Quote:
Originally Posted by hubbahubba
Good to see Graeme back,
Unfortunately I feel the need to be a bit of a downer. I take full responsibility for my results. No blame on anyone but myself and I have not given up as the math still makes sense to me.
I have been trading this system since Graeme started the thread. I have used very conservative money management the whole time. I never trade more than 0.5% of my capital on any one trade. I use very similar entry techniques to Graeme. Price action and candles. My entry success is pretty good. 70% survive long enough for me to...
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Good morning, Hubbahubba
Thank you for your question and others for their warm remark.
I feel obliged to answer your question with great depth as this is the question that rages in most of the readers.
How come Graeme finds long term approach successful but i dont?
I have thought about this question for a long time whilst I was i was away and glad to see that you have brought it up as my answer will also answer as to why I started the project with VEEFX and the last side talk on statistics.
I will answer earnestly and honestly for all but need everyone to think about what Im saying on their own terms. Im not forcing my thoughts onto anyone.
The 200ema project I have run with VEEFX had a final surprise. VEEFX chose the r:r of 1:4 which I explained that I have something important to explain later on. Unfortunately, due to my abrupt absence we didnt get to the part where I explain the surprise.
The surprise was that after 10 or 20 trades and some time after it will show that his trades that were closed for profit would have been far more if he has not closed them.
The reason?
This is eur/usd 4hr zoomed out to the max. It shows roughly 9 months of movement. There are
almost 4 months of ranging period where the price does not exceed more than 200/300 pips (highlighted in red).
But, there are areas just around the 200ema break where the price extends 1000+ pips. Really?
Aqua highlights area that went 1000+ pips.
You might think to yourself, 'ah geez, out of 9 months I
only have 6 weeks of good trading opportunity?'
Yes.
Is it worthwhile?
Definitely. And it requires very little time. What more do we need to ask for?
If we are trading 200ema breaks then
most of 9 months period
we are not even staring at our computer screen. Setup alerts to your phone so when price nears the ema by 50-100 pips you know its time to watch again.
If we take low-risk entries towards the direction of 200ema breaks and control our risk/intention/greed.
Yes, you will suffer a short term drawdown but at the end of it all you will reap greater.
WAIT.
I want to re-focus on my last sentence in purple.
This is where there are personal difference in between each trader.
"..you will suffer a short term drawdown.." What do you personally consider as a short term? For me, its 3-4 months.
"..but at the end of it all you will reap greater.." What do you personally consider as reaping greatly? For me, its at least 1000 pips no less.
This is the parameter which differs from each trader. But you are not born with certain limits and tolerance. Tolerance is built and changes over time.
Now, it is your responsibility to manage your loss during range sessions. If it is 30% drawdown with 0.5% per trade, can I assume that is 60 losses? (unless you change your lot size as you fluctuate up and down your capital balance)
Lets stop here and look back at first chart. The red area that denotes ranging period. Its almost 4 months. What do you think you will honestly lose in that period? 30-50 times? Hopefully at least a quarter of them breakevens
It has never cost me 1000 pips to make 1000 pips.
I know that there are some traders looking for instant fulfilments when it comes to profit taking. Making 1000 pips over 9 months with 4 months of range might not tickle most traders fancy. That amuses me as this is still an excellent return. Please humble yourself by saying aloud you cant drive that new Ferrari Italia by end of this year or write a nasty resignation letter with derogatory comments to your employer. Not yet and not in the next 2-3 years.
Lets say you missed most of the optimum 6 weeks of trading and only managed to place 2 positions that went to +1000 pips each.
Lets say you have lost 1000 pips to get these 2 positions (which is quiet extreme!)
So after 9 months, +1000 pip net profit. That is +27 net pips profit per week.
As we all know I currently have roughly +30 net pips growth per week.
And this is almost guaranteed result but the requirements is that you control your risk and tolerance. Not many will even try to do it.
I do not know which direction the next 100 or 200 pips might go but I do know for a fact that market will move up or down by thousands of pips in the months/years ahead. That is a fact.
The above 2 charts was from 2007. Trend wasnt that great.
In a real trending period (and I would say about 1 in every 3 or 4 years)
Look at eur/usd of Nov 2009 9 months.
Another 6 weeks of optimum trading area. All would be +1000 at least.
How many positions do you think you can have in a gap of week? 2 per week at swing low or swing high?
What if you adhere to do the above and after 9 months, you have 6 positions that are +1000 pips each. You close 5 of them and keep 1. Just for luck because you are already up by few thousand pips profit anyway. Imagine 5 years later that 1 position is still alive. This hasnt happened to me yet but I still have bundles of positions that are 2 years old. (and yes Geoff, it was around 200ema)
Some might say, thats not enough excitement for the efforts required. Trust me when it is far more exciting to watch your positions grow then to place a trade aiming for the next 50 pips and fret with worry when it goes against you by 20 pips. And then you scoff at the idea of mere 27+ pips per week per position..
Hubbahubba, if you can have 50% of your positions moved to BE you are way ahead of most. What do you aim for? 1000+ pips? There will only be 2.4 months of 1 year that will happen. That is statistics for you. Unfortunately that 2 months is not together but spread out.
There are so many side related info I could provide to the above but I think this post is enough for now.
Good day all.
Sincerely,
Graeme