by now i’ve done some follow-up analysis of my portfolio, on how i ended up with such losses as described in my previous posts in category ‘trading’. what i found is that i had simply over-traded, which in the low volatility and slowly trending conditions meant that cumulative spreads had eaten away even those small profits which i succeeded to generate during some rare turns of tides on some currency pairs. (while during a significant volatility more trades with my strategy means more profit, in low volatility conditions it doesn’t play out that way).
my attempted solution which i practiced for couple of days: i doubled the required minimum price change before modifying positions. the mathematical reality is that bigger changes in prices are way more rare (exponentially negative). while before i was making hundreds of trades a day across my portfolio, then the last few days i made only tens of trades, mostly just watching the prices to fluctuate almost around the value of the spread, which didn’t allow to make any changes in portfolio. i did begin recovering losses, a tiny bit, but this would have meant that instead of generating a reasonable profit in average once a month, in similar market conditions i could be able to generate a reasonable profit in average only about once a year (before it would make sense to close all positions and to begin again with minimum bets). not good, but that’s the reality with low volatility currency pairs.
to counter this situation i had to abandon the balancing of currencies across one trading platform. i continue with the same currency pairs for the test’s sake, but now i take only positive positions (only ‘buy’), which in some sense reduces the risk in case if one currency should crash. as you know, shorting is always way more risky due to the fact that losses can in theory go up to infinity (you will go broke faster), while if you go long you will only risk the total amount on the taken positions.
for balancing risks, now between the trading platforms only, i separated again the strategies: on mt4 i continue with my well tested increasing/decreasing method, and on mt5, exactly with the same currency pairs, also betting ‘long’ (buy) only, i’m after the price trends. thus, if on one trading platform i should lose then on the other platform i will gain.
that’s my current tactics to try to generate profit in low volatility conditions, will see what results it will produce. today i already began recovering losses several times faster than the last few days (surprisingly on both trading platforms), but it may just be a coincidence. will see how the situation develops further.