Vavatrade Daily-F Strategy Changes for Better Risk and Money Management

Vavatrade Daily-F strategy update

If you have been following my trading signals and my blog for several months you have probably read my article about the soon to happen improvements to Daily-F that I wrote in January 2014. Well now I want to announce that finally I have implemented those improvements and they went live since May 5th 2014.

So what actually has changed in the Daily-F strategy?

From now on the Daily-F trading robot will not move pending orders and stop losses to a new price when the support and resistance levels change, but instead, it will cancel old pending orders and place new ones at the new price levels.

If support and resistance levels do not change for a day or two then there is no need to make any changes for pending orders and so the EA won’t delete orders just to place new ones with the same parameters. This will ensure that you do not get lots of email alerts about the same pending orders deleted and placed and also this won’t abuse your MetaTrader account. This was somewhat of a problem back in 2012. In 2013 I have improved the Daily-F EA to not cancel and re-place orders but to just move them to a new price according to the trading system rules. However, after several months this proved to be not a good decision because it created a problem for those who use percentage-based risk per trade.

So now the new EA solves this problem for those people who follow my trading signals and risk a certain percentage per trade. For example, when a stop loss changes or the entry price changes, and you have order entered to risk 2%, it would no longer be 2% after the changes. The risk may grow or the risk may shrink, so now the EA simply deletes old orders that do not match the risk lot size for your account and replaces them with new pending orders with the updated trade parameters.

Here’s an example for you. Imagine that you have a buy stop pending order @ 1.2200 with a stop loss of 100 pips @ 1.2100. If you risk 4% per trade and your account equity is $5,000,that would be $200 per trade in risk. This would also mean 0.2 lot size for the 100 pips at risk. Now let’s assume that the entry price is changed because of changing support and resistance levels.

So now the entry price is moved to 1.2300 which is 200 pips away from the initial stop loss (instead of the original 100 pips).  If the lot size does not change, it means that 0.2 lot size for 200 pips is $400 risk per trade, which is 8% and effectively twice the risk you had wanted.  This is how a trade can lose more than you had expected, due to changes in support and resistance lines.

When the system cancels the current pending order and places a new one with the new stop loss and/or entry price, your Client EA will follow the master account and also change. This means that the new lot size will be calculated for the trade according to the newly changed trade parameters. This is done to make sure it risks the exact amount you configured it to risk.

Other tests I am also running on Daily-F

A few months ago I also said that I am looking to lower the maximum allowed stop loss to 250-300 pips. Currently, the max stop loss used can be up to 400 pips. It does not mean my system uses this stop loss on all trades, but this is the maximum allowable stop loss value in pips. I am running several tests with the new stop loss level and this will take several months to see if this version of trading system is significantly better or not. I won’t be going live with these changes and force everyone to use them, but will test them first for quite some time and share the results first. It won’t happen for the next 6 months or even possibly in 2015, but I am looking forward this improvement and running some tests on the side with separate accounts.

Furthermore, I am learning new trading strategies all the time to optimize my trading strategy. If you have been a Forex trader for some time you probably know that the simplest and biggest mistake many traders make is to jump from one thing to another trying to make your system work, but this actually just ruins your trading discipline and you only lose money. So every new thing that I learn and try to implement into my trading system is done wisely with lots of testing and yes, it happens slowly… very slowly.

A trading signals business for me is not just a way to make money. While income is truly important in any business, as it makes it possible to maintain, run and improve, it is certainly not the number one priority for me. I am more interested in growing your account than mine, and I approach this business with a lot of passion.

Ever think about starting a trading signal business yourself?

If you have been following me for a while you probably know that I have even wrote a book about how to start and run a trading signals business yourself. I named the book “How to Start Your Own Forex Signal Service” and am doing my best to publish it on Amazon.com in May 2014.

This is my first hard-copy book and I am going through a lot of stuff to get it published.  All this is new to me, but I have put so much effort into writing and publishing the book. Yeah, I have traveled 6000 miles to U.S. California two times already in the past 6 months to learn how to do this.

If you ever wondered what it takes to start business like vavatrade.com and become an independent signal provider, then this book is for you and I am sure you will learn a lot of things from it.

So, if you are interested in starting a forex signal business, stay tuned for when my book will come out. I will have exceptionally great gifts coming with the book as well. Make sure you are on my mailing list and follow me on social media networks (Instagram, Twitter, Facebook, Google+) to be the first who gets the announcement about the book.

What’s the future of the Daily-F strategy?

Now after 4 months of trading Vavatrade where it has not made any profit and actually lost several percent, this has been a concern to some of my subscribers.  I started to receive emails that the vavatrade is slowly eating up their account and also losing trade after trade where some of them are completely against the trend or the news. People ask if it is wise to put it on hold for a month or two because the trading conditions are bad or something.

I totally understand your concerns, but it is obvious that we see that the trading conditions might be bad only because we experience this in the account. What I mean is that if we knew in advance that these 4 months would be losers then we would certainly pause the trading and just have waited.  But no one can ever know this. We could try to predict it and make guesses, but we would never actually know it 100%. Personally, I never fall into believing much with predictions because then it starts looking like a lottery. Now I am confident that my system is not a lottery because it is a system. Every signal pending order is placed according to the same rules, over and over again, and the fact that it uses support and resistance levels allows this system to automatically adapt to new market conditions. Yes, it gets caught up in false breakouts, but this was the case last year as well, and the year before, when I doubled my account in 12 months using the same Daily-F system.

If we pause the trading system, we will just miss the good months when they start again.  When looking at the past trading history, the good times always return. Of course, that is no guarantee, but I strongly believe that is just a period when things have not worked well for my system, but there are better days to come in the future.

If someone wants to step aside for some time I totally understand you and see no problem with this, but I will stick to my system. Everyone makes their own decisions and when it comes to investment you better be sure to measure it twice, thrice, four times, and as many times as it takes until you believe in yourself that you are going the right direction. It is okay to have a little fear–the thought in the back of your head that will keep reminding you silently at all times–we all have this. Just remember, if you lose with your investment that reminder will come and shout out loud “I knew it will happen, I told you to not go there”, and if you win it will just die and you won’t even remember it. So next time you hear someone saying to you that you made stupid decision investing somewhere or it was the wrong time, just do not mind that person. Remember, no investor or trader is right 100% of the time. People who think others are stupid because of their decisions usually are arrogant people who complain about everything.

Think of it this way. Even the biggest stocks, indices and money managers have losing months and even years, and a few losing months does not mean the end of their strategies.

I do understand your concern that you need to pay monthly fees and you see your account getting smaller, but it’s that risk we, as forex traders, need to take with every trading strategy. It’s the risk that we take with every investment. If you don’t take the risk you won’t stand even a chance to earn money in any business or investment. No matter what trading system you will invest in and how good and profitable it is, no one knows how it will look in 1 month, 3 months later, 6 months later, etc.

News trading is really important

Yes, I know many currency traders out there will tell me that I should be doing fundamental analysis as well to make my trades more reliable. But to tell you the truth, and it’s an ugly truth whether you like it or not, I know nothing about fundamental analysis. I do know lots of techniques on how to trade the news and have even created a number of trading tools for MetaTrader 4 account that will help you trade that way automatically for some of the process, but I do not trade news myself. I am not into politics, I do not watch the news every day, and I do not read about the news that much either. I spend my time elsewhere and that is by creating content for my readers, creating programs and apps for MT4, writing books, shooting videos and most importantly, living life with my family. Yes, it probably sounds too personal for some of you, but I spend more time with my family and just enjoying life than I spend working on my computer and trading forex.

Call it inappropriate trading, call it irresponsible trading, laugh at it, but I still won’t spend 5 or 10 years studying economics to understand all the economic news or become an analyst to be able to implement just a portion of this into my trading strategy, because you cannot only rely on news trading alone either. If this sounds crazy to you I encourage you to read about John Bollinger’s work on how he tried to combine technical and fundamental analysis together. So I am looking very close now to using Bollinger Bands for my system and already playing with some techniques I learned from John Bollinger.

My vision is a 100% automated trading that uses only technical analysis, because we all have a life to live, and you know what, we deserve it.

If you feel like you are spending too much time trying to beat the Forex market please take my friendly advice and cut the time you spend in front of the charts 😉

 

About the author

Rimantas Petrauskas

First I am a father, a husband and then the author of the book “How to Start Your Own Forex Signals Service”. I am also a Forex trader, a programmer, an entrepreneur, and the founder of ea-coder.com Forex blog. I have created two of the most popular trade copiers and other trading tools for MT4 that are already used world wide by hundreds of currency traders.

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