Digital Diatribes

A presentation of data on climate and other stuff

Forex Account Update as of 4/30/2012 [Through 01/31/2011]

Posted by The Diatribe Guy on May 2, 2012

Continuing my account updating:

OUTSTANDING ORDERS as of End of Day 12/31/2010 settled by End of Day 01/31/2011
Date of entry / Type of Entry / Lot size / Currency Pair / Entry Price / Date of Settlement / Exit Price / Net Profit
None.

*Net profit means profit after consideration of swap fees (these can be negative or positive)

New Orders since End of Day 12/31/2010, settled by end of day 01/31/2011
Date of entry / Type of Entry / Lot size / Currency Pair / Entry Price / Date of Settlement / Exit Price / Net Profit
01/05/2011 BUY 0.02 xauusd 1374.785 01/12/2011 1384.705 +19.71
01/14/2011 BUY 0.02 xauusd 1365.265 01/19/2011 1373.16 +15.73
01/27/2011 BUY 0.02 xauusd 1320.240 01/31/2011 1327.17 +13.82

New Orders Since end of day 12/31/2010, still outstanding as of end of day 01/31/2011
Date of entry / Type of entry / Currency Pair / Lot size / Entry price
01/04/2011 BUY 0.02 xauusd 1388.655
01/13/2011 BUY 0.02 xauusd 1374.770
01/20/2011 BUY 0.02 xauusd 1361.020
01/20/2011 BUY 0.02 xauusd 1347.040
01/24/2011 BUY 0.02 xauusd 1333.580

Carried Orders Since before end of day 12/31/2010, still outstanding as of end of day 01/31/2011
Date of entry / Type of entry / Currency Pair / Lot size / Entry price
None.

Equity Balance @ 01/31/2011: $3,052.89
Current Month Return: -7.23%
Initial 10/31/2009 balance: $2,360.46
Current Yield since inception: +29.33%
Annualized Return: +24.59%
Average monthly return: +1.85%

11/1/2009 – 7/31/2010: +89.71%
8/1/2010 – 10/17/2010 (the date at which point I ceased the short strategy and liquidated positions): -34.35%
10/18/2010 – 12/31/2010: +11.94%
1/1/2011 – 1/31/2011: -7.23%

Journal Notes:
No concerns about gold getting “killed.” I look at it as a buying opportunity, and looking back historically, sometimes you end up holding these positions for a while.

As price drops I’ll keep buying. I trade small sizes relative to account balance, so I can absorb quite a downswing. I’m not even remotely into nervous territory. This just looks like some short term action to me.

Minor tweak to my strategy, just because my schedule was not able to fit the strategy as far as checking in 24 hours after the high, etc.

1) basically, I just check in every morning when I wake up
2) If price is at a profit-taking level, I take profits and leave it at that
3) If price has dropped to at least 0.995 or less of the last buy-in level, I buy again.
4) If price is not at a profit-taking level, but has not dropped to a buy-in level, I place a buy limit order at 99% of the last buy-in level. Just one. If it drops more than that, I’ll apply (3) and (4) the next morning.

I didn’t make the changes because the other strategy wasn’t working, I made the changes because it simplified things. The old way I had to keep track of when to check in, which could be at any time, and my schedule didn’t always permit it, which means I wasn’t checking in as often as I could, which means missed opportunities for both profit-taking and buy-ins, etc.

Really, what all these strategies boil down to is whether or not this is a relatively volatile investment (it is) that is either in an overall uptrend or at the very least in a horizontal state. All these strategies are just variations of taking advantage of price swings and a generally increasing price. All these same strategies will not be nearly as effective (but can still overall make money) in a slow downtrend. They will lose money in a precipitious and continued downtrend. It’s not rocket science, and there is a risk that you are wrong in your estimation on the trend direction.

I’ve picked my buy-in levels based on backtesting to try and maximize my leverage of the volatility in gold. Shorts were a loser in this market because it defiantly refused to correct, so for right now I’m long only.

Whenever there are a few days or weeks where gold retraces, I’m not disappointed in that. Obviously if, a year from now, gold is at $1000 after a continued downtrend, my results will suck. But I actually welcome retraces because I consider it a buying opportunity. The most important thing about this is that I literally trade small enough lots that I can enter a lot of positions at different points and price can drop quite a bit before I’ll even consider worrying about it. I’m not over-leveraged, which is the issue with most people in these markets, where one huge drop wipes them out. It’s also one reason why I limit my trading activity to once per day – to force myself to have a maximum of 5 transactions per week, and usually much less than that on average. overtrading can also kill people. If I lose the whole account, it will be a slow burn. I’m not above holding a position for months if need be. Really, no big deal. Sure, it costs me on the swap, but overall that is not a huge deal.

I really don’t feel any differently about trading in this way than I do about investing in mutual fund, stocks, whatever. If you put in $100 today and price drops 15%, you ride it out for the longer term. I do the same thing. Just because it’s “trading” doesn’t mean I don’t hold positions for as long as I need to. So, when Brazil does this or China does that and gold drops $50/oz, then it’s not a big deal. Now, if it drops another $50, then another $50, then another $50, at some point it obviously becomes a bigger deal.

I will never, ever, ever, claim to be a market timer. Yes, I try to buy low and sell high, but more from a “the trend is up and I will be in and out with mutliple positions over time” sort of way. I take generally small profits over and over rather than make any attempt to suggest I know the perfect buy-in or sell points.

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