Good morning Team Rainbow. In preparation for the journey restart on 2 January, I have made one or two adjustments to the Rainbow bus. These are adjustments to make the trip smoother (hopefully) and the signals much easier for you to implement. I have amended the relvant info links on the main blog page.


1. As before, signals are given as buy or sells at 8am, midday, 4pm and (ocassionally) 8pm. In summer those times will be one hour later. All signals are buy/sells at market price.


2. Stop losses are 90 pips as before. However, the target is now 40 pips and there is no half closing of positions. That means that once you have entered the trade, you can place an OCO (one cancels the other order) to close at either 40 in profit or 90 in loss. The 90 pip stop loss is a fail safe stop as if the trade goes against us AND is showing opposing signals, I will close at the next 4 hour mark. This amendment will enable you to set the trade and forget it, rather than having to move stops during the trade.


3. 10 currency pairs will be traded. I anticipate approximately 2 or 3 trades per pair per week. However, when the cumulative profit for the week is 280 pips, NO MORE TRADES WILL BE SIGNALLED OR TAKEN. I anticipate a 70% - 80% win rate and need 7 from the 10 pairs to hit the 40 pip target. This is because I believe that most systems have good periods and bad periods. Good trending systems do not work well in ranging markets and vice versa. The plan is to recognise this and cash in when profits are on the table. Then walk away and start again the following week. I have set these targets because they will deliver our long term goals of a monthly return in excess of 10%.



Imagine a fruit machine or a casino. The adage that most players give their winnings back is true. The casino operators know that the odds are stacked in the house's favour. Usually when someone wins they continue to play and inevitably their performance returns to the mean, which is to lose. If, every week, performance of our system varies from minus 400 to plus 400 but overall breaks even we have a neutral system. If we bank and close at 280 in profit, we will have a winning system.



4. Stakes will be £4 a pip assuming a £20,000 capital, so maximum loss per trade will be £360, or 1.8%. If target is reached (280 pips) we will earn £1,120 per week, or £4,480 per month which is a monthly return of 22%. This gives us some lee way to have a poor week during the month and still achieve in excess of 10%.



Obviously, a £5,000 capital balance will trade at a stake size of £1 a pip.



5. Stake sizes will be raised at each month end to maintain the risk per trade at 1.8% of capital.



As I have stated before, the Rainbow Road journey is a long one and not a short term get-rich-quick scheme. With great care, I believe capital can be increased over 3 years by more than 30-fold. This will happen if we achieve our 10% monthly target. Even if we achieve half of that, I will be more than happy.



One or two final notes.



I. You get out of life what you put in. Results will depend upon you taking action. Your future lies in your hands, not mine.



II. To carry on doing the same things and expecting different results is the first sign of insanity.



III. Make a change and try to stick to one thing. Give the Rainbow Road bus the benefit of your company for 6 months and then evaluate.



IV. Losses happen. Do not think your next best system is the holy grail. Or a new great mailshot is the cross-roads in your life that you have been waiting for. No system is.



That reminds me of scammers who mailshot a great forex system to 1,000 people who can trial it for 30 days, thereafter is will cost £100 a month. If it produces a loss in the 30 days, presumably it will not produce any subscribers and will have cost a mailshot (pennies). If it produces a profit, then perhaps at least 300 will subscribe. That gives them £30,000. The scammers don't care if the system then produces a loss the following month and everyone cancels. As long as they have endless supplies of more names to spam, they will make money.



They have a notion that all systems are random and don't work. They turn that into a good business by applying probability theory. All systems work some of the time. If they get it right in 6 months of the year, they have £180,000 from just mailshotting 1,000 a month. Imagine if that were 10,000?



I have tried to combine an income-producing system with the need for user-friendly operation that allows lives to be led at the same time. PC watching for 15 hours a day is not a viable solution in the long run.



Mrs Rainbow continues to improve which is good news. Enjoy the New Year festivities tonight.



I hope you all have a healthy 2008 and the Rainbow bus gets progressively heavier with bags of pips as we go. Thanks for keeping the faith and see you back on the road at 8am Wednesday morning.