Having a little fun with Forex

JohnsMoneyTree

Active Member
So over on my blog I'll be starting a small contest where I'll be pitting some basic technical analysis against a local financial planner and their not-so-stellar GICs. The hope/expectation is to show the ease of trading Forex to those who are new to it by blasting the GIC out of the water. Currently the planner is offering a 5 year, non-cashable GIC at 2.60%. I aim to use some very simple technical analysis to beat the return within 6 months.

If it works out, then I'll have some fun showing an alternative to traditional investments for those who want more of a return from a GIC but aren't sure about daytrading stocks. If it doesn't work then I'll have a nice case study of how to adjust a strategy based on market conditions, but I seriously expect it to outperform.

The twist is that I won't be babysitting the trades. The idea is good risk management, solid trading rules and using a slightly longer timeframe, i.e. H1, for the charts. Thought you guys might find it interesting.
 

jack

Administrator
Staff member
Setting the bar a bit low eh? :p

If you're going up against a GIC with secured principal (ie, no potential loss on invested amount, outside of time and inflation risk), how will you compensate for this in your comparison? In other words, if you return 5% in your FX account, beating the GIC rate, but risked 20% of the account balance at any one time to do so, I'd consider this a failure.
 

JohnsMoneyTree

Active Member
If I were risking 20% on any trade I would agree. As it stands I'll be trading with a single mini-lot per trade (so roughly 6.67%), a 1:3 risk/reward ratio with a hard-coded SL of 50 pips. That gives me exposure of approximately 1% per trade with the SL, so I'm still not risking much of the principle.

I'm purposely picking on the GIC because that's what's posted on their window (I kid you not) and it's something that people pay attention to. I could have just as easily picked on a mutual fund, but the GIC is a common enough investment that most people can relate to. I'm actually not looking to get Forex traders excited about this, but I am trying to showcase how Forex trading can supplement other peoples investment portfolios easily, even if it's just "play money" that they use (after a decent run on a demo account of course).
 

jack

Administrator
Staff member
JohnsMoneyTree said:
If I were risking 20% on any trade I would agree. As it stands I'll be trading with a single mini-lot per trade (so roughly 6.67%), a 1:3 risk/reward ratio with a hard-coded SL of 50 pips. That gives me exposure of approximately 1% per trade with the SL, so I'm still not risking much of the principle.

I'm purposely picking on the GIC because that's what's posted on their window (I kid you not) and it's something that people pay attention to. I could have just as easily picked on a mutual fund, but the GIC is a common enough investment that most people can relate to. I'm actually not looking to get Forex traders excited about this, but I am trying to showcase how Forex trading can supplement other peoples investment portfolios easily, even if it's just "play money" that they use (after a decent run on a demo account of course).
Yes, I figured this was your target audience... the droves of people who don't really venture outside of GICs and savings accounts.

(I mean, the people who use GICs specifically for their features won't be swayed, but there's many who use them simply because they don't think they can invest in much else.)

Here in Canada, our big 5 banks have been pitching managed mutual funds to these habitual GIC and high interest savings users who fall into the "don't know much else"/"scared of the rest" category... and they've been doing well at it. Sad really, some people's first experience with a non-GIC investment gets to be a managed fund with the same name as their bank that's coupled with a high MER..
 

JohnsMoneyTree

Active Member
Jack said:
Here in Canada, our big 5 banks have been pitching managed mutual funds to these habitual GIC and high interest savings users who fall into the "don't know much else"/"scared of the rest" category... and they've been doing well at it. Sad really, some people's first experience with a non-GIC investment gets to be a managed fund with the same name as their bank that's coupled with a high MER..
Oh I'm from Canada too (near Toronto actually) so I know this fact very, very well. I"m hoping to apply some AdWords credits and focus on our fellow citizens to get them to open up their eyes a bit. A friend of mine works for an international bank that's in a bit of hot water right now (wink, wink, nudge, nudge) and thought it was hilarious that I was taking on a GIC. Her words were "I hope it's not one of ours!" She works inside the system and hates it as much as we do, but it pays the bills for her and her family so she goes with it. Fear and complacency can make even the greatest of human nothing more than a cog.
 

spyder

Member
Interesting challenge. Will you publish your trading rules for the contest? I'm interested what I can learn from you in term of mechanization and testing mechanical edges ;).
 

shopster

Well-Known Member
spyder said:
Interesting challenge. Will you publish your trading rules for the contest? I'm interested what I can learn from you in term of mechanization and testing mechanical edges ;).

JMT, just another fx wannabe with a list of excuses for a puke 'em out crash and burn.
A nice lite snack.


http://growingthemoneytree.com/author/jsvazicgmail-com/


s
 

Alpha-Bet

Well-Known Member
JohnsMoneyTree said:
So over on my blog I'll be starting a small contest where I'll be pitting some basic technical analysis against a local financial planner and their not-so-stellar GICs. The hope/expectation is to show the ease of trading Forex to those who are new to it by blasting the GIC out of the water. Currently the planner is offering a 5 year, non-cashable GIC at 2.60%. I aim to use some very simple technical analysis to beat the return within 6 months.
JohnsMoneyTree said:
The twist is that I won't be babysitting the trades. The idea is good risk management, solid trading rules and using a slightly longer timeframe, i.e. H1, for the charts. Thought you guys might find it interesting.
The twist is, you did babysit the trades....
 

shopster

Well-Known Member
Effective immediately, I am restarting the GIC contest. I have gone into the account and reset the account balance as well as the profit/loss. I have created a new version of Forearm that is specific to the strategy outlined in chapter 6 of Growing The Money Tree. What this means is that this version of Forearm will:

By John Svazic|July 1st, 2014|

Only use EMA(11), SMA(19) and RSI(9) as indicators.
Have a minimum delta of 3.5 for the EMA/SMA crossover before it will be considered a valid crossover.
Require the RSI be between 30 and 50 to confirm a Sell signal and between 50 and 80 to confirm a Buy signal.
Only the NZD/USD pair will be used for trading.
Use a 30:1 leverage on the account.
Limit trade sizes to 2 mini-lots (20,000 units) per trade.

.......................


hey,

let me call the banksters on the kiwi /bux pair and give them the new rules of engagement.

round 2 should go much smoother if all the players are onside with the direction change based on the lagging indi. tech.

using 1000:1 leverage will delay the eventual crash and burn for a bit longer....:)

s
 

AusDoc

Well-Known Member
shopster said:
... What this means is that this version of Forearm will:

By John Svazic|July 1st, 2014|

Only use EMA(11), SMA(19) and RSI(9) as indicators.
Have a minimum delta of 3.5 for the EMA/SMA crossover before it will be considered a valid crossover.
Require the RSI be between 30 and 50 to confirm a Sell signal and between 50 and 80 to confirm a Buy signal.
Only the NZD/USD pair will be used for trading.
Use a 30:1 leverage on the account.
Limit trade sizes to 2 mini-lots (20,000 units) per trade.
:)) :)) :)) :))...this is painfully funny stuff... I think it should come with a health warning!

I see Shopster has already given the wealth warning.

chapter 6 of Growing The Money Tree
...OMG...GMAB.
 

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