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PTMC team 24.10 2013

Portfolio trading

Hello there, Protraders!

Today I would like to present you a very interesting tool named the "portfolio" which is very advanced and sophisticated. It allows you to design your own baskets of instruments, i.e. currencies, with certain coefficient values. But let's start it from the beginning.

Trying to make your own bunch of instruments, you will need to go to the "tools" and "portfolio". When "portfolio" window comes up, you will use "create new portfolio" button. You can make as many portfolios as you like, each for different occasions. I.e. the EUR basket which contains currency pairs with EUR as a base currency. You can also pick pairs that are positively or negatively correlated with risk appetite. Why is it so good? There are few reasons for that, so please let me introduce you into my way of seeing it.

Designing your own basket you will be able to choose coefficient between values of instruments used in your portfolio. The default value is "1" for each meaning that every instrument counts in same proportion to the portfolio's "price". If you think, that some instruments are more important than others, and you want to differentiate their relative weight, then you can do it by changing the coefficient value. When you set your basket of instruments up, you will receive the overall value of it displayed as one number - the basket's price. So you are able to measure gains and losses of your basket counted as one instrument.

Portfolio - Creating chart basket

If you get the price of your portfolio, you are able to display it in form of a chart. It's very similar to the CME traded Dollar Index (DXY). Here you are able to find support and resistance levels, trends and formations. You can determine for example which currency dominates the market or determine market's sentiment. You could use such portfolios to confirm your trades or timing, because every strategy has it's better and worse times. Another important way to make your basket useful is portfolio trading.

Trading portfolio - Protrader

Trading portfolio? Yes, you can. It's well known truth that diversification is one of the best ways to limit your risk while being exposed in the market. Picking many instruments would make you less vulnerable to anomalies that may occur regarding to one instrument, country, world region, or assets group. In example, if you would like to buy EUR, then you will have to pick the financing currency. By choosing one, you are tying the result of your trade to the circumstances regarding one of these two currencies. But if you would make a Euro portfolio, you would be able to trade Euro against the whole basket of currencies. In such case, sudden crisis in one country would affect your investment only partially, leaving better chances for the rest of your portfolio to gain you a nice profit that would offset those accidental loses. With the Protrader portfolio tool, you are able to do it like professionals do!

Trading portfolio - Chart risk 1H - Protrader

To place order on your basket, you should go to the "Order Entry" panel and pick your portfolio from the instrument list, you can type in few letters of its name to make search easier and simply chose whether to sell or buy each instrument from your basket in set quantity then multiplied by predefined coefficient value. So if you have two instruments with coefficient "1" and "2", and you will place an order of 2 lots, then your trade would be as high as 6 lots because: (2 lots *1) + (2 lots *2).

Trading portfolio - Amounts confirmation - Protrader

If you would like to invert some pairs because they do not fit your basket (i.e. AUD/USD and EUR/AUD in "Aussie basket") you can use negative coefficient which makes the pair influence inversed.

Trading portfolio - Chart AUD Basket 1H. Amounts confirmation - Protrader

On the image above, we want to go short on Australian Dollar because of the RBA head dovish speech last night. But EUR/AUD didn't fit the AUD-basket, so we simply change coefficient value of EUR/AUD to -1 and placing an order. While selling each AUD based pair, we buy the one quoted in AUD. Isn't that beautiful?

There are some tools built in Protrader 3 that will help you to manage your portfolio trading. I like very much the account exposition and positions balance windows. With trading multiple instruments especially in many baskets, you are able to watch your overall currency exposition and summary balance of positions on each instrument. It is very important information for you to know, which how your portfolios are working and how much risk you are taking at the moment.

Have not tried PTMC yet? There is no better way to boost knowledge than to use it! Start trading with PTMC now!

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