A little bit about goal setting ..

I think it is essential for every trader to set goals in life. I read recently the popular book "Think And Grow Rich" written by Napoleon Hill. Napoleon Hill was given the task to examine the most successful people, by that time the most wealthy man Andrew Carnegie. The reason Andrew gave Napoleon the task, was that he had one of the qualities that successful people have, "do more than people expect from you". That means that in every task, he works harder than he is paid for. The books title does not refer only to accumulate materialistic riches, but also how to get a life with love, friends, no fear of failure, living healthy and being confident.

The basic principles to success are:

1. Set one main goal in life
2. Set secondary goals that lead to the main goal
3. Program yourself into success mode

The principle is to program your subconscious mind in accepting yourself as a success. You have to dream every day about your main goal and imagine yourself as you are when you have obtained it. If you want to be a professional mutual fund manager, going every day to work in a suit driving a Mercedes, you have to imagine yourself every day as you would already live like that. Surround yourself with successful persons not with pessimists. And also create your own master mind group, with people that have similar goals and want to succeed. Share your knowledge with them and in exchange you will get knowledge from them.

One of my favorite motivational speakers: Brian Tracy

Donchian Price Channels

As I discovered the technical analysis of the financial markets for the first time, I read a book about a position trading strategy with the Donchian price channels. The price channel was developed by the famous commodity trader Richard Donchian. It simply indicates the highest and lowest points of n periods of the price.

This strategy used two periods a 55-day and 20-day price channel. The 55-day channel was used to enter positions and 20 for exiting them. In addition to that the strategy has a few enhancements: Exiting positions if the Average Directional Index of a 14 period shows a peak over 70 points. Positions are also closed if after breakout the price does not close over the breakout level within five days. This strategy was developed a few decades ago, so I was interested if the strategy was still valid, so I did a strategy test on the EURO/DOLLAR with Excel.  

The first thing I noticed, when I entered the trades into Excel, was that this strategy carries an enormous amount of risk. Already in the first trades there is a loss of 1000 Euros, which is a 20% draw down! As the cumulative amount of money compounds, the losses and profits get bigger. If there would have been five losing trades in the beginning, the virtual account would have been gone.

The worst losing trade happened on the 27.07.2010 with – 8140,15 € and the best trade was opened just before the worst trade on the 22.4.2010 with a profit of 15 737,78 €. As the capital accumulates, the profits and losses get more volatile. 

So in conclusion to this strategy testing, I could say this could be a good strategy for those who are looking for a position trading strategy in forex. Later on I will run the same test on commodities and some equity indexes. With a 5000 Euro start capital the return over a 10 year period is high but also the risk. We don´t know if this strategy worked only in the past but not in the future. Markets are changing. The rapid change in the variance of the returns can be a result of the markets becoming more structured with automated trading. 

THIS BLOG

is a sort of a diary for myself  in which I will share my future investments and sentiments. I believe that there are not so many blogs written by rookie traders, so this will also be a good place for those who are at the same point regarding trading.

First a little of myself: I am a 21-year old student from Helsinki, Finland. I currently study BBA as an exchange student in Vienna, Austria. My goal  in ten years is to be a financially independent trader. I have been trading Forex and making long term investments in stocks, now I have discovered the unlimited potential of derivatives. So my plan is to start trading with them.