Building an equity millipede

Hi Calculus,

I usually have no interest in closing positions opened in the same day, so I would leave both long and short running, the stronger will survive. :-)

Cheers,

Cam

I would leave the short at the mercy of the market. Reason: the price could go either up or down and I couldn't know for sure where, as there is no entry method that works all the time.

Let's say the price moves up and eventually closes out your short. Both ways you retain your long position, all you lose is the small unrealized profit accumulated on the previous short.

Now assume the price moves down instead. Both ways you lose your long position, but instead of a small static profit you would have a growing short. So essentially the whole difference is the outcome for the short. You're deciding whether to trade the uncertain large growth for a certain small floating value of the position. Hence, I choose growth over a small realized profit. It's the very core of the millipede building philosophy in my opinion.

Yes, that's the way I've been doing it, but I was starting to think of the possibility of covering the short rather than letting the market decide. That's the key point isn't it - the market will decide....

Barbs, Like Cam, you make an excellent point - potential growth over small realised profit. You never know do you, the short could turn out to be a 500+ tick move, do enough trades and you're going to get your share of them. Thanks.

Good afternoon everyone,

Thank you everyone for your experience and knowledge on building this equity millipede. I read this thread last year aka January 2012 until Feb-march 20012. I thought I was king of the world with what he was showing us. But until I realized I was just beginning my journey to success. I have made 700$ in some weeks and in others lost over 200$. Breaking even pretty much. But what I've learned from Graeme's method is that trading is your own business. Trading someone else's system is like opening a franchise: but in forex there is no such thing as a franchise.

Graeme did say razor sharp entries were good, but then he also said they didn't matter; well that depends on your capital. Can you withstand a weekly fluctuation or a daily fluctuation. Someone with a billion dollars can withstand a yearly wick fluctuation. Fluctuation is the a traders nightmare. See I trade mostly on daily candles, using hindsight of weekly,monthly, and yearly. For the daily I will see what the market is saying then I will look at 4hours and see if there is a reversal aka higher highs and higher lows turning into lower highs and breaking out to lower lows. The secret is the information within the information. 'When its up buy and when its down sell' - think about the true meaning behind that. its always been about HH, HL, LH, and LL. The smaller time frame will tell you if your anticipation of the higher time frame is probable. However even if you understand that you wont be a professional trader. Low risk entry is the main thing that will keep your capital alive. Do you understand what a low risk entry is? okay so you understand what it is, but can you pull the trigger on low risk entries only and only low risk entries. See to build a millipede takes a long time, especially if the market is moving sideways like it did for the past 2-3.5 years. Why do you think almost all of you didn't have a surviving millipede(correct me if I'm wrong) a millipede being many legs of course.

When dealing with entries or life... did you ever ask yourself, how long or what will it cost you before you figure out whether your decision was right or wrong. when your driving, how long will it take you before you find out you speeding was a wrong choice? is it when you miss something? or after you hit a pole? or someone? Trading is a lot simpler than life decision. You either have negative pips or positive pips. A real man admits he is wrong when he is wrong. So a question for all of you... How many pips does it take you before you figure out your trade was wrong? Now you start thinking like a real trader. Scenario goes like this 'If I enter here how many pips will it take me before I know this was a bad trade?'.... Now obviously the less pips the longer your account and emotions will last. So next time your about to enter a trade ask yourself 'how long will it take me to know that I was wrong?'.

I never cared that I was wrong because life is uncertain and we're all predicting something that only the Lord knows. The real question 'WHAT AM I DOING THAT'S WRONG?'. and there is a lot of things. But what I was doing wrong was I was trading naked(no indicators) but yet I wasn't using all the factors of trading naked aka the HH, HL, LH, and LL. After that I knew when to enter and how to enter and when I knew I was wrong aka my s.l. Yes I use stop loss and move it to B.E once the day is over and in profit. If day is over and my s,l not hit and i'm negative I close the trade out. Thats that. NO FEELINGS just EXPERIENCE. And I need More experience

Another thing I wanted to add is screen time. Someone on here said that the 3X20 exercise was to add screen time experience. You want screen time experience. GO pick a currency and go into the 5minute chart and watch it everyday for 30 mins. That's 6 candle formations a day. Watch it before bed time if you can't sleep that will put you right to bed. Screen time makes a trader who he is. Just like any other career. With out the experience your slow and not good at what you do. With experience your a valuable person.

Diversification should not even be thought about until you can enter more than 2 trades and have had them open successfully for a few weeks(considering your trading daily candles using weekly, monthly, and yearly candle hindsight).

A)So understand a method that works around HH, HL, LH, LW.
B)Understand the meaning of razor sharp entries; How long(many pips) as a professional trader will it take you to figure out you were wrong
C)Diversify when main hindsight you use is changing its Higher Highs, Higher Lows, Lower Highs, and Lower Lows.... that means something is happening and the trend is dying out. Time to take profits.

I hope I helped some of you out that are new and maybe a few who are old to this thread. Once again thank you all who have posted along with Graeme, it was a great read and I learned a lot. Thank you.

Kind regards,
Jacob

Calculus,

If both signals were generated with in couple of hours and hardly 50 pips apart, there is a bigger chance of SL being hit on both sides.

Currently, in my practice what I do is, I allow the market to take out the short at the logical stop loss. This is anyway already committed risk. However, I will re-enter short exactly at the same price, if price comes back after taking out your initial SL and cover the long.

Thanks
TradeStar

I'm inspired by this thread and the folks here.

Another good post by someone who seldom posts on forums.....

Great thread so far! I'm slowly reading through it.

Wondering if anyone here trades Flying Buddha that was briefly mentioned here. I took a test trade with this on AUD/USD and have secured 300 pips along with many smaller positions since late January.

Great thread.

I opened an Oanda demo account and have been trading since January 1st.

I have a question. For example, I had a two week old position in gbpjpy and was up about 200 pips but then it retraced 100 pips. So I added another position thinking the uptrend would continue, but instead it stalled. When I tried to exit the new position, it said I had to close my earlier position first. I don't understand why I have to close a previous position first. So, in order to get out of a losing trade, I had to close an earlier trade in the same pair.

Is this the standard among all forex brokers?

Good afternoon to all,
Is anyone using Pipeasy's original method and being successful?

controling risk with time.thats beautiful.time is the main trade.regards

To really make this strategy work you've got to solve some big problems -

1. Reading the market
2. Low risk entries
3. Risk management
4. Psychological pressures
5. Stacking
6. When to trade - when to do nothing
7. And probably the most important, how to make sure your stacked positions don't get gobbled up by the market (or at least how to make sure they're given the best chance. The markets are perverse remember, so they're always going to try to get ya)

Some of the above are more important than others and of course all answers are correct only for the individual that answers themselves, ie what's right for me not not be right for you.

The other important point to note is the answers to those questions all blend into each other. For example, stacking is part of entries, stacking is part of risk management, stacking is part of knowing when to trade. Also, when to do something or nothing is part of risk management and it's part of stacking which is also part of the psychological pressures etc.

Over the next week or so I'll try to make a series of posts and offer my thoughts onthe above.

Hopefully starting from the bottom. "how to make sure your stacked positions don't get gobbled up by the market" will be of particular interest (to me) and I have built my edge around it. Low risk entries would be next in the order of preference

If you are based in the US/Citizen/US Broker, the regulation is First-in-first-out (FIFO). Need to close first the first one before the 2nd position.

Hi! Vee,

Glad to know that you are having success with the System. I am still struggling with my trading a little bit. Distructed following development of several EA and I am not going anywhere, until I found a kind of variation in my entry method incorporating idea I got from Graeme's thread on Stacking.

I still have a lot to learn though. For example with GBPNZD, I have established 2 sell positions with 100 pips apart at 1.8830. I only managed to stacked 2 positions as I am afraid it will revert back upward soon. Although the weekly chart shows the general trend is going down, current price is already passed support level from Feb. '12/Jan.'11. If my hindsight is correct on the weekly chart, I am already anticipating the upward trend all the way back to the previous resistance of 2.0850 level. Following Graeme's - that my job as a trader is to enter and follow the market. Common sense is telling me that I have to close my position when the trend will turn arround or am I going to let this 2 soldier die?

In addition, once my equity turns positive from more than 10 initial entries, I stacked heavily even at a margin level below 250%. I have nothing to lost anyway - if I stamped out due to margin, I will still keep my profit yet utilize my capital at the most. By the way what is your safe margin level you are maintaining accross all your positions?

I love to hear your comments guys.

Regards,

Edd

Vee, I want to make some solid posts and don't have time right now, so I'll get around to it at the weekend.

However, to give you a pointer. In order to offer your position (initial probe + more importantly your stacks which are the secret sauce in all of this) the best chance of success, I think THE key is to trade at the edges of price, those are the levels that from a probability point of view the market will find it hard to gobble up your position.

Define 'edges'? It's just another way to describe an extreme. Markets generally move from undervalued to overvalued and it's at those key areas where we should be at our desks looking to put trades on. Yes, anyone can put a probe on when price is not at an edge and can then stack 1 or 101 extra positions but again from a probability point of view the market has a high chance of coming back to that level and stopping out all your hard work.

Never discount the emotional drain of having 7 short trades on say the Euro at 1.3500 to 1.3450 (just plucking some numbers out of the air), seeing price go to 1.3350 and sleeping like a very satisfied baby only to come in the next day to see price gobble up those unchanged stops. Yes, this will happen even if you trade at the edges but it will happen far less than if you trade in the middle of the range. So the less it happens the less emotional pressure you'll feel which means the better shape your mind will be in to analyse/take trades.

Good Day Vee,

Could you pls share Average Buy/Sell consolidated positions indicator ( if of course is for share ).
It is very good idea to group stacking episodes into separate groups and treat such group as one virtual order.

Wish all of you plenty of green pips!
miekra

Hi Miekra, I have yet to modify the indicator to show average price of each group of stacking episodes. I use the same one freely available on the web with a little tweak. Google "Consolidated Position Indicator for MT4".

Most of my indicators and EAs are compiled via mt4 editor a dozen times during my trading session based on my own personal need so sharing what I have may not work for you. I use this approach to minimize the effect of "pre-defined actions/entries" that Graeme advocates. If market is not constant, EAs and indicators should also be adjusted on the fly to reflect the current state of the market/price action.

p.s. all we need is to add a start and end date parameter (or a comment parameter) in this indicator to scan thru open positions. Should be pretty straightforward.

A few posts back I said that in order to really make this strategy work we all have to find answers to some very tricky problems. With these answers in place we can then mould them into the complete trading strategy.

Here are the problems that need answers to -

1. Reading the market including when to trade and when not to
2. How to make sure your stacked positions have the best chance of surviving
3. Risk management
4. Low risk entries
5. Stacking
6. Psychological pressures
   
   

In this and my following posts I'm going to show everyone my current through process which I've been working on over the last year or so. Most of that time has been spent thinking rather than trading and it's only in the next few months that I going to start putting the ideas into practice. However, I still need some help, mainly on the mental aspect and I'd love to hear some of the ideas of other members in relation to my main mental problem. More on this in a later post.

------------------------------------ ------------------------------------ ------------------------------------ ------------------------

Reading the market including when to trade and when not to.

and

How to make sure your stacked positions have the best chance of surviving

My answers to the above 2 questions are very much related.

Price generally moves from undervalued to overvalued before repeating. This pattern repeats in whatever timeframe you’re looking at, 1m, 5m, 240m, Week, Month or even above that. Pick any chart, any timeframe, can you see the natural ebb and flow from under to over and back again? And it doesn’t really matter if the market is trending or ranging, price still generally moves from under to over.

Understanding this and using the information is potentially a big edge if used correctly.


Example: Undervalued to overvalued – Range Type Market




Example: Undervalued to overvalued – Trending Type Market




In the final move down I’ve noted ‘under???

Will this be the bottom?

It might be, then again it might not be, but it’s certainly heading towards undervalued status. If it is undervalued then probabilities suggest 2 things –

1. Price has a good chance of not moving back to that undervalued area for some time, and
2. The next stop, which may be some time away, will be when price goes to overvalued

Another word for over/under is ‘edge’ as in look to trade at the edges. Our edge therefore is literally the edge.


How to find the edges – Quick Method

The spotting of a potential edge in price is easy. Note, I said potential edge, you’re not looking to trade at this time, you’re only doing a bit of recon, which may or not be turn out to be right.

1. Pull up a chart in whatever timeframe you’re interested in
2. Bunch the bars up really tightly and see how price has moved previous in the past
3. Say it’s Cable 60m, look at the last 2-3 months and note the general movements
4. Just eyeball the chart, no fancy measurements are needed

Assume price has been dumping for some time, that’s an initial warning that we may either be at an edge or nearing one


Important

No trading at this stage, you’re only looking for potential areas to get interested in. Perhaps you think Cable is near an edge, but then over the next 5 days price dumps even more. You were wrong, big deal, no money risked, nor lost.

Summary: Just get some rough idea of where an edge might be.


More detailed way of spotting edges

I use simple trend lines, parallel lines that sort of thing. I can add my lines to any chart within a few minutes. All I try to do is draw from significant price bars. WRBs, big highs and lows, any bar that looks interesting on the chart.

What you want to try and so it find what’s called the frequency of price, see the following examples.

See how simple the lines are and they’re all drawn off significant price bars. As I said above it shouldn’t take you more than a few minutes to add the lines to any chart. Sometimes, you’ll struggle to find any good lines as price is messy, having been all over the place. If so, draw nothing or go to a to a higher/lower timeframe .

Can you also see the lines generally capture the frequency of price? That’s what you’re trying to log into because if you can find frequency then you’ll have a great chance of zeroing in on the over/under valuation of price.

One final point. In the first chart you didn’t know about the touch 1 and 2 of the yellow line, those were used to draw the line AFTER price traded at those levels. The 3rd touch was tradable.






3rd Touch in more detail

Let’s look at that 3rd touch in more detail because it’s where one of our trading edge lies.

Can you see point x, assume that’s when you started to look at the chart

You’d drawn in the yellow line and it was clear to you in HINDSIGHT that point 2 was overvalued and it’s quite possible that right here at point x, price is undervalued (but for this example, you have no interested in longs)

So judging that price had moved down from overvalued (point 2) to potentially undervalued (point x) logic would have you thinking that IF price does start to move up, the logical place for it to go would be to that line, around point 3 so making it overvalued.

And if the market does prove you right at point 3 then it has a good chance of moving back down to undervalued.

If an area around point 3 does turn out to be an extreme/edge in price then price has a good chance of not returning to the area and your positions (initial probe(s) + stacks) have in turn a good chance of surviving.


Text book example

Yes, of course this was a textbook example and I wanted to show something perfect in order to make my point without complicating matters. Go look around your charts and you’ll see plenty of examples just like this as well as others which are messy and all together harder to trade.


What happens if we try establish positions when price isn’t at a potential edge?

From a probability point of view we get frustrated, or at least I do. The bigger move is from over to undervaluation but inside that there’s often a load of semi random movement. Today they love the dollar because of the trade figures, tomorrow they’ve changed their mind, the next day it’s all love again etc.

Here’s an example of what I call the Gobble zone. ALL positions and ALL stacks, even though they might have looked like really solid trades at the time, got gobbled up within 1-5 days. Try trading in these zones for the next few months, then tell me you’re not getting frustrated with it all.




Go to the top of the class if you’ve spotted something on the chart relating to frequency. I don’t know about you, but a very simple line can be drawn from the top as well as a parallel line off the low. Looks like we might be on to something here, NOT FOR PUTTING ON TRADES, but for defining areas that might be overvalued/undervalued and in turn edges on the chart.

Now, before anyone accuses me of curve fitting those lines, look at them closely, especially where I start the lower line from. Can you see I haven’t drawn the line from the low of that move, instead it’s around the open/closes of the candles. This is fine, you want to try and capture the general area, the lines are not going to be used for entering orders. I often move the lines up or down 1-10 ticks as in this chart to make everything fit a bit better.





Summary

2 questions asked –

When to trade, when not to

and
How to make sure your stacked positions have the best chance of surviving

Answer to both: Only at the edges as these offer the best chance of your position (initial probe(s) + stacks) surviving.

But what about in the middle, after price has started moving down from overvalued to undervalued. Won’t you miss some excellent trades.
Yes, no doubt you will but I’d suggest that for every good trade you miss you’ll also miss 2-3 losing/breakeven ones. Trading as we know is all about putting probabilities in our favour and I think only looking to trade at the edges does just that.

Let the edges in price become one of your trading edges.