Friday, February 29, 2008
Welcome to our Blog
Let me be the first to welcome you to the Tradewinds Currency Daily Trade Blog. It is an effort to educate our fellow fund members on our trading strategies, share the fundamental and technical data we are working off of, give added insight into the why behind our trades, and to provide a forum where we can log each and every trade we make. So welcome and enjoy.
Why we started the fund/What you should remember about our risk appetite.
I thought I'd take a moment to share with you why we started Tradewinds Asset Management.
As our group began to learn to trade Forex it never was our intention to trade other individuals' funds. Our goal all along was to take a small portion of our own portfolio and endeavor to make high returns on it through a high-risk investment (Forex). And with that goal in mind, in late 2006 we set to work on building a trading strategy that would meet that goal. Our trading strategy is ours and ours alone. It is tailored to OUR trading personality and risk comfort levels. From the beginning we have understood that our risk appetite, investment goals, and financial personalities are not necessarily the same as other investors and that quite frankly "no two investors" are the same. We hope that you will understand, that when you ask us to manage your Forex account, that we will be doing so according to our risk appetite.
And so as we started trading live funds fall of last year, word of our Forex success quickly spread. Our trading system saw returns of over 40% in October and November 2007. Soon into November our family and friends were asking us to trade their money alongside ours. In response to these requests we formed Tradewinds Asset Management.
We try to be as transparent as possible. We have shared EVERY trade our system either took or would have taken . This data is crucial to understanding our risk appetite. We risk large amounts in anticipation of large returns. Few systems average 30+% monthly returns in a year without risking equal amounts. Our risk appetite may not be as aggressive as those Forex traders who experience drawdown as high as 50-60% nor may it be as conservative as those who limit drawdown to 5-10%. We trade according to the risk appetite of our partners and those who choose to have their money traded alongside ours are subject to that same level of risk. It may not be enough risk, it may be too much, or it may be just right. It is up to each individual investor to find out for him/herself what level of returns they would hope to make and then take the risk that corresponds to those potential returns.
As our group began to learn to trade Forex it never was our intention to trade other individuals' funds. Our goal all along was to take a small portion of our own portfolio and endeavor to make high returns on it through a high-risk investment (Forex). And with that goal in mind, in late 2006 we set to work on building a trading strategy that would meet that goal. Our trading strategy is ours and ours alone. It is tailored to OUR trading personality and risk comfort levels. From the beginning we have understood that our risk appetite, investment goals, and financial personalities are not necessarily the same as other investors and that quite frankly "no two investors" are the same. We hope that you will understand, that when you ask us to manage your Forex account, that we will be doing so according to our risk appetite.
And so as we started trading live funds fall of last year, word of our Forex success quickly spread. Our trading system saw returns of over 40% in October and November 2007. Soon into November our family and friends were asking us to trade their money alongside ours. In response to these requests we formed Tradewinds Asset Management.
We try to be as transparent as possible. We have shared EVERY trade our system either took or would have taken . This data is crucial to understanding our risk appetite. We risk large amounts in anticipation of large returns. Few systems average 30+% monthly returns in a year without risking equal amounts. Our risk appetite may not be as aggressive as those Forex traders who experience drawdown as high as 50-60% nor may it be as conservative as those who limit drawdown to 5-10%. We trade according to the risk appetite of our partners and those who choose to have their money traded alongside ours are subject to that same level of risk. It may not be enough risk, it may be too much, or it may be just right. It is up to each individual investor to find out for him/herself what level of returns they would hope to make and then take the risk that corresponds to those potential returns.
February 2008 Report
This post has been back dated to as to include a complete log of 2008 results.
February finished the month drawndown. Two large losing days and a change in how the GBP/JPY reacts to our GBP/JPY strategy resulted in the first losing month of 2008.
February 2008 = -9%
February finished the month drawndown. Two large losing days and a change in how the GBP/JPY reacts to our GBP/JPY strategy resulted in the first losing month of 2008.
February 2008 = -9%
Thursday, February 28, 2008
What is a "Trading System"?
Every once in a while you may check your trade log to see what trades were made on your account. You may ask yourself, why and how the decision to take that trade was made. Allow me to give you a little insight into the process behind every trade.
First, I would encourage you to read Investopedia's definition of a trading system.
Every trade our system signals has a reason for entry and a strategy to get out. Whether the trade made money or lost, whether the trade lasted 24 hours or 24 seconds, every trade is taken with a purpose in mind and is based off of precise entry signals. Every trade taken has a set stop-loss (absolute risk) and take-profit (profit goal). The trader's sole responsibility is to see that the system's rules are carried out precisely as called for in the plan. And thus, with confidence, we can "Plan the Trade and Trade the Plan" without emotion or fear. No system wins everyday. No system can guarantee consistent daily returns through all market conditions. The famous "Turtles' " system lost more often than it won but still managed to make over 80% per year.
Drawdown. The bad word in Forex. For those unfamiliar with typical Forex drawdown I would invite you to Google "Typical Forex Drawdown" to get a feel for what other Forex systems are experiencing. You will see anywhere from 5% - 65% all depending on the potential return. Obviously a system that only experiences drawdown of 5-10% will not make more than a couple percent per month while a system that risks 50+ percent will have the potential for equal monthly gains. In creating our system we looked to be somewhere in the middle between high Forex returns and high Forex risk. Keep in mind that compared to many investments any Forex risk is a high-risk.
WHY USE AN AUTOTRADER? We use an autotrader for the same reason every commercial plane these days uses auto pilot, because humans are prone to make errors in the heat of the moment. Trading is a highly stressful endeavor. Our system takes between 700-1000 trades per month. Every trade involves complex formulas for determining when to enter, what position size to enter with, and how to exit the market. Without the computer we could not execute the system rules exactly according to plan. However, as with commercial flight, our pilot (a professional trader) is always at the wheeling monitoring the auto trader, watching the market, studying the fundamental news and making adjustments to the strategies as is necessary.
No Trade Days. You will see that often one or both of the Strategies' rules signal a no trade for that day. This is normal. We have calculated when a day is a much higher risk for loss. In some cases, we take half risk that day, in other cases we don't trade. We don't trade most bank holidays, when the end of the month falls on a Monday or Friday we tend not to trade (unless market conditions warrant it), we often weill take half risk on days when major news is coming out prior to our anticipated exit time, and we do not trade the day that the non-farm payroll report is released (typically the first Friday of each month).
Emotion Free Forex Trading. Forex trading can be VERY stressful for both the trader and the investor. Our system is designed to take all of the emotion out of the trade. Every possible trade scenario has a rule attached that indicates to the trader what to do. My job as lead trader is 1) analyze the market prior to the open to determine if any fundamental factors require placing the system on hold that day and 2) to analyze the effectiveness of the system and strategies making changes when/where necessary. These changes however are NOT made on a daily basis since not every trade will win and no system will win every day. These changes are typically made monthly.
Emotion Free Forex Investing. Is there such a thing? I doubt it. But there are ways to reduce the daily stress of Forex investing. First, NEVER invest money you can't afford to lose. I can't even imagine the stress and emotion that would go along with that. Second, only check your account weekly. I know this sounds easier than it is, but you will find that Forex is a 6 steps forward 5 steps back process. If you are checking it daily you will be on such an emotional roller coaster that you won't be able to happily live your life. You will find that on winning days I am your favorite person and on losing ones your least favorite. But you shouldn't have to go through that kind of emotional daily ride (When you place your funds in the account can help with this). Third, knowledge is power. Learn everything you can about Forex. Understand the risk, the reward, and the fundamental reasons why currencies do what they do. If you get so good that you decide to pull your money and trade on your own, I welcome you to do it. If not, I am happy to continue to trade your funds. Just learn so that you know what your investment is (Here is a good place to start).
First, I would encourage you to read Investopedia's definition of a trading system.
Every trade our system signals has a reason for entry and a strategy to get out. Whether the trade made money or lost, whether the trade lasted 24 hours or 24 seconds, every trade is taken with a purpose in mind and is based off of precise entry signals. Every trade taken has a set stop-loss (absolute risk) and take-profit (profit goal). The trader's sole responsibility is to see that the system's rules are carried out precisely as called for in the plan. And thus, with confidence, we can "Plan the Trade and Trade the Plan" without emotion or fear. No system wins everyday. No system can guarantee consistent daily returns through all market conditions. The famous "Turtles' " system lost more often than it won but still managed to make over 80% per year.
Drawdown. The bad word in Forex. For those unfamiliar with typical Forex drawdown I would invite you to Google "Typical Forex Drawdown" to get a feel for what other Forex systems are experiencing. You will see anywhere from 5% - 65% all depending on the potential return. Obviously a system that only experiences drawdown of 5-10% will not make more than a couple percent per month while a system that risks 50+ percent will have the potential for equal monthly gains. In creating our system we looked to be somewhere in the middle between high Forex returns and high Forex risk. Keep in mind that compared to many investments any Forex risk is a high-risk.
WHY USE AN AUTOTRADER? We use an autotrader for the same reason every commercial plane these days uses auto pilot, because humans are prone to make errors in the heat of the moment. Trading is a highly stressful endeavor. Our system takes between 700-1000 trades per month. Every trade involves complex formulas for determining when to enter, what position size to enter with, and how to exit the market. Without the computer we could not execute the system rules exactly according to plan. However, as with commercial flight, our pilot (a professional trader) is always at the wheeling monitoring the auto trader, watching the market, studying the fundamental news and making adjustments to the strategies as is necessary.
No Trade Days. You will see that often one or both of the Strategies' rules signal a no trade for that day. This is normal. We have calculated when a day is a much higher risk for loss. In some cases, we take half risk that day, in other cases we don't trade. We don't trade most bank holidays, when the end of the month falls on a Monday or Friday we tend not to trade (unless market conditions warrant it), we often weill take half risk on days when major news is coming out prior to our anticipated exit time, and we do not trade the day that the non-farm payroll report is released (typically the first Friday of each month).
Emotion Free Forex Trading. Forex trading can be VERY stressful for both the trader and the investor. Our system is designed to take all of the emotion out of the trade. Every possible trade scenario has a rule attached that indicates to the trader what to do. My job as lead trader is 1) analyze the market prior to the open to determine if any fundamental factors require placing the system on hold that day and 2) to analyze the effectiveness of the system and strategies making changes when/where necessary. These changes however are NOT made on a daily basis since not every trade will win and no system will win every day. These changes are typically made monthly.
Emotion Free Forex Investing. Is there such a thing? I doubt it. But there are ways to reduce the daily stress of Forex investing. First, NEVER invest money you can't afford to lose. I can't even imagine the stress and emotion that would go along with that. Second, only check your account weekly. I know this sounds easier than it is, but you will find that Forex is a 6 steps forward 5 steps back process. If you are checking it daily you will be on such an emotional roller coaster that you won't be able to happily live your life. You will find that on winning days I am your favorite person and on losing ones your least favorite. But you shouldn't have to go through that kind of emotional daily ride (When you place your funds in the account can help with this). Third, knowledge is power. Learn everything you can about Forex. Understand the risk, the reward, and the fundamental reasons why currencies do what they do. If you get so good that you decide to pull your money and trade on your own, I welcome you to do it. If not, I am happy to continue to trade your funds. Just learn so that you know what your investment is (Here is a good place to start).
Subscribe to:
Posts (Atom)