My Money Blog

Learning the Basics of Forex Trading

Posted on 20. Feb, 2010 by Casper.

The past couple of weeks I have tested the Fapturbo Robot on a new live account. This post is not about theis forex robot but being back in the forex market made me seek out some fundamental “rules” about forex trading. So here is some of the places I thought was excellent sites that any new traders should have a look at:

1. Dailyfx

Dailyfx.com has a range of vidoes that will teach new forex traders how to spot the market trend, use different tools, money management and more (Go to to dailyfx.com training videos). The videos are fairly simple but holds so much valuable information. Information anyone must know to be successful in the forex trading arena.

The site also has alot more info that surely can be used in everyday trading.

2. Forexfactory (forum)

The subtitle here may suggest that forexfactory.com is a forum. It is a complete website and have a very nice “Todays Forex News page”; but actually I want to mention their forum. Ofcourse the forum has plenty of threads as most forums do, but especially the EUR / USD thread is more than active and you can learn alot just by being a passive reader. They share both ideas tips, chart analyzis and more. I recommend stopping by because there is so much good information in there.

3. Babypips

If you are a brand new forex trader, it is crucial that you attend the babypips school. No you do not need to sign up or join in anyway. The school lets you start in any grade, but I recommend starting in pre-school and work your up. If or when you have learned all about the basics, you can continue to forex-college! This site is exellent and should not be ignored by anyone wanting to learn about forex trading.

I know there are plenty of sites out there that can teach you about forex, but these are the sites that gave me the most info, and I had no problem understanding it. It might not be so for others. If you come across a site that you believe holds good forex learning resources, let me know. I will add it to this post asap.

Happy trading.

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Fapturbo Forex Robot Tests

Posted on 16. Feb, 2010 by Casper.

The last couple of posts here has been about some daily updates on the performance of the Fapturbo robot. I have decided not to update these per day but rather per week. Untill I start this update (counting from this Monday this week), let me just give you a short update:

Prevously I had great experience with the Fapturbo robot, but this time it really doesn’t impress me at all. It still does make good trades everyday, earning me around $20 -$40 a day on some trades. However it seems to make at least on or two trades a day that reaches the stop loss and therefor kills whatever is gained. I have managed to grow my forex account tremendously, but only by shutting down fapturbo as trades came close to a stop loss, then waited till the trades went positiv and close them manually.

Especially one trade really got me worried: Fapturbo opened a long position which rapidly became a loss. Although the trade didn’t reach the stop loss the fapturbo robot decided to close it with a loss. I don’t mind taking a loss if I have too, but just 20 seconds later it opened a new long position on the same pair. If the Fapturbo robot believes the pair will go up why close a long position?!

I am considering taking of the fapturbo money management, and run it with my own settings. Also, I will probably interfere from time to time, shutting down the forex robot to prevent it from closing or taking small profit if I feel I can do better myself. I will ofcourse mention this whenever such measures has been taking.

Untill next update: Happy trades!

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Fapturbo Forex Robot Results – Part 3

Posted on 05. Feb, 2010 by Casper.

Todays fapturbo trading was not impressive at all. As I wrote in my last post, I had an open position which was on the negative side. That position (8804020) ended with a stop loss and a total loss of  $66.11. Although the fapturbo had many positive trades last night, it also had another bad trade that also ended with the pre-defined stop loss (8824861). A loss of $69.02. Both of these trades where a long position on EUR / CHF, so it seems the fapturbo robot made some really bad calls yesterday on that specific pair.

Seeing the profit versus the loses, I am wondering why the default settings are set to take profit after 5-10 pips but stop loss is 50 -80 pips depending on currency pair. Why take such big loses when the robot hasmade a wrong decission shouldn’t it cut the loses instead of hoping for a good result…?

I have decided to try with friday tradings on (default settings are off), so we will see how the robot will perform tonight.

Here are todays results:

Lot size 0.1
Leverage: 400 (high leverage for test purposes. NOT recommendable! More info on lot size and leverage here)

The profit for each trade is the far right column.
Total profit for 3. Feb: $ -102.13

Total profit for this account: $ -51.16

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Fapturbo Forex Robot Results – Part 2

Posted on 04. Feb, 2010 by Casper.

Another day has past and the forex robot FAPturbo has made some nice trades.

Here are todays results:

Lot size 0.1
Leverage: 400 (high leverage for test purposes. NOT recommendable! More info on lot size and leverage here)

The profit for each trade is the far right column.
Total profit for 3. Feb: $ 33.03

Total profit for this account: $ 50.97

At this momment I have an open position that is on the negative side. The result will ofcourse be uploaded once this position is closed.

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WordpressTrafficPlugins.com Review – Do They Work?

Posted on 28. Sep, 2009 by Casper.

So it is time again for a product review. This time I have tested 3 plugins from the Clickbank product “WordpressTrafficPlugins“. Let’s get right to it and see what happens when you download these plugins and put them to work.

Once the packet is downloaded you have 3 plugins that does very different things:  Poster Pro, Socialize-It Pro and as a bonus The RSS Aggregator.

Poster Pro:

I simple plugin that allows you to upload multiple articles and shedule them for later publishing. Articles can be added to chosen category, and will be tagged automatically.

Socialize-It Pro:

This plugin is the reason I bought this product. It automatically bookmarks your post when it gets published. It comes with 30 bookmarking sites but you can add or delete as many as you want. There is also a nice feature where you can choose how many percentages of the sites you want to use for a post to avoid any spamming problems. It can also send you an email with the stats of your bookmarking when you have published a new post.

The RSS Aggregator:

The RSS Aggregator let’s you fetch RSS feeds and post them to your own blog. Just adding the RSS feed and choose how many posts you want.

The three plugins are easy to install and also very simple to setup. They all work but with a few minor negative sides:

The Socialize it pro plugin takes time to setup as you have to manually register at each of the bookmarking sites and then enter the details for each site within your admin area. Also some bookmark submits are failing permanently, probably due to robot-prevention measures on the site.

The RSS Agregator needs some IT knowlegde as you need to setup a cronjob for it to work 100% on autopilot.

The Verdict:

I must admit that the Socialize-It Pro plugin it is really worth the money if you are looking for an easy way to bookmark your blog posts. Once you have it all setup you never have to worry about bookmarking again!

Click here to learn more about the plugins from WordpressTrafficPlugins.com

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Understanding Lot Size And Risk In Forex (And Fapturbo LRR – Lot Risk Reductor)

Posted on 28. Apr, 2009 by Casper.

Lot size and risks can be hard to understand and calculate. How much is 1 lot size? How can you calculate a lot size? This post should outline how lot sizing works in Forex. This post also works as a guide to the FAPturbo robot as you need to consider how lot sizing works when assessing your trade risk when using the robot if you are turning off money management. FAPTurbo money management does a good job of determining lot size based on your account balance and available margin, but many people are turning this off and manually setting lot sizes.

Lot sizes are shown as a percentage of a full lot
1 full lot in forex is equal to $100,000.00 of the underlying currency so 1 lot of USDCAD equals $100,000.00 USD. If the USD appreciates versus the CAD you will have more than $100,000.00 (profit) if you went long (bought the USDCAD contract) and less than $100,000.00 (loss) if you went short (sold the USDCAD contract).
If the USD depreciates versus the CAD you will have less than $100,000.00 (loss) if you went long (bought the USDCAD contract) and more
than $100,000.00 (profit) if you went short (sold the USDCAD contract).

The amount of the profit or loss from a contract purchase are related to the lot size and the number of pips the underlying moved:

1.0 lot = $10.00 per pip, you are trading a full lot, or $100,000.00 of the underlying currency
0.9 lot = $9.00 per pip, you are trading a .9 lot, or $90,000.00 of the underlying currency
0.8 lot = $8.00 per pip, you are trading a .8 lot, or $80,000.00 of the underlying currency
etc….
0.1 lot = $1.00 per pip, you are trading a .1 lot, or $10,000.00 of the underlying currency
0.09 lot = 0.90 cents per pip, you are trading a .09 lot, or $9,000.00 of the underlying currency
0.08 lot = 0.80 cents per pip, you are trading a .09 lot, or $8,000.00 of the underlying currency
etc….
0.01 lot = 0.10 cents per pip, you are trading a .01 lot, or $1,000.00 of the underlying currency

**note: some currencies are not exactly $10.00 per pip or a fraction thereof but for our needs assuming so is fine.

Remember, recommended risk levels are no more than 1-2% of your account balance per trade.

So if you trade 0.1 lots, you are risking $1.00 per pip. If the underlying moves against you, and your stop loss is at 60 pips, you are risking $60.00. If your account is $500.00 you are risking 60/500 = 12% of your account on this one trade.

So with a $500.00 account what lot size should I be trading to only risk 1-2% of my account?
$500.00 X .01 = $5.00 risk per trade at 1%, $10.00 risk per trade at 2%

Now lets say our stop loss is 50 pips, so with $5.00 at risk (we have determined our comfort level is risking 1% of our account per trade), we need to be trading a lot size that only risks 0.10 cents per pip ($5.00/50=0.10) so to manage our risk we should set our lot size to 0.01 lots per trade. If your comfort level is 2% risk per trade, then 500.00 x .02 = $10.00 per trade. So $10.00/50=0.20 cents per pip risk which means we should set our lot size to 0.02. FAPTurbo’s Lot Risk Reductor does something similar, but it also decreases lot size as more and more trades are opened, thus decreasing risk as your account balance and margin change. When you manually set the lot size, each trade would be opened with the same lot size, even if your account balance is lower due to some losses.
If you are manually setting your lot sizes you need to revisit them regularly, they are not a set and forget item

Lot risk reductor for the FAPturbo Robot(LRR)

The Scalper Lot Risk Reductor (LRR) in FAPTurbo works in conjunction with money management (MM). If you turn off MM, then the LRR will
have no effect. How does the LRR work? Basically it is used by FAPTurbo in the calculation of what size lot to open for a given trade. If you set the LRR to 5.0 you are telling FAPTurbo to use 5% of your available margin to open each trade. The amount of margin allocated determines the lot size FAPTurbo can open in conjunction with your accounts leverage and balance.
The first trade FAPTurbo opens will use 5% of your available margin and open a trade with the calculated lot size. The second trade FAPTurbo opens will use 5% of the remaining margin in your account to determine the appropriate lot size.
For example, if you have $500.00 available margin, FAPTurbo will use $25.00 of your margin to open it’s trade. You now have $475.00 in
available margin (excluding 1st trade profit/loss at time). If FAPTurbo needs to open a second trade, while the first trade is still running it will use 5% of the $475.00 to open this second trade, which would be $23.75 of your available margin, now leaving you with $451.25 of available margin. Due to this smaller margin amount the second trade may open a smaller lot size.
This lot sizing is dynamic, and is calculated at the time of the trade opening. As the calculation takes into account your current available margin, it is affected by current open positions. Open positions that are showing a loss decrease available margin in real time, and those at a profit increase available margin.
Also, margin is calculated using the underlying currency versus the currency of your account. If your account is in USD, and you want to trade the EURUSD pair, to buy 0.1 lots or $10,000.00 of the currency your broker will use the current rate of the underlying. In the EURUSD pair that is the EUR, so to buy $10,000.00 or 0.1 lots of EUR with a USD account you take the $10,000.00 and multiply it by the current EUR rate, say it is 1.3000, and the amount used to determine needed margin by your broker to make the trade is based on $13,000.00 USD.

Effect of 2% account balance risk versus 10% account balance risk

Assuming worst case scenario, here is the difference in your account if you risk 2% of your account balance versus 10%

Risking 2% of total account per trade

Trades — Account balance –
1 Start — $5000 — 100
2 $4900 — 98
3 $4802 — 96
4 $4706 — 94
5 $4612 — 92
6 $4520 — 90
7 $4430 — 89
8 $4341 — 87
9 $4254 — 85
10 $4169 — 17% of the account has been lost

Risking 10% of total account per trade

Trades — Account balance –
1 Start — $5000 — 500
2 $4500 — 450
3 $4050 — 405
4 $3645 — 364
5 $3281 — 328
6 $2953 — 295
7 $2658 — 265
8 $2392 — 239
9 $2153 — 215
10 $1938 — over 60% of the account has been lost

Stop loss level in FAPTurbo

Basically the SL in FAPTurbo, from what we have seen on the forum is around the 110 pip mark. Although each pair could be different and may also change with market conditions.

Forex Leverage

Leverage in forex is like margin in stock and option trading. You are using the houses money to trade larger positions than you otherwise could.
Leverage in Forex comes in 1:25, 1:50, 1:100, 1:200, 1:300, 1:400, and 1:500. Leverage determines what amount of margin is needed to open a given lot size.
For example, to determine the margin needed to open a 0.1 lot on a $1000.00 account you divide the lot size in dollars by the leverage amount (see lot size and risk section for lot size to dollar conversion). So for a $10,000.00 lot size (0.1) with an account at 1:100
leverage and a balance in your account of $1000.00 you need $100.00 of available margin (10,000 / 100 = $100) (lotsize / margin = required
account margin).
If we change the margin from 1:100 to 1:200 then ($10,000 / 200 = $50.00) so you need $50.00 of available margin to buy 0.1 lots.
So leverage allows you to use less of your money, depending on the level your broker gives you, to buy the same amount of underlying currency.

Money management (MM)

Margin required has absolutely ZERO to do with risk. Here is why:

Same trader, same size account, same money management technique, two brokers, different margin requirement:

Say broker A’s margin requirement is 1% (1:100), Broker B’s margin requirement = 0.5% (1:200), account value is $5,000.00.

Trader decides to do a maximum trade (for him, following his MM) (10% of margin) at both brokers.

Broker A = buy $5,000 X 10% = $500 = at 1% of 10K (0.1 lot size) = 5 x 0.1 lots (or .5 lots). Notional transactional value = EUR 50,000 and value per pip $5.00.

Broker B = buy $5,000 X 10% = $500 = at 0.5% of 10K (0.1 lot size) = 10 x 0.1 lots (or 1.0 lots). Notional transactional value = EUR 100,000 and value per pip $10.00.

Let’s say the trade was not such a good idea. The eurusd moves 100 points in the wrong direction. With broker A he loses $500, with broker
B, $1000.

The solution is that you must calculate your risk not by using your margin required percentage but by looking at your leverage ratio:

Say broker A’s margin requirement is 1% (1:100), Broker B’s margin requirement = 0.5% (1:200)., account value is $5,000.00

Broker A = EUR50,000 (5 x 10K lots (5 x 0.1 lots or 1 x 0.5 lots))/ $5,000 (total capital) = leverage of 10:1. I.e. you take your capital, wish it is EUR50,000 (for which you give the broker some measily security of 1%) and off you go. Risking not 10% of what you have but risking what you have 10 times.

Broker B = EUR100,000 (10 x 10K lots (10 x 0.1 lots or 1 x 1.0 lots))/ $5,000 (total capital) = leverage of 20:1. I.e. you take your capital, wish it is EUR100,000 (for which you give the broker some measily security of 0.5%) and off you go. Risking not 10% of what you have but risking what you have 20 times.

Basically, higher leverage ratio = higher risk.

Because margin required is a variable it can not be used to judge the risk where the other properties of the transaction are all fixed (non-variable): Margin = $5000, lot size = EUR10,000 and pip value = $1.00/ per 10K. That is why you should look at the transaction from the notional value angle and not the variable margin requirement angle like most do.

Many traders say as part of “money management” that they will risk only say, 10% of their capital at any given time. What they mean is that they will do transactions to the value of 10% of their margin based on the margin requirement. This is WRONG. When assessing risk, you need to look at how much of your account balance (read as YOUR MONEY) you are risking with each trade.

Here is my approach – I keep my leverage down at 1:100, then I determine what lot size I am comfortable with based on the Stop Loss in use.

With FAPTurbo’s assumed SL at 110 pips, if I trade 0.1 lots, am I prepared to lose $110.00 on a trade gone bad? If the $110.00 is less than 2% of my account balance, then the answer is yes. If the $110.00 is more than 2%, then the answer is no, and I decrease my lot size to something that fits the maximum 2% risk of my account balance on any trade (see lot size and risk section for more detail).
For new or inexperienced traders I would recommend using FAPTurbo’s built in money management.

Hope this helps.

Regards and good trading,
Wayne

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