The best forex question ever

I might be a cheerleader for Oanda, but actually I place myself more in the position of trying to figure out a Forex system to see if I can make money.

Anyway, sorry if I am HiJacking this thread, but ppl here may like the links.

Would you trust this man? Oanda's founder (FOREX)

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I found the website of the founder of Oanda, the FOREX broker, who is a prof of Computer Science at U of Toronto.

http://www.eecg.toronto.edu/~stumm/

Well I had a picture of Olsen too, I need to relocate it.
Here is a picture of Olsen, too!

http://www.financial-spread-betting.com/Olsen-oanda.html
 
Quote from Iconoclast:

I for one appreciate the insights of a hedge fund manager. I will read anything NTB writes, with great interest.

We're fortunate to have a real hedge fund manager on this board to share his trading knowledge.

NTB, thank you!

I've read traders simply bash Oanda, but have not read in detail the reasons why, the way NTB spells it out.

What NTB is saying, clearly, is that Oanda purposefully rigs their platform to cheat retail traders, "embedding" Box Option pricing in the favor of Oanda and against retail traders.

This is good to know because I think people lose too much money trading forex as it is.

Thanks again NTB for the heads up.

Iconoclast
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Thank you, Iconoclast. At least I know that I have a following of at least one! We all start somewhere I suppose..:). Anyway, I do not want to leave people with the impression that Oanda is in anyway cheating people. As usual, it is caveat emptor. They spell out very clearly that you must trade this product with them exclusively and they take the other side. This is different than when you trade an OTC option with an investment bank who takes the other side since those products are fungible with the rest of Wall St. and can be offset elsewhere or at least a competitive market can be established. Oanda clearly states that you must trade with them exclusively and this product is not fungible with any other counterparty for offset. As such, you are a captive client and you are at their mercy for pricing. This product in it's seeming 'simplicity', allows for the potential of significant abuses in pricing of embedded spreads. In my opinion, trading this product as a customer creates an insurmountable negative expectancy against the counterparty in this trade. In short, while all dealers embed a 'spread' to theoretical value when pricing an option product for a customer, this product forces a non-competitive environment and allows for significant abuses (likely insurmountable) due to the lack of fungibility elsewhere.

By the way, this product has nothing to do with helping a trader to be more profitable or develop a winning strategy. It is merely a different and creative way to skin the cat. The burden to create a strategy with an edge still firmly rests with the practioner and no slicing and dicing is going to assist someone in taking a losing strategy and turning it into a winning one.
 
Quote from NTB:

The burden to create a strategy with an edge still firmly rests with the practioner and no slicing and dicing is going to assist someone in taking a losing strategy and turning it into a winning one.
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LOL. Perhaps you expect too much from others. :D
 
Quote from Boberson:

Hi, I have a question for all of you experienced traders out there.

What is the reason for your success or lack-there-of in forex?

Thanks,

Beau L
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Inability to stay awake 24/7 to constantly observe a continuous market :D
 
Quote from NTB:

In my opinion, Oanda continues to simplify and enhance the ability for retail traders to lose money more easily in the forex market. As a trading platform, Oanda is probably one of the best for the retail trader in terms of ease of use and user-friendly capability. The addition of BoxOptions seems to be consistent with bringing additional complex product offerings to the retail public easily tradeable by even the most inexperienced participants. With that said, inexperienced participants should not be trading forex options and especially intra-day forex options.
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I for one are glad they offer box options. Sure it will kill some clients (deservadly so) but I for one find them imeasurably useful for long term positions and short term high probablity spikes. It also adds another spectrum to the market for me. People don't HAVE to use them either.
 
Quote from Boberson:

Hi, I have a question for all of you experienced traders out there.

What is the reason for your success or lack-there-of in forex?

Thanks,

Beau L
More...

The FORMULA for making money in forex, stocks, futures, or any tradeable instrument is the following

(Number of Trades x Win % x Avg Win ) - ( Number of Trades x (1-Win%) x Avg Loss )

I have seen many traders make the this mistake. What they tend to do is take HUGE losses and have avg sized wins. One for example was 68% winning with an avg win of about $50 but with an avg loss of $150. Its hard to make money unless you are near perfect trading when your losses are 3X your wins. Most traders I talk to want to have a HIGH percentage winning system. That's all they talk about, not realizing that 'most' systems that have high win rates have to have wide stops and thus the avg loss will be high and may be hard for new traders to trade. You can also make a lot by being right 1/3 to 40% of the time if your wins are 2.5 X+ your losses.

The key in trading forex is to trade WITH the trend until the market has gone too far based on statistics, implied volatility extremes derived from currency options prices and then trade against the trend.

For me I find using the 5 min chart to determine direction and then trading off of a 35 tick chart made up of only FXCM, GAIN,COES,HOTS,GFT banks works great. I'll buy lower keltner on the 35 tick chart if trend is up on 5 min chart and short upper keltner if trend is down. I am very quick to get out so avg loss is about 6 pips and have about an avg win of the same after spread. I'm about 80% winning doing this overall. That's one strategy, the other is to short at the avg high of the day but on the fast 35 tick chart upper keltner. Usually when this gets hit the market reverses. I try to catch 10 to 20 pips on these trades as market is way overbought. Reverse for buying lows. Out of every 10 buy the low sell the high you are likely to take one 20 pip loss as the currency is abnormally strong/weak. It's a part of the game of trading.

One other thing I do to increase avg win size and cut avg loss size is to trade small at the beginning of the day, maybe do 2 or 3 lot trades and then once up $300 to $500 on the day increase to 5 or 10 lot trades. THat way if I'm off that day or market is not acting like it does 9 out of 10 days then I'll lose but have small losses. I only increase size when doing well.

Another suggestion is have a few strategys you employ and KNOW the probabilitys of them working. The BEST strategies may give you 3 to 5 trades a week so you need to trade LARGE size when you see them. I have one method that is about 95% winning. If market down a lot or up a lot on day I will short/buy at the place where most traders have their positions. This trade almost always works the first time touched as losing traders will exit their trades at even giving me nice 6 to 15 pip pop. I'll do 10 lots here.
 
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