Statistics on MTP End Of Day Version with Futures

[prh]

This is a phenomenally superb software!

To get a handle on the metrics on a limited sample, I backtested all eligible futures trades from January 10 to August 11 2005 and examined profitability with each of four trade management schemes. Scheme 4 is the one Steve Griffiths designed and wins hands down over the more conservative alternate schemes 1, 2 and 3.

The testing was for intermediate automatic setups only, based on 1 contract per commodity which gave 28 setups. Each of four different money management schemes were considered and examined.

Scheme 1: Move stop to breakeven after the 100% profit target reached and take profit at the x2 level (bottom of the blue bar for longs and top of blue bar for shorts):

ALL TRADES: 10256.45
Number of trades: 28
Number of winners: 11
Number of b/e: 5
Number of losers: 12
Percent winners and b/e: 57
Percent b/e: 17
Largest Win: 2906.25
Smallest Win: 358.4
Largest Loss: -590
Smallest Loss: -60
Winner size (mean) 1332
Loss size (mean) -368
Median Win 1150
Median Loss -315
Total Wins: 14662.15
Total Losses: -4405.7
Overall P/L: 3.327996


Scheme 2: Move stop to breakeven after the 100% profit target reached and take profit at the x3 level (top of the blue bar for longs and bottom of blue bar for shorts) so that the exit is either at the x3 level or at break even:

ALL TRADES: 15218.1
Number of trades: 28
Number of winners: 9
Number of b/e: 7
Number of losers: 12
Percent winners and b/e: 57
Percent b/e: 25
Largest Win: 4406.25
Smallest Win: 1000
Largest Loss: -590
Smallest Loss: -60
Winner size (mean) 2180
Loss size (mean) -368
Median Win 1800
Median Loss -315
Total Wins: 19623.75
Total Losses: -4405.7
Overall P/L: 4.45417

Scheme 3: Move stop to breakeven after the 100% profit target reached and take profit at the x3 level (top of the blue bar for longs and bottom of blue bar for shorts). When the x2 level is reached, move the stop to the 100% level to protect some profit (1 times the risk):

ALL TRADES: 14385.1
Number of trades: 28
Number of winners: 10
Number of b/e: 6
Number of losers: 12
Percent winners and b/e: 57
Percent b/e: 21
Largest Win: 4406.25
Smallest Win: 380
Largest Loss: -590
Smallest Loss: -60
Winner size (mean) 1879
Loss size (mean) -368
Median Win 1612.5
Median Loss -315
Total Wins: 18790.75
Total Losses: -4405.7
Overall P/L: 4.2651

Scheme 4: Move stop to breakeven after the 100% profit target reached and take profit at the target level (Wave C or Wave 3 and trail the stop to low of previous day for longs and high of previous day for shorts), in essence the algoritm that Steve Griffiths designed:

ALL TRADES: 26076.8
Number of trades: 28
Number of winners: 9
Number of b/e: 7
Number of losers: 12
Percent winners and b/e: 57
Percent b/e: 25
Largest Win: 5625
Smallest Win: 1060
Largest Loss: -590
Smallest Loss: -60
Winner size (mean) 3386
Loss size (mean) -368
Median Win 3000
Median Loss -315
Total Wins: 30482.5
Total Losses: -4405.7
Overall P/L: 6.91888


This is a limited sample of course. During the analysis I made several observations: Once the x3 level is reached, the markets very rarely retraced to the 100% level, most of the time they kept going.
Most importantly, the loss size was the same among the 4 schemes, not surprising since the risk is limited in each instance. Therefore the strength of the 4th scheme (MTP algoritm) lies in the concept of maximizing the profit. Even though the % winners was smaller in Scheme 4, the total % of winners+breakevens remained at 57%.

In summary, based on this limited sampling of futures trades, taking into account 1 contract per trade, the MTP trade management scheme produced the largest profits with an overall dollar-based P/L of 6.9

Congratulations to Steve for such a fine program and algoritm.

Philippe

[Gene]

Hi Philippe,

Based on your statistics, more losers and a lot of b/e, I have an idea: what about CONTRARIAN TRADING (when MPT shows buy, you sell..) with a good money management?
It will be an interesting study. Maybe more profit? Maybe Steve will be interested too in finding new ways of using MTP and will help us. This is not a joke, I'm very serious.
Gene

[prh]

Gene

I have considered that. The setups that do not set up often are wave C's that turn into large Wave 3's. I have not done a formal study on that but it is worth considering. The most recent example is Feeder Cattle with setups in the last few days, none triggered as the feeders charged up...

I have no problems with the b/e - a sign of good money management. But I agree with looking at taking the other side of the bar (setup bar). I will look at this in the next week or so and let you know my findings.

Take care and thank you for the suggestion.

Philippe

[Matt Bowen]

I love it...you deliver an over 200% return and the first thing people try to do is figure out how they can get more winning trades.

What people may fail to realize here is that had you put on all of the positions for the months of January and February (In other words...these where active positions) the total margin was $12,923. to carry these positions overnight...I'm sure some of these were stopped out by April 11th when you started getting new signals. The point I'm making here is that if the Margin was $12,923. and the total profits on Scheme 4 are 26,076 this is over a 200% return in less than 9 months...with NO position sizing!!!

Here is a copy of the Excel spreadsheet Philippe made:

http://www.mtptrader.com/MTPlog.xls

Why is that when you have a system that is only 32% correct but delivers over 200% profit do people find an incessant need to find more winners?

Did anybody actually notice that the MTPredictor system (same one in the manual) had a 6.91 Risk to Reward ratio:That's almost $7.00 dollars profit for every $1.00 you risk!!! Hell, I'll take these numbers all day long...in fact, my only question is: "How many times can I do it?"

I'm really starting question traders motives, are they looking to be Right or Rich?

[Gene]

Hi,

Matt is simplifying the several trading isssues to "I'm really starting question traders motives, are they looking to be Right or Reach?"

WHAT ABOUT TRASDERS LOOKING FOR BETTER SOLUTIONS? EVOLUTION, like in every field of life! (More) RIGHT and - not "or", Matt - (more) RICH.

I hope Matt will agree with me that MTP is not the best tool we can have for trading and that MTP can be improved. I guess Steve is working for V5 exactly for this reason. And we are interested too - this is the idea of our posts. Something wrong?

Probably this is the reason too, why Matt and Steve - former salespersons for Tom Joseph's Advanced GET trading software - after presenting Advanced GET as the best trading software , are now promoting MTP.
(And Tom Joseph is promoting now a new software - DYNAMIC TREND PROFILE).

So, why we cannot look for better trading solutions too, without raising questions from MTP team?
I believe in using this forum - first of all - to post ideas, not to advertise MTP by showing statistics and some charts. We use already MTP, we don't need advertising.
Matt, you are a brilliant guy and a real trader, help the forum posting trading ideas, solutions. not questioning what is posted.

Have a good trading.
Gene

[Tony Beckwith]

Gene and Philippe
On behalf of MTPredictor, I'd like to thank you for this discussion on the forum. We're keen to encourage active participation and the win/loss v. profitability question is guaranteed to do that!
Our trading philosophy here has always been to focus on risk/reward and the 'Profit Factor' rather than simple win/loss ratio itself. At the end of the day...profit. However, a full and frank discussion and your own work as valued customers of ours is welcome - thank you.
Tony.

[Angel]

Hi Philippe, Hi all,

Many thanks for sharing your statistics results with the MTPredictor familly. Concerning your results, I would like to ask some questions :

1) How many different futures have you been trading for this report. I mean by knowing the exact list of your futures portfolio you can calculate how many trades on average you made with a list of 40 futures for example ?

2) You said that " I backtested all eligible futures trades from January 10 to August 11 2005". Do you mean by "eligible" that you took ALL the raw set-ups MTPredictor gave you ?

3) The testing was for intermediate automatic setups only, what do you mean exactly ? Do you mean that the scan settings used for the testing are the DEFAULT SETTING as :
- The three TS1, TS2 and TS3 boxes for the trade set-ups are ticked
- The INTERMEDIATE of the Elliott Waves is also ticked
- The two last point box and the HeightX2 of the restrictions part are also
ticked

4) Last question, did you use a weekly trend filter for your end of day report.

Thanks for your attention,

Have a good trading all of you,

Angel

[Matt Bowen]

Hi Gene,

After 22 years in this business I can honestly say I'm a reformed man. I have spent countless hours behind "System Writer" (for those of you who are new, that was the first Omega Research product launched in the 1980's, TradeStation would come out five years later.) In any event, I learned a long time ago not to base a trading system on "How many winners" you ended up with. It's very simple,if you have 10 trades with 7 wins (70% winners) and you make $1.00 on each you are a 7 bucks ahead. If on the other hand you have a 4 wins and you win $4.00 on each you are $16.00 ahead... Think about it, what would you rather have $7.00 or $16.00? You know what is going to make that decision when you have REAL money on the line? Your comfort zone. Most people can't handle being wrong 6 out of 10 times...It takes them years to get over this pattern of thinking.

In one case, a trader setup two accounts and in one account I had him take his normal quick profit 65% winning system. Next, he then we set up a separate account where he traded the a trend following method similar to that of Richard Donchian's 2 and 20 system. Guess what, halfway trough the year the trend following method had already made more than the previous year using the 65% win method...It did not take long for this trader to see what he was missing. his need to be RIGHT had been cured.

You see the average person is not setup to accept this truth because their NEED to be right will ALWAYS take over as the deciding force with "How to trade". I have sat and watched people do this for years and I just cringe on the fact that they leave so much money on the table.

Traders should be concerned about making money; after all it is the reason to be in the markets. In the beginning, most traders are concerned more about the total return of their investment rather than their exposure. However, stay in the game long enough and you will agree with the professionals - take care of the losers and the winners will take care of themselves.
When reviewing a trading system you should concern yourself with the breakeven level of your system. Or the minimum level of performance that will still show a profit. In plain language, "how often can you be wrong and still make money?"

Let's look at two different trading systems and see how they compare:

System #1
Percent Accurate: 65%
Average Win: $850
Average Loss: $1,100

System #2
Percent Accurate: 37%
Average Win: $3,400
Average Loss: $900

On the surface system one looks substantially better than system two. It is 65% accurate after all. Most traders can stomach being right 6 times in 10. System two with its 37% accurate would be hard to sit through - or so it seems.

When you look at expectation per trade you begin to see the big differences between the two systems. The expectation per trade measures the expected amount you will make on a given trade. This statistic uses a sample of the trades from a given track record.

System One expectation per trade: $167.50
System Two expectation per trade: $691.00

System one has a low expectation per trade. A little bit of slippage or transaction costs can eat of the majority of its expected profit. System two has a more robust expectation. Slippage and transaction costs will not decrease its expected profit as much as system one.

Looking at the breakeven percent shows an even bigger difference in the two systems:

System one breakeven percent: 56.4%
System two breakeven percent: 20.9%

System one must be right more than half of the time just to generate profits while system two can be right less than 25% of the time. With this information, which system would you rather trade?

Assume you begin trading each system, each takes 10 trades. Both systems loose the first 8 trades and the last two trades are profitable.

System One After 8 losers: (8 x $1,100) = ($8,800)
System Two After 8 losers: (8 x $900) = ($7,200)

System One Next 2 trades are winners: (2 x $850) = +$1,700
System Two Next 2 trades are winners: (2 x $3,400) = +$6,800

System One Net results of 10 trades: ($7,100)
System Two Net results of 10 trades: ($400.00)

What happens if you begin trading either system and you hit a string of 8 losers? System one is down $8,800 and system two is down $7,200. What happens if the next two trades are winners? System one will be sitting at loss of $7,100 and system two will be at a loss of $400.00. The recovery time of system two is much better than the recovery time of system one.

Manage your breakeven percent and making money is easier. Do not be fooled into trading a particular trading system just because of a so-called high percent accuracy. At the end of the day, your gut will measure drawdown recovery and your mind will accept a lower accuracy.

Why do traders miss the big moves? People often make decisions on their perception of what the market direction will be. Once they make their directional choice, they become blinded to any other option. They will keep searching for any type of validation to support their analysis even if they are soon losing money. In bull or bear markets people become convinced that things will never end. They fail to recognize that their particular opinion on market direction is wrong. They remain in denial and watch their portfolio balances get sucked dry. Suddenly their plans for a life of luxury are gone. Literally trillions of dollars have vanished from investor accounts that were waiting for the never to be seen rebound. Where do you think the losses went? Well it had to go somewhere, right? Losses go into the accounts of investors armed with solid trading plans. Savvy individuals always prepare for up, down or sideways markets. How is it that so many traders lose money, yet a handful always make a fortune?

Most people are Not READY to HEAR the message. Most of these new traders are in a constant discovery mode, which means they have to reinvent themselves whenever the future does not turn out like the past (which happens to be all the time). This is the same reason they jump around buying all kinds of software...thinking that the software is going to bail them out. No, the software is not going to bail you out, trust me I've spent over $50,000 dollars of software that is now collecting dust...and you know what, it had all the claims (20 years ago) of the same stuff being marketed by today's vendors. I think of my software days as a kid in the amusement park...whenever I lost money, I would just go buy another piece of software. Well, it kind of like riding a roller coaster...instead of getting off the coaster, you just stay on and keep going up and down. How many times are you going to go up and down? Eventually, you will get tired and either quit the business or GET SERIOUS and start to play the game like a professional trader.

[Gene]

Hi Matt and all traders,



Matt, I see you missed the point - again. We are not criticizing MTP - you don't have to defend MTP. We have MTP, MTP makes some money and we are looking for more efficient solutions, if possible. And we know how to trade.
Did you study about Contrarian Trading for example? There are tons of materials. I'm sure you did, I know you are a kind of trading encyclopedia.

Probably even novice traders knows that in trading you ALWAYS have to analyze TOGETHER:

#1. % WINNING TRADES (% WT)
#2. WIN/LOSS RATIO (W/L R)

And that MONEY MANAGEMENT IS VITAL; I hope all traders learned or will learn the plus and minus of each method (starting with Anti Martingale methods, of course). And, of course, always looking for RISK/REWARD ratios as part of money management. Myself I consider only R/R of at least 1.5:1.0. A high R/R will miss many good trades. A low R/R can have a negative influence on trading capital.

Remember, if % WT is 40% for example and W/L R is 1.50, you are break even. But a trader has several expenses: computers, monitiors, Internet conection, softwares, data, commissions...and slippage.
Higher % WT and higher W/L R represents more money; smaller represents trubles, even out of business.

And now, #3, ignored in many statistics, based on points, not dollars:

THE STUDY MUST BE PER MARKET TRADED, NOT PER TOTAL PORTFOLIO. WHY? SIMPLE - every market has a different point value, with a huge dollars implication.

For example - assuming the same 2:1 R/R:
- if you loose 1 point in Natural Gas, it will cost you $10,000 and that will be reflected in bad statistics as 1 point loss;
-if you win 10 points in YM, it will be ONLY $50 profit (10 points x $5) and that will be reflected in bad statistics as 10 points profit;

The misleading statistics will show very proud,"great results" - a 9 points profit - but you lost $9,950.
This is why such statistics make me smile. I consider such statistics the results of a naive view, not manipulation, but it can be, too.

My conclusions about trading are made in a different way, with several formulas, including markets contribution factor. But is probably too sofisticated for people never trading for an institutional trader.

A good analysis need to be based on dollars and points. Yes, it is not simple, but is conclusive. Only points is crazy, a nonsens - for the reasons I mentioned; only dollars is not giving the whole picture.

Probably because I use to trade (currencies) several years in a very large financial institution since 70's (with no Internet when I started, but a sofisticated sysem for institutions only, based on Reuters), I did not paid over $50,000 for softwares. I'm surprised Matt failed in such trap - and I'm sorry for you, Matt. It seems you repeated the same mistake several times - you just forget to learn from your mistakes. Not good in life, very bad in trading.

Myself I did somethig different. My payment was in thousands of hours of study. I tried to improve the efficiency of trading = more profit at the end of the year, without trusting the advertising of new software developers. Rarely I bought some softwares, ONLY for original ideas that I believed are of interest - as I did with MTP - BUT NEVER such softwares will represent the main tool in my trading. I'll always keep my trading frames - time proved.
In 70's we had just a few resources. I studied focusing on Gann, I was interested in Jesse Livermore's work, Magee and Edwards and a few other.
In 80's cames Kaufmann, latter - a lot!

Why I have MTP? I was intersted in Elliot, I studied Frost & Prechter, Brice Gilmore, Robert Miner,etc. And Steve's ideas kept my attention. I LIKE IT! And I want to find new ways we can use the ideas. Steve ideas interested me also, because remind me WAVE TRACKER PRO, an add-on for eSignal by tic2tic.com, BUT MTP IS STAND ALONE - I like stand alone softwares; I don't like "octopus" softwares.

And MTP is OK, making some money, but it can be better. Since first edition, Steve is looking for better solutions - new releases; we try to see also how MTP can be of better use, this is why we have posts in this forum. As Matt said - we are looking for making money; we make, some traders probably more than Matt, but an open mind is looking for BETTER.

Matt, lets not argue on this forum, and do not be sure you are the most or the only knowledgeble trader in this forum, as it seems to be the approach of your post. Who khows who is the best! Maybe there are traders never posting and smilling about you and me. Never underestimate other traders.

Your post is for sure good for some traders and this is the most important issue about a post - something usefull, something to learn, or to refresh some knowledge.
Always is good hearing from you, Matt. I'm looking for your new posts about some interesting trading issues.
Have a good trading all of you.
Gene

[prh]

Wow!

What storm of responses did I trigger here... It seems that in the end we all agree that the dollar-based P/L ratio is what matters, and does your account value go up? My simple testing over 8 months pointed out that in this limited sample the trade management scheme of MTP was very profitable with dollar-based P/L of 6.9 - quite a record. The spreadsheet showing the trade details is now posted. I went back to each of Steve's newsletters and entered each trade. I tried doing this using the History module but that did not seem to work all the time.

It is possible that the profitability is even better when changing the number of contracts based on a percent (1-2%) risk factor - if anyone wants to figure that out, please do so (Gene, please go ahead).

At this stage, I will be happy to record each trade as it occurs (quite infrequently) and post the results of this prospective records at the end of the year if anyone is interested.

Answers to Angel:
1. There were 28 trades - listed on the spreadsheet.
2. All the raw setups that triggered. Most did, some did not. Those that did not are obviously not entered. Those trades were also posted on Steve's daily report (the vast majority).
3. Default settings indeed.
4. No weekly trend filter used, although that would probably be a good idea in a trending market.

In my personal trading I use MTP and its tight risk control for futures and stocks. I also use XTL continuation trades (daily chart) from a portfolio of stocks (in a weekly XTL Wave 3 trend) using Advanced GET EOD version. Both softwares give different trades and highly selective trade setups with limited risk. Every one has his/her own preferences. I found my niche and methods and they work for me.

Good night.

Philippe

[Angel]

Hi guys,

I would like to give some HUMBLE ideas :o concerning CONTRARIAN TRADING using within MTPredictor. This method I give you would need all of your sincere point of view guys.

It is only for sharing knowing that some nice and open minded traders as Gene, Philippe, Matt, Tony and others are more experienced than me. Don't hesitate to transalte this idea because of my poor English level.

1) when MPT shows buy, you buy and vice verca for a short position
2)First option : the trade is going in your favor :rolleyes: so you follow the great trade management, breakeven included or scheme 4
3) twice option, you are stopped out :mad: so you have to wait that the current bar where you have been stopped out be RED (for sell) and be triggered for entering a short order ONLY if the R/R >2 or 1.50 for Gene ;)

To study this method it would be great if the new backtesting module allowed us to test this contrarian method as for example :
"If a buy set up is entered but the trade be stopped out then REVERSE the position in a SHORT trade after the current RED bar be triggered". It would be perfect that the general sample performance get a 3 separate report for the classic method, the contrarian method and for both method TOGETHER in order to see exactly the weight of each method.

Last thing, it would be interested in aplying this method within all the futures we can trade on the Europeen, US/Canadian and asian markets ( may be 150 different futures contract).

Have a good day

Angel

[Angel]

Hi Philippe, Hi all :D

Just one question concerning your statistics results. Did you ever thing to apply a scheme 5 for your exit strategy on a long positon for example like :

1) Prices close ABOVE the 100% initial risk zone, then the stop is moved 2 ticks ABOVE the entry trigger level
2) Prices reach the 2-3 profit area and close in this area, then move your stop to the 100% initial risk level
3) Prices close ABOVE the 2-3 profit area, then a 20 EMA is applied to the chart. The trade will be close when prices has breached the first bar which closes through the 20 EMA. In fact, the 20 EMA would run as a trailing stop.

Knowing that a 20 EMA is a great trend tool, may be it would be interrested :rolleyes: in testing this kind of exit scheme on the 28 trade.

Have a good trading day

Angel

[Matt Bowen]

Sorry for the delay on my response, I've been battling the a Sinus Infection here and that's probably why I missed your point. I do understand your point about the contrarian idea. I think if the answer were really that simple we could just flip our monitors upside down and we would go from 70% losing trades to 70% winning trades. The problem has to do with trends. Any trend following strategy is dependant on trends to make money. In Michael Covel's Trend Following he explains why chasing after higher win percentages is like a Dog chasing after it's own tail. It's interesting that nobody takes the other side of Babe Ruth's strikeout ratio: http://www.turtletrader.com/babe-ruth.html everybody just seems to concentrate on the fact that Babe Ruth was the Grand Slam King. From a pure numbers perspective, he saw more failure at the plate than success.

By the way, I would strongly suggest people read Michael Covel's new book: http://www.michaelcovel.com/

Now, I'm trying to defend MTPredictor. You are correct and MTPredictor is not perfect (I think we can all see that) nor is any other system being offered in the market place. I do however feel that most people are being misguided by MANY vendors in the market place by offering product that have 80% win ratios. I've spent 20 years trying to get the 80% win ratios and you know what..it aint there, but that does not stop the new traders from trying. Hey man go for it, I fell into the "Black-Hole" of 80% win ratios...fortunately I crawled out of the hole. What's my point here: I would like to save the new guy from wasting his time and money on something that is not there. There have been a lot smarter traders than me that have attempted to do the same thing with some of the best MIT quant guy on the planet. I also realize that trends do work: http://www.turtletrader.com/how-many.html

And yes, Gene I'm not here to argue...like you, I just want to help. I think you have made some good points in you post. We have both poured our hearts into this business: I probably spent a lot more money, but you spent more time and I think we can both offer value to this bulletin board.

Let me say than you to Philippe for starting the thread and you for your participation. I'm glad that this board is starting to attract more discussion and I hope people find it worth their time to read. :)

All the best,
-Matt

[Angel]

Hi all,

Happy to read you again matt :)

Guys, all of your interventions remember me what my professor always told us :

"Guys, don't forget this : 80% of the business make 20% of the profit and the other 20% make 80% of the profit. This rule is very simple but absolutely TRUE !!!

Two last things, a BIG thanks to steve for the new daily report ;) and do you really thing that the v5.00 would release before the end of october ?

Some nice and frankly guys are sharing ideas, thanks for that

Take care Matt,

Good trading all of you,

Angel

[mcdirt]

Yes, love the new format for the Newsletters - should be very beneficial to the education of us all. Thanks Steve.

Regarding v5 ... will it have the new graphics engine you talked about before Steve?

rgds McDirt

[Matt Bowen]

Hi Gene,

Ok.. here we go again...Yes, Michael Covel does not trade...nobody could if they had to compile that amount of information and put together all of those web sites.

Now, Gene...the fact that you will not buy his book or even go to the bookstore to read it makes me wonder because if you have been in this business long enough (you should know by now) that 90% percent of ALL vendors do not trade...THE REASON THEY SELL CRAP IS BECAUSE THEY CAN"T TRADE. Does that mean the product they are selling is of no value? In most cases, YES! However, in Covel's case he did his homework he spent 10 years interviewing traders. If you read his book you will see these are all BIG name traders well into the hundreds of millions and in some cases billions...these traders all volunteered their time and interviews with Michael Covel...so you might want to take that into consideration.

Tell you what Gene ( and this offer is only good for Gene) you send me your address and I'll send you a copy of the book...if you find it worthless then I'll shut up. If anything, most of the book is written from these large institutial traders and most small traders can't relate to the material...so yeah, I can see why they would NOT like the book...especially if they are not trend following traders.

I can tell you one thing, the traders in Covel's book didn't get there by using Stochastics, MACD, RSI and whatever canned indicators the trading community likes to cook-up.

I can smell-out fake vendors in 5 minutes. Most vendors are so pathetic at trading they couldn't trade their way out of a paper bag and what's worse, they end up offering traders a trading system that's nothing more than a shell game. One of the Reasons I went to work for Tom Joseph and Steve Griffiths is because they are REAL traders who trade their own money, it makes a huge difference when you talk to them face to face.

Now, lets move on to EliteTrader (Gene, I gotta tell you when you wrote this I had to step back and ask myself what is he thinking). Seriously, Most of these buffoons on EliteTrader are wanna-be traders who bitch and complain about everything. Besides all that, ask yourself one question: If somebody is a serious trader, who has time to read all that crap? Think about it for a minute, If I trade from 9:30am until 4:15pm (time that I am in front of the screen) Why in the world would I want go into some trading room and read what Tom ,Dick and Harry are eating for lunch or what software they just bought or what movie they went to see last night...WHO CARES. After 7 hours of trading the last thing I want to do read about what some trader (whose probably only been trading for six months and read 5 or 6 books then post under some pseudo name). C'mon Gene Elite Trader??? Most of these traders are still looking for the holy-grail, they have not figured out the the REAL HOLY-GRAIL is money management: watch the video...this is the real Holy Grail: http://www.mtptrader.com/showthread.php?t=243

Did you know that vendors can pay the owners of EliteTrader $750. you can actually go in and promote your software and tout it up all you want (again under a pseudo name)...talk about false pretenses. I fell sorry for the people who do read those boards...Oh, let's not forget that the sole purpose of the EliteTrader site is to generate advertising dollars. Here is another one: Stocks and Commodities readers choice awards...he who spends the most money on advertising wins the readers choice awards...did you ever notice the correlation?

You wrote:
REVIEWS BY TRADERS, and you will find out that 67% are not recommending the book. Are they wrong? It is 67%!

No surprise here... 67% percent of the trading population can't handle money management...no wonder they can't make any money...they wouldn't know a good trend following trade if they were standing on top of it.

Gene, this discussion this morning has me laughing so hard, I guess experience is the best teacher.

Thanks for the get well wishes. I'm feeling much better... thanks for the good laugh!!!

[Matt Bowen]

I didn't know you are such a great expert, knowing all people posting in elitetrader, their quality and how good or bed traders they are. It is good to know. I hope we can count on your opinion about them, you assuming the responsibility of what you tell us.

No, I do not claim to be an expert (far from it), but you don't have to be if you read between the lines on some of the post on EliteTrader's boards.

Matt, please stop talking about Covel - enough is enough, please.
Lets start when we have time, of course, you and me, a tutorial about Money Management, for helping new traders.

Did I lose my First Amendment rights here? Why do you think I'm recommending the book...because most of it is about money management. If you took the time to read it you would see this...No, you would rather listen Curtis Faith or some book review... Gene, I'll respect your opinion AFTER you have read the book, but not by judging the cover and listening to third-party opinions.

To continue this discussion would be an exercise in futility.

[britlab]

At the request of the respected Trading Author Michael Covel, we deleted two post ( #16 and # 18) which misrepresent and demean Mr. Covel and his book "Trend Following" as well as the website: www.turtletrader.com (http://www.turtletrader.com)


We apologize to both Mr. Covel and the readers for any inconvenience this may have caused.


The Moderator

[stevej]

MTPTrader report for Friday June 16, 2006

***What's gong on with the MTP risk report?***

Second, as you have heard by now the MTP risk report has been stopped as a daily service. This free report was just taking too much time to produce each day and really didn't provide enough "action" for most of our members. So, rather than confuse and bore people with a report that traded on daily bars it's best to put our time in areas where we can help educate customers better. The big difference here is that instead of spending two or three hours on that report I will be able to send out more frequent reports on news, education, or trading material that will expedite your learning curve.

I will continue to publish the track record results of the report on a quarterly basis.


Well past the end of the quarter Matt. I used to really enjoy this report even if it did bore others. Look forward to the update.

Steve

[Steve Griffiths]

Hi Steve,

As I said, Matt does not have time to update or follow this regularly. It was taking far more time than origionally anticipated. Matt does have many other duties at MTPredictor ;)

The work load at MTPredictor has increased over the last few months, which is good :) but it does mean that we cannot do all that we would like. We all work 12 hour days as it is.........

Thanks

Steve Griffiths

[Matt Bowen]

Hi Stevej,

How in the world did this thread get dug up? In any case, I would love to bring back the report and I called Steve Griffiths in London earlier today to discuss it. The main problem is many traders do not understand drawdowns. In other words, they don't want to see 15% or 20% drawdowns in portfolio (and any professional knows this comes with the territory). You and I both know the average person has an zero tolerance for losses and wants to make money everyday AND they only want to trade form 10:00am until noon so they can make their 1:00 tee time (I actually had a guy tell me this the last week :rolleyes: )

After I wrote that report for 9 months and in all that time I had about 20 or 30 people who really enjoyed, the rest of the time I had people asking what's a "front month" futures contract was or what is position sizing. Seriously, we showed them how they could make 30% returns per quarter (some were even better than that) on small accounts. This was nothing that the average user can't do on their own, they just don't have the patience to apply portfolio management... there seems to be this incessant need to make 200% returns by next Friday and they don't have time for drawdowns. The problem here Steve is that I'm giving them something for free and when people don't pay for this kind of knowledge there is no value. Trust me, when I was sending out that report I could see how many people were opening the report and as well as how many just hit the delete button...that is a wasted effort. When you spend two hours putting something together (to help people) and they can't even open the thing, then imagine what's going on in my mind.

[Matt Bowen]

Here is something I put in my report tonight that goes right along with the previous post:

Make sure you read number seven (7)...


http://www.iitm.com

Van Tharp, Ph.D.



The Myth of Stock Selection
Since most people believe that stock selection is the key to making money, I'd like to share with you the source of that myth.

1) Mutual funds are by charter supposed to be fully invested. Furthermore, their job is NOT to make money but to outperform the market (which most of them cannot do).

2) If you must be fully invested, then you cannot really practice position sizing or proper risk control. And even asset allocation (which is really position sizing) seems like finding the right assets.

3) Mutual funds, by the way, don't get paid for performance, they get paid by the amount of assets they manage...they get paid if they keep your money.

4) When the market goes up, most funds make money and most people are happy to be a little richer...and the fund managers go on CNBC and talk about which stocks they like.

5) When the markets go down, most funds lose money. The funds that make money do so by stock selection. And what they do is find stocks that are selling for less than their assets are worth if they were liquidated.

6) And when we have mutual fund crises (like the one recently when funds were selling to mutual funds when the public couldn't buy), it was all blamed on market timing.

7) What most people don't understand is that the best traders get out of mutual funds and become hedge fund managers where they can really trade. And very little of what they do has to do with stock selection. It has to do with cutting losses short, letting profits run, and proper position sizing.

So much for our little myth.

Welcome to the world of how money is really made in the market.


--------------------------------------------------------------------------

Why don't you hear this from most people who are selling you trading software? Because most of the idiots (who are vendors) in this business don't understand trading to begin with. Which probably leads into your next question: "So why do they sell you something they don't even understand?" Look, as with ANYTHING in life, the answer to 99 out of every 100 questions is MONEY. They sell you products and services because as long as you don't understand how the trading business works, they can continue pumping you with ideas so they can get paid... sounds kind of brutal doesn't it?

It might take you a few years to realize that the vast majority of what you read in the trading business is completely false in terms of what it takes to make consistent profits. Logically, what you read might make conceptual sense, but just member something else about life, the majority do not prevail and this is precisely why you need be working with concepts that have been proven to work. My suggestion to those new to my report is...get started on the right foot by reading the right material. Make sure you get a copy of this book: http://www.iitm.com/products/books/trade_your_way_to_financial_free.htm

I'm a nice guy in normal situations, but I'm vicious in my analysis of other trading systems and vendors. I'm as hard on other traders as I am with myself...and I'm brutal with myself. That's because money is on the line here -- your money. I would be doing you a huge disservice if I were not absolutely truthful at all times. There are going to be plenty of you that call me up and I'm going to tell you exactly what you don't want to hear. And why does this happen? Because most people are looking at the wrong material, why do you thing they can't achieve any success? What's even more crazy is some people will sit for hours Slicing and dicing indicators (changing parameters or looking at combinations), this is not a path to success, in fact, It has nothing to do with trading success. Go back and read #7 (on the first part of this post).

[stevej]

Matt,

I used to find the report both enjoyable and informative.

Frankly, I cannot understand why people seem to want to stare at a computer screen all day if there is an alternative way of doing things that takes about 30 minutes per day at a time of ones choosing.

I do mean stare at it all day because if one is to take all trades thrown up by any methodology (including MTP) you cannot leave the computer even to get a cup of coffee, lunch or attend to bodily functions.

Still, if that's what people want then its a matter for them. EOD RIP?

What a shame.

Steve

[Steve Griffiths]

Hi Steve,

I think you have got completely the wrong idea here. MTP EOD is very much alive and used by many many traders worldwide with great success on Stocks, Forex and Futures.

As such we have both RT and EOD traders using the software......

Steve

[stevej]

Hi Steve,

I think you have got completely the wrong idea here. MTP EOD is very much alive and used by many many traders worldwide with great success on Stocks, Forex and Futures.

As such we have both RT and EOD traders using the software......

Steve

Yes I know. I have been one of them since August 2004. I just regret the apparrent obsession with intraday trading to the virtual exclusion of EOD.

Steve

[jswin]

I've traded MTP EOD for nearly three months with real money after paper trading for approximately six months. I am very picky on my setups - nearly all are automatic with full restrictions on and in addition to that I look for a good ABC pattern and only take trades in the direction of the overall market trend, if one has been established. If the market is consolidating I'll go long and short but generally not against the trend of the individual stock.

Closed trades: 17
Wins: 2
Loss: 9
BE: 6

The interesting thing is that I've won 11R and lost 9R - so slightly up overall. I just closed Coca Cola for a 7.5R win in three days which was fun. According to most MTP users, I should expect 40% wins, rather than the 12% I've achieved so far. In correlated markets like stocks I can see understand it is easy to go through a period of losses like I've experienced, so I am actually very impressed that MTP has held its own through a poor trading period and I expect it to achieve its 40% target and be profitable once it does. I'll post again after 50 trades.

[Steve Griffiths]

Hi Guys,

This is brilliant, how many people would expect to actually be making money when only having won on 11% of the trades. Most system or approaches would have had you bankrupt at this stage, but MTP has kept the losses under control..

How a program fairs when things are not going well (in a drawdown period) says far more than how it handles the good times. What most amateurs traders (with little or no experience) understand is that holding its own like this though such a tough time is absolutely brilliant performance - most hedge funds would kill for a system that limited drawdowns this well :)

Steve

[Matt Bowen]

Hi SteveJ,

Thanks for the post. You have to remember, you are one of the top 5% who know how the game of trading works. If I put you on the other end of my phone and let you listen to what the average person calls in here with... you would be completely floored at the logic and by what they are attempting to accomplish. I'm serious, I'm like a pro-bona psychologist, these people literally call me up and proceed to tell me their trading STORY about how they crafted up some cockamamie system and it's going to take them to the bank. Meanwhile I'm sitting here asking myself why this guy is even calling me...because according to him, he's got it all figured out his system makes a ton of money. Does this make any sense to you? No, do you know why? Because the person is lying to them self, but they don't want to except reality. The real story is they are losing money...that's why they are calling.

The average trader who calls me thinks he's going to take a $10,000. account and run it up to $100,000. so he can support his family or quit his job. First of all that is a 1000% return...how many people do you know that have achieved a 1000% return in one year? I've been at this for over 20 years and never once seen this done (not saying it can't be done, but I have not seen it done). Second, fantasy or daydreaming is nice to explore (in your sleep), but not while you are in front of the computer looking at charts. Sometimes, I think people get caught up in the illusion of making money trading and they will do just about ANYTHING to satisfy this need.

Frankly, I cannot understand why people seem to want to stare at a computer screen all day if there is an alternative way of doing things that takes about 30 minutes per day at a time of ones choosing.

Let's back up for a second... remember the average guy has $5000. to $10,000 and he's probably got 2 maybe 3 months to pull this off (make his fortune). So, when you have this kind of bankroll to work with YOU ARE FORCED TO DAY TRADE. Can you imagine the a guy with a $10,000 account trying to sell Crude Oil short in August? The margin on the trade is more than the guys account and therefore he can't place the trade. So, for the $5000. to $10,000 player he has no choice, his day trading margins are probably $300 to $500 per contract and guess what happens next? Instead of using position sizing he decides to get on the "fast track" and totally bypass the money management. Before long he is now stuck in a massive drawdown (50%+) and his gain to recovery ratio is so large that he now will most likely be trading for free for an entire year just to get back to brake even on the losses. If you guys do not understand what a drawdown to recover ratio is then read this:

http://www.iitm.com/tips/Tips-MM.htm

Steve, you are absolutely right in saying: there is an alternative way of doing things that takes about 30 minutes per day at a time of ones choosing. However, you can't tell these people what they REALLY need to hear because they don't want to listen...they are still believe it's possible to make 1000%. I agree with you that day trading is like playing a fast paced game, but what the hell are you going to say to reach them? Most of them have to blow-out their trading accounts before you can get their attention and even at that point they want to blame the software, the vendor, the market...it's never their fault. I think Day trading is a lot more demanding than position trading and the worst part is (especially as you get older) you need to be in great shape to deal with the mental exhaustion because it can be nerve racking at times....this is not only with MTPredictor, but with ANY day trading program. If a person spent 2 years in front of a real-time screen for 6.5 hours each day and then you will have an idea of what I'm talking about. Day trading can be very rewarding for the right person...just make sure you are the right person.

I do mean stare at it all day because if one is to take all trades thrown up by any methodology (including MTP) you cannot leave the computer even to get a cup of coffee, lunch or attend to bodily functions. Still, if that's what people want then its a matter for them. EOD RIP

Almost all of the clients I work with that are trading 50k and above are not day trading, they don't have the time nor the inclination (most of them will refer to it as sitting in front of a slot machine all day), they are too busy running their business or career. Believe me, End of Day is not dead...and never will be because it is the standard for most professional traders. Steve just remember, what people want is not necessarily what is good for them. Eventually they will figure it out...and I'll just keep sticking screw-drivers in my head to get he point accross :eek:

As the Great Joe Girard always says: The elevator to health, wealth and happiness is out of order, you have to take the stairs one step at a time. This is very true with trading because there is no "fast track" plan or short cut to profits.

All the best,

[Matt Bowen]

Hi Jswin,

The interesting thing is that I've won 11R and lost 9R - so slightly up overall. I just closed Coca Cola for a 7.5R win in three days which was fun. According to most MTP users, I should expect 40% wins, rather than the 12% I've achieved so far.

Let me just say this... you are to be congratulated for this effort. The fact that you were able to sit through (what was probably an immediate drawdown) and then prevail to your first 2 large r-multiple wins is a massive accomlidhment... good for you :) Excellent Job!!!

All the best,

[jands]

Hi Matt,

Just curious, when you are sticking screwdrivers in your head do you predrill to make it easier or are you a tough guy and stick them right in without predrilling?:D

Jim

[stevej]

I've traded MTP EOD for nearly three months with real money after paper trading for approximately six months. I am very picky on my setups - nearly all are automatic with full restrictions on and in addition to that I look for a good ABC pattern and only take trades in the direction of the overall market trend, if one has been established. If the market is consolidating I'll go long and short but generally not against the trend of the individual stock.

Closed trades: 17
Wins: 2
Loss: 9
BE: 6

The interesting thing is that I've won 11R and lost 9R - so slightly up overall. I just closed Coca Cola for a 7.5R win in three days which was fun. According to most MTP users, I should expect 40% wins, rather than the 12% I've achieved so far. In correlated markets like stocks I can see understand it is easy to go through a period of losses like I've experienced, so I am actually very impressed that MTP has held its own through a poor trading period and I expect it to achieve its 40% target and be profitable once it does. I'll post again after 50 trades.

My experience with US stocks is a W/L ratio closer to 30% than 40% and you cannot expect a run of 7.5R trades but with correct money management you ought to make a decent profit.

The real issue with stocks is they will be affected not only by their own characteristics but also by the wider market. Find a satisfactory way of assessing market direction then only go long in strong stocks in strong markets and vice versa in weak markets.

Does anybody have a reliable means of assessing market direction?

Steve

[Matt Bowen]

Hi Jswin,

I usually have the screw driver sitting right next to the phone, sometimes It feels like a manual labotomy :D On another note, looks like the fed is holding steady...buyers are back for more.

[Matt Bowen]

I want to thank Ian Parker for sending me this e-mail... it really is a perfect example of what we have been talking about here...Thanks Again Ian.

Hey Matt:

Been reading the forums and "Tharpes Thoughts" today really speaks to what you were talking about when it comes to the resistance of people when it comes to really see the picture.

Resistance to Issues - "Tharp Thoughts"

By Van K. Tharp, Ph.D.

When Jack Schwager visited Ed Seykota to interview him for his book Market Wizards, Jack found that he was the person being interviewed, not Ed. Jack would start to say things and Ed would indicate how the assumptions behind Jack’s questions revealed his psychological issues. As a result, Jack returned to New York with no interview. Instead, he mailed a set of questions to Ed to answer. Again, Ed turned the questions around into Jack’s issues. However, once they’d done this process about five times, the result was one of the best interviews in Market Wizards.

Ed’s approach is full of danger as a teaching tool. Socrates, who was well known for turning questions back on people, which is called the Socratic method of teaching, was poisoned. And Socrates didn’t usually enter into the most dangerous of areas—asking questions about the psychological assumptions behind what people do. Most people don’t want to know their issues. Indeed, they interpret anything designed to get you to look inward as a real threat.

Let me give you an example.

How do I develop a system in which I can be right at least 60% of the time?

Van: You seem to have a fascination with being right?

What do you mean? I just asked a reasonable question can’t you answer it.

Van: What if you could make money being right 40% of the time? Would that be acceptable?

You’re not answering my question. I want to know how to develop a system that’s designed to be right 60% of the time. But I will answer the last question—no I want to be right 60% of the time or better.

Van: I was looking at the assumption under your question. You seem to have a strong need to be right. You’d probably be a much better trader if you didn’t have that need. What would happen if you were wrong? How would you feel if you were wrong?

How can I learn anything? Why are you asking all of these silly questions? I’m not interested in being wrong, I’m interested in being right. Understood? You want to turn everything into a psychological issue. Not everything is psychological. It’s really hard to learn anything from you when you are always throwing out all of this psychological stuff. Can’t you just answer a simple question?

That’s an example of resistance to the issue. Neither of us gets anywhere. But what if the conversation went a little differently?

How do I develop a system in which I can be right at least 60% of the time?

Van: You seem to have a fascination with being right?

Well, I do like to be right, naturally, doesn’t everybody?

Van: Why do you want to be right?

Well, I’ve always worked to do a good job, to get good grades, and be successful. To accomplish that, you have to be right.

Van: Do you? What if you could be right 20% of the time and make huge profits – just because you cut your losses short and let your profits run? If you had eight 1R losses and two 10 R wins, you’d only be right 20% of the time, but you’d be ahead by 12R…that’s pretty good.

I never thought about it that way.

Van: So what if you just accepted losses when you got them, allowing them to be small losses and let your profits run when you have a good trade? Don’t you think that might be a good idea? And you’ll have trouble doing that if you want to be right all the time. For example, if you had nine 1-R gains and one 10R loss, you’d be right 90% of the time and still lose money.

Again, I never thought about it that way.

Van: So why don’t you just play around with the idea that you can be wrong and still be successful. Being right or wrong is a meaningless invention of your mind. Instead, what if you just developed a good system and practiced following it? A loss has nothing to do with being wrong. Instead, a loss has everything to do with following your system and not making a mistake. Doesn’t that put losses in a different framework?

When you start looking at yourself, you’ll find that there are lots of things that come up for you. You’ll start noticing the patterns that you repeat over and over again. And that’s one of the most valuable lessons you could ever learn.

So, let me ask you a simple question: How do you respond when someone turns what you say into a question about your psychological assumptions?

More Examples:

Q: What do you consider good performance in a system? How does my system compare?

Response: Why haven’t you set objectives? Do you have a need to be the best?

Q: I am considering purchasing a system. Does anyone have a recommendation for one that works that allows you to see code?

Response: What you really mean is that you don’t feel comfortable developing your own system. Why not?

Q: Here’s my strategy. What do you think of it?

Response: You appear to need other people’s approval to determine if your strategy is any good. Why? How about testing it to see if meets your objectives?

About Van Tharp: Trading coach, and author Dr. Van K. Tharp, is widely recognized for his best-selling book Trade Your Way to Financial Fre-edom and his outstanding Peak Performance Home Study program - a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at www.iitm.com.

Thanks Again Ian

[ccdltd]

I’ve always been interested in the high v low winning percentage argument. I agree that you can make money with a low winning percentage, the key of course being good trade/money management(this is how I trade). The crucial point here is I believe that most people cannot psychologically handle trading this way as it goes against their mental model of how the world operates.

Now, if we assume that one of the keys to long term success in the markets is the idea of compounding than wouldn’t a higher winning percentage method (with a greater frequency of trades) compound faster than a low one?

Naj

[Steve Griffiths]

I’ve always been interested in the high v low winning percentage argument. I agree that you can make money with a low winning percentage, the key of course being good trade/money management(this is how I trade). The crucial point here is I believe that most people cannot psychologically handle trading this way as it goes against their mental model of how the world operates.

Naj

Exactly............ now you know why 97% of amateur traders fails - simply because they cannot accept what is required to be successful in this industry (which is actually different form what normal life teaches them....)

Steve

[jswin]

Hi Jswin,



Let me just say this... you are to be congratulated for this effort. The fact that you were able to sit through (what was probably an immediate drawdown) and then prevail to your first 2 large r-multiple wins is a massive accomlidhment... good for you :) Excellent Job!!!

All the best,

Thanks Matt, and it would only be fair to point out that the only reason I had been able to take 8 or 9 losses straight up was that I'd read your courses parts 1 and 2 a couple of times and immersed myself in this forum for nearly a year. I was prepared in advance for a drawdown and knew how I'd deal with it. So, congratulations really go to yourself, Steve and Tony.

[jswin]

Nice setup on Dow 30 constituent International Paper triggered yesterday. I can't post charts to the forum yet - did anyone else catch it?

[Abirami]

Hi,
Some info about Forex TRade
Foreign exchange, forex or just FX are all terms used to describe the trading of the world's many currencies. The forex market is the largest market in the world, with trades amounting to more than USD 1.5 trillion every day. This is more than one hundred times the daily trading on the NYSE (New York Stock Exchange). Most forex trading is speculative, with only a few percent of market activity representing governments' and companies' fundamental currency conversion needs.
Unlike trading on the stock market, the forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the forex market is a 24-hour market

[dctommy]

Nice setup on Dow 30 constituent International Paper triggered yesterday. I can't post charts to the forum yet - did anyone else catch it?


I caught the IP setup & I am long 10 call contracts. So far so good.

I am experimenting with using MTP buy and stop loss thresholds to set my
option buy/sell signals, all tied to the underlying. Fire n' forget.

I'll let you know how it goes. Next step is to try credit spreads using
MTP.


dctommy

[Matt Bowen]

Hi Abirami,

Foreign exchange, forex or just FX are all terms used to describe the trading of the world's many currencies. The forex market is the largest market in the world, with trades amounting to more than USD 1.5 trillion every day. This is more than one hundred times the daily trading on the NYSE (New York Stock Exchange).

The Forex market might be the largest market in the world, but you also have more people losing money in this market than any other market... you'll see why in a minute.

Most forex trading is speculative, with only a few percent of market activity representing governments' and companies' fundamental currency conversion needs.

Forex may sound like an exchange but it isn't. It exists entirely in cyberspace with every broker and every bank having different prices for any particular currency. There is little or no regulation, even for brokers who register with the CFTC and the NFA. Forex brokers do not have to mark to market each day as do futures brokers. If your forex broker files for bankruptcy or absconds with your money you have zero recourse.

Unlike trading on the stock market, the forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market.

Yeah, which means you have absolutely no recourse!

Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world.

Do you know what those two counterparts are? The bank and the broker, the same people who are taking the other side of your trade. AND GUESS WHAT? That's more like a conflict of interest... but because this market is unregulated, they have a license to steal your money.

The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the forex market is a 24-hour market

Big deal...I can trade regular Futures contracts on these same exchanges... Ok, now let's see just how GREAT this market REALL is as outlined by Mr. Ross

WHEN TO NOT TRADE FOREX

Because so many people bombard us with requests about forex, we teach people how to trade it. Better to teach them the right way than to let them commit financial suicide. Nevertheless, we do not advocate forex trading unless you have a particular reason as to why you need to trade during the middle of the night, or you have a specific need to trade in currency pairs that do not involve the U.S. dollar If the U.S. dollar is involved and you are able to trade during U.S. market hours (7:20am-2:00pm U.S. Central Time) you are much better off trading currencies in the Chicago currency futures markets. Here are the reasons why:

Brokers can deceive you about there being no commissions. $30 minimum/round turn (called the spread) is in reality a commission that eats up your capital at an astonishing rate. Even winning traders lose money and end up with negative results because of this outlandish overhead. Trading futures, you should never have to pay a broker more than $10/round turn, and usually quite a bit less than that.

Guaranteed fills. True but… The only way a broker can guarantee fills is for the broker to become the buyer or seller of last resort. That means the broker is running a bucket shop. All forex brokers are the buyer and seller of last resort.

Brokers do not all tell the truth about volume. They show the volume for all forex trading, which doesn't even come close to the volume they truly have at their own brokerage, which is where you are trading. Volume in currency futures is considerably higher than the volume traded at any single forex broker, often greater by a factor of ten.

Leaning. Brokers say they are charging you a 3 pip spread to trade the popular currency pairs. But in reality a broker may be making as much or more than 10 pips on your trades. He does this by skewing prices. Since you are not trading at an exchange, the broker can feed you any price he wants to feed you. He can buy at the bank for perhaps 7 pips less than he sells to you. He then charges you 3 pips for the privilege of being ripped off for a total of 10 pips.

Unregulated. Forex may sound like an exchange but it isn't. It exists entirely in cyberspace with every broker and every bank having different prices for any particular currency. There is little or no regulation, even for brokers who register with the CFTC and the NFA. Forex brokers do not have to mark to market each day as do futures brokers. If your forex broker files for bankruptcy or absconds with your money you have zero recourse.

No guarantee. If a forex broker does go out of business, you could lose all your money. There are no guarantees and no one standing behind it. Futures brokers are required to mark to market at the end of every session every day. They have to put up cash to cover every open trade on their books. Futures brokers have gone broke, but no futures customer has ever lost one cent of the money in his trading account because of a failed broker. Nor have they had to wait for their money. It is immediately available.

You can get exactly the same action in the euro fx futures as you get in the "Euro" forex. Commissions are as low as one tenth per round turn depending on volume, through a regulated broker, trading electronically at an exchange where you know the true price of the currency.

What is the true price? A forex broker can only give you the price of a currency as quoted to him by the bank through which he trades. Banks have differing prices for a currency. You never know what the real price is because there is no central exchange through which all prices flow. Besides not knowing the true price from the bank, you can also be deceived by "leaning" or "skewing" of the real price at the bank. Forex brokers commonly lean the prices.

Forex brokers are not necessarily truthful. They lure people in with hype and false advertising: "No commissions!" "Guaranteed fills." "24 hour trading:" Who in their right mind is going to trade in the middle of the night unless they have a special need. While it is true that total forex volume is greater than in the futures, futures, volume at the exchange is greater than the volume at your broker for the most popularly traded currencies. The only place where the liquidity differential matters is in currencies like the Mexican peso, the Brazilian real, and somebody's drachma. Those thinly traded currencies may be more liquid in forex. But if you trade anything but the few most liquid and popular currencies, you are going to be paying at least 5 pips, and often more. Unless you have a particular commercial need to deal in Polish zlotys, Indian rupees, or some other thinly traded currency, you don't need forex.

You are told by forex brokers that there is little or no stop running. This is one of their biggest and boldest fabrications. The truth is there is far more stop running in forex than in futures, and possibly as much stop running as in the stock market. I have friends who work in forex as well as many traders who of necessity have to trade forex. One of my students is a market maker in forex. These are people who should know, but in case you don't want to believe me or them, simple observation of forex trading will reveal the vast amount of stop running that takes place there. Who is it that runs the stops? Why it is your friendly forex broker. The broker has a vested interest in seeing to it that your orders are filled. Stop running is nothing more than order filling. The broker sees to it that everybody's order gets filled.

Probably you have heard that if you are winning regularly in forex, you may be barred from trading. Is this true? Yes it is. The fact that it is true is just another proof that when you trade forex you are trading at a bucket shop. In the book, "Reminiscences of a Stock Operator," we are told that Jesse Livermore was banned from trading at certain stock brokers because they couldn't stand him beating the house. The same thing is true with many forex brokers. Since they are the ones guaranteeing you a fill, they are in effect the buyer and seller of last resort. The truth is that most forex brokers have precious little liquidity at their firms. In order to give you the impression that there is liquidity, it is the broker who gives you your fill. It is the broker who does the stop running that supposedly doesn't exist in forex. But if you are regularly beating the socks off the broker, he will ban you from trading at his firm.

Now you know the truth about forex. I challenge any and all forex brokers to prove that I am wrong. I will change or remove anything proven to be untrue in what I stated above.

Is there hope for a trader who wants to trade forex? Yes there is. There are forex brokers and retail banks where the trading is legitimate, with no leaning and a very small spread. You will have to do your due diligence in finding out. For the most part, these brokers and banks are not in the U.S.

There is yet another hope on the horizon for traders who want to trade forex in a regulated venue. Sadly it will not take place until 2008. At that time you will be able to trade forex on Globex at the CME, in a regulated environment and with uniformity of prices.

Now, there are people out there who make maoney trading Forex, but you better be aware of what you are up against before entering this market...and for God's sake, don't try to trade this market on 3 and 5 minute charts...it's impossible with leaning and stop running that goes on in this market.

[pbb]

Just find a reliable broker, forex is ok as long as you use a good broker. You can trade cash at the same broker as you trade e-mini's with. If you are really affraid to loose some of your funds, don't trade anyway. Or at least don't put all your funds with just one broker. If you are able to gain +50% a year on your funds invested just because you are using mtp, why should you then be affraid to loose some of your funds. You can make it up next year!

[jswin]

I've traded MTP EOD for nearly three months with real money after paper trading for approximately six months. I am very picky on my setups - nearly all are automatic with full restrictions on and in addition to that I look for a good ABC pattern and only take trades in the direction of the overall market trend, if one has been established. If the market is consolidating I'll go long and short but generally not against the trend of the individual stock.

Closed trades: 17
Wins: 2
Loss: 9
BE: 6

The interesting thing is that I've won 11R and lost 9R - so slightly up overall. I just closed Coca Cola for a 7.5R win in three days which was fun. According to most MTP users, I should expect 40% wins, rather than the 12% I've achieved so far. In correlated markets like stocks I can see understand it is easy to go through a period of losses like I've experienced, so I am actually very impressed that MTP has held its own through a poor trading period and I expect it to achieve its 40% target and be profitable once it does. I'll post again after 50 trades.

I have now completed 28 trades and have two currently open. Utilising the same trade selection criteria outlined above, my results are now as follows:

Trades won: 6 for 23.35 R
Trades lost: 15 for 15 R
Trades broke even: 7
Open trades are winning and would provide 4 R if closed now.

I am pretty chuffed that MTP has come back strongly from my initial drawdown to have me nicely in profit :)