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.