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Posts Tagged ‘Portfolio investments’

Shifting more from equities to long term forex

January 26th, 2010

Yeah, I’m selling a lot of my equities right now. The markets was amazing last year, we all know that. I was very skeptical in the beginning months, thinking that it was too early for recovery. But I went along for the ride, and I am glad that I did. Now I’m beginning to worry again, primarily because of the extreme recovery made, is it really sustainable? I’m thinking that it probably isn’t, so I have begun to sell holdings, starting with the ones in emerging markets. Brazil, Russia, India and China was truly amazing last year, but a lot of it (at least in the case of B and R) was fueled by increasing commodity prices, something that China in large part have been the driving force behind by buying and stockpiling a lot of resources. Now there’s rumors that China has enough and will stop buying, immediately leading to lower prices.

In the end my idea is to reduce my equities to about 25% of what I was holding yesterday. I will buy some gold, but I’m not a real gold bug, it’s more of a hedge.

So, what will I do with the money? I will switch it over the long term forex trading. I’ve been running RoboMiner for 6 months now, and made about 80% over that time (really depends how you calculate since I’ve been adding funds now and then, but MyFXBook has gotten it to 80% gain and 50% absolute gain). That is amazing I think. But I think that EA could have done better still with some changes (the Pro version adds a few things like ability to trade all currencies and the shift-function). So I’ve been working on my own grid trader again, that actually is getting quite nice I think. I’m about to start demo trading it seriously at different brokers right now, but in a month I hope I’m confident enough to put it live on a rather big account. I’m really pleased with the backtest performance, which in the case of a long term grid trader is quite precise.

I will start the live test on my existing Alpari UK account and look into opening others. I’m thinking about starting a $10000 account at Forex.com/UK (but perhaps in euros, since I already have a USD account, again to hedge a bit) to get the Pro spreads and five decimal pricing. I’m also looking at FXCM UK.  I really would like at least 1:200 and favorable swaps. Well see. It is fun to code EAs again at least :)

Reality based expectations

September 4th, 2009

Recently I read a great piece of advise in a forum (I’m someguy over at Donnas forum) regarding what kind of “standards” we, as a automated trading community, should require before forking over hard earned dollar/euros/skulls for the latest and greatest piece of software that is being spammed to us from professional affiliates (I hate spammers and scamsters). It isn’t brain surgery of course, but now and then a EA comes along that actually looks promising and the developers are saying that they only will sell a few hundred copies (I like restricted releases, but hate when it isn’t enforced after the 100 copies are clearly already sold). That is when we need this “checklist”. Right now I think there actually is a few EAs for MT4 that live up to the standard, but even some of them use the marketing lingo of the scamsters (come on FAP and MD teams, redo your websites).

After this I started to think about my own expectations on the performance of my automated strategies. I think I need a better game plan. Right now I don’t think I am aware enough. I need to make a model for the risk I’m willing to take and base it on % risked per trade and also try to limit total exposure by limiting the number of concurrent open positions. I’ve just started thinking about it, so it is a work in progress. I think I will basically use my current model for my more “traditional” portfolio where I do monthly reviews and redistribute the funds according to previous months winners (basically what is sometimes called a rotation system, where you bet on your winners). For forex I’m thinking that I should demo trade a lot of different EAs and pairs and choose (on a weekly and monthly basis) the top 5 performers and just trade them. For example right now that setup would probably be: 1/ MD Pro EURUSD 2/ MD Pro USDCHF 3/ FAPT USDCAD 4/ Forex Shocker EURCHF and possibly 5/ Forex Shocker GBPUSD. I should bet on the proven winners (and perhaps even bet more on the # 1 strategy than the #5, say a ratio of twice the lot size for #1 compared to #5 and 2-4 somewhere in between.

I’ve also come to realize that I need to include my forex trading in my total portfolio. Right now I really treat it as a side project (that is taking more time than my “real” multi-asset portfolio, simply because I enjoy it more).  But as the correlation between my forex trading performance and the other asset classes in my portfolio strategy is basically zero of course it should be treated as a great addition and I think it should be a new asset class. I’m thinking even that it should be split up in sub-classes of scalpers and more long-term strategies. FAPT/MDPro/FS is a completely different case than RoboMiner.

As for the risk taking I think I should try not just to maximize my weekly/monthly gains of course. I have always tried to choose setups that take risks I can live with (IE to limit draw downs to levels I don’t feel sick about). But I need a better calculated model here also. I think I will base it on total exposure and historical draw down (in %), not on the gained/lost sum of money (if it is losing of course after some time it will be “rotated” out of the portfolio by the rules above) for the scalper class. For the more long term forex asset class (that right now only would include RoboMiner) I will just try to make the most and not risk margin calls I think. For RoboMiner that would mean that I would use a conservative lot size and just let it ride, it will make what it makes (the developers state 4-8% a month using default values I think). Other long term strategies could include systems like LMT or carry trades I think, but I’m not doing that right now.

I’m really looking forward to do some more math on this.

Found collective2.com, interested

August 30th, 2009

Okay, I just wrote the whole deal in the Subject didn’t I? :D

Well, I found www.collective2.com just earlier this week and was intrigued. It’s basically a collection of different trading strategies and also a forum for trading discussions. You can subscribe to different strategies (some are free, but the good ones cost money) and assemble your own portfolio using several of them. One of the great parts is that you can search for strategies with low or no correlation to the ones you already have in your portfolio. This is great from a diversification perspective, which is very important to a multi-asset portfolio of course. There is a huge diversity in the strategies offered, ranging from traditional equity investments to commodities and forex trading systems. You can also setup a strategy of your own and let others use it (and charge for it if you like).

All in all it seems like a great place to find trading systems which invest in diverse assets. Some of the strategies can even be fully automated (like EAs we are all familiar with). I’m going to look into this more when I have some spare time, but that is scarce right now. :)

If anyone have experience of C2 already or starts now, please enlighten us with comments.