Pipsqueaks #3: Forex Automation

I was pleasantly pleased this evening when my daughter (she’s seven) volunteered to wash the dishes. Of course, she’s not really washing the dishes, she’s loading the dishwasher. In a few short years, I probably couldn’t get her to do that using all the coercion I could muster. Oh the joys of parenting… I do reflect fondly how, at my daughter’s age, my wife and I grew up in households that didn’t have a dishwasher, or a microwave oven, or even a garbage disposal. My family did however have a clothes washer and dryer and an “extension” phone, luxuries unknown to my wife’s family, living the former Soviet Union in the 70s and 80s. Back then if you were really well-to-do you had this wonderful gizmo call a car phone. I remember the first time I saw a cell phone. A friend of mine who was a real estate agent had just acquired one, one of those early Motorola ” brick”  phones. I shudder to think what it cost, but today smart phones are as ubiquitous as sliced bread. We dare not leave the house without them. Before I had a cell phone I could actually remember phone numbers…

A Curta Calculator. Now what self respecting geek wouldn’t want to have one of these?

One of the things I coveted as a child was this contraption called a Curta calculator, that would help you with your number crunching and it only set you back $150 at a time when 4 function electronic calculators were just hitting the market at around $400 (and today you get them free). And what about our personal computers and laptops, just where would we be without them? Land of the living is what I really want to say. My first computer was an LNW 80 kit machine, a TRS 80 clone, that I acquired when I was 20 years old and no one had computers in their homes. Oh, the promise of automating one’s homework and all things typewritten were fanciful ideas at the time, but in reality it was just a clunky contraption that demanded gobs of time trying to learn how to get the darn thing to work.

Certainly computers have come a long way since then to the extent that we hate to imagine life without them (remember having to keep a healthy stock of stamps to send  out all those bills each month?). And as much as I hate to admit it, I’ve always liked the darn things, probably because of the potential they presented in terms of the things they could do versus that which they were actually capable of doing at the time (in addition to being a pencil-necked geek at heart as well). Obviously one of the benefits of personal computing coupled with broadband is the ability to perform Forex trading from the comfort of one’s own home. Now, just about anyone can participate in the world’s largest market and trade currencies, just like the big banks. Remember in their infancy, computers became the workhorses of large banking institutions as, not only were they aptly suited for doing vast quantities of number crunching, but also because the same institutions were the only ones with the financial resources that could afford to pay for them. And, just as we can have our own computers, we can now dabble into what was once the domain of the big banks – currency trading.


So Forex trading instinctively appealed to me, I guess because I once again fell in love with the potential while quietly agonizing over the reality. Like a lot of folks I’m using meta-trader 4, and yes, there’s still a lot of thumbing through charts ,manual handwork, thumbing through charts, changing settings, thumbing through charts, and such, but there are also resources out there that will help deal with the tedium of many mundane tasks. What I want to talk about are scripts and expert advisors (EAs).


I’ve never really noticed that our chat room ever really touched upon the usage of scripts but they are something that I’m rather fond of. For the benefit of those who are not familiar with scripts or it even EA’s, a script is a program code which is executed one time, and an EA is a program code which is executed on every tick of a chart. Scripts are great at automating mundane tasks, such as changing the timeframe of open charts, or closing open charts, or closing open positions, or closing open short positions, or closing open long positions, and so on. EA’s can function as indicators, generate signals, move stops or auto trade your account. Now this is the bit that really fascinated me. Imagine, a piece of software diligently working 24 seven for you growing your brokerage account. Of course that’s the promise, the reality can be very different. Or so I came to learn.


I remember experimenting with my first auto traders. I found them on the Internet, and they had interesting and catchy names which belie their true functions. “Forex Gold” I think it was called was an early bit of code I experimented with that turned the alchemists’ dream on its head because all it excelled at was turning gold into lead. Another disappointing auto trader was called something like “Pip Finder” which would have been better off being called “Pip Loser” as teaching your dog to punch keys on your keyboard would have yielded better trades than that dog of an auto trader. Then there was “Forex Magic” – your account balance disappears like magic right before your eyes.


Okay so I’m exaggerating a little, but for me auto traders do have their place; however, when I use one, with few exceptions, I let them generate signals but I choose to place the trades manually. That’s just my preference. My exception to this are auto traders that will trade to a specific rule are not influenced by market conditions (like the Sominex that will place pending orders according to a preset rule at a specific time – it not only speeds up the speed at which the pending orders can be placed on eliminating the need for manual calculation, it will also do this in the middle of the night, while Johnny is happily asleep dreaming of the profits that will be his when he awakens in the morning).


Otherwise I want final say in trade placement called by an auto trader. One of my strongest reasons for doing this has much to do with my awareness that Forex trading can be an easy method to make a lot of money if you know what you’re doing – but “knowing” is just the first part – with practice and experience you will develop a feel for the rhythm of the market that no piece of software can match. You see the data and you look at the charts, you’re aware of the coming news, and you know in an instant whether you should take a trade or pass on it.


Now it is not my intention to be overly critical of auto traders; in fact I use them every day; I run the Sominex EA quite often and I am constantly looking at and evaluating new EA’s in the same way I’m experimenting new strategies and new trading ideas. And that for me as part of the fun of trading – the experimenting, the new discoveries, and so on. Let me share something that I’m currently trying out as a trading idea. Having spent many a late night studying the behavior of the London session and watching that transition into the New York open I picked up a tidbit or two. There’s something interesting to look at.


Using 15 minute charts, charting EUR/USD or GBP/USD, look at the spot price between 730 and 8 o’clock NY time relative to the 21 EMA. Typically starting from about the 7:30 candle EURUSD Free Forex Strategy(or the 7:45) price will move towards the 21 EMA, which makes a nice little prelude trade to the NY open. Some days it may take a few candles to get to the 21 EMA, but it does its best to get there. Go through the charts and check it out, you’ll find it’s pretty interesting.


Now, at the New York open the market will likely form it’s high (or low) before noon NY time. And often, it will follow the trend of the London session, a very strong indicator would be bull candles above the 21 EMA for a buy position, and conversely, bear candles below the 21 EMA for a sell position. When price is hovering close to or crossing the 21 EMA, you can wait for several candles to form to confirm the trend. It is often (but not always) consistent with the 200 SMA, just something to help forecast the trend direction. I will not trade when the 200 SMA and / or the 21 EMA are flat or if price action is just moving sideways. Go through the charts, you can find some consistency with this pattern with other currency pairs as well. At the very least I think it’s something interesting worth looking into.


The sharing of new ideas and new strategies are just some of the benefits that members of Slick trade can take advantage of. So if you’re new to Forex or Nadex trading or just interested in learning more, you might consider becoming a member of Slick Trade. You’ll get access to strategies, auto trader EA’s, educational materials, and the helpful support of other traders just like you.


Have a good week, and, as always, thanks for reading.




Next week: Basket trading… or was that a basket case? I never can remember…


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