha..
“Terjadi bullish divergence, pound akan reversal ke atas ???”
cape dehhhh..

Kembali ke volatilitas..
ternyata gak banyak orang yg merasa perlu memperhatikan volatilitas.
Gak ada yg ngeh, atau emang cuman gue doang yg merhatiin volatilitas sih ?
Well, kayaknya sih bukan gue doang. At least ada researchers di BIS (Bank for International Settlement) dan Citigroup yg mikirin volatilitas.
Yah gitu deh.
By the way, kayaknya volatilitas short term di market udah mulai membaik nih.
Kita lihat aja deh perkembangan minggu ini.
Good luck to us.

BIS report on volatility

Continuing my recent research on market volatility, i found this report from Bank for International Settlement (www.bis.org). The report can be downloaded from this link (pdf).

My observation on this change in market bahavior is confirmed in the report:

The evidence presented in this Report shows that over the period from mid-2004 to March 2006 the volatility of short-term and long-term interest rates, stocks, exchange rates and corporate spreads has been generally low relative to the previous five to 10 years in both industrial countries and emerging market economies (EMEs). However, if the sample period is extended back to the last two to three decades, for which daily data are available, other periods in which volatility reached similar low levels can be observed. The exception is represented by the volatility of short-term interest rates, which has reached its lowest level for 20 years in all the main currency areas.

Regarding the possible causes of this are:

The sharp decline of financial volatility witnessed over the last few years may have benefited from increased liquidity of financial markets. Since this concept is not easy to operationalise, it is useful to look at several indicators.
Throughout the sample the turnover of stock markets has increased considerably, and now stands almost everywhere around the highest levels since 1990. In the foreign exchange markets volumes were virtually flat over the period 2000-02, but since 2003 an upward trend has emerged.
In recent years financial innovation and the rise of new classes of financial institutions, combined with a change in the trading behaviour of traditional institutional investors, have contributed to increasing market liquidity.

And something more interesting is this part:

A key issue is whether the current low level of volatility is a permanent new feature of financial markets or only a temporary phenomenon. The results suggest that important drivers of the volatility reduction seem to be structural, and may therefore have a permanent effect on volatility.

So ? Less volatility. Smoother charts ? My quick guess is this: trend following strategy may perform better on lower timeframe.
Another good material was posted in my friend’s blog here, tittled “Market Effects of Hedge Funds”.

A dead ended discussion

A dead-ended discussion about volatility on this Elitetrader forum.
There were only me, Truestory and ElectricSavant who added to the conversation.
Hundreds of hits on that thread, but nobody replied.
Nobody really understand about the market.
LOLLLL !!!!

Me:
pardon me,
im a newbie in this forum.
does anyone notice a much smaller volatility in forex’ intraday behavior ?
when i place a 300 or 500 bar average true range on 15minute charts of eurusd, gbpusd, usdchf, usdjpy, they are declining a lot since november 2006.
what may cause this ?
is it a more stable global economy ?
more liquidity in the spot market ?
less liquidity ?
please advice.
thank you.

TrueStory:
It’s natural. Volatility goes up and down in cycles. Since November, you’re right, it has come down some, especially in certain pairs. But it will rise again as we move to new congestion levels as economies and interest rates change…

Me:
TrueStory, thank you for your relieving answer.
I run a volatility-dependent system, and I have less-frequent trades these days. I start to worry about the market, will it move more in the future, more volatility like the past time..
I’m not quite understand the correlation between market’s liquidity and volatility. There must be some correlation, but is it negatively or positively correlated ?
Thank you..

TrueStory:
I believe the relationship between liquidity and volatility is too dependent on other factors to be easily defined. It also depends on whether you’re looking at short-term or longer-term volatility.

Me:
Ive been exploiting short term volatility for mechanical system design, but has never been learning what fundamental factors do determine volatility.
Could anyone please point me where to look at this, any books or other resources ? Thank you so much.

ElectricSavant:
yeah…it’s like this…what picture am I being presented? right?

More robust but less trades

Streamlining the codes to detect low volatility pairs as I mentioned in my previous post.
The codes now is as follows:

((!prm_volatility_filter) || (val_far_atr >= prm_tp_pips*Point)) &&

The system is now more robust. Less drawdown.
But i must admit, we may expecting less frequent trades as we are now able to isolate lower probability trades and avoid trading them.
Let’s see how it’ll do this week.
Good luck to us.

Alasan fundamental

Apa sih penyebab turunnya volatilitas di market semenjak november 2006 ?
Masih inget dengan temen gue yg namanya Asrul kan ? Yup, asrul, yg gue tulis di blog post sebelumnya yg berjudul a funny friend of mine. Seperti yg gue pernah sebut sebelumnya, dia itu market master. Perilaku market udah mendarah daging bagi dia dah, ha ha ha. Pokoknya doi tuh oke banget deh.
Berikut ini diskusi gue dengan dia soal faktor fundamental yg menyebabkan menurunnya volatilitas market :

darmasdt: ini ada penurunan volatilitas di semua pairs
darmasdt: gue udah kasih filter, tapi jadinya jumlah transaksi berkurang
darmasdt: semenjak oktober november 2006
darmasdt: ada apa ya secara fundamental ?
darmasdt: kok volatilitas menurun
darmasdt: panjang bar memendek, gitu lho
darmasdt: yg tadinya dalam 1 bar 15 menit itu panjangnya 15-20 pips, sekarang ini hanya 7-8 pips
darmasdt: kenapa gitu ya as
darmasdt: ?
asrul_daf: thn 2004 kan US kena double deficit
asrul_daf: policy naikin rate sampe 14 kali…disatu sisi bagus
asrul_daf: tapi sisi satunya malah inflasinya bengkak
darmasdt: ini kelihatan perubahan signifikan, menurunnya volatilitas itu sejak november 2006
asrul_daf: 2004-05, volatiliti bagus, karena US lg jelek,,,plus minyak juga naik
darmasdt: ic
darmasdt: trus
darmasdt: akhir 2006 apa yg terjadi ?
darmasdt: ekonomi dunia stabil ?
asrul_daf: 2006 setelah greenspan turun, diharapkan tdk ada lg kenaikan rate US.
darmasdt: ic
asrul_daf: kenyataanya mau potong rate juga bernanke msh belum yakin, karena takut inflasi malah naik trs
asrul_daf: trs ekonomi duni lagi mengarah ke asia, terutama Cina
darmasdt: oke
darmasdt: thanks as
darmasdt: siip banget lu
darmasdt: 🙂
darmasdt: top abisss
asrul_daf: namanya juga gosip news
asrul_daf: gw pikir udh jln live nya dar
darmasdt: belum as
asrul_daf: kyk yg lu bilang…STS emang bgs kalo pasar US yg leading ya, kmrn pagi Asia udh gerak , byk kena SL ya STS dar.
darmasdt: filter volatility nya barus selesai tadi subuh, gue gak berani live pakai yg cuek kayak kemarin gitu, terlalu pasrah ke market
darmasdt: iya. itu dulunya belum sempurna, terlalu mengandalkan siklus itu
asrul_daf: kalo ada market yg libur, mending systemnya ga dijalanin dulu kali ya dar
darmasdt: setelah kejadian drawdown seminggu kemarin, gue baru inget, ternyata memang ada handle yg belum gue kerjain. baru selesai tadi subuh
asrul_daf: kmrn kan pasca libur pasar Eropa, paskah

Emoticon nggak tampil di copy-paste ini jadi kesannya kaku gitu. Padahal banyak icon2 ketawa, nyengir dan sebagainya, diskusi yg santai tapi oke banget deh dengan master asrul.

Penurunan volatilitas

Gue pernah tulis di blog ini tentang turunnya volatilitas di market forex majors.
Nah ternyata hal itu lah penyebab drawdown dari STS seminggu ini, dan kurang cantiknya perilaku STS di pair USDCHF dan USDJPY semenjak november 2006.
Setelah mikir-mikir dan utak-atik statistik, akhirnya gue tambahin code ini di bagian pre-trade filternya:

// these lines are to avoid trades on low volatility pairs :
((!prm_atr_far_filter) ||
(val_far_atr >= prm_tp_pips*Point+
(prm_min_vol_spare*MarketInfo(Symbol(),MODE_SPREAD)*Point)
)
) &&
// end of code to avoid trades on low volatility pairs

Dengan penambahan filter seperti ini, ternyata STS mampu menghindari banyak sekali losing trades pada saat2 volatilitas menurun. Biasanya terjadi karena gerakan market tidak cukup volatile utk meng-hit TP, keburu lari lagi jauh2 dan malah hit SL.
Hasil modifikasi ini menjadikan STS sampai pada versi vy_6, menggantikan vy_5b yg masih terlalu mengandalkan siklus historical, tapi kurang peka dengan penurunan volatilitas.
Di versi vy_6 ini, performance STS meningkat tajam, profit factor menjadi 2.0 +/- 20% di beberapa tested pair.
Hasil nggak tidur selama 3 hari ini ternyata sebanding dengan hasil yg didapat. He he he..
Capek tapi hepi. Dan seperti biasanya: Good luck to us.

Less Volatility

I’ve witnessed a decreasing volatility in all forex pairs. This was observed when I put a long term ATR indicator into several forex pairs on all time frames. During the last 7 years, the volatility have been declining by more than 40%. I thought that was only me who observe such a shift in market behavior. But then I found this article on FXCM’s website:

Why the Forex Market Changed

Through the 1980s and 1990s, and even into the new century, the distinctive characteristic of the foreign exchange market was its volatility—a volatility that was a reflection of major imbalances between national economies.
When a country over-spent or over-borrowed, or when its external trade went wildly out of balance, its interest rates were forced up and its economic growth slowed down. In the forex market, the country’s currency also paid the price—usually by sudden and sometimes drastic devaluation. In short, economic imbalance generated currency volatility.

Increasing globalization has changed all that. In today’s world of tightening economic interdependency, it is in every country’s interest to maintain economic and financial stability—even if it costs. And trade surplus countries (in particular China) now effectively underwrite trade deficit countries (in particular the US) in the name of stability and an orderly market. As one result, interest rate differences are compressed. As another, currency volatility is minimized.

The New Range-Bound Forex Market

The forex market has undergone a profound change. In past years, a trade imbalance or an interest rate shift could suddenly move a currency price hundreds of pips. For that reason, success in the forex market followed a traditional formula: Cut your losses short, but let your profits run. Traders took small losses quickly, but rode big trends for big wins. A volatile forex market rewarded breakout traders.

Using that formula, professional traders were disciplined enough (or their black boxes were disciplined enough) to absorb several small losing trades, because their one, very large win more than made up for them. Using a breakout trading system, only 30% of the trades had to be winners, because the payoff on a breakout trade could be six times the total of the losses. The risk/reward ratio and the mathematical probabilities were in their favor.

STS Profile

Overview

STS is Stealth Trader System. STS is a mechanical trading system that employs statistics and mathematical formulas to determine every aspect of trade decisions, which includes:
– Entry points
– Volatility filter
– Predetermined stop loss level
– Pre calculated position sizing
– Adaptability feature

How STS Works

Entry points
The STS internal engine uses statistical formula to determine market’s natural median to be used as an anchor point for further calculation.
From this median, a standard deviation and average true range then added and/or subtracted to determine potential buy/sell area.
A counter-move philosophy is used to take market position.

Volatility filter
Using volatility cyclic detection algorithm, the system determines the proper time to get active. It doesn’t use a rigid time-filtration, but it gauges the cyclic nature of intraday market volatility. It will trade during optimum volatility session of the forex market.

Predetermined Stop Loss level
The system has a strict risk management rules. It will never enter any position without any pre-determined stop loss level. This will ensure the safety of the equity being traded. Any sudden adverse market movement will be anticipated.

Pre-calculated position sizing
The system has an internal ability to determine its position sizing.
The system will take care of how many contracts to trades, when to add more contracts, and when to reduce exposure to manage risk on the occurrence of consecutive losing trades.

Adaptability
Many mechanical systems fail to adapt to the change of behavior of the market, thus making the common disastrous experience where a system that performs extremely well in back testing, then perform very poorly in live trading environment.
This STS system is not a rigid system. It has a built in capability to gauge market’s volatility. This ability thus enhances the durability of the system towards the continuous changes in market behavior.

Risk and Performance Profile

Risk
Using a single standard contract on a $10,000 initial capital, the maximum consecutive losing trades were 3 trades, thus making a roughly 20% risk of relative Draw Downs.
A draw down exceeding 40% of the capital, which brought by a more than 6 consecutive losing trades per currency pairs will trigger a fail-safe decision to stop running the system.

Performance
Using a single standard contract on a $10,000 initial capital, the profit factor is 1.5. 80% of the positions hit its Take Profit levels, indicating that this system has been able to determine a high probability entry point.

Robustness
The system has performed a consistent positive expectancy on a high-resolution historical data (1999-2007), on all tested currency pairs:
– EURUSD
– GBPUSD
– USDJPY
– USDCHF
– AUDUSD
– USDCAD
Forward testing on live price feed environment has performed a behavior consistent to the back test profile.

Short Term Trading

———- Forwarded message ———-
From: Darma
Date: Feb 18, 2007 5:28 PM
Subject: short term trading
To: indotraders@yahoogroups.com

Dear friends,

sharing dikit ya…
kalo ada pihak2 yg kurang berkenan, mohon maaf sebelumnya ya.. maklum deh saya ini masih belajar..

pertama2 saya mohon maaf karena selama ini jadi jarang posting di milis kita ini.
Itu karena selama ini sibuk sendiri, riset, fokus (ngikutin saran/sindiran dari jack, jussi dan eugene,hehehe).. No time for gossip milis…
Sekaligus saya mau sampaikan maaf juga dari teman2 lainnya yg dulunya adalah frequent poster di sini. Mereka juga asik trading, riset, etc.
Dari beberapa yg saya temui beberapa bulan ini, mereka sempat bilang: “aduh gak enak ama temen2 di milis, kita jarang sharing2, abis lagi seru sih, lagian kalo sharing2 ntar malah dibilang sok pamer” he he he.. Maklum deh, belakangan ini sering ada black campaign dalam rangka memajukan milis tertentu, padahal apa sih untungnya punya milis yg rame ya, kecuali utk orang2 pengangguran yg gak punya kerjaan lain, he he he…

Oke, enough for the basa basi.. Now let me start..

di lembaran2 yg lalu, saya selalu sebut: profitable trading dengan long term trend following itu jelas2 nyata.
Saya selalu sebut contoh turtle system yg dari curtis faith, yg kemudian kami bikin EA nya exactly as the said rules, hasilnya bener2 profit. Kami modifikasi, hasilnya bahkan lebih cantik lagi. Begitu juga dengan sistem “Aberration” yg pakai deviasi, alias Bollinger band, yg juga mengadopsi filosofi long term trend following, jelas2 profitable.
Gak ada prediction, gak ada hal2 canggih, hanya averages, deviasi, true range, etc..
Profitabilitas sistem2 di horizon long term itu sangat ditentukan oleh lengkapnya suatu sistem. Gak cuman entry – exit. Karena kalau mengandalkan entry-exit polos, sistem yg entry di 55 day b/o, exit di 20 day b/o, pasti bakalan losing. Apalagi yg entry di b/o bands, exit di b/o bands lainnya. Ugly banget deh..
Tapi ternyata, karena adanya komponen risk management (position sizing, pre-determined SL), trailing exit, dan multiple entry utk memanfaatkan trending session semaksimal mungkin, akhirnya suatu sistem yg sangat simple malah menjadi profitable.

Itu cerita saya di lembaran2 yg lalu. Namanya juga org lagi belajar selalu kena sindrom kaget, baru tau kayak gitu saya pikir: “that was the ONLY answer”..
Tapi ternyata perjalanan belum selesai. Sistem long term kayak gitu nggak feasible utk dijalankan kalau hanya mentradingkan capital $5k, apalagi cuman $400. Kecuali kalau trading itu hanya hobby. Baru layak dijalankan secara komersial kalo ada capital 100k ke atas, itu pun dengan efisiensi di komponen2 fixed cost. “Gak nendang” banget deh…

So, akhirnya, berangkat dari hasil belajar sebelumnya, lanjut bertapa lagi, riset lagi.
Kerangkanya masih sama: systematic trading, yg ujung2nya bisa di-mekanisasi.
Hasilnya: Short term trading si doable. Mission very possible.
Kuncinya:
– FX market punya pola volatilitas intraday yg sangat siklik. Hal ini termanifestasi pada batasan penggunaan suatu sistem tertentu pada jam2 tertentu saja. Akhirnya bakalan ada saat2 di mana kita menggunakan prinsip mean-reversion, dan ada saat2 di mana kita bisa menggunakan prinsip momentum.
– Profil Risk-to-Reward ratio per single trade nya ternyata inverted.
– Penentuan SL dan TP mengacu pada gerakan rata2 historical per satuan waktu tertentu, dilakukan dgn menarik value dari ATR (average true range), sehingga didapat suatu sistem yg sangat robust: menggunakan parameter yg sama utk semua currency pairs, dan profit di semua pairs. Robust.

Jadi, teman2 seperjuangan ku di sini, let me tell you here: jangan menyerah. Jangan berkecil hati.
Kalau gak percaya my story, berikut saya sertakan kutipan tulisan dari blog nya covel, komentar ed seykota dan covel tentang short term trading:
http://www.michaelcovel.com/archives/000314.html

Rgrds,
Darma

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http://www.michaelcovel.com/archives/000314.html

Ed Seykota was recently asked in his forum:

“I am new to trend following and wish to ask you what your favorite chart is for determining a given market’s trend? Daily, Weekly, Yearly, Hourly?”

Ed responded:

“Hmmm…your list seems to lack scaling options for minute, second, and millisecond. If you want to go for the really high frequency stuff, you might try trading visible light, in the range of one cycle per 10-15 seconds. Trading gamma rays, at around one cycle per 10-20 seconds, requires a lot of expensive instrumentation, whereas you can trade visible light “by eye.” I don’t know of even one short-term trader, however, who claims to show a profit at these frequencies. In general, higher frequency trading succumbs to declining profit potential against non-declining transaction costs. You might consider trading a chart with a long enough time scale that transaction costs are a minor factor – something like a daily price chart, going back a year or two.”

I agree with Ed’s pithy wisdom, but he is not saying short term is impossible.

There do exist shorter term systematic traders who have done quite well (Toby Crabel, Jim Simons). They would agree with Ed that their style is hard. The shorter you go the more you need great execution, fantastic data and multiple systems. To be a great shorter term mechanical trader is a different animal than trend following, but it is a style that a select few have mastered.
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..

Myth in FX

This is my post to the Indotraders mailing list.

Utk temen2, liat deh itu video presentasi yg diposting Eugene, menurut gue bagus. BANGET.
Yang bicara di situ ada 3 orang trader:
Pembicara utamanya: 10 years trade fx + er2
2 lainnya:
15 years trade emini, fx daytrading, stock
10 years trade fx, er2

Coba liatin teknik trading mereka dan persepsi mereka terhadap market FX.

Beberapa hal yg menarik antara lain:

Beberapa mitos ttg FX:

1. Mitos bhw anda trading di interbank market. Kenyataan anda trading dalam suatu house, shg mrk tidak pernah pakai tight SL. Hanya cat-SL, sdangkan exitnya pakai mental-SL. (tolong koreksi kalo gue salah soal yg ini)
2. Mitos bahwa FX = low cost. Kenyataan: biaya spread yg 2-3pips itu sangat tinggi. Bandingkan dengan trading futures atau stock, comission di bawah 1 pips per r/t. Apalagi dibanding ER2 yg volatilitasnya bisa 20 tick sehari.
3. Mitos soal Leverage yg dijadikan daya tarik. Kenyataan: ini adalah senjata paling ampuh bagi house utk marketing, sekaligus menjadi penyebab utama kehancuran rekening customer (para trader pemula)
4. Mitos bhwa di FX anda bisa trading selama 24 Hour. Kenyataan: para professional trader seperti para pembicara di video trsebut hanya trading di jam-jam tertentu saja. Mrk lihat calendar utk lihat kapan ada action di market. Bahkan menurut mereka: trader yg mencoba trading intraday dan mentradingkan semua signal buy/sell dari sistem nya, pasti trader2 itu rekeningnya masih losing. itu menurut pengamatan mereka melihat trader2 lainnya. Ini menarik sekali.
5. Mitos soal fasilitas Free software, free data utk FX. Kenyataannya: free sfotware dan data itu gak baik. Ini menurut mereka. Mrk pakai tradestation. Mungkin bener juga kata mereka, tapi mungkin juga salah ya. I don;t know. Coba temen2 ada yg bisa kasi tanggapan ?
6. Mitos soal indikator2: sell di overbought, buy di oversold. Buy/sell di corssover dll. Kenyataannya: teknik trading seperti itu sengaja disebarkan oleh pihak2 yg berkepentingan. Wah wah.
7. Mitos bhwa cukup demo 1-2 bulan, lalu go Live. Kenyataan: menurut mereka: “don’t expect to go live within 6 months, 1 year or even 18 months”.
8. Mitos bhwa FX & Futures lebih rumit drpada stock. Kenyataan: menurut mrk: stock lebih repot.

Hal menarik lain: Soal teknik trading.

Mereka pakai satu setting (mrk pakai 1 indikator) di 3 timeframe.
Mereka jelas2 bilang penggunaan banyak indikator di satu timeframe itu salah satu ciri2 trader yg masih merugi. Mereka justru lakukan yg sebaliknya sebaliknya: mrk pakai satu indikator atau tanpa indikator, di multiple timeframe. Utk intraday mrk pakai chart 15 min, 10min, 3 min. Utk posisi swing yg lebih panjang mrk pakai tf yg lebih panjang, tp tetap multiple timeframe.

Yah begitu lah point2 yg gue dapat tangkap dari video tersebut. Mungkin gue ada salah tangkap atau ada yg terlewat. Utk lebih jelasnya, silakan liat ndiri deh yak..
Ini gue posting lagi link nya, siapa tau ada yg kelewat postingnya Eugene:

http://www.netpicks.com/UTM/MythBustingE1.html

http://www.netpicks.com/UTM/MythBustingE2.htm

Thanks to Eugene for the link.

Rgrds,
Darma

p.s.
Video di link itu bisa disave gak sih ? Ada yg bisa bantu ?