Original Oanda Contest Rules

How to get high returns by risking it all

I just want to first begin by saying bad money management will inevitably lead to disasterous results. If anyone is interested in learning more about how to optimize your money management to obtain high yielding resuls I would recommend Van Tharpe’s books. However, I would never trade my entire account the way that I traded during this contest. Honestly the only reason I started trading this way was “feels like an old man” was up 250% in the first two weeks. I saw those results and decided it was time to invoke the “nuclear option”.

At first I honestly didn’t want to explain what method I was trading in fear someone might look at my results, try them, and blow up an account. However, I spoke with Rob yesterday and he invited me to try to look at this method with a fresh perspective and still use good money management concepts, so here goes.

1. Take 1%-3% of your trading capital open a new account or sub account and strictly dedicate it to this one method.
2. If the account doubles take your money out! Put the winnings back into your main account! At this point you will be trading with the “house’s money“.
3. Plan that this new account will be blown at some point, it is inevitable!
4. When the account gets blown reinvest 1-3% of your capital into your sub account.

Ok, I have the sub account open now what?

Oanda has the lowest spreads that I can find on EUR/USD, it is only .9 pips! What this means is we can take advantage of this fact. The price only has to move 2 pips in our favor and we net 1.1 pips per trade, WooooHooooo! If anyone at this point is thinking 1.1 pips? Is this guy on crack? No, I’m not. Luckily for currency traders our market is still unregulated. Some people have a false impression that if you want to make money in forex you need lots of pips, they are “pip mongers“. Well how much can I make with a net of 1.1 pips you might be asking? Here is a spreadsheet to emphasize the power of 1.1 pips fully leveraged at 50:1. I already know I messed up trades 10-40 but I didn’t feel like starting over so I just highlighted it yellow. This chart tells us that if we fully leverage an account then after 280 trades we will have made 392% return on our money. At this point you may be thinking wow 392% I’m going to implement this on my real account! If I still haven’t convinced you of doing this then click here.

Now to get to the holy grail:

You might be thinking. We still haven’t implemented a strategy yet. Where do I enter? Where do I exit? What is my stop loss? etc. etc. etc.

What if I told you it doesn’t frigging matter! It’s only 2 pips! 2 pips! Who cares where you enter?! Who cares where you exit!

Just kidding, there was a little more thought put behind the process than that….But not much, honestly.

Here were my rules for entering and exiting:
1. Look at the 15 minute chart what is the overall trend? Is it up? Is it down? Ranging? If you don’t know print it out. “Put it on the wall across the room from you and then look at it” (This is a quote I just have no idea where from).
2. If the market is going up on the 15 I will only take long trades. If the market is going down on the 15 I will only take short trades. If the market is ranging I will take trades in either direction, but I tend to try to stay out of the market during this time. My thought process behind this is simple. I want the power of the price behind me.
3. Switch to a one minute chart. Now ask yourself is the current trend on the one minute chart in my favor? Meaning, if the 15 is trending up is the one minute trending up as well?
4. Look for strong places of support and resistance on the 1 min. Ok now remember those and stay the f*** away from them. The price behaves erratically and unpredictably around these levels. Remember we only want 2 pips, yea, woooohooo 2 pips! We want them as calm and as easily as possible.
(The strategy is done at this point. Pick the places you want to rob your 2 pips and start robbing.)
5. Here is what I personally choose to do next. Place heiken ashi candles on your one minute chart. If you don’t have them Oanda does. I know their charting platform is close to being the worst one that exists today but bear with me.
6. If our rules above tell us we are only allow to go long then look for the bars to turn red. Let them ride down until you get the first green bar the green bar should also break the trendline created by the red bars. I was going to post a real life example here. But since Oanda is closed I can’t get a screen shot. So, I’m going to draw one.

Please do not trade for the 2 pip profit if the 1minute bar is opposite your direction! If it’s green go long if it’s red go short. But do not trade against the now!

Remember experience counts! We musts get comfortable with this system before using real money! Don’t use real money! Experience counts!

One last note/open thread. I was working on a theory in which I created a proprietary indicator for Tradestation/Metatrader. The theory was this. Add 2 pips to the current price then create an oscillator that says how many times in the past X bars has the price traded at this level.  I’m also working on an indicator that will determine the chances of the market turning from its current point.  I’ve ran tons of statistics on this with Metatrader.  If you want to be the best trader then I highly recommend learning Excel and statistics.  I think one day this indicator will have huge potential.  Not that it already doesnt…