Welcome,
I'm Scott, an aspiring full time FOREX trader. I'm also sort of a "math geek in training," so I frequently apply the tools of mathematics and science to my study of FOREX price behavior. This site is where I store my research notes (rambling as some of them may be...) as well as my more coherent mathematical market musings. Between the research archives, the Forex Factory Journal, and the "blog" type posts, Market-geeks.com describes my journey as a FOREX trader from 2005 to the present. Come back often, check out the newest updates, and help keep the site running by visiting the site's sponsors. Enjoy, and keep pipping up!
Questions or comments? Post a message at my Forex Factory journal..
Carry Account Summary
Monday 2/8/10
All the info on what's happening with the carry account is in the chart and table above. So why am I making a post today? Because I just found out...
They're making a sequel to Wall Street!!
Yep, it's called "Wall Street: Money Never Sleeps" and I just saw the trailer over the weekend. w00t!! Anyway, keep pipping up!
Friday 2/5/10
Wow, check out the weekend spread on USD/HUF; 450 pips! Needless to say, when the spread widened out today it triggered my sell order. I actually had a pip of slippage and filled at 198.49. So I'm short 20 USD/HUF in addition to my Turkish Lira position. Yay! Have a good weekend, and keep pipping up!
Wednesday 2/3/10
Introducing the Hungarian Forint! I looked at a 300 day William's %R for all three high yield currencies that I'm looking at now and the Forint is the most favorable at about -74%. This means USD/HUF is about 26% of its 300 day range off of its long term lows. The reading for the Turkish Lira is about -85% and the South African Rand stands at -91%. I think what I'll do to determine relative position sizes is to use the sum of the (1+%R) values as the denominator, and the individual (1+%R) values as the numerators. So my current denominator would be:
(26+15+9) = 50.
The relative position sizes would be:
USD/HUF: 26/50 = 52%
USD/TRY: 15/50 = 30%
USD/ZAR: 9/50 = 18%
So it's time to start building up a position in Hungary. I've added this new asset allocation method to the summary table at the top of the page. Keep pipping up!
Monday 2/1/10
Based on the big selloff today, the calculator is showing a reduction order of 6 units, which in the case of this short position translates to a buy order. However, since I trail buy orders about 100 pips behind the offer, my order would be somewhere around 1.4970 which would have me buying back dollars at a loss. I'm not willing to do that, so I'm not placing the order. Jesse Livermore once said that it wasn't his thinking that made big money; it was his sitting tight. So for now I'll just keep collecting interest and keep pipping up!
Friday 1/29/10
The kind of silly 1-unit order that I placed yesterday filled when the spread widened for the weekend. The order size calculator is flashing a sell order of 4 more units but I won't be placing anything until sometime on Sunday night or later when the spread narrows again. Have a good weekend and keep pipping up!
Thursday 1/28/10
And there was much rejoicing as my sell order finally filled today on an intraday dip in price. Since prices are still relatively high, the order size calculator is still flashing a sell signal for 1 unit, so I've placed that order at 1.4850, about 100 pips below the current bid. Keep pipping up!
Monday 1/25/10
Hey! Hai! What's up with my order not filling today? Oi! Take a look at today's chart and keep pipping up!
Thursday 1/21/10
I had an error in yesterday's post and chart, saying that the sell order I'm currently trailing started at a size of 16 units. It actually started at 15 units, and I've fixed it on today's chart. Anyway, the order is actually now up to 33 units and still trailing the high water mark of the bid by at least 100 pips. It's set at 1.4750 now. Stay tuned, and keep pipping up!
Wednesday 1/20/10
A new improvement to the homepage today! Instead of posting charts every so often in these posts, I'll just keep one up at the top of the page with the summary table. I'll update that chart each day with annotations, etc. As you can see, I'm still trailing my sell order behind the price, and it's getting larger. I trail the order 100 pips behind the bid, moving it in increments of 50 pips. Since today's price reached a high of 1.4787, the bid moved past 1.4750 at some point, so my trailing order is 100 pips behind that level at 1.4650. And this is how we keep pipping up!
Tuesday 1/19/10
The price is moving up, and I've moved the sell order up to 1.4500. The size of the order has increased to 21 units as well. Take a look at a chart of the current situation, and keep pipping up!
Monday 1/18/10
Simplify, simplify, simplify! I've drastically simplified the method for determining order sizes, and hopefully eliminated the problem of what happens if the position stays in profitable territory for long periods of time, thus not allowing me to increase the position size. The new simpler method is on the carry trade strategy page, and I've changed the summary table to reflect the change as well. Based on the new method, I now have an order to increase my USD/TRY position by selling 15 units at 1.4450, which I'll be trailing behind the price if it continues to move north. So now we can more simply...keep pipping up!
Friday 1/15/10
Oops! I forgot to update the Liquidation Fund value in the summary table yesterday. Because I bought back 11 units of USD/TRY, I have to add that $11.00 to the Liquidation Fund so I can include it in my next entry order. The spread is back up to 200 pips until the markets open again, so it's time to relax. Have a good weekend and keep pipping up!
Thursday 1/14/10
The buy order for 11 units filled, and the next buy order amount is 7 units. I won't be placing the next buy order however until we again see lower daily highs. Keep pipping up!
Wednesday 1/13/10
I've moved the buy order down to 1.4600 and increased its size to 11 units. Keep pipping up!
Monday 1/11/10
About 7 or 8 hours ago, price hit a low of 1.4473, meaning that the offer was 1.4503. I've just moved the 9 unit buy order down to 1.4650 as a result. It's nice to not have to babysit the chart all day while still being able to...keep pipping up!
Sunday 1/10/10
The sell order size moved up to 9 units as my open profit increased to over $3 on the narrower spread, so I've placed that order (it's close enough to the 10 unit minimum which is actually probably too high a minimum for a position of just 210 units to begin with). The buy order is at 1.4700 and I'll trail the offer by at least 100 pips. I may move the order in smaller increments than 100 pips though; probably 50. So tomorrow if the offer is below 1.4550, I'll move the order down to 1.4650, etc. Take a look at the chart, and keep pipping up!
Friday 1/8/10
First of all, it is HELLA cold here! The sell order size has moved up to 5 units, and that's with the spread on USD/TRY at 200 pips for the weekend. When the spread narrows my open profit and the order size will be larger, so I may be placing a profit taking order early next week. Until then, keep warm and keep pipping up!
Wednesday 1/6/10
The USD/TRY has moved down further into profitable territory and my calculator is flashing a take-profit order size of 2 units at this point. I'm not entering this order yet for two reasons.
The first is the rule about trailing the order at about twice the spread (I use 100 pips for USD/TRY) behind the price, and moving it from handle to handle based on round numbers. My average entry price is 1.4793, so my first order placement point would be 1.4700. In order for me to place an order there though, the offer would need to be at or below 1.4600 to satisfy the 100 pip trailing requirement.
The second reason is a new rule that I've just incorporated into the Carry Trade Strategy page which says that my profit taking orders must be at least 10 units in size. This eliminates tiny orders that don't change my deposit balance.
So it's nice to see the position in profit as I continue to collect interest, but I'm not willing to take any off the table at these prices. Instead, I guess I'll just...keep pipping up!
Tuesday 1/5/10
I'm posting again today to mention what happens in a case when the position moves into profitable territory like it did today. Yesterday I was talking about a pending entry order to sell 11 units which I haven't placed because the price is dropping. Now that we're in profitable territory, that order isn't even listed in the Carry Account Summary table, because my eye is now on a potential profit-taking exit order. So what happens to the 11 unit order that I never placed? Never fear; my pent up demand for those units is still there, and it's still rising as the days go by. Notice that I keep track of the last entry order date, currently 12/24/09. Next time the price is rising at some point above my average entry price (loss territory), I'll again be in the business of calculating the next entry order size. That calculation will take into account the fact that I haven't entered since 12/24/09, and will yield an order size that is large enough to keep me "on schedule" and...keep pipping up!
Monday 1/4/10
The pending sell entry order is now 11 units but I still haven't placed it because the price is plummeting. My open loss has moved from over $4.00 to only $0.11. I won't be updating this blog every day like this if nothing happens, but I'll update the Carry Account Summary table on weekdays. Keep pipping up!
Friday 1/1/10
Happy New Year!!
I've upgraded the Carry Account Summary table at the top of the page to reflect the actual formulas on the carry trade strategy page, and updated the data in the table. The account deposit has accumulated 21 cents in interest in the week since the last update. w00t! As of today the next entry order amount is 8 units, but I don't have an order in place for that yet. One reason for this is that the price is moving down, and I don't place the entry orders until price begins making higher daily lows. The other reason is that the spread is 200 pips right now due to the holiday and the coming weekend. So trailing a sell order at twice the spread behind the bid would put that sell order well below my Average Entry Price (AEP) of 1.4793. I'm not willing to sell at such a low price; my sales have to take place at prices above the AEP. So the big "kickoff" day won't include any actual trading or order placement, but here's a chart of the current situation.
As always...keep pipping up!
Thursday 12/31/09
w00t! The carry trade strategy page is finished. There's a link to it under the Carry Account Summary table at the top of the page too. The official kick-off is tomorrow...keep pipping up!
Wednesday 12/30/09
Instead of breaking up the strategy explanation into a bunch of separate posts, I'm creating a new page here on the site which covers everything. I'm about 2/3 of the way through writing it, so hang in there! The "official" launch of the 10 year carry trade strategy is on New Year's day; w00t! I should have the new page done by tonight or tomorrow, and I'll include a link to it under the Carry Account Summary table above. Keep pipping...up!
Sunday 12/27/09
I've added a table to the top of the home page which shows my current carry trade account situation. As you can see, I'm starting this long term strategy with the remnants of one of my smaller accounts, with a starting deposit of only $69.10 supporting a carry position value of $210 (short 210 USD/TRY). Although this amount is quite small, the goal is to build the carry position to a point at which it actually provides a meaningful income.
Some of the table entries will not be self-explanatory because they concern the method that I'll be using to trade around the core positions. In the next post I'll begin providing specific details of how this works. Until then...keep pipping up!
Friday 12/25/09
Happy Holidays!!
Monday 12/21/09
I neglected to mention two other risk reduction techniques in the last post; diversification and flexibility. Turkey happens to border at least one major world flash point, so who knows what could happen there over the next 10 years. My solution will be to build positions in other high interest currencies as well, starting with the Hungarian Forint and the South African Rand. Also, currencies that are high yielding today may be tomorrow's funding currencies, so I'll also be on the lookout for opportunities to move into better income vehicles. Unlike bonds, currencies don't have the "reinvestment risk" problem with principal, because there's no fixed maturation date on my positions. The more I think about it, the more I'm convinced that this "get rich slow" approach has to be one of the most rational ways to trade with a real edge in FOREX. As always...keep pipping up!
Saturday 12/19/09
My goal is to continually increase the size of my income producing carry position. So let's say I want to double its size each year. By the Rule of 72, 6% per month compounded monthly is 100% per year. This in turn works out to an average daily increase of 0.2% of a starting balance over 30 days. The interest income adds to my margin deposit, reducing my level of leverage, but not by nearly enough to be safe from large "black swan" moves. I can make up the difference by trading around the core position and by making additional deposits into the account. That's the basic outline of the plan. I'll fill in details with future posts. Keep pipping up!
Tuesday 12/15/09
The more I consider it, the more I keep coming back to the conclusion that the only consistent edge in FOREX that I've seen so far consists of the advantage wrought from the the positive carry. I've suspended all other trading activity to concentrate exclusively on building my USD/TRY carry position over the very long term. The fact that Oanda pays carry interest on a daily basis, combined with the powerful potential of compound interest yields some interesting possibilities. More on this later. Keep pipping up!
Friday 12/11/09
One of the reasons that I consider interest rate differentials as a major pillar in a FOREX trading method is that they form the "bottom line" of the fundamental analysis side of the equation. Just as in the old FA/TA divergence method, I want to consider the real world economic factors that are putting pressure on exchange rates. But I've simplified this from looking at every news release, and just distilled it down to the rate differentials.
There are two other "pillars" to the method I'm building which I'll discuss in future posts; a "long tails" approach to trade/money management, and a method of analyzing volume in terms of market microstructure to determine entry points. Happy weekend, and keep pipping up!
Thursday 12/10/09
Did I mention that these updates won't be daily anymore? At any rate, let's talk rates. Here's a table showing the current interest rate differentials on 18 currency pairs (read from the left side first, then the top row).
I post this because as I go back to the drawing board I'm settling on certain principles to guide the design of my next method. One of those principles is to always be in the direction of the positive carry. Currently, I only have one position open in the account; a short carry position in USD/TRY in the amount of 289% of equity. More later. As always, keep pipping up!
Monday 12/7/09
Frequent visitors will notice immediately that Market-geeks.com has undergone some changes this week. Gone is the FA/TA divergence strategy which was far too cumbersome for its lackluster performance. Also, I've moved the FOREX articles to a separate page of their own. Finally, I'll be keeping each update message here on the main page (and eventually in archives) instead of changing it every day in the same space as I was doing before. This way, if you don't visit the site for a few days, you'll still be able to see all of the past messages.
So for those of you who were visiting every day and following the progress of the FA/TA divergence trades, the big question must be, "well...so now what?" The answer is simply that I'm in the process of developing a new approach, which is one of the reasons I've gone to this "blog" format on the site. In addition to my more formal research notes and articles, Market-geeks.com will now be home to this journal of discovery as I record my progress toward the goal of becoming a full time currency trader. Stay tuned, and keep pipping up!!
