Many people hear stories about how much volume is traded every day on the Forex market. But does anybody have any solid information about it?
The Wall Street Journal does. This information is from their September 1st, 2010 edition.
And remember, more volume traded equals more liquidity, and more liquidity means you are able to get into and out of trades easier than other markets.
Hey Windsor Park:
I’ve heard it mentioned once or twice, but what’s the Smart Trader 10-10-10 rule of thumb?
- All Thumbs Trader
Great question! Many traders from around the world have been using Smart Trader and have been very satisfied with the results! And one of the most common questions we get from those who haven’t seen Smart Trader yet, is this:
“How much will Smart Trader make, per month, if I just let it do its thing?”
To help answer that question for everyone, we found that the following rule of thumb applies to Smart Trader during normal market conditions.
The Smart Trader 10-10-10 rule of thumb ($10k – 0.10 lot – 10%)
During normal market conditions, with an account size of $10,000 trading the GBPJPY at 0.10 lots, you’ll usually have less than 10% drawdown, and earn about 5%-10% per month!
So, $10k @0.10 lots = <10%DD & 5-10%/month
Now, that ratio holds true as you increase or decrease the initial amount.
$5,000 @ 0.05 lots = <10%DD & 5-10%/month
$25,000 @ 0.25 lots = <10%DD & 5-10%/month
$100,000 @ 1.0 lots = <10%DD & 5-10%/month
Now for all you non-math people out there, be sure to remember that if you increase the lots, you’ll increase BOTH the potential drawdown AS WELL AS the potential return. (That’s riskier.)
So, $10k @ 0.20 lots = (about 10%DD) & 10%-20%/month.
And remember, this rule of thumb is not intended to be strictly accurate for every currency pair. Some pairs will have higher yields with lower drawdowns and vice versa.
Here are links to some Smart Trader results.
Beginning Amount - Trading Lot Size - Pair(s)
$10,000 . 0.20 Lots CADJPY
$10,000 0.40 Lots CADJPY & USDCAD
Here is an explanation of what you’ll see at forexfactory.com/windsorpark .
You can set up your own report for free! We’d love to see how your demo is doing!
The following two accounts are available on mt4stats.com
st1000.mt4stats.com/analyses . $1,000 . 0.25 Lots (Test complete, 4 months)
st25000.mt4stats.com/analyses . $25,000 . 2.0 Lots (Test complete, 7 months)
Here is a chart with the most recent ADR (20-day) from the beginning of May 2011. The values are in micropips (pips plus a decimal place), 100% of the ADR. So, if you decide to choose 200% of the ADR for your Stop Loss, you would multiply this value by 2.
- USDCAD = 733 micropips = 73.3 pips
- 200% ADR for SL = 1,466 micropips Smart Trader Stop Loss setting: 1466
Hey Windsor Park:
Why do some Forex traders say they make 10% a week, or 100% a year, or 5% a day? Is that really possible? Or are they just stretching the truth? Also, if what they say is true, why do you show results on the blog that are so much smaller than 10% a week?
-Befuddled by Forex
Great question! You’d be amazed how often people ask about other trader’s claims. Most of the time, other traders will tell you how much they made (in %), but not how they made it (the settings they used). That’s not an issue here at Windsor Park because we tell you right here on this blog about the Smart Trader settings we use for the Smart Trader test results we provide weekly!
Also, every trader has a different level of risk tolerance, even you. Some are willing to risk more of their account at any one time in order to gather more profit (and more potential loss) than others. And that’s okay.
Remember, most traders agree that the following settings are very conservative: 0.1 lot on a $10,000 account, 0.05 lots on a $5,000 account, 0.25 lots on a $25,000 account. And don’t forget…that is a tenth of a lot on a $10,000 account spread out over all your open orders at any one time. Again, the settings in the previous sentences are very conservative. So, the more lots you risk, the more profit or loss you’ll get from your trades (even 5, 10, 100% a day, week, or year).
So if these traders are claiming “amazing returns”, they either are risking a lot of lots on any one trade, OR… they have a great system that allows them to trade more courageously (like Smart Trader). Shameless plug…I know.
As for the results on the blog that you think are small, let’s do some math. Take a look at the GBPJPY for the last week. It made 0.59% last week and 3.85% over the last 7 weeks. (You know, come to think of it… 3.85% beats out my bank that only pays 1.01% on a 1-year CD and 0.25% per year for my savings account.)
But stop the presses! Smart Trader made 3.85% on $25,000, but the drawdowns are small. “How small are they?” They’re SO SMALL, you can run this same strategy on a $5,000 account. If you did, that same 3.85% on $25,000 ($963) would have been $963 / $5,000 = 19.26% in 7 weeks. That’s fantastic!
So why does Windsor Park show such small % results on the blog? Two reasons come to mind:
- First, the results are the results. Now that you’ve read this blog you can see how easily you can adapt our results to your account.
- Secondly, some people are new to the Forex market and have the following view: “these returns in the Forex market look too good to be true, so they must be fake.” I’ll bet that when you were new to Forex, you had the same thought. So we post modest gains on the blog, in order to not scare anyone away and knowing that all of you experienced traders will do your own math with the numbers we post.
Oh! One more shameless plug. You can always compare more Smart Trader trading results here. That should help out.
If you’re looking at some stellar results on mt4stats, you may think the results are too good to be true!
3 Things, 2 Pages, 1 Fallacy…Then, It’s Time for Pie!
First things first:
- MT4Stats is a 3rd party website. Windsor Park does not own/control/influence/etc. any content there (We also do not endorse any of their ads). They provide all mt4 users worldwide with 3rd party verification and give honest, live results straight from the mt4 trading station.
3 Things to pay attention to while reviewing results on mt4stats:
- Duration of the account
- Open Orders
- Equity is the most important indicator. It is how much money you actually have in the account if you stop the EA and close all open trades. You can find the account’s equity at the bottom of the Statement page.
- Duration of the account is how long the account has been running. This will help you determine how stable a strategy is. This is also available on the Statement page.
- Open Orders will effect the balance of an account, positively or negatively. Therefore, Account Balance doesn’t matter nearly as much as Equity does. You guessed it: Statement page.
2 Pages: Statement and Analyses
There are two tabs at the top of an mt4stats webpage.
- Statement shows every trade (closed and those still open), as well as the account Equity at the bottom of the page.
- Analyses, yes the plural of Analysis. The Analyses page shows the total number of trades (P/L), as well as a pie chart at the bottom of the page showing the distribution of profitable trades among the different currency pairs you are trading.
The Fallacy of Gain in %
On the Analyses page, you’ll notice “Gain in Percentage”. This number can be close to the mark, but unless there are no open orders and the account is “flat”, the gain in % is incorrect. Gain in % is based on Current Balance divided by Initial Balance. You’ll remember from earlier that Equity is the most important indicator of the amount in your account. Therefore, in order to determine the correct gain in %, you must take the Equity and divide that by the Initial Balance. This will provide you with the correct gain in percentage.
Example: Current account equity of $12,000 divided by the $10,000 initial balance (12,000 / 10,000 = 1.2 or 20% profitable increase).
What Time of the Day is My Strategy Working?
Here is a graph showing the total amount of orders opened during the 24 hours of the day. The correct way to read this is: since the beginning of this account, on April 4th, the account has opened an order in the 2100 hour about 27 times. This is a great help to those people who run multiple strategies on the same account. It helps them determine when they can safely run a different strategy, while not losing the benefit of running Smart Trader 1 Pair.
A Pie Chart of Stability
In the first pie chart below (ST4Pair), notice that the two Japanese Yen pairs, (EURJPY and GBPJPY), account for more than 2/3rds of all the trades placed. Compared to many other strategies (King’s Cross shown below), this is a very well balanced strategy. Watching ST4Pair for weeks showed that the four pairs fluctuated from 38%/31%/16%/15% to settle at 32%/32%/18%/18%. Very stable.
And you can see that the Kings Cross 1 strategy is heavily weighted toward the GBPUSD, not only in lot size but also in the amount of trades placed. King’s is still an excellent strategy after all these years, but Windsor Park is always on the lookout for other strategies with great returns, low risk, and good stability. We’ll keep you posted!
And don’t forget, you can get your own FREE mt4stats page for your demo or live accounts (even a vps account)! This allows you to share your own results with your friends.
(Please note: Practice demo accounts don’t last forever. Therefore, the link in this blog to ST1Pair is now connected to a new account.)
Have you noticed a pattern from this year’s Smart Trader results?
Smart Trader really grooves on certain currency pairs in this market. On other pairs, not so much. But remember, one of the greatest benefits Windsor Park provides is the data from over 100 trading stations running day and night! Having access to this information allows us to narrow our testing focus. Therefore, since any particular strategy will excel on certain pairs, we are able to tweak our settings to accommodate those specific pairs.
As currency traders, you and I need to assess the market conditions to determine which of the vehicles at our disposal will work best. If you’ll forgive the analogy, our strategies are similar to an SUV. You wouldn’t take a sports car off-road, and you wouldn’t take a big semi-truck just down to the corner grocery. But there are some SUV’s that you could use for both situations. An SUV will get different gas mileage off-road than it will on the highway. In the same way, our strategies provide different returns based on the market conditions. And remember, no matter which strategy you choose, you are still the driver. You’re in charge!
So, take a look at the GBPJPY with Smart Trader here. I’m calling it st1pair. It has less than 2% losing trades! (Running since April 4th, this pair was chosen for its consistent top 5 Smart Trader ranking on the blog)
Also, don’t forget that all of you members are an integral part of the testing process!
Setting up the Smart Trader – 4Pair strategy is VERY straight forward. But, you should only choose the 4Pair strategy if your account size is greater than $20,000 at least. If you are beginning with an account size of $5,000 or $10,000 you may choose to start with a single pair, like the GBPJPY.
So, setting up 4Pair takes only 5 steps for new traders, and even fewer steps for all the experienced traders out there.
- Step 1: Download the MetaTrader 4 platform and Smart Trader software from here (This is also available at step 1 on the main page). Watch the first training video here. It covers installing the MetaTrader 4 platform and initial setup.
- Step 2: Install Smart Trader into the same file folder where you installed the mt4 software. After installing Smart Trader, be sure to close the mt4 program. Then, restart the MetaTrader 4 program (there should be a shortcut on your desktop).
- Step 3: Load four (4) new currency pair charts. Feel free to choose your favorite pairs, but you might want to look at which pairs have performed well over the last few weeks (See “Weekly Trading Results” on the blog).
- Step 4: Next, load the Smart Trader template on each of the 4 currency pair charts. Click on Charts>Template>Smart Trader for each chart.
- Step 5: After you click on the smiley face on each chart, you ONLY NEED TO CHANGE THREE SETTINGS. Change the lot size to 0.05 per pair for a conservative setting on a $20,000 account, set the different Stop Loss for each currency pair, and change the Max Order setting to 5 on each currency pair. (On Smart Trader v0.6, the max order setting is a global setting. That means, 5 max orders for the account, not each individual currency pair.)
You’re set! Don’t forget to leave your computer on, and the program running. This will allow the software to place trades and close them at a profit!
Keep watching this blog…we’ll cover more advanced settings at a later date.
Past performance is no guarantee of future results.