Weekly Update

This week was not a good start for Team Aphid Bird. We experienced some extremely range-bound and choppy markets which is the worst environment for the TAB strategy to trade in. Out of 12 trades, most were losers while the biggest losses were seen in EUR/JPY as we flipped our position many times toward the end of the week only to see it flipped over and over again as it traded in a range. We know that this is not abnormal and these kind of draw-downs have occured in the past. I will not be reconfiguring the portfolio. The final result as is follows:

Total Trades: 12
Volume Traded: 490k
P&L: -($511.08)
ROI: -25.55%
Balance: $1,488.92

My manual, discretionary trading went quite well however and I feel that it is important that I update about that too. I personally took a total of 20 trades and lost on 10 of them. However, I am very good with my money management and my winners were much bigger than my losers. I was able to much more than offset the losses from TAB and even make money on the week. I did not trade more than 2 minis per trade and often traded only 1 mini. Here is a summary of my discretionary trading results:



Total Trades: 20
Volume Traded: 360k
P&L: $1,227.82
ROI: 61.39%
Balance: $3,227.82

When we combine these two results (the discretionary and TAB trades), we get our complete portfolio's results as follows:

Total Trades: 32
Volume Traded: 850k
P&L: $716.74
ROI: 35.84%
Balance: $2,716.74

This last result represents the portfolio as it is going into this new week of trading. Hopefully we will see some positive results from TAB and we'll really be performing well then. I will have a similar update like this every week followed by a more detailed, monthly update.





Happy Trading!

C2 Discrepancy (Update)

I contacted TAB to inform them about the Collective2 discrepancy I wrote about earlier and they had this reply:

Hi Travis,

Thanks for the link. We have read your C2 Discrepancy comments and we should say C2 is correct. Here is the situation for that GBPUSD trade:

As you know we are trading TAB thru Oanda for our own accounts and Managed Accounts, because Oanda spreads match with our signal generating software (actaully Oanda spreads are tighter but we base our trading decisions on signal generating software's spreads). So our first profit target was 1.9736 at Oanda, but since C2 spreads are wider, we widen our entry/exit levels by one pip to match original signal values. Therefore, we put 1.9737 at C2 and FX-Auto (we use the same spreads at FX-Auto and C2). Actually 1.9737 ask rate was hit on our signal generating software but since FXCM uses variable spreads (and probably tighter), 1.9737 ask rate didn't hit on FXCM or FXDD and 1.9736 ask rate didn't hit at Oanda platform. As a result, 1.9737 was hit only at C2 and all other clients had full profit trade on this one. Sometimes this happens in opposite way and while C2 clients benefit FX-Auto clients suffer. This is a result of spread difference among different brokers. It has nothing to do with underestimation of
our results by C2.


So, in the defense of Collective2, it seems that this is something that happense from time to time and can go either way.

Kudos to Steve and FXCM

Believe it or not, this post will be praising FXCM and one of their fine employees in the San Francisco office, Steve. And yes, I am serious.

For the amount of flack that FXCM receives I was truly amazed with the way they dealt with the following issue today:

During the middle of the trading day we had a signal from TAB to go short EUR/USD. The strange thing, however, is that instead of just 1 trade with the usual 4 minis being filled, there were suddenly 2 trades, only a few pips different than one another, and 8 minis! Knowing that TAB is a group that is always minimizing risks I found this puzzling and somewhat troubling. They essentially doubled our risk on an average trade.

I quickly emailed TAB asking why they had decided to open two, such similar trades. Before I heard a response from them I saw one of the trades vanish from my platform. I figured the situation had been resolved and there was nothing to worry about.

Unfortunately, the trade went against us and we, as the system always does, flipped our position. But wait, now I'm long 8 EUR/USD minis!!! After checking my history, I see that all 8 of the previous 2 short trades showed up meaning that the trade that I thought had vanished and had been remedied was actually still in the shadows.

I quickly got on FXCM's web live-chat support and began talking to a man named Steve. He listened to my issue and seemed to understand. He wanted to call me to clarify a few things and I told him to give me just a few minutes as I was leaving work.

Not long after I got in my car and headed home, the phone rang and it was Steve. He explained to me that tech support would be looking into the manner, but in the meantime they needed to close the outstanding duplicate trade. I gave him permission to do so and he did. He then said that they would need to "go through the audit trail" to determine if the issue was actually on FXCM's side.

"Oh great!", I'm thinking. It sounded like a typical, big firm excuse to make excuses why they can't bust my trades and compensate me for the losses. I had no choice but to agree and Steve promised to call me within the next couple hours.

I got home and started looking at some charts and Steve called. This was no more than 30 minutes later. He quickly told me that there had indeed been an issue with duplicate orders being sent and that my account would be credited to the amount of $192 and some odd cents. "This of course includes the added, auto-trading commissions" he said with authority. I was nearly speechless, not only was I expecting to have to fight with them to simply bust the trades that were mistakenly put on, but I thought for sure the commission would be a lost cause. His math was spot on and all I could do was thank him for being so quick to resolve the issue.

My only question for Steve was when it would be safe to start running the TAB EUR/USD signal again. He said that the tech team was investigating and working on it, but it should be no later than tomorrow. Again, he promised to call me with an update.

A couple hours later, Steve called. Although I couldn't answer the phone, he left a message informing me that the problems had all been remedied and it was now safe to start the EUR/USD signals from TAB. Again, I was impressed with the speed which this was accomplished.

I can't compliment the exemplary service I received from FXCM enough. This entire issue was solved within the matter of hours when I expected to spend weeks fighting about it and in the end, not being fully compensated for the errors. Again, thank you FXCM and if you read this Steve, a superior job well done!

C2 Discrepancy

As you probably know, TAB is offered as auto-trading through Collective2 and the website also serves as a third party performance audit. However, if you are a live trader of TAB's system, you would have noticed that the GBP/USD trade on 1/9/2008 turned out much differently than represented on Collective2. The surprising thing is that the actual trade was more favorable than what is represented on C2!

Collective2 shows that the first target of the GBP/USD short was met, which is was. However, C2 then shows that 2 of the 3 remaining mini lots were stopped out at 1.9777 for a 5 pip loss on each and then the final mini lot made it to the final target of 1.9651 This nets a 36 pip profit for the trade.

In actuality, the 2 minis minis were never stopped out of slight losses and I don't believe they ever came within less than 10 pips of doing so. Therefore, all 3 remaining minis ran to the final target of 1.9651 netting nearly 100 pips for the entire trade. This is a massive difference and I just thought it was interesting to note considering C2 is technically understating the results.

Manual Trade Closed

I closed the manual GBP/JPY trade of 2 minis this morning before I left for work for a profit of 230 pips on 2 minis or 460pip depending on how you calulate it. Initially, the pair went higher and I missed out on 40 or so pips, but it is now trading much lower.

Initial Account Vitals

I think it's important to list the initial, vital statistics of my auto-trading account:

Beginning Balance: $2,000
Details:

Most of you will immediately see my current leverage at 1:60.37 and say "this guy is crazy, he's going to blow his account in one week". But looking through all of TAB's trades for 2007, they never had more than one signal trading at one time. This means my total exposure at any one time will be only 4 mini lots (1 trade). If you take that into account, my theoretical leverage is 1:20.12

For those of you that are unfamiliar with FX-Auto, a 1:20 leverage is considered to be a maximum safety for your auto-trading portfolio. I am trading in fixed lots as I have already devised a system for increasing size and would rather have manual control over those decisions.

I will probably update this blog at least once a week at the end of each trading week to track the overall performance. The work is done, now it's time to be patient.

Excel Data

Ok, as promised I am posting the Excel file of the data I collected from TAB's 2007 results. It can be downloaded from this link. I had to upload the file to a free hosting website called MediaFire since I can't seem to attach files to this blog.

Let me explain the file a bit. The first tab, "C2 Performance 2007", is quite basic. I simply pulled the trades that Collective2 showed for each month of 2007. The basic data includes total number of trades, total volume for the month, and total number of pips earned or lost. For example, in February there were a total of 29 trades, volume of 1,160k or 116 mini lots and 578 pips profit. A very helpful thing that I think is vital in examining any system for auto-trading profitability is calculating the total pips profit or loss by including the auto-trading fee. Since the auto-trading fee is a commission of $1/mini traded this was simple to calculate. TAB trades in lots of 4 minis so it will cost us $4 for each trade. By multiplying $4 by the number of trades during the month and subtracting from the total number of pips gained, we get our actual profit or loss in pips. But if you are actually paying attention, you will notice that the formulas used to compute the month's total pips do not multiply the number of trades by 4 to get the total commission. Instead, it just subtracts the total number of trades. The reason for not multiplying the fees by 4 is because we aren't multiplying our number of earned pips by 4. I calculated each trade from buy to sell or vice versa for the number of gained pips. If this is unclear, feel free to drop me a note for clarification.

The second tab, "Hyp. Portf." for hypothetical portfolio, is a bit more detailed. Please read the comments for the underlying assumptions and initial portfolio parameters. You will notice that I created this and assumed that I would be increasing my trading size (or volume) as my account balance grew. I used data from the first tab to calculate total monthly volume and this includes the increases in trade size. It is crucial to accurately include this number as it represents how much we will pay each month in auto-trading fees and has a direct affect on the profitability of our trading. The notes underneath each month represent what size increases I made at the end of that month that would be effective starting the next month.

Fore example, after January 2007 there was not enough profit to increase our trading size so we kept trading in blocks of 40k per trade for the month of February. February was a great month, however, and we were able to increase our trading size for GBP/USD and EUR/USD for the month of March. Changes in volume for the two pairs would be reflected in the March calculations. Please see the notes in the spreadsheet for my methodology as it pertains to increasing trading sizes.


I hope you can now appreciate the amount of leg-work and research I put into studying this system before risking any money. I did not blindly trust the system's past performance without my own investigation and inclusion for added fees that I will incur by auto-trading it. This is where I believe so many traders coming to FX-Auto fail. That is, they lack the motivation to do any due diligence.

Trading Commences!

Ok, so it's not quite as exciting as it sounds, but auto-trading has begun. I awoke this morning to find four orders resting in my account from TAB. As promised the orders are far from the market and entries would be able to be placed quite easily if received manually.

Of course, out of respect for TAB and their system I will not post the details of any orders or trades until they have been closed.

It's nice to see that signals are being generated and TAB is back from a nice Holiday break.

Manual Trade

Although this blog's purpose is to track the performance of FX-Auto and TAB's signals, it is also to track the performance of my auto-trading account in general. I will not make a habit of taking many manual trades, but I did take a long position of 2 mini lots GBP/JPY from 213.90 late in Friday's trading. I will not discuss my reasons for this trade because I don't feel they are applicable. I would not discuss it at all, but it will inevitably have an effect on my auto-trading account balance and I want to account for it.

Right now, GBP/JPY is trading at 214.95 so I am sitting on a nice 105 pips profit. I plan to hold this trade for awhile and possibly for a final target of 219.90, but I will evaluate this on a day-to-day basis.

TAB and Account Setup

It's finally 2008 and Team Aphid Bird has started to generate signals. For those of you unfamiliar, Team Aphid Bird (TAB) is a very succesful Forex trading system that has been offered through Collective2 since late 2006. They have had extremely impressive and consistant results due mostly to their ability to manage risk. Since the middle of 2007 they began offering their system through FX-Auto, a website that hosts trading systems that can be auto-traded for a small, added commission.

My account has been fully functional for just over a week now and I have been awaiting TAB's first trade signals. If you are familiar with TAB you know that they hault trading during the second half of December due to the Holidays and potential liquidty issues and market volatility. I seized this as a perfect time to set up and fund my account with FX-Auto and begin the new year with TAB.

I decided to open my account with FXCM rather than FXDD for several reasons. Firstly, I am familiar with FXCM, their platform, services, etc and this made it an obvious choice. I also noticed that TAB's performance was better on the FXCM side rather than FXDD. I was also concerned about TAB's entry and exit strategy since they trade 4 mini lots per trade. Here is the email I sent them followed by their reply:

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Hello,

I have observed TAB for a long time on C2 and am now finally wanting to start trading with your system on FX-Auto. My biggest concern is your exit strategy and how to set this up with FX-Auto trading. I know that you have 4 partial exits for each trade, so does this mean that contract sizes need to be set up in multiples of 4?

For example, if I am trading 3 of your currency pairs on FX-Auto and only allocate 1 mini lot per trade, how will I exit? One mini lot can't be exited in 4 partials. My understanding is that I would have to allocate 4 minis per trade so I could exit each partial as 1mini. Also, if I want to increase my size for any pair, I would have to increase it by 4 more minis?

I appreciate your time in answering these questions, they are probably ones you've received before, however, I did not see it on your website's FAQ. Also, I've noticed you don't trade in the second half of December so it would be wise for me to wait until the new year to begin with your system.

Thanks,

Travis
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Hi Travis,

Yes, contract sizes need to be set up in multiples of 4. At Fx-Auto,if you choose 0.1 lot for your trade size, then you'll be trading 4minilots automatically. Therefore depending on your initial capital,you can choose 1 to 6 currencies. But our core currencies are EURUSD,GBPUSD and EURJPY, so we recommend you to start with these currencies(or any of them depending on your capital).

Re. exits, normally you do nothing in autotrading, you just set up your account and trade size and we do the rest for you. Since you don't know the strategy and where to exit and also due to our ability to follow fx-market 24hrs, we do not recommend you to intervene manually. When you have sufficient capital and if you like to increase your trade size, then it should be increased by multiples of 4, but again at FX-Auto you need to choose 0.2 as your trade size, then you will be trading 8 minilots, or 0.3 trade size will trade 12 minilots and so on.

Due to lack of liquidity in fx-market in second half of December (end of financial year in most countries and also Christmas), we stop trading until early January. By the way, we recommend FXCM instead of FXDD if you are going to autotrade thru FX-Auto, because slippage at FXDD is worse than FXCM. Please do not hesitate to ask any questions you have.

Best Regards,

Team Aphid
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As you noticed, TAB also recommended using FXCM over FXDD due to slippage issues that they experienced with FXDD in the past. I also happen to have an Introducing Broker (IB) account with FXCM and figured that I could sign up my new auto-trading account under this IB account and receive a portion of the spread credited back. I have to pat myself on the back for being savvy there, afterall this is a business and should be treated like on. I'll only receive about 25 cents back for each mini lot traded but this is 25% back of the $1/mini I am being charged in commission for the auto trading. The choice to go with FXCM was obvious.

I faxed the required application and documents in and had my account set up in less than a week. I funded it with $2,000 via debit card and this took slightly longer than expected due to the Holiday season (or so they claimed).

I had done extensive research on the TAB signals for all of their 2007 trading and compiled this data into excel spreadsheets. I will share this in a later post. I chose the same three signals that are traded on Collective2, EUR/USD, GBP/USD and EUR/JPY. Although EUR/JPY has not made money on FX-Auto since inception, I believe it would be foolish not to include this pair if I expect to replicate the results shown on Collective2. If I had more capital it might even be wise to weight the portfolio toward the EUR/JPY pair as one could argue that it has underperformed and is due to catch up to it's historical average. I have not decided to include the other pairs that TAB offers simply because I want to evaluate them further on live trading. These pairs are not traded on the Collective2 system so they can only be evaluated from the FX-Auto data. I will consider adding these pairs in the future.

The three signals listed above where chosen for my portfolio and are ready to receive signals from TAB.

Introduction . . .

FX-Auto has received a lot of criticism. Some of it I can agree with, but for the most part, I feel that the users are blindly choosing the "best" systems and not taking proper money management into consideration. The largest fault with FX-Auto is their inability to display intra-trade draw-down. More simply put, the "max draw-down" statistic that they show for each system is incomplete because it only represents the drawdown that a trade represented at the close of the trade. For example, lets assume a system purchases EUR/USD at 1.4735 and the pair declines to 1.4355, but the system never closes the trade and the EUR/USD eventually comes back to the 1.4700 figure. The system closes now for a 35 pip loss and this is now displayed as the maximum draw-down. In actuality, the pair traded down to 1.4355 which would represent a 380 pip draw-down. For smaller accounts, this could be enough to whipe someone out completly.

But most of the criticism to FX-Auto comes from traders complaining that systems perform well during a short period of time and then fail to replicate these results in the future. Of course, the past results represented by FX-Auto are actual, live traded results and are not manipulated. Unfortunately, traders come to FX-Auto with moneybag pupils and instantly pick the most profitable systems for the past week or month. They usually tend to have no regard for proper money management, fail to evaluate the actual riskiness of each system and then wonder why they experience terrible losses. To make matters worse, most of these traders will throw in the towel on their newly found systems and jump to the next rising star after a week or two only to experience the same morbid cycle. I refer to this as unfortunate because it is possible that some of these systems are indeed profitable, but will experience draw-downs much like any system. The key is to remain patient and allow for a performance curve to develop over time.

My goal with this journal is to attempt to (if only slightly) put the debate of whether FX-Auto can actually be a lucrative venture or if it is simply a losing gamble to rest. I have also been quite disappointed with the amount of information and personal experiences with regards to this topic. Searching the web and Elite Trader only turned up a handful of first-hand accounts and I hope to contribute information to others who are curious about FX-Auto and the systems they offer.

If interested, feel free to catch up on my intentions through the thread I started on Elite Trader.