After July 16th 2011, US clients can continue to use Dukascopy’s Trading Systems (software – Jforex) with Dukascopy’s US partner. Unfortunately, the US partner has not been mentioned quite just yet but, I will update this post once I have the details. We’ll continue to have access to the feature enriched Jforex platform. However, we will be limited by the US regulations such as obeying by the FIFO ( first in, first out), no hedging, and lower leverage rules. We’re basically leasing the software from Dukascopy and being kicked out their front door unless you are an Eligible contract participant (millionaire).

FairTradingTech teamed up with Dukascopy as a third party provider to finally offer MetaTrader’s popular trading platform to Dukascopy’s customers for a small IB commission. The application process is lengthy and similar to Dukascopy’s application but the added steps would pay off in the long run as Dukascopy’s deep liquidity, honest ECN, and financial solvency defines them as the best FX broker in the world. With benefits like these, I’ve been waiting patiently to use my MetaTrader tools on my Dukascopy account in an efficient way for a long time. Unfortunately by the time a solution was available and my application approved, I will only have 30 days before my account is moved to US Soil. At that point, all the benefits that once enticed me to trade with Dukascopy will end and prolonging the status of my account will no longer be meaningful. Another disappointment from the regulatory environment found within the USA.

Alpari US has a floating spread on EURUSD around 1.5 pip, which is excellent and it is about half a pip better than STFX. Zero Commission with a regulated broker is also quite nice, but when considering a day trading strategy I really need ECN instant execution. Through the past month I’ve experienced enough requotes to find it annoying but not enough for me to close my account. I doubled my deposit on June 1st as I had plans to use Alpari for the long haul.

However, I almost forgot about an ECN FX broker less than a 40 minute drive away from me. MB Trading offers the transparent instant execution that I’m looking for. With an average 0.9 pip spread on EURUSD with a small $2.95 commission for a std lot, I’ll be getting spreads close to what I was getting at GoMarkets. Thats a big saving when I can easily make over 100 trades a month. Also, I started to trade GBPCHF and by switching to MB I’ll be making about 2 pips more per trade compared to Alpari. With MB’s instant execution, difference in spreads, and a closer server I’m sure it will increase my profitability and make my day-trading experience easier. How could I forget about MB?

An article by Craig Ross from Apex Futures. Live discussion here.

1. Efficient Market

Emini S&P 500 (ES) futures have a tight bid-ask spread of typically 1 tick or $12.50 per contract. This spread should be considered your cost of entry (not unlike commissions) to enter and exit the market. The wider the spread, the more the trade has to move in your favor just for you to get to break-even.

Since Forex firms “create” the market and therefore, the bid-ask spread, they can widen it to whatever they see fit. Even when Forex firms advertise a fixed spread, they typically reserve the right to widen when they see fit. Typically, this spread is anywhere from $15 to $50+ depending on the currency pair and market condition.

2. Central Regulated Exchange

All ES trades are done through the Chicago Mercantile Exchange and its member firms where all trades are recorded in an official time and sales. All trades are made available to the public on a first come, first served basis and trades must follow the CME Clearing rules, along with the strict CFTC and NFA rules.

Forex trades occur “over the counter,” (off any exchange floor or computer) where there is no centralized exchange with a time and sales report to compare your fill. Traders with different firms can experience different fills even when trades are executed simultaneously. This can become a conflict of interest since your order may not be getting the best possible execution.

3. Low Commissions

ES commissions are only about $2.00-$3.00 per contract and larger traders can even lease a membership to further reduce their fees. This low transaction cost allows daytraders to get in and out of the market without commissions significantly cutting into their profits.

While most Forex firms do not charge a “disclosed” commission, they make their money by creating their own bid/ask spread and taking the other side of your trade, typically costing much more than the transaction costs of the ES. FX ECN brokerage firms charges $5-10 per trade per lot, which can really eat into your potential day trading profits.

4. Level II Trading

You can see the 10 best bids and 10 best asks along with the associated volume in real time and you are allow the placement of your order at any price you wish when trading the ES. This transparency of the market’s orders allows ES traders to see where and how many orders have been placed ahead of them. For short term daytraders this information may be very valuable and may be used as an indication of future market movements.

Most Forex platforms do not offer Level II type pricing and for the few that do, since there is no centralized market, it is only the orders that their firm has access to and not the entire market. Also, most Forex firms do not allow you to place an order within a few ticks of the last price or between their posted bid/ask spreads, further limiting your trading abilities.

5. No Interest Charges

For futures trading the daytrade and position margins do not require you to pay any interest on the remainder of the funds. The $500 posted for daytraders is a performance bond and traders do not pay interest on the remaining value of the ES futures contract. No special type of futures trading account is required to be able to take advantage of the daytrade margins.

Forex has a cost of carry associated with its trading which means interest may be charged or paid on positions taken. This can be a benefit for position traders that focus on carry trade position building strategies. Also, most Forex brokers do not have increased margin requirements during off hours.

6. Liquidity

The Emini S&P futures trade an average of over 2,300,000 times a day which allows for great price action, volatility and speedy execution. At a current approximate value of $50,000, that is over $100 billion changing hands every trading day.

Forex markets are as liquid which means movements can be shaky and erratic, making daytrading more difficult. Forex firms like to make the claim that the over the counter foreign exchange market trades more than one trillion Dollars in volume per day, but most people don’t realize is that in most cases you are trading against your broker’s dealing desk rather than the true interbank market.

7. Tax Advantages

US Futures traders have favorable tax consequences for short term traders since futures profits are taxed 60/40, which means that 60% of the gain is taxed at the maximum rate of 15% (similar to long-term gains) and the other 40% is taxed at a maximum rate of 35% as ordinary income. Securities positions held for less than 12 months are considered short term gains and taxed at 35%.

8. Safety of Funds

When you trade the ES you are trading with a Commodity Futures Trading Commission (CFTC) regulated and National Futures Association (NFA) member firm which is subject to the customer segregated funds rules laid out by the US government. In the over 100 years of futures trading there has never been a loss of customer funds due to the failure of a clearing member because of these rules that are in place. While there are never any guarantees that you can’t lose money, this track record is unprecedented.

Many Forex firms are unregulated or on foreign soil. Therefore, there may be no protection of customers funds. Even with regulated US Forex firms, funds are not considered segregated and your investments are not in segregated accounts. If a regulated Forex firm goes bankrupt, clients funds are not offered the same protection as if they were in the futures market.

9. Deep Market

The S&P 500 index is comprised of very actively traded stocks with some of the largest market capitalizations and with hundreds of billions of dollars invested in some fashion in them. With such large dollar values and high trading volume it would be very hard to manipulate its movements.

On the other hand sometimes it is easy to move or even manipulate a particular stock and even a foreign currency market. George Soros has been accused of intentional driving down the price of the British Pound and the currencies of Thailand and Malaysia. Many stock “promoters,” insiders and markets makers have been convicted of manipulating stocks.

10. Volume Analysis

Volume can be one of the most useful indicator that a day trader can use. Volume can be used as indication of the validity or lack thereof, of a particular move. In other words combined with other indicators and/or chart patterns volume can be used to confirm a move in the market. Most market technicians would agree that a move made on relatively light volume is not as significant as a move made on heavy volume.

Since the Forex market is over the counter (OTC), there is no centralized exchange with an accurate record of volume. So what might appear to be a significant volume increase on a Forex chart, may just be a false move. To improve your accuracy demo a LEVEL 2 Futures Platform today.

CME Group Inc, will increase crude oil margins another 25% at the closing of the bell making hedgers and speculators fill in the gap to cover their overnight positions. For overnight margins, crude will be $8,438 per contract from $6,750. History has a way of repeating itself therefore, we can expect a temporary sell off later on today as traders readjust their positions to compensate for the increased margin. Silver and Gold took a huge drop after margins were increased just a week ago so we are expecting the same to happen to crude oil prices. Currently June Future contracts are trading above 103.70 near todays highs of 104.22. We are expecting to find support just under 102. The Mississippi Flood is causing an increase in prices as the flood may decrease speculative output supplies. The margin increase will have an immediate effect on the market as the concerns of flooding will continue to keep the bullish trend alive.

Gold above $1505

Crude Oil June Contracts above $111.20. A $2 rally since US Open.

EURUSD makes new Highs as Interest Rate Hikes are in near term to control inflationary pressure. Currently trading above 1.4500 with a high of 1.4547

Silver continues to push new highs in each trading session. Currently trading above $45.25

The shocking news… Standard + Poor’s has concerns for US Debt. Possible downgrading in the future. It’s not shocking news to most investors as the dollar continues to slide off the cliff and commodities continue to soar. The US government has held a AAA rating for the last decade even with its uncontrollable spending habits. The S+P500 sold off yesterday to only rally even harder today as the US Dollar is at its weakest point against 13 of the 16 most traded currencies . Currently, S+P trading above 1327.25

High Yield currencies continue to rally against the weak US Dollar despite the European debt crisis. A perfect example of how the market can stay irrational longer than you can stay solvent.

To say the least, I’ve had a streak of terrible luck trading through out the last 4 months. The first unfortunate event was on December 13th,2010 when I decided to use an Expert Advisor during the most volatile trading session taking a 90% gain to a 20% loss. The second unfortunate event was a technical issue that closed my 100% offset (Hedge=Break-Time ) at a 1 pip gain exposing me to the market while I was away. The third misfortune was from trading against my analysis after already completing my daily goal. And, so on. Now, that I look back on all these mistakes, they were all preventive with one easy solution.

VPS -A Virtual Private Server is located remotely and will work as a backup that will run 24/7. The server will act as a host for my trading platform. Within the trading platform, I will run a risk management software that I have developed. This software is the key to my solution. It has the key ingredients that I am unfortunately missing. Therefore, there is no better of a name than “Discipline Trader” EA. This software is basically designed to save my a** when I can not monitor the market, when I’m suffering from sleep deprivation, or if I run into any technical errors. It’s simply a risk management Expert Advisor and a guide to follow your trading plan. In the simplest terms, it will follow the trading plan regardless of outside influences and since my trading style requires a high degree of concentration, having a partner beside my side is exactly what I need. Each weekend I will plug in a new trading agenda that will include preset trading windows fit around my schedule. It will include a fixed stopout level preventing loss, limit the amount of open positions, and close all positions once the daily goal is met. If I can not follow this hard coded trading plan, the software will automatically intervene preventing any further or future loss. Not only is it smarter to always have a back up plan, but for myself, it is the only solution to preserve capital.

• Learn from your mistakes by acknowledging you have a mistake in the first place.
• Accomplishing difficult tasks will increase the chance and frequency for mistakes and failure.

My mistakes are not stupid or complex but simple and easy to fix. Finally, a solution…

Economic News Releases normally increase volatility, risk and uncertainty, however, if the technical analysis supports the direction of the fundamental forecast, then the outcome can be quite rewarding. With a positive forecast of an interest rate hike, investors have been bullish towards the British Pound since the beginning of this year. GBPJPY’s low of 125.50 on January 1st compared to a high of 135.20 currently, a corrective move wouldn’t be uncommon. UK Claimant Count Change will be released 90 minutes into the London trading session with a slightly negative forecast compared to last months 3.8k surprise. This deviation may be corrected this month offering a reversal to temporary support around 134.00. We will be looking for a trend-line Break to the downward side for another short position, as well as another position if current support of 135.00 is broken. Here is our trade plan. This will be a perfect iDRAW Setup.

We all know that commercial EA’s are not worth the $150 price tag but the idea of letting a robot make money 24/7 do have its persuasion. We often push aside the historical evidence of previous trading robots failure and cross our fingers as we place our newly purchased expert advisor on our demo/live account hoping to see some positive gains. Well this has been the dreams of many experienced and new traders/investors. The truth is, you get what you pay for.

Now for myself, I’ve never purchased a trading robot. However, I’ve definitely had the same dream. I dream of a day where I can take a break and let a robot do some trading of its own. As a human we have our limitation and so does a robot. We face fatigue that can lead to bad judgment and a robot doesn’t quite have an ability to learn from its mistakes or make decisions based on the most sudden changes. With a combination of human instinct and the durability of a robot the outcome will surely be stable.

After several years of trading, I figured it was time to take my experience and create a trading robot. This trading robot will not be semi-automated like the iDRAW, but an Expert Advisor designed with a strategic entry and exit system that will be fully automated. Trading levels are predetermined on historical data eliminating the use of lagging indicators; entry logic is based on support and resistance levels. A dynamic stoploss and an emergency stopout level has been added after December 13th’s incident. Risk management controls number of open positions, monitors equity drawdown, and is prepared to deal with unexpected market conditions. We have taken what we can from our previous mishap and created a solution to prevent problems in the future. We will also continue to separate our manual trading accounts from our trading robot to prevent a second mishap.

What happened on December 13th:
The market opened from its weekend rest and started out with a small range as little market news was available and only a few economical reports were coming out. Gold had most of the day trader’s attention with high volume and an unstoppable bull run. Most FX majors moved in a tight range offering us over 20+ scalps on EURUSD after a long 10 hour trading session. Our goals were met and it was time to call it a day.
Elite Trading Team (pipinvestment1) Dec 13 2010 at 03:20-Trades: 21 Trades –Pips: 53 pips–Market: SUNDAY Asian Open till London: Very Low volume: 20 Pip Range for 8 hours: Choppy market – Small Long Breakout — Max dd: 15 pips

What happened over the next 12 hours is what took an equity gain of 90% to a 20% loss. We were forward testing our trading robot while we were scalping and the performance was quite impressive. 5 wins, no losses, minimal drawdown and this were all within the first 10 hours of the market being open. I could not resist the temptation of making some extra pips while I was asleep. I placed some price alerts just in case the market momentum increased after the London open and I was off to bed. It felt like as soon as I was asleep the sound alerts went off. I opened up the laptop to discover multiple positions were open, the momentum was still increasing, and I was a cup of coffee and 6 hours of sleep behind schedule before I could make the right trading decisions to manage these open positions. I placed an emergency stoploss , another price alert, and I was hoping I could get some sleep before making the next judgment. It wasn’t more than 90 minutes later that next sound alert went off… Unfortunately, the lack the sleep led to poor decisions that ultimately crippled my account. The first mistake was using the trading robot while I was asleep and the second mistake was trying to make crucial decisions minutes after being woken up. Another lesson learned and a misfortune to grow from.

Prevention: I’ve become a successful trader by learning from all the mistakes that I have made. As I make new mistakes, I review what took place and create a solution to prevent the scenario from happening a second time. I would like to share with you a trading indicator that will display Equity Drawdown. This indicator will tell you in Dollars your current drawdown and it will also display the dollar amount needed to reach 2% 10% 20% and 30% drawdown levels. If you would like a Free copy including source code click here. or email me.

I created this indicator to speed up my thought process, as a trader’s life line is his equity. In some scenarios we do not have the time to calculate our drawdown percentage. In the past, I have relied on Myfxbook for the most up to date statistics, but with a 5 minute delay this wasn’t suitable for everyday trading conditions. I had to design an indicator that would calculate my current drawdown level as my account balance grew. Now, this indicator will give you an up to date overview of your account. I also added a Tick count to ensure that you are connected and the indicator is functioning at every new tick. If you have any suggestions of how we can improve this indicator please leave your comments below.