Index, Forex and Diversified Trading

using simple mechancial solutions


Brent Penfold trading since 1983
and helping others since 2001!

International Best Seller! Now translated into;
German, Polish, Japanese, Korean and Simplified Chinese.


Frequently Asked Questions

With Forex trading clearly money and risk management are paramount. Do you provide guidance and advice in this regard? What account size would you recommend to commence trading the ForexALERT signals? And what is your starting account balance in the performance results table?

You’re correct money management is paramount. ForexALERT provides everything to trade giving exact entry, stop and exit instructions. The estimated USD risk per trade per 1 CME currency futures contract is also given. Recommending an appropriate account size is a difficult question to answer as it falls into “personal” advice and I’m only licensed to give “general” advice. In addition every trader is different regarding their appetite for risk (drawdown), financial position and investment objectives. And not every trader uses the same money management strategy. In addition not all subscribers will be trading currency futures like I do. For example if people trade currency CFDs or margin FX (Forex) where they can customize the contract size of the currency pair they trade then they can obviously trade ForexALERT with a smaller account as they would be risking less money. So for me to suggest an appropriate account size would be difficult. However I hope the performance metrics I’ve included in ForexALERT will help you in deciding an appropriate account size. An important metric to consider is the drawdown. If you have a high pain threshold (for drawdowns) then you would be able to trade ForexALERT with a smaller account size. If you are very sensitive to drawdown pain then you would prefer to trade ForexALERT with a larger account size. I hope this makes sense? Also you can chat with your broker and they’ll be able to help you with the decision process.

The performance metrics just show the results of trading only 1 futures contract per signal where USD50 has been deducted for brokerage and slippage.


I'm currently reading your 'SPI book' and I've spent the evening scouring your website, but I have a query please. I am trying to differentiate between your KEY LEVEL and your ForexALERT newsletters. My understanding is that both are based on the KEY LEVEL mechanical system (described in the KEY LEVEL Book) but that they differ slightly (as evidenced by different theoretical trading results). It seems that for the same price I could subscribe to the ForexALERT Newsletter and get direct guidance (to trade a variation of KEY LEVEL) or subscribe to the KEY LEVEL Newsletter and also receive advice on your intentions to trade KEY LEVEL (which I could then shadow). Can you please confirm whether I have got it right?.

Thanks for your email. Key Level is a fully disclosed mechanical trading strategy, or mechanical pattern. ForexAERT is an fx newsletter. ForexALERT trades a portfolio of patterns. One of those patterns is Key Level.


You have several pairs shown in ForexALERT showing 'past' performances back to 1973. Are these hypothetical back tested results of your algorithm system using your preferred pairs?
Yes that is correct, the results are hypothetical as stated in ForexALERT.

“Hypothetical results trading 1 futures contract per signal, deducting USD50 for brokerage & slippage.”


I have noticed that all your results, including the recommendations in email below, are all hypothetical. Why can you not supply real results with actual trades you have done? Hypothetical details are not real and mean that they could have happened, but didn't. What's the story?

All the results on the web site are hypothetical…. even SpiTrader and IndexTrader which have been available to the public since April 2001. IndexALERT’s results are also hypothetical even though IndexALERT has been available now since 2004 and similarly with BBTT (Jan 2008), Key Level (Jan 2008) and ForexALERT (Jan 2009). Although I revised (simplified) Key Level and ForexALERT (since it does trade the Key Level pattern) in August 2009. As I said all the results are hypothetical.

The reason why they hypothetical even though the models and newsletters have been available for a while is two fold.

Firstly as traders we need to know whether the strategy we wish to trade has an edge – regardless of how good or bad a market will be at a particular time or how good or bad our broker is in executing our orders. Also - I only trade very liquid markets so there is every likely hood the hypothetical trades would have occurred - the question then becomes slippage. For conservatism you certainly could estimate more for slippage if that would make you more comfortable.

Secondly – owners/subscribers are able to watch me personally trade live everything I offer – so they get to see my fills – entries and exits – my real results. And also people can request to see my real time index results as well – there is a link on the web site to request them. However I don’t offer any individual account real time results for my forex services. I do for my index services as I thought I should do so when I was starting out. But now that I’m established as an adviser I feel people know me and know I trade what I offer. And as you know I offer free trials of the newsletter where people can watch me trade live for 21 days seeing my actual fills during the trial period.

So I’ve elected not to have to double/triple my paper work by opening additional separate individual accounts to show people my real time results for BBTT, Key Levels and ForexALERT. It’s a pain in the backside for me to keep separate accounts for SpiTrader, IndexTrader and IndexALERT. Believe me I would rather have just one account to administer and trade.

So the results are hypothetical. They show my strategies trading in a perfect world where holidays and sick leave do not exist and where reasonable slippage occurs. Its shows the statistical edge I trade. And through the index real time results which are available off the web site, and owners’ and subscribers’ ability to watch me personally trade all the set-ups and signals that appear live in real time – I feel I probably give more transparency to real time trading then most other advisors. I hope this makes sense.


I’m sick of looking for my version of "The Grail" and I probably have a fair sized subset of your trading library. I now trade FX via IGMarkets, and am looking at getting a start-up method that I can use to get away from day trading. Think I'd like to buy your Key Level book. As I'm confident I can apply the method myself, I also thought I'd look at your ForexALERT letter, rather than the Key Level letter. Am I correct in assuming that ForexALERT contains the Key Level Method plus some other personal patterns, in the same way that IndexALERT contains IndexTrader plus other patterns? If so, can I trial ForexALERT and buy the Key Level Book? P.S - Missed your Melbourne talk, hope to have more time for the next one. P.P.S - I've kept reading your e-mails over the years whereas I've unsubscribed from literally dozens of others (50+?). Just my little pat on the back for keeping up the common sense over such a long period of time :-)

Thanks for your email and thanks for being on my mail list for so long! And yes… ForexALERT does trade the Key Level pattern plus some other patterns, in the same way IndexALERT trades the IndexTrader patterns plus additional ones. And yes you can purchase Key Level and trial ForexALERT.


Hi Brent. I've been on your email list for a few years and usually just have a casual glance through the results table. I've just been reading through the list of your upcoming workshops and initially was interested in your master trader workshop. However I then had a good look through your website at the different subscriptions you have available. I have traded equities spasmodically over the last 10 years with reasonable level of success. I'm reasonably familiar with technical analysis having completed a diploma of technical analysis many years ago. As I have other interests and employment it has often been difficult for me to consistently devote enough time to my trading to be as successful as I would like. If anything money management would be my weak point. Something that was simple, provided a strict set of rules and would fit into my time poor lifestyle would be ideal. Looking through your models I started to think maybe there might be something in them that may suit me. I have a few questions: I have never traded the futures markets. Do your subscriptions provide advice on how to place orders etc? With regard to opening accounts can you provide any direction on a good advisor/broker for new traders? Based on what I have written above would you have any recommendations on which of your models/newsletters you think would be most appropriate for me to begin with? Realistically what level of starting capital would be ideal to trade your methods? Your thoughts would be much appreciated.
Thanks for your email. I hope I can answer your questions to your satisfaction as many of them relate to “personal” advice and I’m only licensed to give “general” advice. But I’ll give it a go. My newsletters provide everything you need to trade: The index/currency market, entry, stop and exit instructions. Subscribers just copy, paste and email the orders direct to their broker. I’ve attached today’s IndexALERT and ForexALERT for your review. For brokers who are familiar with my newsletters and orders types you can refer to the following link;

http://www.indextrader.com.au/brokers_who_can_help.html

Now for what is best for you.

It depends.

If you’re time poor then a newsletter subscription would be more appropriate (either IndexALERT or ForexALERT). If you wish to become independent then you would consider one of the short-term models (SpiTrader/IndexTrader) or medium-term trend trading strategies (BBTT/Key Levels). Everything is fully disclosed and 100% mechanical. Alternatively, if you have never traded futures before then you may prefer not to commit a lot of money initially. If this was the case then you could consider a newsletter subscription which is only AUD490 per quarter. And as a side bar you are not locked into an initial 12 month subscription. People can keep subscribing on a 3-month basis for as long as they like…and when they’re comfortable they can subscribe for 12 months and receive a good saving. But initially a quarterly subscription would possibly be the best way to put your toe in. And even before that. Get a copy of my book Trading The SPI. For $30 it will give you an insight into how I think about the markets and how I approach trading. It’s no good subscribing to a service or purchasing a model of mine if you’re not comfortable with how I engage with the markets.

If you do decide to subscribe its difficult to advise what an appropriate account balance to start with because it contains personal advice. However I can tell you what I have done. In the attached real time results you’ll see I opened a small account to demonstrate how people could trade IndexALERT.

IndexALERT trades 8 global index futures: Spi, Nikkei, Taiwan, Hang Seng (ASIAN PORTFOLIO), Ftse, Dax, Mini Nasdaq and E-Mini SP500 (ALL = GLOBAL PORTFOLIO). My simple money management rule was to only trade the signals for the ASIAN PORTFOLIO whenever the account was under $40,000 and trade all the signals when the account was over $40,000.

I opened this demonstration account on the 1st November 2005 when the ASX200 was at 4468. At time of writing (May 2009) the ASX200 is down to 3779.

Over this period the ASX200 has fallen -15%.

As you can see my small IndexALERT account has enjoyed +123% gain.

That is what I did….but then it’s my newsletter that I’m trading…so I know it’s easier for me. And if you enjoy the same success with one of the newsletters and in time you wish to become independent then you could consider purchasing one of the models out of your trading profits.

But to start with you should take up a free trial of either IndexALERT or ForexALERT and get a free look and feel for professional futures trading.

I hope this helps.


I must have missed it somewhere but you have not mentioned what size account, risk/rewards.... etc ....necessary that us 'newbie’s' need to consider to take advantage of your daily emails.

This is a difficult question to answer as it falls into “personal” advice and I’m only licensed to give “general” advice. In addition every trader is different regarding their appetite for risk (drawdown), financial position and investment objectives. And not every trader uses the same money management strategy.

In addition not all subscribers will be trading currency futures like I do. For example if people trade currency CFDs or margin FX (Forex) where they can customize the contract size of the currency pair they trade then they can obviously trade ForexALERT with a smaller account as they would be risking less money.

So for me to suggest an appropriate account size would be difficult. However I hope the performance metrics I’ve included in ForexALERT will help you in deciding an appropriate account size. An important metric to consider is the drawdown. If you have a high pain threshold (for drawdowns) then you would be able to trade ForexALERT with a smaller account size. If you are very sensitive to drawdown pain then you would prefer to trade ForexALERT with a larger account size. I hope this makes sense? Also you can chat with your broker and they’ll be able to help you with the decision process.



I assume you will be posting your recommendation ONLY on the daily newsletter...or will you be sending email alerts as situations become of interest?

That’s correct. ForexALERT is a daily newsletter….and when there are set-ups to trade you’ll see the recommendations in ForexALERT. There are no other email alerts. There is only ForexALERT.


I work fulltime and I was wondering how I could utilise your forex recommendations? Can I use your alerts after hours and if it’s after hours what markets can I trade with?

Firstly you will need to establish a routine to regularly download your email before 5:00pm Chicago time (9:00am Sydney time) to receive ForexALERT’s trade recommendations. This is because the next 23 hour electronic trading session starts at 5:00pm Chicago time. Because ForexALERT’s trading recommendations are based on end of day bars you will need to know ForexALERT’s recommendations before the next session starts, which is 5:00pm Chicago time. Most subscribers just copy, paste and email the complete order instruction to their broker before 5:00pm Chicago time where the order is live for their broker to work over the next 23 hours. So it’s like a “set and forget” process once you have placed your order.

If you have a Client Advisor there is no more to do but just copy, paste and email the order.

If you trade margin FX, spot FX or CFD FX you will still need to establish a routine of downloading your email and copy of ForexALERT before 5:00pm Chicago time (9:00am Sydney time). You’ll then need to adjust the price levels in the trade recommendations to suit the FX product you trade. Once you have done that you will need to enter the order into your service providers trading platform.

ForexALERT only covers the EUR/USD, GBP/USD and JPY/USD currency pairs. You will need to decide what you would like to trade. Since currency markets trade on an almost 24 hour basis there is really no thing as “after hours”.

Also ForexALERT’s trade commendations are based on end-of-day data and so it’s not suitable if you’re considering using it for day trading the markets after work each day.



I’m to new forex, how easy is it to learn to use ForexALERT to trade FX?

If you use a Client Advisor it's very easy as you only need to copy, paste and email your orders to your broker. If you use a margin FX, spot FX or CFD FX provider then you will need to learn their trading platform.



I know you cannot give advice on opening an account, however would you mind just giving me an approximation? Do you think I could open an account with 10,000?

Unfortunately I’m not licensed to comment as the advice would constitute personal advice which I’m not licensed to give. Also you would need to consult with your broker on minimum account sizes. However if you trade CFD FX where you can reduce your risk per trade then I’d be surprised if a CFD provider would not allow you to trade FX with a 10,000 account.



Do you recommend any brokers who would be good at executing your alerts?
If you trade Futures then I can recommend any of the brokers on my broker list as they are familiar with my types of orders. Please see the following link:

http://www.indextrader.com.au/brokers_who_can_help.htm

However if you trade CFD FX then I really can't comment as I have never traded CFDs.



If I subscribed to your letter will there be any support from you if I have any questions?
Certainly. People are always welcome to email or call me for help.



I’m reading today’s post...but cannot quite get my head around it. I’m not an Options/CFD trader but just a spot FX trader. So buying or selling 1 lot for March ... etc etc...  kind of drifts over my head. How can I decipher this to suit my day trading 'mums and dads' style of entry and exits? Basically I’m just looking for a signal say go short if price hits XXX.XX ... with Stop at XXX.XX... Take Profit at XXX.XX ? Can that order you have today appear like that? Once I get past this hurdle I’m sure I will not be bothering you with these sort of questions.

No worries. As I say in the newsletter non futures traders like yourself will have to convert the orders and their price levels to suit your own market/s. To copy ForexALERT’s trade instructions…or to alter and adjust them to your spot FX market….all you’ll need to do is see where the entry and stop levels are placed on the daily 23 hour currency futures bar chart and then find the similar level on your spot FX daily (24 hour) bar chart.

If the entry is a one tick break of the previous days low on the currency futures chart, you’ll need to place your entry on a one tick break of the low of yesterday’s spot FX 24 hour bar.

If the stop is a one tick break of the previous days high on the currency futures chart, you’ll need to place your stop on a one tick break of the high of yesterday spot FX 24 hour bar.

So today’s Euro Currency instruction is straight forward…to go short on stop if prices trade at 1.2851 …which is one tick below yesterdays low on the daily Euro Currency futures chart.

You can view yesterdays Euro Currency futures daily (23 hour) bar chart on the link provided in ForexALERT “Additional Information”.

So you’ll need to look at yesterday’s low for the Spot Euro/USD market…..and if the spot prices trades one tick below the low then that is where you would go short. The stop is a one tick break of the yesterday’s high on the Euro Currency futures chart. So you would need to place a stop one tick above yesterdays spot Euro/USD high.

ForexALERT is not a day trading service so it doesn’t use profit targets. It looks to catch 3-4 day moves if it’s not stopped out….and it doesn’t place an expectation on the trade. It lets the market determine where to exit, not a profit target.

When it’s in a position ForexALERT will study the prevailing price pattern that is developing and will adjust the daily stop accordingly. So you’ll need to see where the stop is on the currency futures chart and then find the identical position on a Spot EURO/USD chart and adjust your daily stop accordingly.


Hello Brent. Thank you for your daily ForexALERT emails, appreciated. But for the love of me I cannot 'convert' your JPYUSD charts to what appears to be a more conventional USDJPY configuration. That’s to say my chart pair gives a totally different price to yours, and moves in the opposite direction. I have asked other traders who use other charting packages and theirs has it as USDJPY. Any ideas or help here please.

No worries. This is certainly an annoying problem.  I wish there was a single universal convention on displaying currency pairs on charts. As you know I trade the Chicago Mercantile Exchange’s (CME) currency futures which have been trading without interruption since 1972 (Euro Currency, British Pounds and Japanese Yen).

CME quotes, displays and charts these currency pairs as:

EUR/USD
GBP/USD
JPY/USD

They focus on the movement of the “BASE” currency (the left hand currency) in terms of the “QUOTED” currency (the right hand currency).

So they look at what the Euro Currency, British Pounds and Japanese Yen are doing, going up or down, compared to the USD.

And this is the problem.Most other participants (like your service provider) will quote the currency pairs with the USD on the left side as the “BASE”. i.e: 

USD/EUR
USD/GBP
USD/JPY

As a result CME’s currency futures and hence the charts in ForexALERT will appear back to front, upside down or in reverse to what you are seeing. Usually it is (from my understanding anyway) a simple solution to fix. As I understand it all you would need to do is change your currency quote convention. From memory I’m sure FXCM’s trading platform (FXCM is the largest FX broker in the US) allows traders to configure the convention to suit their needs and is not fixed either way?


And to adjust the ForexALERT price levels all you will need to do is to “inverse” the prices. i.e. divide the prices into “1”.

However I think the best solution would be to adjust your charts parameters to quote the currency pairs like CME. I hope this makes sense and I hope it will be an easy matter for you to “flip” your chart settings so your charts will match ForexALERT.





Disclaimer: Active trading carries a high level of risk and may not be suitable for all people. The high degree of leverage provided by futures can work against you as well as work for you. Before deciding to trade you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your risk capital and therefore you should not trade money that you cannot afford to lose. You should be aware of all the risks associated with active trading and seek advice from an independent financial adviser if you have any doubts. Past performance is no assurance of future performance.

Under Chapters 6D and 7 of Australia’s Corporations Act 2001 I am authorised to carry on a financial services business to provide general advice on futures to Australian wholesale clients. Accordingly any opinions, conclusions and or other information expressed by myself do not contain personal advice. Visitors will need to with, or without the assistant of a person licensed to give personal advice, to determine whether any general advice expressed by myself is appropriate for them given their particular needs, financial situation and investment objectives.