Trader Gordon

The 20 minute video below will update you on the performance of the GOAL Forex ‘Windfall’ Fund.

The fund is currently enjoying 92% closed wins, 7% closed losses, average open draw down of 2.2%, equity growth up 5.8% (80.6% annualized) and balance growth up 10.1% (135.6% annualized) in 17 trading days thus far.

If you have any questions, please get back to Richard Van Cleave at richardvc7@gmail.com.

Dear Friends,

The opening minutes of the video below will update you on the progress to date of the GOAL Forex managed fund of which I am the sole trader. The remainder of the video offers some insights on portfolio diversification and risk management, letting you view the world of managed funds from the perspective of the guy who has to pull the trigger and sweat it out, while Richard gets to spend all day chatting to prospective clients with a martini in one hand and a phone in the other. Life can be so cruel sometimes.

With regard to performance, I’m batting better than 80% winning trades and generating ROI of 5.5% per month (66% or so annualized) while trading at very low leverage with small open draw downs.  The video provides details. Having said that, Richard who is the owner of the fund (I just work here) feels that 6%-8% per month is probably the Goldilocks  ’sweet spot’ (not too low and not to0 high) –  in other words, a rate of performance that will attract conservative capital without scaring folks off — and has asked me to step on the gas a little. So I’ll be working on nudging things up a little over the next couple of months. My job is to take her up a few thousand feet without ripping the wings off (or tipping Richard’s martini).

Having said that, I am required by law to remind you that the past in no way guarantees the future, that things could go horribly wrong at any moment and that, prior to making any trading or investing decision, you should always consult with a licensed advisor who has demonstrated outstanding performance through both bull and bear markets alike. I must warn you that this could be a protracted search. And if you find one, please do let me know!

I’ll be back again soon, if for no other reason than to torment Richard.

One of the reasons I subscribe to Currency Trader Magazine (subscribe online for FREE) is to see how some of the world’s top Forex managed funds are doing. And the answer is, not too good! (OK, you home schoolers, you know I meant ‘not too well’). The October 2009 issue informs us of the following:

Managed Currency Funds Moribund Through August

“With three quarters of 2009 under their belts, professional currency managers appeared to be treading water in 2009. The Barclay Hedge Currency Traders Index (CTI) was down -0.03 percent on the year through September, after losing -0.3 percent in August and initial indications for September also pointing negative. The index tracks the performance of professional money managers registered as commodity trading advisors (CTAs) that exclusively trade currencies. Also, the largest currency fund managers have been underperforming the group as a whole in 2009. Barclay’s BTOP FX Index, which reflects the largest currency funds representing at least 50 percent of the investable assets of the CTI, was down -2.01 percent for the year through September.”

Jeez, that’s too bad. You’ve got to feel sorry for these guys. How will they make all those BMW payments? And when you look at the table and average the numbers under the ‘2009 YTD return’ column you see that the average performance of funds managing more than $10 million) is 4.68% for 2009 (about 1/2 of 1% per month over 9 months), while the average performance of funds managing less than $10 million and more than $1 million is 18.84%, or about 2% per month. For you hair-splitters, that’s about 1/10th of 1% per day.

Yikes! Grandma in a nursing home buying LEAP options on currency ETFs from her Blackberry can do better than that!

Now that we have started our own Forex managed fund I am going to go out on a limb here and predict that we can perform at least TWICE as well as these top rated funds and get better than 1/10th of 1% per day. In fact, I’ll bet we can get at least 2/10ths! Do I hear 3/10ths?

Things are really popping these days and the pips are pouring in. In fact, there’s so much going on that I wrote the following to append to each e-mail — it’s the world’s  longest sigfile!

P.S.

1. Yes, our family has relocated to Dallas, TX where everything is bigger, including the thunderstorms. We’ve had three in just three weeks and already lost the AC power twice, although only for 15 minutes at a time. That’s OK; it’s just enough time for a nap.

2. My trading is going better than ever with over 85% winning Twitter alerts. If that’s Greek to you, click here to learn how to get them FREE.

3. I have teamed up with Richard Van Cleave of Mill Valley, CA and created Growth Opportunity Associates, LTD (GOAL) as the nexus for my trading and research. GOAL has just started a Forex managed fund. Richard is a great guy and a former IBM executive who still wears a tie to bed. Together we’re a great team. Basically, Richard interfaces with clients and counts the money, while I get to be left alone to trade, teach, put out signals and write fun stuff to stick on this blog. Business is great already and should really pick up when the food riots begin.

4. I am no longer posting at my old blog where there is still lots of fun stuff to read like this post … Now I am posting exclusively here at Trading Metro. Be sure to sign up for the RSS feed, whatever that is.

5. For the time being I am still selling my Forex trading course (‘Convenience Currency Trading’) for $495 USD which gives students permanent access to all of the course modules. However, the course will soon be offered as a 3-month-only subscription for $1,495. Click here for details. So if you’re thinking about trading with me and getting 1,000’s of pips a year in 5 hours of trading time a week or less, now is the time to get on board and save some money. This isn’t a ‘come-on,’ just the facts.

6. I will be holding a live Forex seminar the weekend of November 7-8, 2009 here in Dallas, TX where I plan to remove the top of attendees’ heads, pour it all in over two full-immersion training days, then send them home to receive FREE twice-weekly telewebinar support, plus FREE Forex alerts for 6 months, complete with stops and limits (the Twitter alerts are just the pair and direction). Basically, I will be trading for attendees while they get up to speed. They may even get enough pips to cover the cost of the seminar. This event will fill up quickly, so if you’re interested click here to visit GOAL’s contact page where you can contact Richard right away.

7. Forex Auto Pips is a 100% mechanical trading alert service for subscribers that can get you a few 100 extra pips each month in less than 5 minutes a day. The service has already launched here at Trading Metro. Get the details here.

8. Finally, ETF Wave Trader continues to kick Wall Street’s derriere, averaging about 3% a month simple ROI and about 8% a month compounded since early 2004. Get the details here at Trading Metro before the wave changes. I mention that because I’ve got a feeling a new short wave could be coming soon, one that could send the U.S. economy into the basement for some juicy profits.

Well, that’s it for now. Remember, if you have any questions about any of the above, write to Richard. If you don’t hear back from him in an hour, write again. He loves to receive e-mail.

As I like to joke, Forex Auto Pips is the service where the subscriber gets to be the robot. You show up each day, get the trade, place the trade, walk away, come back the next day and see what happened. It’s Christmas every 24 hours! Well, most of the time, anyway.

Over the month of September 2009 we had 19 trades of which all but one has closed successfully, for a current net pip production of 280 pips for the month (assuming that we were to close the one OTM position right now). Were we to close all positions opened since the beginning of July 2009, we’d be up 1,064 pips at the moment. That’s not too bad for less than 5 minutes of work a day.

I really enjoy crunching the numbers for these alerts and seeing them perform. I started experimenting with mechanical trading systems back in 2003 after reading an interview with investing icon Larry Williams in which he described some of his simpler stock picking algorithms. I remember reading (paraphrasing here), “If Monday is an up close day [close higher than open] and Tuesday is an inside day [range is inside range of prior day], buy on an entry stop above the high of Monday and you’ll win most of the time.”

I almost fell over when I read that. I grabbed some historical data on the EUR/USD, slapped the numbers into Excel and created some quick conditional formulas to back test it. It worked like a charm. Over time I tested numerous variables from momentum to price efficiency to volatility (as a function of range) to volume and found several factors that worked well in producing a positive expectancy.

I never cease enjoying playing with numbers. Fortunately, even though I managed to understand and regurgitate enough college calculus to get me through pre-med, all of my Forex number crunching is performed at the 6th grade level with no need for a slide rule!

Because the algorithm that forecasts Forex Auto Pips is pretty simple, it’s robust and forgiving of market extremes. Adding Variable Position Sizing (VPS) where the daily position varies with the momentum and direction of the market has allowed me to produce ROI significantly above raw pip production. So far, so good!

A friend persuaded me to post some of my past humorous attempts at discussing my personal Forex trading experiences. Please be assured that the following had nothing to do with my move from New Hampshire to Dallas and is in no way related to the new slope on my forehead. LOL

Confessions of a Neanderthal Trader

I wasn’t always like this. I used to be intelligent, suave, persuasive. I knew which snifter to use for which brandy and could charm a dog off a meat wagon. Women gave me a second look. Men marveled. Then I discovered Forex. That’s when Madge left me and life has never been the same.

It started with my grooming. I used to be a clothes horse. I shopped at the finest stores. I spit shine my shoes until they blinded passersby. Never was a hair out of place. A lint brush was as indispensable as a Colt .45 to a high school guidance counselor.

But after just one week of Forex currency trading I found myself wearing the same sweats all day. And then the next. And sometimes the day after that. Then I stopped wearing shoes altogether and traded in my socks. Then I was down to my undershirt. Gosh, it’s warm in here. Must be the anxiety. Now I was down to my shorts. Man, I need some fresh air.

And what happened to my intellect? It seemed to be shrinking. I could swear I noticed a distinct new slope to my forehead. Slowly, my vocabulary shrank. I no longer used words like ’sesquipedalian’ and ‘logophile.’ I heard President Bush explaining America’s policy in Iraq and found I could actually understand him when he said ‘nukular’ and ‘Americuh.’

And my personality… Where once I was a great humanitarian, now all I cared about was ripping out the other trader’s guts and handing them back to him on a stick. All I wanted was the pips. Nothing else mattered.

I could picture myself back 40,000 years ago, huddled inside a cave on the edge of a great snow covered mountain, a small fire crackling next to me as I hefted a yak’s thigh bone in each hand. A band of homo sapiens was hunting on the precipice below and I was about to provide them with a little one-man welcoming party. Welcome to the club. Get it, club?

Hey, pal, snap out of it!

It was true. After weeks of staring at charts I was morphing into a currency caveman. I found my hearing had become so acute I could almost hear the candles moving. I could even smell the fear in the market. Or was that me? But I still couldn’t tear myself away from the screen. Five o’clock shadow turned into a hairy face that would frighten my own mother. But I didn’t care.

I was living on raw beef jerky now, squatting in my ergonomic office chair, making grunting sounds and pointing excitedly as the price lurched up and down on the screen.

My imaginary spear clutched tightly, I was no longer thinking about trading. I was sensing when the market was ready to stampede and would be waiting in the shadows to pounce on the weak pips and the stragglers. Candlesticks that used to confound me were now just a docile, grazing herd of red and blue gazelle. They didn’t have a chance.

I threw all those currency trading courses I bought on the Internet into the fire and used the embers to roast some venison. Pivot points? Bollinger Bands? Who needs that stuff? Price can only go up and down, and the less I thought about it, the better I knew instinctively what to do.

Two million years from now I’d be working the trading desk at Goldman Sachs and stealing money from little old ladies — from their IRA’s anyway — but for now, back here in the Paleolithic, I was the king of my kingdom.

I owned the Forex. And I wasn’t about to evolve.

Two older positions closed today: Our 09/10/2009 long USD/CHF gave us 39 pips, while our 09/28/2009 long EUR/USD gave us another 32, for a daily closed pip capture of 71.  Yesterday’s DIP trade was a no show. The market didn’t drop low enough to trigger us in. Give Forex Auto Pips a spin here.

We’re up 24.92% in the current long wave from 07/22, just a bit below this wave’s high thus far. However, the monthly buy/sell ratio of the U.S. stock market is exhibiting sharp primary bearish divergence from recent price action so we may have already sailed over the top. Every time this phenomenon has happened in the past, the market has broken down sharply soon afterwards. Of course, the present instance could prove to be the one and only exception, but I wouldn’t bet the farm on it.

Sooner or later it will seep into the public consciousness that all is not well in Obamaville and small town investors will pull their money out of stocks and stick them back in money market funds. When that happens we’ll get a stock market down wave and go short with 10 contra ETFs.

The infusion of scared money into U.S. Treasuries will likely strengthen the dollar which will cause the euro to head down and, inversely, cause our long OTM positions in USD/CHF to recover and boost Forex Auto Pips even higher.

Audit the Fed? What for? I say, leave them alone. Without intrinsically worthless paper money, I’d be out of a living!

Today’s market surge took our 10 long ETFs in Wave #21 up another 5% to 26.91% as of today’s close.  We’re now 68 market days into this long wave and still going strong.

Our model portfolio is now up 552% since we started back on 5/24/2004 for an average compounded monthly return of 8.6%.

We’ve had 19 winning waves and 2 losers for a net win/loss of 90.5%.

Our long waves have averaged about twice the performance of the average short wave: 15.5% vs. 7.4%.

Our only 2 losses thus far have been on the short side, both of which turned out to be ‘head fakes.’

To continue with the basketball metaphor, we’re pouring most of them in from downtown and so far, have only dribbled two off our toe!

The currency market is like an ice cream parlor. There are many flavors, but it’s all still ice cream. Ditto the Forex. Each of the major currencies is an intrinsically worthless fiat coupon bearing the likenesses of various potentates, backed by nothing tangible and  inherently unstable in purchasing power. It is these minute-to-minute fluctuations that we Forex traders love to trade. In fact, if you stopped to think about it, if we had stable money that was rock solid in buying power, there would be no Forex. Ha!

The four major pairs — EUR/USD, GBP/USD, USD/JPY and USD/CHF — which together comprise the vast majority of daily trading volume can be combined into a virtual, new mega-currency pair I dubbed the ‘Mondo’ which ‘trades’ under the symbol MON/USD. When a one-world, single-unit global currency finally arrives (and I have no doubt that it will one day), we Forex traders will have to ask ourselves the disconcerting question: What will we trade it against? Which reminds me of the ’sound of one hand clapping’ enigma. But until then, the Mondo lives!

To calculate the MON/USD we first must make sure that all four pairs are in the format XXX/USD, therefore we take the reciprocal of the USD/JPY and USD/CHF. Then we average all four pairs together to produce the simple average of the daily close of the MON/USD. Once we’ve done this, we can then use the Hull Moving Average (easily calculated in a spreadsheet and one of my favorites!) to plot the MON/USD on a graph.

I realize that the relative daily volume of the four majors is quite different, however, the calculation of the MON/USD ignores this consideration and just lumps all four pairs together. After all, it’s all the same ice cream!

I calculate the 40 period Hull MA of the daily MON/USD close, subtract from it the 10 Hull MA, then use a 5 Hull MA of the difference for smoothing. The result is the graph you see here which, more or less, shows us where the entire Forex market has been heading over the previous 1oo trading days. Like most things in life it isn’t perfect, but it works remarkably well.

You’ll note that the graph recently turned long on September 4th (16 trading days ago) and is now curving over short. Does this mean the EUR/USD is overbought? Probably. Maybe. Kinda’ looks like it. But then again, as students of my currency trading course know I hate indicators since they all lag (which is why I don’t use them). The Mondo just gives me a general sense of where the entire currency market may be going next. It may be time now to stop cheering the euro higher and give the Federal Reserve Note a little more love.

Someday when I get a Round Tuit I’ll do some back studies on the advisability of using currency ETF options to play these long wave directional changes. Who knows, there could be some hidden treasure there. In the meantime, it’s fun to just hang out in the ice cream parlor and admire all those curves!