Low Risk Forex Management

How Can A Forex Account Be Low Risk and still give High Returns?

Ardra Belitz, a portfolio manager at Lazard Asset Management, told Bloomberg: “It seems no one FX style has consistently outperformed”.

That's why we're constantly adapting for our clients.

Andrew Mitchem, Head Trader, JASFunds.com (ref.1) Tweet

With Forex, yes, you can manage it yourself, but most of our clients don’t have the time to become an expert at something new.
They’d rather focus on making money the way they know how, and let us manage it for them.

But before you have someone else manage it for you, you’ll want to understand a few core concepts, to be able to ask better questions, on how your money will be managed.

The best way I know how to explain it to you is by using the Rubix Cube as an anology…

The Rubix Approach

Picture a Rubix.

Imagine you’re holding it in your hands…

…there are four dimensions to a Rubix cube:

1. The First Edge

2. The Second Edge

3. The Third Edge

4. The Colours

And how does this relate to trading??

Like this:

1. The First Edge is an EA Strategy

2. The Second Edge represents Currency Pairs

3. The Third Edge is the Timeframe Charts

4. Getting the Right Colours In the Right Place equals Profitable Trades

…and when you use 1, 2 and 3 correctly, you get #4 as the result.

Let me explain each of the Trading Terms first, and then I’ll walk you through the methodical process that works for JAS Funds, and our clients.

The Trading Terms

EA Strategy – EA stands for “Expert Advisor”:

An EA Strategy is an add-on piece of software for the MetaTrader currency trading platform. An EA Strategy can be used by a Trader to either watch for specific trading setups or automatically take trades on the traders behalf. (Ref 2)

Currency Pairs:

A currency pair is the quotation of two different currencies, with the value of one currency being quoted against the other. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency. (Ref 3.)

Whilst there are a total of almost 190 currencies globally, there are between 40-70 currency pairs able to be traded by Forex Traders. (Ref 4.)

Timeframe Charts:

Timeframe charts are how Traders look at trades.

The above is a screenshot from the MetaTrader platform.

The green and red bars are known as candles and each candle is a segment of time.

You can choose the time length of the candlestick selecting the time frame as in this example.

With MetaTrader 4, there are 9 timeframes you can use for Trading:

  • 1 minute,
  • 5 minutes,
  • 15 minutes,
  • 30 minutes,
  • 1 hour,
  • 4 hours,
  • 1 day,
  • 1 week and
  • 1 month.

Different time frames give you different picture of the market. It is like zooming in and out of the map. (Ref 5.)

You now understand a portion of the fundamental aspects of Forex Trading.

Let’s now look at how we bring these parts together to grow our clients accounts:

Our Methodical Process to (a) Manage Risk and (b) Produce Profits

Our Head Trader, Andrew Mitchem, has designed a 10 step process, which allows our performance to exceed all comparable market benchmarks:

The JAS Funds Ten Step Approach:

1. Have our proven trading strategies and convey those to our developers, to create our unique Expert Advisor’s (EA’s).

2. Receive the EA’s back, one at a time, from the development team.

3. We then run the single EA through an analysis tool called Tickstory (Ref 6.), where:

i. We test one single currency pair and one timeframe chart at a time, across 5 years of accurate tick-data,

ii. We assess the accuracy of the testing and tick-data by visually sample checking the trades and subsequent results,

iii. If the initial test is positive, we tune various parameters to optimise the results even further.

For example, we may find one EA on one currency pair and timeframe does not perform well on Wednesdays, in the month of October, and if the trade opens before 10am. We can see those unique results through our testing.

We would then discount those criteria (ie. from the above example: removing Wednesdays, October and pre 10am trades) and run the test again, to see the new outcome.

4. Once the results are positive, we use a tool called Quant Analyzer (Ref 7.) to optimise the strategy.

5. Once the strategy has been optimised, we then have the development team update the EA to build it its custom settings for the most optimal outcome. Every single one of our EA’s has different parameters, depending upon which pair and time frame chart it’s running on, as each chart has different characteristics.

6. The newly updated EA is tested again through the Tickstory data.

7. Once the EA has passed the criteria Andrew (our Head Trader) is looking for, consistency over 5 years, low drawdown under 15% and a profit factor over 1.5, it’s then added to a live $20,000 account. Our “EA Live Account”.

Note: this EA has not yet been promoted to the JAS Funds Trading Platform.

8. The EA is left to run for at least 2 months (sometimes more) so that live trades can be taken.

Once we have 10+ live trades over several months, we then run the EA through back-testing data from that same time period, so Andrew can assess if the real live trades have all been picked up on the back testing data.

In other words: “Does our test data match what actually happened in live?”

“Are we getting the same expected results?”

If we are, then our confidence in the expected results is high.

9. Once Andrew has confirmed this, and the results remain positive, Andrew then selects a lot-size needed for each EA, by assessing the number of times it trades and what level the individual and overall drawdowns have been.

** This lot-size step (Step 9) is one of our key strategies to reduce the risk for our clients, as this reduces the potential draw down for each specific EA!

10. The EA is then promoted to run on the master JAS Funds Trading Platform, and we have a new EA monitoring the markets for trading opportunities 24×7 for our clients.

But it doesn’t stop there!!

Every week Andrew assesses the EA’s on the “EA Live Account” – looking for top performers for promotion (and switch off/discard those not working)

And each month, Andrew reviews the JAS Funds Trading Platform EA’s, to ensure their trading activity and performance is in line with our expectations.

If anything needs to change, whether lot size adjustment, characteristics or to remove an EA from the JAS Funds Trading Platform.

You now have a deep understanding about how JAS Funds methodically build our EA’s to produce consistent profits for our clients.

Next Topic: How Fees Work

The next area of a Managed Forex Account to understand is Fee Structures, the types of Fee’s to expect, and WaterMark High management.

Forex Versus...

Revisit the comparisons of Forex returns compared to the other investments available to you today.

How Fees Work

Fee Structures, the Types of Fees, and how Performance is measured by the Watermark High Method.

Already Know This Is Right For You?

If you’ve been referred and you’re just looking to get started, then get in touch with us here:

References on this page:
1. Ardra Belitz quote – “FX Traders Pivot to Tactical Bets as Old-School Strategies Flop” Article on Bloomberg – https://www.bloombergquint.com/business/2018/07/18/fx-traders-pivot-to-tactical-bets-as-old-school-strategies-flop
2. Definition of an EA – Investor Words – http://www.investorwords.com/7635/forex_EA.html
3. Definition of a Currency Pair – Investopedia – https://www.investopedia.com/terms/c/currencypair.asp

4. How Many Currency Pairs Are Able To Be Traded? Answer from Quora – https://www.quora.com/How-many-currency-pairs-are-available-to-trade-on-the-Forex-market-Do-they-ever-add-new-ones
5. What do different Timeframe Charts mean in Forex Trading? Answer from Quora – https://www.quora.com/What-does-the-different-time-frames-of-Forex-charts-mean

6. Tickstory – The Traders Database – https://tickstory.com
7. QuantAnalyzer – Analyze Your Strategies and Trading Results, Find Weak Points and Potential for Improvement, Build Optimal Portfolios and use the best Money Management – https://strategyquant.com/quantanalyzer/