I’m not too proud to say that although I’ve known about them and used them for well over a year – I haven’t been using them like a pro. Like most things, there is so much information and misinformation out there – its easy to get totally lost and confused.

If you’re not familiar – the name Fibonacci comes from Leonardo de Pisa, who was the son of Guilielmo Bonacci. In Italian, “figlio” means son,  therefore you get “Tiglio Bonacci”, which was shortened through the years to Fibonacci. He is one of the most famous mathematicians and came up with the fibonacci sequence. Long story short – fibonacci principles are found all throughout life from the great pyramids to the proportions of your body to this beautiful shell…

Back to trading – there’s the 38%, 62%, 50%, 78%, 23.6% fibos, etc, etc.  There are all types of advanced courses and methodologies and I have taken quite a few. So, did they help me become profitable?  Nope.

Over the last couple weeks I have been introduced to the principles of legendary trader Joe Dinapoli. I highly recommend his book Dinapoli Levels which is very comprehensive and yet easy to understand. Joe has shown me an easy and smart way to use fibs. I don’t use all of his techniques (I really dislike stochastics), but I’ve adopted a couple and wow are they good. Joe’s been trading since the 70′s and really knows his stuff. AND – he keeps it simple which is really important.

What I’ve learned recently will help me capitalize on situations where the “dumb money” is getting clobbered and also help me pick up lots of easy pips everyday.  I highly recommend Joe’s book and video seminars.

Whether you believe in it or not, Fibonacci is a huge part of trading and not knowing about these key levels is like driving your car blind – you’re going to get hurt!  Before I knew about these levels but I wasn’t really getting how to trade with them properly.  I’m not going to get into the specifics of it here, best for you to go right to the source. All I can say is that my fibonacci trading is a lot simpler and a lot more profitable. Thanks Joe!

A quote from Joe’s book:

“Conservative Carl had purchased some unriped bananas the day before. That was enough risk for him so he decided to sit this one out.”

So far I got it working for either the 2001-2006 tick data or the 2004-2009 data (two different mt4 installs), I wasn’t able to put them together all in one file.  For newer tick data there is some available on the forex tester website under data sources. That’s a handy piece of software by the way as you can use it for visual backtesting, it’s like you have a rewind and fast-forward button and can actually enter instant and pending orders, stops, etc and it keeps track of your wins/losses. The only thing I don’t like is that you can’t use custom indicators, just the usual ones that come with mt4.

Here is a link to a forum where someone uploaded a bunch of tick data for e/j a/j g/j and more. You have to do a bit of work but it’s doable. Tip: Most of the links are expired but the megaupload links still work. More Tick Data

I’ve been investigating dozens of ea’s this year and they’ve all been jokes imho. For example there is a managed program that has been doing 50-100% per month for the last 6 months. I’ve been following it with interest. Last week they had a 50% drawdown. (That means that they lost 1/2 the account).  Of course they justify it by saying that it’s doubled a few times already, everyone is still up. Nonsense!!

Just like when you’re a kid and someone twists your arm – we all have a point where we yell Uncle!  Is that when you’ve lost 50% of your account?!  I think that is ridiculous.

Here’s another system that’s listed on MyFxBook which I’ve been watching, its’ an automated system which has done over 200% the last 2 months: Spytrader – Yesterday I was watching it and at one point he had 5 trades open on his 750$ live account and I saw it down 150$ (600$ equity), luckily the euro turned back up and he got out with a small loss but what if the euro would have gone another 30 pips south, would he have let his live 750$ account go to 500$,  400$ ?  Where’s the Uncle point?

AND – what’s up with MyFxBook’s drawdown statistics, it still shows the DD as 3.43%, I witnessed the account go down 20%.  Maybe that’s because the account is already so far in positive it’s not affected. This statistic is not good for me anymore. I don’t know about you but if I saw my live 10,000$ account which has been gaining nicely is all of a sudden down to 7000$ equity in one day’s trading session I would flip.

Introducing: Quantified Risk.   “You know exactly where your Uncle point is for each trade”.

Think about it, who cares if you win 98% of your trades if the 2% losers blow up your account?

In betting language there’s a concept called Flat Betting and an old saying that “no system which doesn’t work in flat betting is worth its salt”. I really like this and if you can get back to simplicity you’ll see that you just need to have an edge. I’m confident after my research years ago on gambling that there is no edge to be found at the casino except for maybe card counting which is not my thing. With Forex you lose some edge everytime you get in a trade by paying the spread to the broker. However, it’s so open-ended that you CAN find a system which has a 60 or 70% win rate. Once you’ve found this and a way to execute consistently you are set.

I’m also testing a 3 step martingale at the moment but here’s the difference: I know that on step#1 I’m risking 1% of my account and then step#2 I’,m risking 2% of my account and step#3 I’m risking 3% of my account. So if I lose the 3 step series I’m down 6%.  Then I can look at how often statistically will I lose the series. Let say for every 30 wins I get 1 series loss, I still have a profit of 24% for that round.  This is Quantified Risk.

It’s possible also that -25% of your account is your Quantified Risk level, but in this case you will have probabilities and statistics in your favor.

Another factor is Risk of Ruin – at 6% loss each time for the mini martingale series, I would have to lose a dozen or so times to ruin my account. Important to factor this in also, It might end up not being worth the risk of ruin and I will stay with flat betting.

I”m so shocked at how many joke systems are out there, is it because the internet is full of scammers who just want to sell broken shovels to unsuspecting gold diggers? Or, is it because few of us take the time and energy to really understand the game.

First of all there’s less fake outs, price has to move x pips before a new bar is created. (Obviously if you’re using 5 pip bricks you’ll have more fake outs then 20 pip bricks.)

One of the biggest advantages if you’re trading manually is that it’s really easy to see patterns and also whether the market is trending or ranging. I think it’s much easier then with time based charts.

For automated trading it’s the price that determines whether your signal candle criteria is met, not time. Which is much better because it’s the price that matters most not the time.

If you’ve been following my post on the fx genius, I’ve finished my testing and shelfed it with the “not worth my time” category. The only broker I know that has really fast execution without requotes (except during news) is Oanda and of course they don’t have mt4. They also charge a monthly fee for their api.

Curious, i checked out some reviews and then did a bunch of “special google searches”. A couple hours later i managed to find a working version of FX Greed which I think is a modified version of the fx genius that someone ripped off and decided to sell. Gotta love the internet =)  I saw a comment somewhere from the creator Dominic complaining. So… do I feel sorry for him- hell no!

Scam or no scam?

It’s a bit of both! So on the website fx genius robot dot com you can see a live account info with FX Clearing who is a decent bucketshop broker who’s earned my trust and is awesome for testing ea’s (check out their micro cents account) – before it was only Oanda (who I love but they don’t have mt4) where you could do cheap moolah per pip. Anyways, I opened up FX Clearing with the login and investor password and watched it trade over a few days earning like 5,000 dollars. It looked like a real account so I decided to test it. At first I put it on my demo account and watched it gain 250 pips in 2 days.

The verdict (part 1): The results on his site are from a demo account which works like a charm but when you put it on a real account and watch the journal in metatrader 4, it’s requote after requote and doesn’t work. I have a very fast vps that I use (ecovps in Holland)  and with the datafeed of Alpari UK demo account with a 31ms pingtime vs FX Clearing server at about 200. (By the way, don’t try to use Windows 2008 server for running metatrader ea’s, it shuts down automatically every 12 hours which sucks – you need 2003 server.)

The verdict part 2: Well, the “good folks” at fx greed (nice name btw), have made some modifications so that you can adjust the “aggression” level so that it waits for bigger gaps. I’ve been testing it the last couple days with agression level 1 and it’s bringing in some pips so far, I’ll update in a couple weeks and let you know if I plan to run it full-time. I like a lot that it gets in at a good time and automatically sets a really tight stop. That keeps the risk way down. If it gains 10 pips a day and it’s trustworthy that can still be some nice extra cash and worth running.

Summary – FX Genius’ promises  are a lie, false marketing, bullshit. However, the concept of scalping the lag time is pretty cool and like I said if it does 10 pips everyday that could be 100 or 200 per day extra cake.

This is where magic happens!  I’m loving trading manually lately, staying up all night playing tunes and making nice gains, gotta love it. After 2 years of tough work to get here, now it’s gravy time!

Update on Ultimate – 2 weeks ago it made close to 300 pips, last week it made 250 pips and then lost all 250,  Ouch. I realize that I need another filter so that it just trades with the “general trend” which for me is above/below the 77 ema. Why 77?  I like it and it works =)  I’ve got to do some more testing before I send it to my programmer for the upgrade but after 8 hours of visual renko backtesting yesterday, I just wanna trade…

This is not for auto-testing (if you figure that out please let me know =), it’s for visual backtesting and gives you the ability to be able to “play”and “pause” the charts, and “fast-forward” which I am using to create winning strategies. I have my entry/exit criteria and then keep records of the wins and losses in excel. Note: To do this you should have already added more renko bars.

1. First of all download this trading simulator shared at ForexFactory by Ronald Raygun. Follow the instructions to manually install to your mt4 or use the auto-installer
2. Go into your metatrader to  c:\program files\metatrader 4\history\ and create a new folder called: renko.
3. In the same folder go into where it says Demo and copy the following files:

   >symbols.raw
   >symbols.sel
   >symgroups.raw
   >ticks.raw
   >all 1 min data, e.g. EURUSD1.hst, GBPUSD1.hst, USDCHF1.hst, etc.
4. Paste the files into your newly created renko folder
5. Open Mt4 and click on Login, use the same user/password but in the server field put: renko and login (no connection)
6. Restart metatrader  (when it opens don’t touch the login button)
7. Put renko script on all or any 1 minute chart, choose the bar size you want and then for timeframe put 5
8. Click View > Strategy Tester
9. Where it says expert advisor choose: LFH Strategy Tester 3
10. For Symbol, choose the currency pair you want (that you put the renko script on)

    Model (every tick)
    Use date – unchecked
    Visual Mode – checked
    Period 5m
    Optimization – unchecked
11. Now click start to open the chart!  (if it says waiting for more then a few seconds, just restart mt4)
12. Right-click to apply a template

Remember that due to the nature of renko bars, price can go almost 2 bars against you with no record. Example – if you short after a down-bar (say 20 pip renko bar) then price can go above where you entered up to 39 pips without creating a new bar.

PS. Credits to “Aktur” at ForexFactory for sharing the original tutorial about how to do backtesting with renko.

1. Download a fresh mt4 – ex: fxcm uk mt4
2. Change chart to 1m and zoom in
3. Turn off autoscroll
4. Go to Tools > Options > Charts – put max bars in chart 512000
5. Put a small rock on your home button and go have a coffee (wait 5-10 min)
6. Add renko script (choose your bar size and put bars 512000)

I just did this with fxcm uk and I’m getting 937  Renko 15 pip bars

If you haven’t heard of renko bars: how it works is instead of a new bar being formed every 5 minutes or hour, you can set the amount of pips movement which will yield a new bar. So if you set it to 10 for example, turn on your renko chart  and the last bar has been an up-bar – now price will form a new up-bar only when price moves up 10 pips. If an hour goes by and price doesn’t move more then a few pips there will be no new renko bars created. In order for price to create a renko down-bar, price has to move 20 pips down.

Yahoo!!  I’ve been at it full on – focussed -  in the lab working hard. (well mostly =)

I’m excited to report that my new ea”ULTIMATE” is 4 real.

Ulimate was designed to prosper in ALL market conditions yielding consistent, high-probability trades with low draw-down, YES!  (It doesn’t trade when the volatility is too low and I manually turn it off before high volatility news events)

Last week was its debut and Ultimate brought in 540 pips!!! I’ve made a small tweak which will improve the probabilities. Ultimate is based solely on price action and “takes small bites out of momentum moves“. Brilliant!!!  The following results are based on a demo account so it may be a bit less although I did have some technical glitches to sort out with my new vps, it turns out that you can’t use Windows Server 2008 for forex trading software because it shuts off every 12 hours. Right now I’m using 2003 64 bit.

I’ve just thrown 100$ into a micro-account and turned on the ea. Updates to come.

(This was on a mini account so each dollar represents a pip. The last trade doesn’t count though because I loaded my new version and forgot to change it from a standard lot to a mini-lot).