Investor Digest for July
Good day, comrades forex investors!
Summer is in full swing, and it's time to talk about the prospects of financial markets for July, and at the same time summarize the June events - where the policy of the leading central banks of the world has remained in the spotlight throughout the month.
Let's look at how the passions on the global monetary front influenced the success of PAMM managers, the most revealing accounts of which we consider, as usual, in our monthly digest. In addition, this month we are adding a new section - interviews with famous traders, during which we will talk with PAMM managers, ask them questions about the strategies used, money management, and so on. Your wishes and additions in the comments will be very useful for us.
Today we look at PAMM accounts of managers from brokers: Alpari, Instaforex, Roboforex, and Forex4You.
PAMM-investing is the most popular investment mechanism in the Forex financial markets. Professional traders around the world open PAMM accounts to attract investment - in order to increase the volume of their trading operations. At the same time, forex brokers provide comprehensive opportunities for evaluating the success of managers, revealing their trading statistics to PAMM investors.
As we have already said, the largest central banks were in the spotlight in June. The last days of the month were full of news headlines indicating that the era of “cheap money” was coming to an end, which significantly affected the competitive position of the main forex currencies.
So the American currency index, which displays the value of the US dollar against six major competitors, weakened by 1.75%. This is because in the near future, according to the estimates of large investors, the US Federal Reserve is at risk of losing innovation in the field of aggressive monetary policy to such currencies as Canadian USD, EUR and GBP. The situation for the dollar is aggravated by a slowdown in national economic growth, where a weakened real estate market and lagging inflation rates could undermine the prospects for a subsequent increase in interest rates.
At the same time, the Canadian dollar added more than 4.0% against other major currencies for the current month, as Bank of Canada officials noted high prospects for an increase in interest rates in July. And this will not surprise anyone, because in June Canadian economic data exceeded forecasts on all fronts, and first of all it is necessary to note the growth of consumer confidence - where the latest estimates of the base retail sales index showed a 1.5% increase - with forecasts for a growth of 0.7%.
But with the prospects for the growth of the British pound and the euro, the situation is not as obvious as with the Canadian, since the terms themselves are still uncertain. Rather, the initiative of the bankers to support the policy of increasing the cost of borrowing, rather than taking into account the growing pace of economic recovery, undermined by the Brexit process and geopolitical tensions the day before, played a role here.
The head of the Bank of England, Mark Carney, was able to surprise everyone - after all, no one expected that at such hours when the country leaves the EU, the economy will be able to allow raising rates. Perhaps here the regulator acted with an eye on the financial sector, which, according to the British establishment, should become the center of regional operations in the long term. The British pound index rose by 0.85%, however, this is a very strong increase, given the fact that by the middle of the month the British dipped by more than 2.0% against major competitors. But the comments of the head of the ECB, Mario Draghi, were overestimated by investors, and Central Bank officials already had to make a reservation that it was not a question of a priority increase in rates, but rather an initial stabilization and a subsequent reduction in the volume of monetary incentives. And then - with an eye on 2018. In June, the single currency index increased slightly by more than 1.75%.
The Japanese yen, like the US dollar, were downsides this month, as risk appetite dominated the markets. The Japanese currency weakened by 1.74% - where the Bank of Japan still sees no reason to make any major changes in the field of monetary policy. The Swiss franc, however, added 0.51%, which is generally good, given the slowdown in inflation and the fact that the Swiss Central Bank kept rates at the same - record low level. Most likely, the Swiss currency exchange rate found support on the basis of strong pan-European economic growth.
PAMM of the month
“PAMM of the month” is a reverse engineering of the world of finance. Here we will take one of the well-known PAMMs and try to determine the strategy underlying it.
For consideration, let's take the Palantir account. At the moment, the account is included in the first 20 Alpari ratings, which means that if the Alpari rating does not lie to us, we are dealing with a conservative strategy.
The manager himself provided a minimum of information about the used trading system, according to the mental state it is introvert and uncommunicative. But, data from open sources (including monitoring myfxbook) will be enough to understand the basic principles of its trade.
Obviously, multicurrency trading. In general, more than 10 pairs are involved, most of which are crosses. The main volume falls on USDJPY, USDCHF and GBPUSD.
Recently, the number of funds involved in trade has grown significantly. Around the same period, the number of funds in the account increased, which indicates the use of a dynamic lot, tied to the size of the deposit.
The graph of the used shoulder confirms this. On average, about a third of the deposit is given to margin.
Martingale in its classic form is not used. However, there is a large number of local top-ups of a fixed volume. To fix the profit, apparently, a simple stop loss, take profit and trailing stop (one third of the take size) are used. The values are different for different tools. Apparently, the adviser is optimized for different currencies, depending on their volatility.
The efficiency of the inputs is quite low, usually it is either too early or too late. The average position price, again, is adjusted by refills.
Apparently, the entrance is carried out according to the indication of some oscillator, when entering the overbought / oversold zone. Given the distance between opposing trades, the timeframe is used intraday, most likely less than the hourly. Judging by the frequent transactions against the trend, the trend filter is not used.
On average, investors earned about 60% of the profit per year. Thus, investing for a short period does not make sense. The best strategy is to invest and wait for a relatively long time, waiting for a small drawdown.
Interview with the Manager
Friends, in addition to other changes, we introduce a new section - interviews with famous traders. Account Manager Solandr kindly agreed to have a little dialogue with us. We look forward to your feedback and comments.
Good afternoon, please introduce yourself (you can use a pseudonym).
How was your first interest in trading?
First became interested in 2005. I learned about the existence of so-called multicurrency accounts and thought about the exchange rates of one currency for another in order to profit. Next was the word FOREX and naturally forex.com - simple and straightforward. There was the first demo and the first real account.
Is trade your main activity or temporary activity?
Trading is actually my second job. There is the main work during the day, like everyone else’s, and the second evening is something like a “second shift,” which often ends after midnight. And this despite the fact that my trading is completely automatic! A lot of time is spent on operational control of the terminals, technical improvement of the adviser and communication with investors.
Have you had bad experiences in the market or did the learning process go smoothly?
Failure experience has been consistently observed for 8 years. Deposit after deposit went into the market abyss without any glimpse or light at the end of the tunnel. Now I already understand that they were due to a simple misunderstanding of the fact that the shape of the price curve does not carry enough information to compensate for the overhead costs of trading (spread, slippage and commission) and make a profit. Therefore, I spent many years of my life playing with various indicators, which are based on the use of the shape of the price curve. He played, customized strategies to fit the curve in the tester, and then successfully merged deposits in real life. This is only after 8 years that I realized that money is in a completely different place - in the real market distribution, based on which you can make a profit. And then only on a very limited number of tools. But this is a separate big topic.
As I understand it, you have a purely mathematical approach to trading in the markets. Do you have a specialized education?
Yes, I am a candidate of technical sciences. And I have some ideas about mathematics. I tried to apply some things from mathematics to Forex and continue my research and verification further. And it helps me a lot, because without any calculations on Forex, there is simply nothing to do.
Talk about the account Solandr. Explain in simple words what is the essence of your trading system?
The essence of the trading system is quite simple. There are so-called extremum points of the price chart (maximum and minimum) at which the price is trying to reverse against the previous local trend. Those people who play against the trend often focus on these extremes, setting their stop loss next to them. On the contrary, I play exclusively against people who play against the trend. By placing pending BUYSTOP and SELLSTOP orders at these points (I call them bifurcation points), I expect that when the price hits these points, there will be an inevitable sharp movement due to the avalanche-like stop loss operation. This creates a positive expectation in my strategy.
In continuation of my view on why this should work, you can read my article on this topic in a blog in Alpari.
By the way, my blog in Alpari is the most popular and has the most views among all the others posted there. A screenshot with the number of views below.
Due to restrictions on freedom of communication at the Alpari forum, a year ago I started my blog in Vkontakte, where you can ask any question of interest to investors without regard to the fact that Alpari's business competitors were mentioned by chance.
There is a large number of materials that were not included in my blog on Alpari, with which I began my communication with investors.
What do you think are the risks? By the maximum drawdown on the tests or something else? How do you manage to keep such a low drawdown?
A huge amount of text can be written on risk issues, since I devoted a fair amount of time to this issue. Transaction risk is the size of potential losses in case the price goes the wrong way. Obviously, it is determined by the distance to stop loss and the volume of the transaction. In the absence of stop loss, the risk of the transaction is equal to the size of the deposit. By the way, here is my article about why stop loss is generally needed.
Briefly, stop loss has two main purposes - this is the limitation of financial losses, and also, importantly, this is the limitation of the duration of the transaction in case of adverse development. And the second in my opinion is no less important than the first.
When asking a question about risks, you most likely meant the quality of the trading system. By increasing the quality of the trading system, you can reduce the drawdown size and, as a result, use your investment capital to the fullest extent, getting the best rate of return per unit of investment. In other words, an increase in the quality of trade gives an increase in the optimal F according to Ralph Vince.
To control the quality of the next version of the trading adviser, I use my developed optimization criterion, which shows the ratio of the sum of percent of trading outcomes of each transaction to the maximum drawdown. The maximum drawdown is also expressed in absolute percentages.
As I understand it, trading is fully automatic?
Yes, trading is fully automatic. I don’t know how to trade hands. I interfere with my hands in automated trading exclusively for operational purposes to eliminate technical imperfections in the execution of trading operations. For example, at 10 terminals the expert successfully closed an open position, and at one terminal the broker gave requotes and the price rolled back from the target profitability level and the expert no longer tries to close the position. In this situation, I can intervene and close the position manually to maximize the synchronization of the result for different brokers. This, of course, is possible only if I'm next to the terminal. Although recently I got the opportunity to manage open positions from my cell phone via RDP.
I devote a huge amount of time to the operational stability of the terminals and I even have a separate monitoring site showing the current open and pending risk in real time. Several years ago, I proposed to make such functionality in monitoring Alpari, but I heard a refusal.
On one of the pages of the site (for personal use) I have data on the status of all terminals, as well as screenshots of terminal screens. This makes it easy to monitor the trade and directly the terminals themselves anywhere with accessible Internet for a cell phone.
At the request of investors, I provide a maximum of information about my trade. Including anyone who wants, you can download a monitoring expert from my site and, installing it in your terminal, always be aware of where I have the nearest pending orders located at the current time in order to make investment decisions. I have not yet met such a degree of transparency in the service provided to investors by managers. As a rule, managers in every possible way hide information about their trade. On the contrary, I am almost completely open. And after each trade, I write a report for investors in the account branch in Alpari. Here is a summary list of all my reports for investors.
Since last year, distinguished manager kaif leads the EURUSD analytic branch as part of predicting the trading outcomes of my strategy. He uses his own methodology for assessing the current state of the market.
How did you come to write an adviser, before that, you had experience in programming?
Advisors began to write just a month after becoming acquainted with Forex, in 2005. Then there was no sensible literature. There were articles by Rosh and listing listing of the standard Moving Average advisor from the MT4 terminal. So, reading the prints on the bus on the way to work and back and trying to fix something myself in the standard advisors, I mastered the programming skills in MQL4. Before that, I already had programming experience at the level of the requirements of a technical university as part of the implementation of some design tasks for course projects. But I think that it is quite possible to start learning MQL4 and completely from scratch. It would only be a desire! Moreover, now there is already an excellent textbook.
How has your trade changed since you created your account? Do you often have to modify the robot?
The basic principles of trade have not changed. Over time, only the principles for calculating certain market indicators have changed. New adviser releases usually appear once every 1-2 weeks. I am constantly working on improving the existing functions of the adviser, as well as adding new ones aimed at the operational stability of its functioning. Sometimes it’s possible to improve something in the strategy.This happens extremely rarely, but nonetheless, it sometimes happens now too. After debugging the new advisor release on the tester, I upload the next release to all terminals. The adviser has individual settings for each account in accordance with the required money management system.
I have several money management systems that I use in trading.
- Cascading money management;
- Classic money management (lot is proportional to the deposit);
- Continuous risk (risk is a percentage of the deposit);
- Optimal F by Ralph Vince.
It was possible to realize such a variety of used money management systems within the framework of one adviser thanks to the application of a scheme for dividing a trading position into a base and corrective one. The base position always has a volume of 0.01 lots and is responsible for the implementation of the trading strategy, and the corrective position is responsible for the implementation of a particular money management system. If readers have questions about the money management systems that I use on this or that account, then you can contact my blog. There in the “Discussions” there are sections devoted to different trading floors where you can ask a question about a specific account.
What do you think beginners are missing out on trying to find patterns in the price movement?
In fact, working on Forex is not the easiest task of all available. And it’s better not to mess with him at all than to contact only superficially by looking at the ratings of PAMM accounts. So the whole money will be! But if you still decide to take it seriously, then I think that before you put at least a penny on Forex, you need to seriously master the subject. For example, I’ll give a few of my selected articles below, which can make beginners think a little about what they have to deal with on Forex.
A “defensive” strategy for investing in PAMM accounts.
Almost according to K. Marx.
Reducing the effect of spreads and slippages on a trading strategy.
What are the goals for the future? Do you have fresh ideas, or are you aiming for systematic development?
Goals for the near future:
- Writing an automatic utility for monitoring the operation of terminals, which would reduce the time to check their status. At the moment, I regularly scan the terminals in the morning and evening manually, spending an average of 10 minutes 2 times a day;
- Writing a utility for monitoring quotes of brokers I work with in order to maximize the synchronization of trading results on different accounts. Now, if one broker had a hairpin and others did not, then the trading result may diverge if this hairpin is not removed from the price chart in time. This utility for monitoring quotes will allow you to do this online, without making much effort to detect them when manually viewing the terminals.
There is also a bunch of other smaller “Wishlist”, which I will implement as I have free time. For example, a new optimization criterion, which departs from the account of a historical drawdown and switches to the quality of transactions based on the MAE / MFE criterion. Perhaps this will allow you to choose even more favorable optimal parameters for the trading system, which can increase maximum profit in the unknown future.
Moment to enter
At the moment, accounts EU_SL2301
and Aleksandr1 show all signs of completion of the correction.
This may be a good time to enter, taking into account the specifics of each of the accounts. For example, entering into a project designed for long-term investments for a month does not make any sense, even if it is an entrance on a pullback.
Moment to exit
The Ninja Trainer PAMM Account is now clearly overheated. If you entered during this year, it's time to take profits.
AlpariSorting is done according to three parameters: minimal drawdownmaximum profitability and age bills. You can use the slider change the strength of each indicator in the sorting formula. That is, if the minimum drawdown is important for you, move the “Min. drawdown. " To accept the changes, click "Sort." Min. drawdown:
|Account name||Drawdown||% per year||Age||% per month|
Night scalping. Technical analysis.
Top-ups against the trend.
Portfolio of strategies.
A portfolio of hedging advisors.
The combination of manual and automatic trading.
Classic trading strategy.
The adviser works, mainly Asia is traded.
Moderate trade. Centenarian.
Analysis of stock volumes. Centenarian.
Mostly manual trading.
Scalping at night.
Trend trading (euro, gold).
|Trends and Cycles.|
Multicurrency semi-automatic trading.
Scalping, Fibonacci levels.
Indicator-free Expert Advisor.
Trade at high TFs.
Forex4youSorting is done according to three parameters: minimal drawdownmaximum profitability and age bills. You can use the slider change the strength of each indicator in the sorting formula. That is, if the minimum drawdown is important for you, move the “Min. drawdown. " To accept the changes, click "Sort." Min. drawdown:
|Account name||Drawdown||% per year||Age||% per month|
Multicurrency Expert Advisor.
RoboforexSorting is done according to three parameters: minimal drawdownmaximum profitability and age bills. You can use the slider change the strength of each indicator in the sorting formula. That is, if the minimum drawdown is important for you, move the “Min. drawdown. " To accept the changes, click "Sort." Min. drawdown:
|Account name||Drawdown||% per year||Age||% per month|
InstaforexSorting is done according to three parameters: minimal drawdownmaximum profitability and age bills. You can use the slider change the strength of each indicator in the sorting formula. That is, if the minimum drawdown is important for you, move the “Min. drawdown. " To accept the changes, click "Sort." Min. drawdown:
|Account name||Drawdown||% per year||Age||% per month|
|Stable Profit Elshad||58||37||527||+3|
Martin the averager.
A sharp shift in long-term competitive prospects in the foreign exchange markets is a real test for managers. And at the same time, this is more than ever fertile ground for investing in PAMM accounts of those who were able to "ride the wave". However, as many could be convinced, a moderate and conservative approach to asset management can turn out to be no less profitable for sober assessments of the market situation than an aggressive one - which also received additional advantages amid growing volatility of trading pairs. Be that as it may, invest in accordance with your current goals - and may profit come with you!