Strategy Overview (Spot FX and CFDs)
This strategy focuses on spot FX majors and minor and respective cross rates.
The core strategy is built out using a systematic fundamental idea generation process as part of the WISH Framework. I use the systematic idea generation process to form long short views based on relative inflationary or deflationary pressures of analysed countries. The strategy focuses on the Majors and Minor Cross rates and I use historical economic data with quantitative models to asses relative strength weakness and possible policy of respective central banks.
Positions may be taken for short term discretionary entries or for longer medium term time horizon of 1-3 months. Stops are calculated based on historical volatility of the asset and potential soft targets are calculated again via 1-3 month travel of the currency based on recent historical volatility.
In trade management is effectively a trend following system where we load up onto winning trades, adding to winners and protecting winning trades by trailing stop in front of the average buy price.
The specific risk limits are set by the the proprietary trading firm/funding agent. However I have adjusted and lightened my own exposure to ensure longevity of the capital under management.
- Max exposure limit 5 x margin.
- Single position exposure limit 25% of max exposure.
- Single position risk limit percentage stop placement -1.5%.
- Tradable set, majors, minors and crosses.
- Draw-down portfolio hard stop/limit -6%.
- Scaling into trades aloud
- Scaling out of trades aloud
- Holding over weekends aloud (5%er prop)
- Holding overnight aloud
Strategy Overview (Futures Intraday)
The funds main focus is to use fundamental global macro analysis to form a bias on market direction for multiple asset classes in the futures market. Executing momentum and mean reversion strategies on outright positional trades and also spreads.
Trade Plan and Rules
Important rules to live by:
- Capital and account preservation is most important.
- Consistent risk management and sticking to trading rules critical to success.
- A loosing trade if handled correctly can be the best trade of the day.
- Process is king, consistency on trading process and staying on plan will lead to long term profitability.
- Trade only if you understand current sentiment and overall market conditions.
- There is always another trading day round the corner.
- Focus on one good trade at a time.
- All you need is one good trade per day, search, plan and execute that trade everyday.
- Read this document everyday before trading and before every planned trade.
- Must complete daily trading plan, strategy and setups before trading.
- Before entering a trade, must run through trade entry checklist (below).
- Stops may never be widened once trade is placed, early exits are aloud.
- Follow scaling plan, no deviation.
- 3 consecutive loosing trades within one trading day – stop trading.
- Negative 5% on the day, stop trading and move to sim.
- 3 consecutive down days – move to sim for 1 day
- Negative finish on the week – move to sim until confidence returns.
- Do not revenge trade, do not overtrade, stick to rules.
Account scaling plan, position limits and stops:
- Outright position risk limit is 2% of account.
- Spread position risk limits is 3% of account.
Position sizes may vary, contract limits may increase or decrease depending on overall account balance.
- Currencies: 6E, 6B, RP, 6A, 6C, 6S, 6J, 6M
- Fixed Income: ZT, ZF, ZN, ZB, UB – ICS Spreads FYT, NOB, BOB/BUB
- Metals: GC
- Energy: CL & 12 month calendar spreads (ex CL Dec17: -CL Dec18)
- Indices: ES, NQ, YM, RTY, NKD, DAX, FESX
- Is this area where market participants are likely to move the market and actively show interest?
- Are you with market direction and current sentiment are we with the current trend?
- Define the trade setup and strategy (Classic, Aggressive, Breakout, Reversal or Range)
- What are the correlated markets doing, is there confirmation in at least one other market?
- Check session time, is there enough volume during the current session?
- Check calendar, news and data release schedule is free.
- If you are trading data, do you know what is expected vs previous, do you understand the data?
- Does this trade meet the minimum risk/reward of 1:2?
- Is the stop placement and position size within risk parameters?
- How likely is the trade to hit predefined targets?
- How long are you willing to let the trade play out in minutes or hours?
- Are you sure and willing to put on risk for this trade, in your mind grade the trade already?
- Press record for trade screen capture recording.
- PLACE TRADE.
In trade management:
- Monitor order flow.
- Monitor correlated markets.
- Monitor news flow, ransquawk, tweetdeck and bloomberg.
- Derisk trade as soon as possible (first target, stop to scratch).
- Allow trade time to play out, allow minimum amount of allocated time for trade as per trade plan.
- Take profit if its within 1 or two ticks of the target, get green on the screen.
Post trade management:
- Stop trade recording.
- Complete post trade analysis, review and write-up.
- Publish trade video and review write up to blog and you tube channel.
- 2-3 trades per day on average.
- Average positive day: + 5% on account
- Exceptional positive day: + 9% on account
- Average negative day: – 2% on account
Disclaimer: There is substantial risk in trading. A loss incurred in connection with futures trading can be significant. Target Alpha Trading makes no claims whatsoever regarding passed or future performance. Any Strategy is for educational purposes only.