Month 3 First Quarter Dec 2005

Ok, heres the first milestone then. December was our first milestone on the way to our Million.

The yardstick for December is £17,000. We reached that the first time on the 28th December and then had a down day and closed the year on a plus -final balance is shown on the report below and is to target so time for a good celebration this new years weekend.

Youll notice there are two reports this month - the monthly as usual and the quarterley report. The gain on the account has been just as expected and we are on target.

emotions this month started to play in - on one day of the month we thought we knew better than the system and could outperform it - we closed the position early at the point where it invariably went in the winning direction.

we then spent two hours trying to get back in at our original entry - we got it in the end and as it happened it was a losing day but thats not whats important - we should never have questioned the system and just played it as is.

Needless to say since that day we have stuck to it religously and will continue to do so.

The problem I think is boredom - when you find something that works well you try and try to make it better - big mistake in the case of moving entries.

On saying that we have spent some time in looking at the money management aspect of the system and as of January 2006 we will be implementing something which seems to give an extra 10-20% per annum on the take. This has been properley backtested and makes a marginal difference to drawdown but a substantial difference to end capital so we have deemed it worth the extra risk.

Next Target is on March 31st which is £32,000 - interim reports will of course follow each month.

all thats left is to wish you all a very healthy, happy and prosperous new year!

Quarterley Report

• Opening balance:£10,000

• Closing Balance: £ 17,088
  
  
• P/L: £7,088
  
  
• % Gain on account: 70.8%
  
  
• Lowest account value: £ 9,882
  
  
• Highest account value: £17,901
  
  
• Maximum Drawdown: £4,620 = 31.8%

Monthly Report - December 2005

• Opening balance:£13,767

• Closing Balance: £ 17,088
  
  
• P/L: £3,321
  
  
• % Gain on account: 24.12%
  
  
• Lowest account value: £ 12,702
  
  
• Highest account value: £17,901
  
  
• Maximum Drawdown: £3,332 = 19.6% peak to valley

Month 2 - 1st - 30th November

Well, what can I say?

November turned out to be probarbly the most difficult month that I've ever done this strategy (yes, been doing it for a while before this experiment)

November suffered a terrible drawdown which almost made the biggest drawdown on record of the system for the last three years. Although we knew the worst case scenario could happen we just didnt think it would happen at this stage of the game - 6 months down the line would be fine but not in the first 2 months please!!

The month started well as on the 4th day we were at new highs of account equity thanks to a slight change to the system. Let me explain.

Although Grail is a long term system that has been worked out over a long period of time - every six months we re-evaluate the settings in use to make sure it's still at it's optimum for the prevailing market conditions. 2005 has been a very volatile year for cable and as such a change in one of our parameters was deemed to be necessary. After running the backtests we were convinced enough to make the change and this was implemented on the 1st of the month.

You may be asking is that is what caused the drawdown and the answer is no, on running the previous scenario the drawdown would have been larger although not to a large degree.

At the point of the lowest drawdown I must admit that we got very nervous - especially as it was eating into original capital. However true to form on the very next day the method gave what we expected it to do and came in ok.

The month is not to target though. To make the million we must hit an average of 22% per month. This should average out though as we go through the next 18 months. In our tests we had months which increased equity as much as 60% and the next 18 months should give some months much higher than others.

Onto the figures then - check back New Years Eve to see if we reached our December target of 17k equity

• Opening balance:£12,486

• Closing Balance: £ 13,767
  
  
• P/L: £1281
  
  
• % Gain on account: 10.2%
  
  
• Lowest account value: £ 9,882
  
  
• Highest account value: £14,502
  
  
• Maximum Drawdown: £4,620 = 31.8%

Month One - 1st - 31st October 2005

Ok, month one over then and performance is within expected parameters.

Full screenshots of the live account are below - any information that could identify any system parameters have been removed. and there are 3 pictures as it doesnt all fit onto one screen.

Before the summary ill add some text. Even though we had full confidence in the system, the first half of the month was a little hairy to say the least - slight doubts begin to surface when your first few days produce nothing by losers. Its also very easy that when a position is looking to continue in a winning trade to leave it open overnight.

However we stuck to our rules which by the way are totally without discretion and we came out on top.

Ive had one problem with the broker this month who slipped me by one pip whilst they didnt slip my partner - this was rectified on the account as you will see from the statement. Ive also had some refferal money paid into the account which is 2X£50 payments for recommending a friend which has to be taken into the final balance - bloody ell i thought, could make a killing just by doing that all day!!

good thing is that the friend also gets £50 so all is fair :)

Just the results left then - somne may look at these and scoff, fine, scoff away - but remember from little acorns come big oak trees :)

see ya all at the end of November.

Results of the first month, bear in mind our frst target is 17k by end of december.

• Opening balance:£10,000

• Closing Balance: £ 12,486
  
  
• P/L: £2,486
  
  
• % Gain on account: 24.8%
  
  
• Lowest account value: £ 8,630
  
  
• Highest account value: £13,326
  
  
• Maximum Drawdown: £1,370 = 13.7%

Launch Time

Ok, Monday the 3rd of October marks the first day of The Million Pound Grail Experiment.

Below is a screenshot from my capital spreads account - I have five broker accounts in total but from Monday this particular account will be used for this experiment alone.

As you can see the screenshot does mask some information. Obviously the account number but also any information that could compromise the systems integrity. There are only a handful of people that know of this system and its going to stay that way.

So, where I hit the stop level you will find blanks before and after, where i hit a take profit level you will also see blanks and as i publish the account once a month you will only see information that does not threaten the integrity of the system.

You can say what you want but the basic advice is this - if you dont like it or you are reading this to try and work out the system then dont bother looking. this is for my use in charting the progress and nothing more.

You may think that im going to sell this system - that is not going to happen so dont hold your breath - anyway, there are many more systems that make many more pips that this for the active trader, namely Hilda. As i explained in the first post this is an investment strategy rather than a trading system.

So, to business. You will see below that i had to add a couple of hundred quid to the account to bring it up to the 10k starting total - at least from that you can tell it's not a demo account.

Like any trade you ever take - the hardest part of the trade is right at the beginning and im sure that month one will be like that. The account is to be played with a leverage of 10:1 with a twist - the twist is the bit that might be a little scary to begin with so it will be interesting to see how it goes. I have no problems in playing the system - ive traded it for the last four months live and im 100% confident in it - the new compounding though has not been tried before except backtesting it.

The backtest looked good but then it was only 6 months of a test rather than the usual 3 years i like to do. All backtests that i do are checked by hand. Also interesting to note that the length of this 2 year experiment is almost as long as the backtest performed on the system itself!

The updates will not be that regular but i guess i might have some comments to make as we go through the first month. If you dont want to read them then just check out the last day of the month when the account status will be revealed.

With that i hope you wish me well as we enter what is traditionally the best trending months of the year. By now most of the muppets have gone broke and are back to demo and the real traders start to build their winter nest egg.

Good luck for October 2005, and rool on October 07 and my million quid :)

Broker Conversation

Ok, in the comments on the last posting someone asked for more info on my conversation with my broker.

I called my broker and asked to speak to the managing director who i got through to immediately.

before i tell you how the conversations went let me address the concerns i had:

1) the broker specified a maximum of £100 per pip

2) eventually there would be a lot of money in the account - how secure were they?

3) would their 'dealer assist' trade placing be able to get the fills quick enough on large trades

4) could in effect two or more of us playing the same system put the stability of the actual company in jeapoardy?

On looking at these questions one thing struck me - I need to have a good win-win relationship with my broker. Many people in the forex world seem to feel an advesarial relationship with their broker - 'the broker ripped me off' is often said.

We have to realise that a broker is in this for the money just as we are - they want to make money and we want to make money - there is no reason at all that we cant both achieve the same thing with a good level of co-operation.

so with the aim of forming a relationship i picked up the phone and got the MD.

Im a bit of a blunt guy and after the initial introductions i asked my first question which was "how many million pound accounts do you hold" he answered and said he couldnt give specifics but when i said im not after their names - just how many, he told me there was several.

I asked how big his biggest account holder was and he told me that he had a couple of punters with accounts in excess of 7 mil.

I then addressed the £100 a pip limit. It turns out the £100 a pip limit is a 'per trade' limit and you can open as many trades as you wish.

I asked what the reaction would be at being suddenly presented with a trade of £700 a pip and he said it would certainly raise some eyebrows and may be difficult to fill without notice. however he also told me of one client who regularly trades at upwards of £1000 a pip without issue.

We then spoke at length about the security of the company and safeguards that were in place. He told me that by law in the uk they have to place all client funds and winning positions into a fund which is untouchable by them - he told me that each day the company had to report on the size of this fund, the customer holding and current winning positions to the FSA (financial services authority) and that they were unable by law to use any part of that account to cover losses.

I have since verified this with the FSA.

After a long conversation of around 30-45 mins the general gist is that once up to £200 a pip i should be contacting for a personal trader and telephone my orders in giving some warning to them to help them out.

They make money by getting a better fill at market than they offer we punters and of course from the spread - they will generally get 1 or 2 pips better filled than we do .

personally i dont have a problem with this and he even said that at decent levels of trade we will be able to negotiate for a better rate of say a 2 pip spread thanks to the volume we will be trading.

I mentioned that the system i trade could well result in occasional winning days of £300,000 and asked if this would cause a problem to the liquidity of the business if there were a few of us doing it. He told me that if we were to take 300k in a day that they would be looking to make 310k on the trade and that the fund holding of the business could easily swallow that kind of take over a sustained period.

it works like this - you cant be advesarial with your broker if you are playing large sums - this has to be a win win situation for both parties concerned as if it isnt this is when they start to shaft you.

Subsequent investigations with the FSA, Dunn & Bradstreet and other sources have settled my mind that there will not be a problem in excecuting our strategy of 10k to 1mill.

Welcome to Grailtrading!

Right, hello and welcome to grail trading.

if you wish to comment on any part of our postings on here then feel free.

what's this all about?

The Grail is a Forex investment strategy which we have found has almost no chance whatever of losing based on a month by month basis. Note here that I said 'almost' as there has been one losing month in the last 3 years.

Its important to note here that the quest for a holy grail trading system has been every traders pursuit since man began to trade the markets. The famous holy grail would be a 100% winning system with that analogy and as this does have losers then we cant add the tag 'holy' to it :)

We don't class this as a trading system - we class it as an investment strategy and mentally there is a difference. An investment is not something that you watch every 5 minutes on a chart and an investment is not something that you expect large returns from immediately , day by day or week by week as you would in a trading system.

This kind of strategy is not played by many in the Forex game as to be honest its boring and you have to have discipline of steel and determination to see it through to a conclusion. It's not 'get rich quick' its more 'get rich slow'

Grail returns can only be measured on a monthly and preferably 6 monthly basis.

Why this site?

Our aim with this blog is to open a real money account on 1st October 2005 with £10,000 of capital and turn it into £1,000,000 within 2 years using a method of compounding the equity throughout that time.

This site will be our yardstick to measure the effectiveness of the investment and to compare it with the best hedge funds and investment vehicles available on the market today.

Following the publishing of our initial targets below we will publish on here screenshots of the live account. Obviously account numbers and actual trade entry levels will be blanked out but you will be able to see the account rise and fall during any given month by watching the equity which will be shown in is entirety.

We feel that we may hit hurdles along the way - for example the burning desire to take out some profit before the account comes to it's fruition or maybe the temptation to add to the account if it falls short of it's monthly target. We don't want that to happen but it will be interesting to see how we handle that.

There are also other problems we may come across. For example, as we live in the UK we will be using spread betting companies to trade with and the one we have identified (capital spreads) currently have a limit of £100 per pip allowed to be traded. This could be a serious problem that hampers our progress in our compounding and we may find we have to open more accounts or even switch altogether to a 'peoper' Forex broker to continue (FYI £100 per pip is roughly equivalent to 18 standard lots with a single lot being $100k)

it will be very interesting to see the responses we get from our spread betting company and we will log our experiences here as we go through.

How do you know this will work?

The system has actually been traded for around 18 months with a different configuration to great success. Our new parameters have been only forward tested for 3 months but does concur with our 3 year backtest which was hand checked for accuracy and found to be within 3-4% of actual results.

The backtest revealed that £10,000 invested in May 2003 would today be worth more than £2 million. The drawdowns were acceptable and so we are confident in its pedigree.

However it is worth noting that past performance can never be relied on for future actions and this is why we are risking an initial pot of £10,000 and not loading it to the hilt with everything we have.

Who is 'we'

There are two of us doing this both at the same time and with the same entries. The other party will remain anon.

Will you be selling this system?

No, this system is such that every single entry is the same for every trader.

We feel that if this was traded on the same broker by even just a handful of people that the broker would start to recognise the pattern and do something to stop it being traded. you may think that this is crazy and that theywouldn't care - but when the account is at say £700,000 its quite possible that the system could take as much as £154,000 in a single day. How would your broker feel if he had say 20 traders doing that on a semi regular basis and all on the same day?

now then - updateI whilst i was thinking of this i just thought lets try and get this sorted so i rang the MD of the brokerage and had a good long chat. lets just say that it wont be a problem, ill cover this in more detail when we get to this point.

Anyhow, no, it wont be for sale this isnt a marketing blog.

Targets:

Obviously we cant measure the success if we dont have a yardstick. Below is our target map of milestones to reach. The targets are aggressive and are stretch targets. however if they arent met we will not deviate from the system.

Dec 31st 2005: £17,000
March 31st 2006: £32,000
June 31st 2006: £58,000
Sept 31st 2006: £104,000
Dec 31st 2006: £188,000
March 31st 2007: £340,000
June 31st 2007: £612,000
Sept 31st 2007: £1,000,000

That's it!

Well, thats the introduction over with. As from 1st October 2005 I will publish on the first of the month the account status and the movement in the month.

Wish us well :)