How to Create a Portfolio in Excel

In the previous article, we introduced the concept of portfolio trading as a way to diversify your funds away from the day to day noise and stress of active trading. We also covered the basics on how to formulate your objectives and your initial asset allocation. In this article, we will take the discussion a step further and illustrate how to create an efficient portfolio using Microsoft Excel or OpenOffice. DSG and Efficacy have both created and shared examples on the Order Flow Trading Academy Members Forum. This article is for those (like me) that are less acquainted with matrix algebra and want to see a step-by-step process in writing.

Market Participants

Have you ever thought about who is participating in the foreign exchange market besides your fellow retail traders? If the answer is no, you should certainly change that. Although we can not have direct insight into the order books of the large banks, we can identify some of the characteristics of important market participants and use this information in our trading.

Price Action Patterns

Price patterns are visual representations of human behavior and occur often and in similar form because human psychology doesn’t change. Every price print, bar, or candlestick is formed because of decisions that have been made by active participants in the market at that point in time. As traders studied charts over time, they noticed certain patterns repeating and have developed strategies to make their own trades based on these patterns.

In today’s markets, many traders use price patterns as entry signals and thus create strong order flow that we, as order flow traders, can use to our advantage. Because our goal is to metagame the participants that use this style of trading, it’s important that we stick to the most popular and widely used patterns. We’ll be looking at the 5 major price action patterns that have found their way into current market lore.

Being better than a “professional coin flipper”

What is an Edge? How can you find one? Where do you start in your search for one? Shall you stop once you found one? How can you readily quantify your edge? And how many edges can the marketplace host at any one time? A trader's edge is what defines his style and ultimately what differentiates his decision-making process from a coin toss. It's his material advantage.

How to Bounce Back From Trading Losses

Trading brings out the best and the worst in us, mainly because it stacks us up against the most difficult thing to accept: uncertainty. As humans, we just don't like the fact that even through extensive work and preparation, things can still go sour. What's worse is that things can go sour even when we do the right thing, which can be really difficult to accept. One trait that allows successful people to bounce back from failure is a resilient mindset. In this article, we're going to explore what separates those that can get back up from those who just get beaten by their situation.

How to Harness Volatility

The Swiss National Bank has recently attracted more attention to the Foreign Exchange market than ever before. Once again, at the Order Flow Trading Academy we wish to keep aspiring traders on the right path and away from trends like this. Many traders are attracted to FX because they are told that it's the “most liquid instrument to trade”. In a previous article we touched on the actual issue of liquidity in the FX market – which is being reduced, not augmented. In this article we are going to explore the actual value – if any – of liquidity and what is instead important for trader profitability (big hint: volatility!).

Dealing with the stress of trading

This business can be stressful. This week required us to hold substantial exposure through a troubled geopolitical environment, and I’m not going to lie; it was more difficult than I expected. It’s not the fear of getting caught out. I accept that the associated positions could drop to zero at any second. There are things you just can’t account for and nobody is gonna fault you for taking a hit on a true black swan. What makes it so stressful is the constant need to pay attention. Getting wiped out in a flash crash event is one thing, getting wiped out because you were slacking about when you could have done something to avoid it? Yeah, that’s just unforgivable.

What it means to dream big

I recently binge watched Wall Street Warriors, and while I was watching it I was struck with a flash of valuable insight. In the second season of the show there is a 28 year old private equity guy named Brett Hickey, who at the time of recording had over $100m under management. As I'm watching this show I find myself asking a question; What is the difference between him and I?

How to Build a Trading Position Properly

What is trading all about? The short answer could be something like “pushing your luck when you're right, and making sure you bail as soon as possible when you're wrong”. The phrase “pushing you luck” actually has a literal translation in trading: pressing a trade. Over the long run, it's difficult to keep a 70 to 80% batting average. One way to secure yourself some leeway is to maximize your efforts when things are going well, so that you can survive the less than stellar periods. In this article, we shall explore some logical ways to compound a position. It doesn't happen often, but when an asset starts to shift through the gears, it only takes 1 or 2 well-compounded positions per year to generate an above average profit.