Managed Forex Accounts

I was a bit surprised that DEV actually had one trade last week, made 0.74% (2X account) shorting the EUR/USD before the pair shot up. That brings Dec total to 4.88% so far. Our own $100K Institutional DEV account was finally funded and were pleasantly surprised to see that it was earning good interest on the balance. The interest rate on USD deposits is 30 day T-Bill minus 75 basis points. The broker also accepts non-USD deposits like EURO, but no interest is paid on foreign currency deposits. Trading should start shortly after the new year.

SEN did not trade as announced by FXCM.

LEO made a few percent this week, using a revised, more conservative strategy. My account is up 7.18% month to date. He might trade only a little bit Dec 31.

KAN traded 3 days only so far, with moderate losses of 5.38% total. He is still trying to get his full concentration back after dealing with some family matters. Looking forward to better trading in Jan 2008. We will meet both LEO and KAN in person near San Francisco on Jan 6.

My $1K experimental GST account saw some large swings in the past two weeks, and is up 4.71% in equity month to date with an open position. It had over 25% profit at one point and then down over 10% later. I expressed my concerns to the trader. The explanation I got from the trader was that he could not trade the small accounts using his scalping style, only trade medium term trend because he still needs to work for a living. He said he could do much better once he gets bigger accounts to trade full time using short term strategy. So it is a catch-22: I won't give him bigger amounts until I see better trading with less volatility, and he can't trade full time to produce the results he promised until I give him a bigger account :)

My partner's CHB account has some drawdown in the open position, the account equity is still up 2.91%. He is having some fun on a cruise right now.

Working out some deals with a few promising traders with pretty long track record. The first few weeks of 2008 would be very busy for us.

Labels: devrim, forex managed account, managed forex accounts

Sentiment Aggressive came back strong last week, recovering most of the drawdown. According to a notice from FXCM, Sentiment Funds will not trade again until the new year. So the results as of last Friday should be final for December. According to my calculations in the personal account, it is down just 1.28% for the month of December including the management fee. Not bad considering it had 5 consecutive months of strong performance previously.

DEV did not trade at all last week, not sure if he will take the rest of the month off as well. We shall see. We are funding our first Institutional DEV account with a $100K account of our own. This account will be traded at one of the largest futures/forex brokers in the world.

LEO had some losses last week, the account is still up 3.11% overall. As expected,KAN only traded lightly last week, actually just one day. It had a small loss of 0.78%. I look forward to more active trading in the account, probably after the new year. GST is just an experiment I have with a small account. As of now, it has given back all the previous gains for the month and down a few percent with open position. CHB account is up 5.85% overall.

I have decided that I won't comment further on Aaron's email about Josh Nyland account in the blog publicly, as I don't want to create an infinite loop going back and forth for a program that I no longer have any interest in. However, if you are still interested in my private comments, you can email me through the contact page from the main www.managedforexpro.com site links. I can email you my views.

We wish every one of our clients and readers a happy holiday season, and look forward to a prosperous new year working with many of you.

Labels: devrim, forex managed account, managed forex accounts

DEV had a normal week, which means moderate profits,no drama. Account is up 1.34% on the week, up 4.11% month to date. Right on track for his usual monthly target of 8% gross for this leverage level.

Sentiment Aggressive Fund took some beating last week. I took a peek just now, it is down slightly more, I only have 1.6% profit left in the account. I think the peak to valley draw down is now slightly higher than the last high of 11.1% set in October. It is down 8.75% month to date. Still, the day to day account volatility is not too much, I still like it. Let's see how it ends the month with two more trading weeks left.

Trading was a bit rough for LEO for the past week. The account is down 4.7% for the week and still up 5.98% for December.

My account for KAN is finally funded on Friday, so trading will begin anytime now. However, KAN is attending to some family matters, and I expect the trading will be a bit light this coming week.

GST account did some dances last week, two steps backwards and two steps forwards, did that couple of times and ended the week with a small profit of 1.17%. Not bad considering the trading condition of last week caused difficulties for many traders. I am also pleased that he is using reasonable stop losses and sticks to my leverage guidelines. I think this managed account has great potential if it continues like that.

We started a live test account for a trader that we will name as CHB. The system uses moderate leverage, 2:1 up to 5:1 usually. However, because we are using an institutional platform with 100K lot minimum constraint, the leverage had to be twice the normal range with a single $25K account. The account started trading 12/5, equity is up 4.9%.

Labels: devrim, forex managed account, managed forex accounts

This is a special update on Josh Nyland's managed account. I will update the other accounts over the weekend, since I still have jet lag due to international travel.

In my last blog, I talked about my views and experience with Josh Nyland "Falcon" managed account. It was in a big drawdown at the time of that writing and I was trying to revoke LPOA and move on.

Aaron, Josh's assistant responded to my request promptly and readily admitted that it was a mistake either on their part or by the broker on leverage, and I would be compensated for that error either way. I was given the opportunity for them to "buy out" my account at my full initial deposit value, and they will assume all the risk on my account. I took that offer right away. I was prepared to take 1/2 of the total loss proportional to my 1/2 leverage account, but Mr. Nyland was confident that this trade will come back so he would rather assume the full risk in my account rather than sharing 50% of the loss in my account if I close the account right away. I am satisfied on how my account problem was handled by Mr. Nyland/Aaron. It is also important to understand that we had an Introducing Broker agreement with Mr. Nyland and my account was used as a test account for our clients, so the way how my account was handled (guaranteed principal back when trying to revoke LPOA) might not be available to a typical investor. By the way, the trades are still open at the moment but the draw down is smaller.

I got an email from Aaron today, detailing their disagreements/clarifications on certain things that I said in my last blog. I got their consent to post Aaron's original email so that my readers can see their perspective in its entirety. Please note that it does not mean I agree to any/all of their points, nor does it change my view of the risks in the trading system in any way. I might comment further on the contents of that email in a future blog, but I am too tired to do it today. So here it is:

=================================================
Dr. Lu,

Mr. Nyland is asking if you can update your blog to clarify a few statements. We understand it is your blog and you can say whatever you want but we also know that you like to deal with facts and the truth and that you are a man of integrity.

1. We do not advertise "no losing trades", we are honest and as you can see on our homepage we say, "Only 2 losing trades since 7-25-07" which is true.

2. Please clarify that you lost 100k in other managed accounts last year. It reads like you lost 100k with FMA LP.

3. It's the same system for 17 months, only the targets were lowered on 7-25. You asked why he stopped trading that way and the reason was because it had 6 flat months of profits with around 20-30% intra month floating draw downs each of those months. We are marketing to the higher net worth clients and 99% of them only want 5% a month, not 30-40% with wild swings.

4. The 28.8% was the maximum intra day draw down. If you go through the daily Tony E statements you will see it is lower then 28.8% which we could have used if we wanted to hide things but we did not. After our current floating trade is out we will disclose the new max intra day DD #. We do this because we are honest.

5. Each set of trades always has at least the EUR/USD and GBP/USD, never just one pair except the one time we were slipped big with PFG and got out fast because only the EUR/USD initiated.

6. We are totally different then Freedom Rocks. If their system really worked they would be money managers just like all the teachers and guru's out their. Mr. Nyland’s system is nothing like using just the range bound characteristics of the EUR/GBP, it is much more complex then that.

7. The system produces more then 7 pips per trade over 75% of the time because we get slippage in our favor. This can be verified on the daily Tony E statements. Yes we charge more because we know we are worth it but clients keep way more then 40-45% of the gross profit. If you do some research on some of the top hedge funds you will see a lot of them charge 50% performance fee. The fee charged is all relative the returns being made. Would you rather make 100% a year Net paying more or 50% a year Net paying less? Net is net so it does not matter what the fees are, it's what the client takes home at the end of the day. All the people I know would pay more as long as the net is higher.

8. Please let your readers know that we did admit to accidentally switching you to the 10 leverage on 12-1 and that we have integrity and paid you the difference because of the one time mistake. This did not happen to any other clients and we are still looking into how it happened. It might of been PFG's fault but we take the blame because it does not matter to you because you were the one moved and we want to make things right.

9. When this trade closes for profit it is not luck or gambling, it is the system. Mr. Nyland knows the fundamental relationship correlation of these pairs and has designed a system to take advantage of it.

Thanks,

Aaron Gilbert

Labels: devrim, forex managed account, managed forex accounts

I have been really busy the past week although I am on vacation in China, visiting my parents. I did not even get time to update my blog until now. Lots of things to talk about.

DEV had a good first week of December, 2.64% profit, no sweat. SEN is down 3.9% in December so far, not a big deal as it is in its normal fluctuation range.

One exciting development is that we finally signed a contract with DEV for Institutional Accounts ($100K minimum accounts) at one of the largest futures/forex brokers in the world.

[The next two paragraphs are edited at the request of LEO to remove certain private info]
I opened two EFX/MBTrading accounts in anticipation of both LEO and KAN. MB assigned the same login and password to both accounts and let the trader to switch between accounts in the platform. I have requested the broker to give me a separate set of username/password for KAN, so that the two traders won't get confused by the accounts.

Only LEO traded my account this week, not KAN, and he made 11.2% for the week. He also gave me final November results update: 12.12% with very small draw downs in the months, like less than 2% based on daily totals.
So here is an updated complete track record of LEO:
Feb 62.18%
Mar 19.25%
Apr 10.88%
May 3.05%
Jun 16.47%
Jul 11.46%
Aug 40.40%
Sep 42.40%
Oct 3.57%
Nov 12.12%
DEC 11.2% (first week)

KAN's account should be ready next week, also excited about that. KAN is an economist by training and an expert chartist, so he is well versed in both fundamental and technical analysis. His trading will be mostly day trading mixed in with some position trading. By the way, KAN told me he had a great week of trading as well, though not in my account since my second EFX account was not ready for him yet. MBTrading holds check deposits for 10 days before crediting it to accounts! In the future, I will advise clients to use wire whenever they can with EFX/MBTrading.

If you tried a trader before and he did not perform the first time, would you give him a second chance? The answer is NO for me usually, but there are exceptions to everything. And I just made an exception, LOL. I will call this trader GST for future reference as we always use a three letter designation for our managed accounts. He is a self taught trader who has traded the spot forex market off and on for over 10 years I was told, but had no prior experience managing big money. In the beginning of his trading experience, there were no online forex brokers and he had to phone in the orders and had to deal with more than 10 pips of spreads on majors, LOL. I believe he has pretty good technical and fundamental knowledge. So I tried him with a small account last year. But here is his problem at that time: he used too high a leverage and he would not cut losses if he was very convinced of his market views. He was right in the long term but the account would not survive till that day, LOL. And the result was predictable: I cut him after big losses in the account.

Over the last few months, GST got into contact with me again and tried to convince me that he is now a much better trader. I was nonchalant at first, basically asking him "why should I believe you are a great trader now while you were not one just last year?", and telling him "show me the money", uh... "show me the statements" rather, he he. So he showed me an account statement starting Nov 14 till Nov 30, he made 242% in 17 calendar days. There were about 120 trades, mostly short day trades, and the max drawdown was about 17% during that time. The leverage is a bit too high for my taste but not crazy for short term trades with stop losses. My thinking is, if he can manage accounts using 1/10 of the leverage trading the same way, that means 24% in 17 days with 1.7% draw down. If he can do that month in and month out, then he is the best freaking trader in the world, LOL.

So I decided to give him another chance testing him with another account, as I had an idle $1K mini account at IBFX. I told him to trade the exact lot size as I tell him to: do not exceed 1 mini lot total at any given time for an $1k account and he can scale up the lot size as the account grows. So here are the daily results after a week: -0.56%, -3.08%, 7.38%, 4.62%, 4.89%, the compounded return for the week is 13.55%. I am very encouraged by the results so far. The trading style and results are similar to the statements he showed me. In my view, the accuracy of evaluating a trader depends on the number of trades, not the length of time span. Some long term trader might have a 2-3 years of good track record, but that still might not be enough to show if he is really good or not, because he might only have a few dozen trades. On the other hand, if a day trader has a few hundred trades in a short time span that are very profitable, there is a good chance that he is really good. I hope his good trading continues. I will setup a PAMM account for him soon with just the test accounts.

I test and monitor tons of other managed accounts, but I usually don't talk about them until after we either put them on our site or cut losses. I don't want my readers/clients to rush out to try them when I mention some managed accounts, because chances are they will lose money. Most managed accounts out there will fail based on my experience testing about two dozens of them.

I have had a test account with Josh Nyland since October 24. Some other IBs call it "Falcon" system and tout it as the best managed account since sliced bread as it hardly had any losing "set of trades". Folks, that should be the first warning sign to you when a trader advertises no losing trades or high win rate! It usually means when he loses, he loses BIG! But I decided to test it with my own account anyway since I don't want to miss any possibility of good managed accounts for my clients. It was nice of him to let me test it with only $5K, rather than the usual $10-20K minimum. By the way, I vowed that I will NEVER test any managed account again with more than $5K, after losing over $100K over the last year testing them!

Another thing I want to commend Josh is his openness with trading results from this system. He posts the trading results/statements on his website. But that's where I sensed trouble! Josh only started to trade the current system since late July. His earler high returns are from totally different trading (don't ask me why he stopped trading that way, I don't know, but the fact that he stopped should be a good clue for you!), so one should never mix the results when evaluating his trading results, but some IBs do that to jack up the average monthly numbers, beware! In the short history of this particular system since late July, it has already seen maximum of 28.8% drawdown in the daily statement! I am sure the intraday was even higher. Mathematical probability tells me that there is a high chance that the system will see 50% or more drawdown in 6-12 months. That is what I warned some of my clients about. The system trades three pairs: EUR/USD, GBP/USD, EUR/GBP. Any set of trades might contain only one pair, or up to all three pairs. It relies on the USUAL range bound characteristics of EUR/GBP. This is not too different from Freedom Rocks using the pairs EUR/USD and USD/CHF which relies on the uptrend/range bound movements of the cross pair EUR/CHF. Well, look what happens to Freedom Rocks when EUR/CHF had a not-so-big drop, many FR users got into a big drawdown and the aggressive ones got margined out. Same possibility exists with Josh Nyland's system when EUR/GBP gets into a rare big movement.

Based on that fear, I requested the most conservative leverage on my test account, which uses 1/2 of his normal leverage. My philosophy with all these managed accounts now is "better safe than sorry", because I lost too much already. Trying to get rich quick will only send you to the poor house in a hurry. Another concern I have with this managed account is the high fee, 2pips commission/35% performance fee. Thanks to the openness of Josh's trading statement, I was able to calculate/estimate that the 2pip commission is equivalent to 30-40% gross profit because this system does not produce a lot of pips per trade! In the end, I estimate that the investor will keep only 40-45% of the gross profit. We simply can not in good conscience recommending this MA to our clients with such high fee even though we will make a sh*tload of money from this because of Josh's generous fee sharing with IBs. I was planning to negotiate a special lower fee for our clients IF the test account passes my risk assessment. That was a big IF.

After trading started on Oct 24, my 1/2 leverage account was up about 4.3% by end of Nov before 35% fee, and it experienced max drawdown maybe between 10-15%. The normal leverage account should double both the profit and draw down. I don't have the exact draw down number because I did not monitor it closely as I thought it is much safer than Josh's normal leverage account, so did not worry about it too much.

Well, a friend/client alerted me today that Josh's account had a 50% drawdown, so my fear turned into reality, faster than I imagined! I was thinking how lucky I was that I requested the 1/2 leverage account, so I should be down only 25% instead of 50%. Or so I thought. However, when I logged into my online statement, I was shocked to see my account now had FULL LEVERAGE positions, and almost 49% open drawdown! I was thinking, WTF! I have sent them an email demanding an explanation and possible compensation for the additional loss for jacking up the leverage without my prior consent. I am not holding my breath, but we will see what happens. In any case, I am revoking the Power of Attorney in the same email, as I see no point in continuing with this risky MA and I will NEVER recommend it to my clients even if it recovers from this drawdown. This is gambling, not investing. End of story with this managed account. Case closed for me.

By the way, there is another trader that I monitor who advertises no losing trades, who is now in a 60% draw down! When I asked him before what he would do when he finds out that the trend is against his trade, he told me "No trend ever goes against me!", LMAO. I haven't bothered with even a test account with him after hearing that.

Whew, that's it for now. I am exhausted from this long post.

Labels: devrim, forex managed account, managed forex accounts

(Edited: I removed specific reference to any particular program at the request of the broker)

There is nothing to report in terms of account performance as it is the weekend. I want to talk a bit about the effect of compounding and how a small fee can add up over time. Let's say there is 1% less annual management fee on an initial $1,000 investment. It might seem so trivial, that's only $10 a year after all. Or is it? Let me do a simple illustration.

Suppose the fund returns 30% Net per year after all fees. And compare that with the performance if you pay 1% less annual management fee. What will they look like after 10 years of compounding? Check out the following table

Year	Normal fee	1% less annual fee
0	$1,000.00	$1,000.00
1	$1,300.00	$1,313.00
2	$1,690.00	$1,723.97
3	$2,197.00	$2,263.57
4	$2,856.10	$2,972.07
5	$3,712.93	$3,902.33
6	$4,826.81	$5,123.76
7	$6,274.85	$6,727.49
8	$8,157.31	$8,833.19
9	$10,604.50	$11,597.98
10	$13,785.85	$15,228.15

After 10 years of compounding, the difference is $1442.30, or 10.46%! Or 144.23% of your initial investment, looking from a different angle!

Labels: devrim, forex managed account, managed forex accounts

Trading for November has officially ended in the managed accounts. Here is a quick performance summary for the month based on my live accounts.

DEV had a rocky start, but ended the month with a 10% gross profit in the 2X account.

Sentiment Aggressive Fund had another stellar month with 11.18% profit in November after accounting for the 1% annual management fee, before the 20% performance fee.