W5: Tuesday

AUD/USD: +
EUR/USD: +
GBP/USD: +-+

USD/CAD: +
USD/CHF: +
USD/JPY:

Some vindication is granted for yesterday's big hurt. The QRF system was only able to claim a single profit target, but almost all the stops were adjusted so they became profitable enough to dig us halfway out of yesterday's hole, gaining $153.69.

Week 5: Monday

Setup: Once again, I begin the week by resetting my demo account to $5,000 USD, with a leverage of 20:1. For this week, the profit-loss ratio will be 2.5:1. Stop loss remains at 30 pips. Take profit is 75. I'll be trading each of the Big Six at roughly $15,000 lots.

AUD/USD: -
EUR/USD: -
GBP/USD: -

USD/CAD: -
USD/CHF: -
USD/JPY: --

I entered twelve total trades, with seven of them stopping out before today was over, leaving a hole worth $267.05 in my investment capital. Five trades carried over to Tuesday.

Week 4: Summary

This week, I traded at a 2:1 profit-loss ratio. It made quite a difference.

AUD/USD: +-+-
EUR/USD: ++-
GBP/USD: --++

USD/CAD: +-+-
USD/CHF: ++-
USD/JPY: ++-+

I made about the same number of trades as last week. This week, however, I was expecting such a low (compared to the first couple of weeks) number. The QRF finishes Week 4 with a profit of $500.92. Instead of a drawdown, we walk away with a 10% return on investment. I'll take it!

Not bad from a system that doesn't worry about entry and exit signals and relies on more or less random buy and sell decisions. The longer I study things out, the more convinced I become that smart money management is the key to successful trading. Not a certain combination of indicators or a certain method of entry or exit.

W4: Thursday

AUD/USD: -
EUR/USD: -
GBP/USD: ++

USD/CAD: +-
USD/CHF: -
USD/JPY: -+

I only initiated five trades for Thursday, but I also closed several from the day before, gaining $227.27 on my final day of Week 4, thus exiting the first profitable week of the QRF experiment.

W4: Wednesday

AUD/USD: +
EUR/USD: +
GBP/USD:

USD/CAD: -
USD/CHF: +
USD/JPY: +

After two days in trade, the Eurodollar finally retraced enough to stop short of a full take profit. I'll take the modified stop amount over a loss any day, though. Once again, I only made six trades. This is shaping up to be my quietest week yet, which is fine by me. I prefer keeping the activity down to a handful of profitable trades, rather than making a dozen trades a day that lose more money than they make.

The QRF system finished out Wednesday with a gain of $99.79, for a total ongoing profit of $273.65 for this week.

W4: Tuesday

AUD/USD: +-
EUR/USD:
GBP/USD: -

USD/CAD: +
USD/CHF: +
USD/JPY:

I'm either trudging through another slow week, or the change in PLR is having slightly bigger impact on my trading activity than I though it would. I only initiated six trades today; four of them are still open, including Monday's EUR/USD position, which happens to be my strongest trade going into Wednesday.

I will say, though: if I'm trudging, I'm doing it profitably. I've gained $123.26 making the total profit for this week $173.86. I like it!

W4: Monday

Welcome to Week 4 in my QRF experiment. This week, I'm trading at a profit-loss ratio of 2:1, with a 30 pip stop loss and a 60 pip take profit. This is the first week I originally expected to end profitably. Also, because our ratio is getting taller, I can expect to make less trades, and I can expect my positions to stay open longer.

AUD/USD:
EUR/USD:
GBP/USD: -

USD/CAD:
USD/CHF:
USD/JPY: +

Like most weeks, week 4 was off to a slow start. Only two trades closed today, the rest are being carried. Unlike most weeks, we started this Monday off with a PROFIT!

Realized Profit: $50.60, making this the first Monday that the QRF system closed with a profit instead of a loss. The system is, once again, matching my expectations.

Week 3: Summary

AUD/USD: ---
EUR/USD: --+
GBP/USD: ++--+

USD/CAD: -+-
USD/CHF: ++++
USD/JPY: +---

It seemed like a very slow week. I noticed lots of meandering and consolidation. Truthfully, though, there was a great opportunity for massive profiteering as the Yen flexed its muscles. I had already gotten stopped out of some preliminary trades witht the Jappy, though, and my rules kept me from trading it for the rest of the week.

When I began this experiment, I expected Weeks 4 or 5 to turn out the profits. The last two weeks gave me some hope that the QRF system might turn an early profit starting this week. While it did have some profitable days, we're still coming out of this week with $4911.90 USD, a drawdown of 1.76%.

I originally expected this week to break even, and this result is just about on par with that. I didn't get the number of trades I was expecting, though, so I can't help but feeling I might not be getting the whole story for this week.

W3: Thursday

AUD/USD:
EUR/USD: +
GBP/USD: +

USD/CAD: -
USD/CHF: +
USD/JPY:

Very little action today. It's nice to be able to report a profitable day; the QRF system raked in $33.59 USD. That helped stanch the bleeding; however, we're still down $93.86 for the entire week.

W3: Wednesday

AUD/USD: -
EUR/USD: -
GBP/USD: --

USD/CAD:
USD/CHF: +
USD/JPY:

Not much going on this week. I've noticed the best action in the USD/JPY pair this week. Unfortunately, I was on the wrong side of it this time. I lost $23.83 today.

W3: Tuesday

Not a lot of action today. Just about the same amount of trades as last Tuesday, come to think of it.

AUD/USD: -
EUR/USD: -
GBP/USD: +

USD/CAD: +
USD/CHF: +
USD/JPY: ---

The QRF system had its first bonafide TP for the week, and not just one, but two! That was dampened a bit by a mistake on my part when I forgot to take into account an early morning SL on the Jappy. It should have only traded twice today before invoking rule 2a. Because I somehow missed that one, rule 2b now comes into play. The USD/JPY pair, the source of so many TPs in the previous two weeks, is done for Week 3.

All told, we lost $64.41 today, bringing the total loss for the week to $103.63 USD.

W3: Monday

AUD/USD: -
EUR/USD:
GBP/USD: +

USD/CAD: +
USD/CHF: +
USD/JPY: +-

All of the positives today were simply due to modified stops. No take profits were hit today, so I finished at a loss of $32.22 for the day and the week. It's a much better start than the last two Mondays; hopefully we can improve on it as the week progresses.

Week 2 Summary

I've started adding color to my activity log. The red '+' indicates a slight gain that didn't reach the take profit level. This usually happens when I modify a stop loss level past the purchase price and then stop out of a trade.

AUD/USD: -+--+- (-160 pips)
EUR/USD: -++-++- ( 0 pips)
GBP/USD: -+++--+ (+ 30 pips)

USD/CAD: +-++++-++ (+ 90 pips)
USD/CHF: -+-- (- 60 pips)
USD/JPY: +--++-+-++- (+ 30 pips)

That's a loss of 70 pips, not counting the cost of doing business. Add the spreads for 44 trades and we're looking at a total loss of around 120 pips, give or take some. This is right on par with what I expected from Week 2. Slightly better, even.

Having started the week with $5,000 USD in my trading account, I've got 4,956.06 left. That's just a fraction of a percent drawdown. I expected to lose more than that; it seems that the QRF system is doing better earlier than I thought it would. At this rate we'll probably see profits next week, although I originally wasn't expecting to see solid profits until we got to the 2.5:1 PL level.

I'm pleased with the results so far. I'm still noticing the occasional silly trading mistake on my part, but I'm workin' on that. There will be plenty of chances for that, too. Next week is right around the corner.

W2: Thursday

I've had a lot going on this week, so this is going up a bit late. It was a pretty exciting week in the FOREX as well:


AUD/USD: -
EUR/USD: ++-
GBP/USD: +

USD/CAD: ++
USD/CHF: -
USD/JPY: ++-


It looked like I might finish in the black today and for the week, but such was not the case. I wasn't expecting it to happen this early in the experiment, but I did see the numbers heading that way for a while, and got my hopes up a bit. This week's performance was still better than I expected. Today's trading gave me a +44.27 gain, leaving me only $43.94 in the hole!

W2: Wednesday

Today's action was a pleasant surprise. Rule 2a went to work early on, keeping the action on AUD/USD, GBP/USD, and USD/CAD to a minumum.

AUD/USD: +
EUR/USD: +-
GBP/USD: --

USD/CAD: +-
USD/CHF: -
USD/JPY: +-+-

Thanks in part to some closing action borrowed from the day before, we managed to climb out of the hole by $145.06, reducing this week's sting to -$88.21. I think I'm going to stop posting swing trade results to the day they originated and just post them on the day they close. It seems too confusing otherwise.

W2: Tuesday

We bounced back a bit, which makes today the QRF system's first profitable day! Yay! I have an open trade on every pair except AUD/USD, which invoked rule 2 by stopping out twice.

AUD/USD: -
EUR/USD: +
GBP/USD: ++

USD/CAD: ++
USD/CHF: -
USD/JPY: +

Bottom line: +47.51 today for a weekly net of -167.27. Hey, it's a start.

I had a busy day today, so I wasn't able to trade as often as I otherwise might. It doesn't look like I missed much. The market seems very quiet for a Tuesday. Indeed, several pairs have consolidated today, notably EUR/USD, GBP/USD, USD/CHF, and USD/JPY.

I guess investors are waiting for tomorrow's scheduled Swiss trade balance report and Trichet's speech. If so, I should wake up tomorrow morning with results on the five pairs still trading now. I may need to keep an eye on how choppy the markets get, but if I have to sit out tomorrow, I may as well call it a week. There's significant news expected tomorrow, and the Fed Heads are supposed to bump their gums Thursday.

I may just let it ride.

W2: Monday

I opened long on USD/CAD and USD/JPY. I went short on USD/CHF (by mistake), AUD/USD, EUR/USD, and GBP/USD. From there, I followed the rules of my system, repeating profitable positions and reversing the losses.

AUD/USD: -+-
EUR/USD: -
GBP/USD: -+
USD/CAD: +-
USD/CHF: -+
USD/JPY: +--

Result for Monday:

13 trades, with USD/CHF still open as of this writing (it finally took profit at 10:43 Wednesday morning). Realized profit/loss: -214.78 USD.

The week is still early; we still haven't gotten to the fun part yet!

Week 2 Preparation

Setup: Resetting my demo account to $5,000 USD @ 20:1 leverage. Proft-loss ratio (PLR) will be 1:1 this week, with both take profit (TP) and stop losses (SL) set to 30 pips. Each of six pairs will trade at 15% of the available capital. While that flies in the face of the 2% rule favored by many seasoned traders, I'm assuming for the purposes of this exercise that the $5,000 total represents what I'm willing to safely risk.


Expectations: I won't get quite as many trades this week, and the higher TP level will help ensure a slightly better quality from those trades. However, I expect many of them will still end too quickly, and the spreads will inflict some losses this week rather than allowing a break-even or even slight profit for the QRF system. I don't expect to lose as much as last week, but I won't be surprised to kiss about 200 pips goodbye, give or take a few.

Rule Override: Since I'm still trading on a short ratio, I think I'll keep the adjustment from last week a while longer.

2a. If a currency pair's trade history contains two losses, I will cease trading it for the day.

Week 1: Summary

Here's a quick look at this week's trading activity:

AUD/USD: -+--+ (- 60 pips)
EUR/USD: --+--- (-135 pips)
GBP/USD: -+-+++-+--+ (- 60 pips)

USD/CAD: +--- (- 75 pips)
USD/CHF: -+++-++- (- 15 pips)
USD/JPY: ++-++++-+-++++++- (+ 75 pips)

That's -270 pips from market action alone. Trading costs money, however, and the broker wants his share too. There were 51 trades this week. I estimate an additional cost of 119.9 pips in spreads for a total of -389.9 pips. The spread varies widely from trade to trade, so I will make do with estimating it; I'm more concerned with actual dollar amounts than pips anyway.

Speaking of dollar amounts, I started with $5,000 in my account. I now have $4,577.75, for a drawdown of 8.4%.

The QRF system went for a wild ride this week, and it was all downhill! So why am I grinning like a fool? Several reasons:

1. Predictability. The market 'responded' more or less exactly as I expected. I predicted a loss for this week, and that is what I got. This suggests that my instincts are telling me the right things, and that I know more or less what I am getting into. From what I understand, predictability is a key ingredient in a successful trading strategy. I feel that I am on the right track here.

2. Experience. I risked nothing but my time, and learned quite a bit from trading this week.

3. Confidence. I waded into the forex under dubious conditions, traded more or less randomly, and still walked away with 91.6% of my capital intact. Even if I were trading with real money, I'd still live to trade another week. If that represents the worst that the markets can throw at me, I can trade confidently and with little to fear in the way of loss.

4. Expectation. This week's result should be a baseline to which I can compare future results. Since I traded the worst ratio first, I expect there isn't much of anywhere to go from here but up. Mark me well; in weeks to come and at higher ratios, this system WILL trade profitably.

There's definitely room for improvement, though. I made some mistakes this week, and need to focus on following my rules a little better. I must also consider having a sideboard of pairs not involving the USD that I can use when news hits and I'm not sure how I expect the Dollar to behave. I think I'm going to add a link or two to help me track the news a little better as well.

In the meantime, though... there's a weekend getting under way! Happy pippin'!

W1: Thursday

It was a short and bittersweet day in the Forex for the QRF. I shorted the EUR/USD and went long on everything else. Here's what happened:

AUD/USD: +
EUR/USD: -
GBP/USD: +

USD/CAD: NO TRADE
USD/CHF: -
USD/JPY: -

Rule 2 kept the USD/CAD from trading at all. It also kept everything else except USD/JPY and USD/CHF from trading more than once for today. That's just as well, almost none of the pairs had time to do more than one trade anyhow. I quit early on Thursday because I like to use the tail end of the trading week to let existing trades wind down. Interestingly, however, all my trades have exited by now. I'm done for the week.

So, what's the damage? We've gone and slipped another $95.53, for a total loss of $424.82 USD. How do I feel about that? Satisfied. Content. That's right. If you're nonplussed by that, go back and read my expectations for Week 1 again. That would be the second entry in the blog.

If you still can't figure it out, I'll explain in tomorrow's summary for the week. Keep pippin!

W1: Wednesday

Another late start. It's just as well; I'm hoping the late starts will give the markets time to settle after the expected news reports. Opened long on USD/CAD, USD/JPY, AND EUR/USD. Short on GBP/USD, AUD/USD and USD/CHF. I seemed to stay pretty long on the USD overall, especially where the Yen was concerned:

AUD/USD: -
EUR/USD: -
GBP/USD: -

USD/CAD: -
USD/CHF: -++
USD/JPY: ++++++

Eight profits to five losses! Sure, it's ridiculously easy to hit the take profit levels at 0.5:1, but it is to no avail. Even if I wasn't getting eaten up by the spreads with so many trades per day, each profit is only worth half of a loss. The experience is telling, though.

It looked like we'd recover some of our losses as the Jappy kept raking in the profits, but early Thurdsay morning, other trades stopped out pretty hard. The QRF system went down another $58.58 for a running loss of $329.29 USD.

W1: Tuesday

It was off to a late start this morning. In fact, it was almost afternoon when I went long on AUD/USD and short on everything else. The story for today:

AUD/USD: -
EUR/USD: +-
GBP/USD: +++-+-

USD/CAD: -
USD/CHF: +++
USD/JPY: ++++-+-

Twenty trades in one day ! That is a personal record. And so many TPs... I would almost have killed for that many profits when I was trading at 3.5:1 leverage! At 0.5:1, however, the QRF system lost another $50.39.

The AUD/USD made a quick exit as rule 2a was invoked to retire the pair early today. The GBP/USD joined it after a nice run of TPs. For pure performance, though, the Jappy (USD/JPY) and the Big Cheese (USD/CHF) are the stars today!

Due to a funny little quirk in rule 2a, EUR/USD technically should have stopped trading after it took profit early on, but I was too distracted to notice until I entered another trade with it, which meandered for several hours and then stopped out. I made a second mistake in shorting the Jappy when I was supposed to go long on it. I lucked out on that one; that trade took a profit and so I just continued trading the result of that mistake.

I note that I'm taking quite a bit of profit from shorting the Sterling against the Dollar and the Dollar against the Yen. Since I started considering more exotic pairs yesterday, it occured to me that trading the Sterling directly against the Yen might be a good idea. Then I looked at the spread and decided it wasn't. Ah, well. I do have a short list of non-USD pairs with much better spreads. I'll think about how to work them in if I ever need to invoke rule 3 on the Dollar.

In the meantime, I gotta focus a little more. My rules can't protect me from loss if I'm ignoring them, intentionally or not. It might be a good idea to set aside two time periods per day specifically for trading. I'll think it over.

W1: Monday

I opened around 7:00 Monday morning going long on USD/CAD, USD/CHF, and USD/JPY. I went short on AUD/USD, EUR/USD, and GBP/USD. From there, I followed the rules of my system, repeating profitable positions and reversing the losses. Here's the results, in brief:

AUD/USD: -+
EUR/USD: --
GBP/USD: -+-

USD/CAD: +-
USD/CHF: -
USD/JPY: ++-

Result for Monday: Out of 13 trades, I took 5 profits and 8 losses, realizing a net loss of $217.37 USD. It's not looking good for the Home Team, folks...

I learned that a retail sales report is due to hit the news on Tuesday. I considered invoking Rule 3, but I have a couple of problems there. First, all of my pairs include the USD, and this news is supposed to affect the USD. That would mean closing out all my pairs and not trading tomorrow. I normally wouldn't have a problem with that. It's only for a day, right?

Wrong! I also learned there is a report due every day this week from Tuesday on to Friday. Invoking Rule 3 would mean not trading any more this week. Because I am only trading this ratio for a single week, that would basically render this week's experiment moot. Since I'm not sure how these reports will affect the market, I'm going to keep trading and gain the experience. I'll just have to hope that my trading rules will take me out of the wild pairs before I lose my hypothetical shirt. That is what they're for, after all.

In the future, I think it might be wise to include a couple of pairs that don't trade the USD directly. That way, if the Greenback does wig out on weeks like this, I'll have something else to trade. Then again, I suspect that when the Dollar goes wonky, most other currencies feel it too.

Not familiar with the QRF rules? Check out http://darkforex.blogspot.com/2007/03/quasi-random-forex-system.html

Week 1 Preparation

Setup:

I will begin by resetting my Forex account to $5,000.00 USD @ 20:1 leverage. This will give me a nice 100K margin with which to work. This weeks profit-loss ratio (PLR) will be 0.5:1, with a take profit (TP) of 15 pips and a stop loss (SL) of 30. Each issue will trade for about 15% of the total account, or $15,000.00 USD.

Expectations:

I believe this short ratio will be less than optimal for my purposes. I should trigger more TPs with it than at the higher ratios, but I will need a lot of profits to make up for the losses. The average week at this rate looks like something around... -55 pips. Overall, I expect a good number of trades to end too quickly.

Rule Override:

To compensate for the shorter ratios, I will make the following adjustment to tighten rule 2 a bit:

2a. If a pair's trade history (see rule 1 in the first post) contains two losses, I will cease trading it for that day.

Quasi-Random Forex System

Now that I've had some weeks to learn my way around the Forex, I've decided to set up an experiment to help me understand it a little better on a basic level. Enter the QRF system. Please note that I am trading this system on a DEMO account (see the links at the bottom of the page), and NOT with my hard-earned cash.

Purpose:

I want to know what profit-loss ratio (PLR) is most likely to suit my trading style. The focus here is on money management, not necessarily just profit.

I will begin with a PLR of 0.5:1, trading that for a full week before incrementing the ratio to 1:1. I will add 0.5 to the ratio each subsequent week until I am satisfied that I have gleaned all I can from the experiment.

Trade Duration:

This system is based on results, with trades lasting anywhere from minutes to the entire trading week. Trades will end with a take profit (TP), stop loss (SL), or manual closure (CL). TP and SL levels will be determined at the time of the trade, based on what ratio I am trading that week. I will CL any open trades at the end of the week, and sometimes certain pairs if I expect a news day to throw them into a tizzy. Charting intervals are irrelevant to this system, since I'm not using any standard indicators. A trading week will begin Monday morning; I will stop entering trades on or about 2:00 PM (Pacific Time) on Thursday afternoon. Any trades still open when the market closes on Friday will end with a CL.

Trade Entry and Exit:

Enter a position favoring the USD on each of the Big Six at the beginning of the trading week. Subsequent positions in a given pair will depend upon that pair's performance, according to the following rules:

1. A short history showing the results of the last three trades will be kept for each pair. A '+' means that I took a profit on that trade, while a '-' means I took a loss.

2a. If a pair stops out twice in a row, I will stop trading it for the rest of the day.
2b. If a pair stops out three times in a row, I will retire that pair for the rest of the week. This could happen the day after rule 2a is invoked.

3. If I think a news item will adversely affect a pair (and this experiment's result for that week), I will simply not trade that pair for that news day.

4. Reverse position on a - ; repeat the previous position on a + .

For example, if my last trade on USD/JPY (long) stopped out, I will next trade the USD/JPY short. If it took a profit, I would repeat the long position.