The ability to learn a system and then design a solution to master it is the key to many mathematical formulae. For this particular forex trader, automated trading and algorithms have been his forte. On this basis he attracted much attention within the retail sector by showing quite astonishing results over a six-year period managing PAMM accounts, and through presence on various forums became well known among algo-traders. For most, the initial foray into retail forex is usually less than profitable, often resulting in losses however in this particular circumstance it has been quite the opposite, demonstrating that the select few are able to navigate the market in such a way to rack up significant profits.
The trader, who has asked us to preserve his anonymity due to regional sensitivities (see example here: https://www.financemagnates.comtag/forex-trader-kidnapped/ ), and instead would prefer to be identified by his nickname hrenfx, was named as the EA world cup 2011 winner, along with nominations for other coveted awards as a result of his unprecedented success in automated trading, and has generated substantial return on his initial investment in a relatively short timeframe.
Brief Overview of Trading Performance:
MetaTrader 4 Account
Initial Investment: $5000. Earnings: $400,000. Profitability 7833%.
Initial Investment: $677. Income: Over $230,000. Profitability: Over 40000%. Turnover greater than $60 billion (ongoing)
Awards and Nominations:
Winner: Largest Absolute Profit leader LCHI2011 ($400,000).
Nominated: Highest Relative Income. (profit gained on this PAMM account (over 40000%).
Best Private Investor 2011 http://www.investor.rts.ru/ru/statistics/2011/
This interview provides an insight into achieving success, his journey through the initial stages and how he views his future in the world of trading.
Please provide some background on your trading
I have been trading Forex since 2006. In these early stages I made my first few thousand percent return with an initial investment of just a few hundred dollars.
By the latter part of 2007 I had managed to turn a profit with FXOpen despite only beginning to trade with them shortly prior to that time. Unfortunately, the entire business model of the retail forex sector was gray and quite unclear to me as a newcomer, and FXOpen was no exception in this respect. Still I managed to establish some valuable contacts during this period in which I was viewed as a potential client.
While a totally innovative system of trading in retail forex was undergoing its new phase of development, I began to work with some of the range of relatively large and regulated companies. I have a lot of memories associated with this period. A real war was unleashed between specially designed anti-manipulative algorithms on one hand, and chief dealers putting a spoke in the wheel, on the other hand.
In the end, the algorithms used to win rather quickly. Under these circumstances the broker usually forced the trader to stop trading and withdraw the profits. It became clear to me that the so-called notable forex regulators served as a mere front for what was becoming clear to me as the business model of a shadow banking system in which non-regulated companies were as good as the regulated ones.
It was also evident that forex forums were flooded with “paid” posts and inadequate forum users from various shady agencies engaged in blackmailing decent companies. This continues to happen up until now and their “opinion” is still convincing to a number of readers. It’s just enough to look up “SCAM BrokerName” in any search system to see what I mean.
As a result, having tried my hand in various organizations within this sector, I gave up trading for quite a while. I took up publishing my own market research in forums instead. It was valuable experience but somewhat disappointing.
STP brokers and ECN/STP (there are very few of them) emerged with time. Then I had already had some experience in trading via several API and MT4 offerings. I was introduced to FXOpen ECN through some of my previous contacts. Without hesitation, I opened a PAMM account but got about a 90% drawdown on my second day. It was not entirely my fault. My broker was also to blame for some technical problems, which were solved successfully a few months later. As for me, I also made some progress – I worked out an algorithm for an Expert Adviser.
During the course of my trading, FXOpen’s entire ECN system was going through a real stress test, as MT4 was trying to handle a heavy flow of trading orders and volumes as never before. Loopholes and bugs were detected and fixed by their support department. I would have never made such achievements without the help of the technical support team, to which I extend my thanks.
What is your strategy?
Spotting market inefficiencies and trading on them. Statistics, confidence intervals and many other factors are of great importance here. That is why the number of trades per day may exceed 1000, while the number of trading orders can be well over 100,000. Here we are not talking about high-frequency trading. However such trading specifics entail certain restrictions imposed by the MT4 platform.
Personally, I take the advantage of placing orders in Level II thus being able to affect the price directly. That is the reason why I prefer Limit Orders in my trading. In this case I can act as a kind of institutional market maker, offering better prices compared to those set by banks. I just react rapidly and grab ECN liquidity, directly bypassing sluggish intermediaries such as trading platforms. It gives me a chance to take the best possible orders form the STP without negative slippage. At the same time it provides an opportunity to compensate for a substantial part of commission through the frequent positive slippage. In this process, everything is tuned to maximize fill rate and minimize trading costs.
So, I tend to use not only the standard bid history when searching for market inefficiencies, but the ask history too. Fortunately, this functionality is provided by the broker in their MT4 trading platform.”
Tell us a few words about Algorithmic Trading (algo trading).
Almost every algo trader arrives at the point of creating personal research and trading infrastructure, which includes collection and storage of market data, back testing, visualization and logging of numerous trading parameters and so on. On one hand, it’s very useful to follow these stages from beginning to end by yourself. On the other hand, it’s a huge waste of time! You are actually reinventing the wheel and developing a tool that could be universal for all algo traders and their trading styles.
If you have the infrastructure, you can dedicate most of the time to different research and analysis. Everyone has his own methods and tools of how and where to dig and delve and where not to. As a rule, an algo trader makes himself a hostage to his own strategies and ideas which are hard to digress from or abandon. That is why it is always worth expanding horizons by learning new visions of the market and approaches to trading as a whole.”
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What currency pairs do you trade?
Certain currency pairs are closely related in forex, therefore there is not one specific answer to this question. Any currency pair can be traded by means of two other pairs. There is as well an opportunity to trade currencies not only in pairs but in units of three or four. That is why it would be more precise to say that the whole trading must be based on synthetic currency. I have posted on forums regarding this issue.”
Do you trade in other markets?
No, I don’t and I have never tried before. I intended to speak to some competent EA creators and developers from the stock market sector during the 2011 Best Private Investor contest. Unfortunately, most of them have a rather vague idea of what institutional forex is.”
What do you think of risk?
I have a different, unconventional attitude to it.”
What is the main formula to succeed in Forex trading from your point of view?
Well, I will give a brief but an honest answer – I don’t know. But such trading terms as prices, liquidity, latency, execution, pricing model, commission and API play a crucial role. Here we can also mention reliable safekeeping of client funds, brokers’ technical sustainability and resistance to liquidity providers’ manipulation, as well as legal defense from potential disputes with STP market participants and protection of the trade flow from toxic status (anonymity in the main stream).
Choose the best broker, the one that best suits your strategy. By doing so you will only have to fight with the market itself.
They say success in forex is a myth. However, you have shown a phenomenal result. What is your secret?
Every person has his own vision of success. I have had to go through certain stages of development. But there are still a lot of things that I plan to do. Despite the seemingly all-around automation and EA trading, sometimes I really feel tired and exhausted. This may trigger some uncontrolled trading activity or no trading at all. Not to mention the never-ending market research. Everything is subjective.”
The most difficult thing is to think independently. I guess this is the key.
What is your vision of the forex industry in the future?
This, actually, is a huge topic for discussion. The very brokerage model is going to change soon. The brokers’ income will depend not on the spread, but on the turnover. Thus, the value of the customer base will be estimated not in the number of clients or deals but in the level of experience and success of the traders. Here we are talking primarily about scalpers making the highest return.
A transition to ECN/STP models, not just pure STP, will likely be considered as well. This will help to integrate huge retail liquidity, which is separated at the moment, as well as to add the institutional liquidity. These factors will prove to be a leap forward in the history of development within the forex industry.
Unfortunately, despite the undeniable advantages of some brokers’ conditions, especially nowadays, lots of people still trade the same old way. They put up with uncompetitive trading terms, literally giving away the lion’s share of their potential profit to the imperfect brokers. They limit themselves in their approach to trading.
Currently, the development of retail forex is hindered by the same product that used to contribute to its torrid growth. By this, I refer to the MT4 trading platform. Obviously, its resources have been almost exhausted. Sad enough but the imposed MT4 stereotypes (that were useful once) have gone out of date. There is a separate class of trading strategies that can’t be implemented in the current phase of the platform development.
We are talking about the need to develop an affordable Forex product with an emphasis on automated trading. Such a product should make it possible to carry out absolutely new market analysis and try new trading solutions with the lowest maintenance costs.
Institutional forex is far from perfect, too. It will inevitably become more mainstream and undergo a number of changes.
Investors will also become more reasonable with time. They will no longer remain loyal to their investment managers within broker companies offering poorer trading terms. It means the efficiency of the money management segment will go up as well.”
What else would you like to add?
“I’d like to thank my family. I would hardly have managed to achieve to this level without their help and support.”