It was a "good news/bad news" month for trading with Forex Profit Monster. The bad news first... on paper there was a loss for the month of (-1,737) pips across the 8 pairs I trade on the 4 Hour chart. However, once again this loss isn't what it seems and is just a factor of the time frame I use to post the results (each calendar month).
The reason I say this is, the good news is that in the first week of October I've closed trades that were opened in September (and remained open at the end of September) for a total profit of +2,226 pips, and as of writing this blog post I still have several trades open with a total equity profit of about +1,200 pips... and some of these open trades are still from September as well. By adding the extra week into the results I would have a +489 pip profit and the +1,200 pips of open equity instead of the loss I'm posting. This is why it's not always easy to post the results like this... but the only other alternative would be to post them quarterly or yearly... and unfortunately that wouldn't suit the intentions of this blog, which was to provide up to date information regarding my performance trading Forex Profit Monster to those who are considering using it themselves.
I have been very busy this past month answering emails I've received not only about FPM, but about the other things going on in the Forex market the past few weeks... namely the Japanese intervention and the CFTC rule change that will be limiting our leverage use in a few days. I'll comment on those subjects after I post the details for September:
27 trades on the 4 Hour chart
3 wins: 432 pips
24 losses: 2,169 pips
Total: (-1,737 pips)
12.5% win rate
Avg win: 144 pips
Avg loss: 90 pips
Avg R/R: 1.6 to 1
Breakdown by currency pair:
AUD/USD 0 W, 0 L : 0 pips (1 trade initiated, carried into October)
GBP/JPY 1 W, 1 L : (-137 pips)
EUR/USD 0 W, 3 L : (-150 pips)
USD/CHF 1 W, 3 L : (-154 pips)
EUR/JPY 0 W, 2 L : (-159 pips)
USD/JPY 0 W, 3 L : (-196 pips)
USD/CAD 1 W, 6 L : (-295 pips)
GBP/USD 0 W, 6 L : (-646 pips)
Here are the FPM results for 2010 so far:
January: +823
February: +669
March: +434
April: (-446)
May: +4,597
June (-1,870)
July (-185)
August +903
September (-1,737)
Total: +3,188 pips
Average: +354 pips per month
OK, with the results out of the way for September, I wanted to take a minute to comment on some things that happened during the month and are set to happen in a few days. First up, the Japanese intervention on September 15th.
I received a lot of emails from people asking how I handled the situation as it's not something that comes up often and obviously there is no set rule in the trading system on how to handle it. I was lucky enough to be at my computer on the 15th checking my trades when prices started going crazy on the Yen pairs (this is a benefit of trading the 4 Hour chart over the Daily chart)... and having heard rumors about the Japanese government considering a currency intervention I figured it must have happened. A quick check of Google news and sure enough the Japanese were extremely busy flooding the market with Yen and buying up U.S. Dollars in an attempt to slow the growth of their currency which was at a 15 year high. The reason the Japanese are concerned about the value of their currency is they are extremely dependent upon a weaker currency to support their export based economy. Once the Yen gets too strong it wreaks havoc on their economy and they look for any way to reduce its strength... an "intervention" is usually their final solution, but they may not just do it once... if it doesn't work the first time (which it hasn't as the USD/JPY pair is now lower then it was when they intervened) they can do it again... although sooner or later it becomes counterproductive and the Bank of Japan decides it has already "wasted" enough Yen and bought enough USD.
As far as how I handled the situation... I had trades open on all of my Yen pairs (all shorts of course) and I closed them out immediately upon learning of the intervention. The reason I did this was something I learned after studying Ed Seykota years ago. Ed had some simple rules for his trend following trading, two of which were "Follow your rules without question" and "Know when to break your rules". Now most people would say these two rules contradict each other (as Jack Schwager pointed out to Ed in his "Market Wizards" interview), but they don't if you understand what Seykota means. As a trader you should always have the discipline to follow your rules, but when the conditions change so drastically like they did with the Japanese intervention, it's time to throw the rules out the window and get out of the market (especially if you have a profit and know that the result of the intervention will probably wipe that profit out, even if it's only for a short period of time). You can always re-enter the market later on when things settle down if you want to. I actually did this myself... just a couple of days later I took new trades on the USD/JPY, and the EUR/JPY, but decided to stay away from the GBP/JPY for a little while longer due to it being a pair with a much higher volatility. As the Japanese didn't do much else after the push of the initial intervention I picked up trading the GBP/JPY again at the start of October. I'll still be watching the Bank of Japan closely though as they may decide to intervene again as the price of the Yen is hitting new highs once again.
Now for the other subject that has had traders chattering for the past couple of weeks... the U.S. government's new regulations about leverage in the Forex market. There has been debate for quite some time now (oh, at least since Obama entered office) of lowering the leverage available for retail Forex traders like you and me. It used to be brokerages offered as much as 400:1 leverage, that was reduced to 200:1, 100:1, and now as of next week the most leverage you'll be able to use with a U.S. broker is 50:1. Now some people are happy because everyone thought the reduction might go to 10:1, but I don't think that's really the issue. The issue here is that once again the "nanny state" run by the current administration is deciding what's best for the lowest common denominator in our society. I was able to use my 200:1 leverage quite successfully for a few years... and I wouldn't have been able to build my trading business as fast as I did without it. I'm sorry if Joe Blow from East Bumfuque opens a trading account with high leverage, doesn't manage his money properly and then ends up quickly losing it all... that's his fault, not mine, not the brokers' and certainly not the government's. If Joe Blow doesn't understand how leverage affects his ability to trade then he deserves to lose his money... and then maybe he will learn how to manage it or learn that he has no business trading!
While I'm mad at the government for once again overreacting and making up a bunch of rules and regulations after the fact to make it look like they are responding to the "financial crisis" (btw Mr. Obama, it wasn't the small retail trader who caused any of this mess), the leverage change doesn't really affect me personally very much. It just means I may have to add a little bit of cash to my brokerage account to cover the increase in margin I need to keep on open trades, or I'll just have to reduce my positions slightly to keep my risk in line and to rectify the change in leverage rule. Either way it's easily fixed and won't affect my business model very much. The same should go for you... don't let a stupid rule change by the government stop you from enjoying one of the last frontiers of the business world where a single person can take a small amount of money and build it up into a profitable business in a relatively short period of time!
That's it for this month... if you'd like to contact me for more information on purchasing the Forex Profit Monster system (or my day trading system Forex Day Monster)... visit my website at www.forexprofitmonster.com, or my eBay page at http://myworld.ebay.com/jimsgr8stuff4less/.
Jim
www.forexprofitmonster.com
http://myworld.ebay.com/jimsgr8stuff4less/
