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Matts Micro Sep 12, 2015 6:47am | Post# 1

3 Attachment(s)
I have decided to rewrite the intro to try and simplify what I am doing without the essay

I built this system from attempting the rags to riches thread:
http://www.forexfactory.com/showthread.php?t=444377


Start with 2 accounts (or a bank account and a trading account) called the "Principle" and "Trading" accounts.

The Principle account has "Levels" as follows-
$100
$200
$400
$800
$1600
etc.

The Trading account deposit always begins at 10% of the current Principle account Level.

So if at the start the Principle account has a balance of $250 the current Level is $200. We withdraw $20 (10% of current Level) and deposit into Trading account.

From here we attempt to achieve +3 net trades (3 more wins than losses, not wins in a row) of 2:1 R:R trades, risking 50% of the Trading account for 100% reward.

As such-
Trading account
Start deposit: $20
1*Net Win = $40
2*Net Wins = $80
3*Net Wins = $160

We will trade the account until we hit either +3 net trades or until it hits -1 net trade. If the Trading account gets to -1 net trade ($10 in this example) we reimburse the trading account from the Principle account (so withdraw $10 from Principle and deposit into Trading account to bring the Trading account balance back to $20).

Once our goal of +3 net trades has been achieved we will withdraw our profits from the Trading account and deposit into the Principle account minus the deposit to start the next series.

Trading Account:
Balance-
$160-$140 (leaving $20 to begin the new trading series)
$20

Principle Account:
Balance-
$250-$20 (initial withdrawal for Trading account deposit)
$230+$140 (successful +3 trading series)
$370

Once the Principle account hits either the next Level up or down (so in this example $400 to the topside or $100 to the downside) the Trading account deposit will also be adjusted to 10% of the new Level.

So that's about it. Any questions please ask away. If anybody decides to give it a whirl I would be interested to know how they go.

Cheers and GL,
Matt.
.........................................................................................

Example:
Click to Enlarge

Name: Capital Weightlifting2.JPG
Size: 248 KB

Here's a system test against a compounded 1% account. Settings are at 1% risk (5% will need to be entered to test the system at my explained risk) with 40% win/loss rate, (both adjustable).

Capital Weightlifting 6.xlsx

The same Test but with a +2 Net trade Take Profit scenario
Capital Weightlifting +2 net trade.xlsx


Edit 18/8/18: I have come across an interesting quirk. If you choose to trade 1 account rather than 2 (an easy thing to do as long as you keep on your trade levels) your 2:1 trades can have have a greater risk in lot size vs leveraged account balance.
I am used to a 60-80 TP with a 30-40 SL because that is all my account will accept on leverage of 1:500 but if my full balance is in the one account I am able to scalp 20 pips for a 10 pip SL (for the scalpers out there). A word of warning on this as usual however, if a blackswan event happens or even just some random news spikes your account (with a less than perfect broker, which is almost all) it could devastate an account.

tmcwil5517 Sep 12, 2015 8:07am | Post# 2

Hello. I have being working on a "new" (probably already out there but new to me) Money Management System and thought I'd share. The system was brought about by attempting the thread "Rags to Riches in 10 to 20 Trades" http://www.forexfactory.com/showthread.php?t=444377 . I was attempting this high risk system and though I never completed it, I quite often managed more than a few levels up. It got me thinking about how I could preserve my capital but also retain the current trading level achieved. After experimenting with the system and...
I have done something of the same nature, in which I would have a main account with the funds(100 dollars, about 2 years ago), and would transfer 10$ at a time to the trading account, in which I would make super quick trades with 1000:1 leverage.
On one of my tries I got up to 10,000 dollars in 1 day with only about 40-50 pips, and with the desire to hit 1,000,000 dollars the next day, I (surprise!) lost it all. I have never been that lucky again, and will never try to either.
However, your technique seems profitable, if traded responsibly. I'll follow this, I fancy this idea and would like to know more about it.

Erebus Sep 12, 2015 8:20am | Post# 3

I'll be following; quick suggestion, seems to me that the Principal + Trading account and all associated trades could be visually "seen" much better using a flow chart - if you are good with that sort of thing.

May the pips be with you, John

Matts Micro Sep 12, 2015 8:53am | Post# 4

{quote} I have done something of the same nature, in which I would have a main account with the funds(100 dollars, about 2 years ago), and would transfer 10$ at a time to the trading account, in which I would make super quick trades with 1000:1 leverage. On one of my tries I got up to 10,000 dollars in 1 day with only about 40-50 pips, and with the desire to hit 1,000,000 dollars the next day, I (surprise!) lost it all. I have never been that lucky again, and will never try to either. However, your technique seems profitable, if traded responsibly....

Hi tmcwil, Wow that's some gains.


This can be tried on small accounts too. When I first started I was using a $100 (I don't use demo for testing, always micro live accounts). It's a little more difficult using micro lots as there isn't as much flexibility in the pipage but still easily doable. So with a $100 in the principle account and $10 transferred to the trading account. With the 2:1 trading strategy it shouldn't take more than 3-4 tries to get to +3 net trades. So it can look like this:

Deposit: $10
Lose: $5 (-1 net trade)
Deposit $10 (0 net trades)
Win: $20 (+1 net trade)
Lose: $10 (0 net trades)
Win: $20 (+1 net trade)
Win: $40 (+2 net trades)
Lose: $20 (+1 net trades)
Win: $40 (+2 net trades)
Win: $80 (+3 net trades)

Now the +3 net trades have been met I transfer $70 to the Principle account (leaving $10 for the next trading round in my Trading account). So my Principle account is now on $155 ($100-$10 initial deposit, -$5 for second deposit, +70 from Trading account profits).

If another +3 net round can be made within the next 6 attempts I will be over $200 and be able to increase the deposit from $10 to $20 and start over. From $155 I have 22 attempts (including current deposit) to get +3 net trades before dropping to next level down (though $50 isn't a realistic Principle account level but I am just using as an example). If I can't reach +3 net trades in 22 attempts then perhaps it's time for me pull apart my trading system.

This system isn't a get-rich-quick system though. As you can see there can be some trades involved in just one +3 round and I also tend to have a few break evens amongst it as well. 2:1 trades need to be well thought out and much patience is needed.

Matts Micro Sep 12, 2015 8:58am | Post# 5

I'll be following; quick suggestion, seems to me that the Principal + Trading account and all associated trades could be visually "seen" much better using a flow chart - if you are good with that sort of thing. May the pips be with you, John
Thank you John. Yes I am a little clumsy at these sort of things but it had also crossed my mind too. I will certainly look to put something together now.

Cheers,
Matt.

Matts Micro Sep 12, 2015 10:50am | Post# 6

1 Attachment(s)
Here's my attempt of a flow chart (sorta... just an example really). Hope you can make sense of it. If any questions please don't hesitate.
Click to Enlarge

Name: Flow Chart.JPG
Size: 240 KB

sinqua Sep 12, 2015 2:47pm | Post# 7

Here's my attempt of a flow chart (sorta... just an example really). Hope you can make sense of it. If any questions please don't hesitate. {image}
Now this right here is brilliant.

I can safely assume you have thought up a sound trading method.

Only patience and discipline stand in your way.

Matts Micro Sep 13, 2015 3:03am | Post# 8

{quote} Now this right here is brilliant. I can safely assume you have thought up a sound trading method. Only patience and discipline stand in your way.
Thank you friend for your kind words.

You have hit the nail on the head. Patience and discipline imo trumps all other factors as a Trader. If a person can master these two skills then the rest will fall in line fairly quickly. As a trader these two factors also reach beyond sitting at a desk taking trades, examples are sleep, eating and exercise to name a few.

I personally am a discretionary trader but I'm also looking at many factors to make a trading decision. I am looking at things such as volume, range, time of day, much correlation (often when the market moves many trading opportunities are available and it is important to choose the pair most likely to succeed in a 2:1 setup), fundamental influences, Order Flow / Harmonics, PA and patterns to name a few. I am mostly a BO and swing trader which I believe is useful when trying 50%/100% (2:1) trades. It enables me to set a tighter SL with expectations of a Profit run. Often if the SL is hit then the trade decision was wrong and a SL with more room would have been irrelevant.

I am planning to do another example as the one above was a bit rushed and doesn't display the full power of this MM system.

GL
Matt

Matts Micro Sep 13, 2015 5:51am | Post# 9

1 Attachment(s)
Here is another example. As you can see there are more losses than wins. It maybe not that surprising that the system ends up on top considering that it is dealing with 2:1 trades so I put in a couple of other common systems with the static lots and 2% risk vs 4% reward to see how it fares.

As I mentioned in the opening I noticed that my trading wins/losses can revolve around market confidence. I find it so easy to make pips when the charts are firing on all pistons. I can see entries clearer and the even the Money isn't brave enough to try to move PA to try and collect stops. It's like it has taken 5 Redbulls and it's going to where it's going and nothing is going to stand in its way. On the other hand when nobody is sure where it's going including the Money such as during the Greek crisis when every small twitter changed short term sentiment and reversed PA, it makes it very hard to put together flowing trades. This week is probably going to be one of those times (and has been for a while to a degree) with the Fed. Reserve Rate. Every little squark can be an excuse for the Money to switch short term sentiment and on thin liquidity and until after the decision could be very hard to trade. My point is that I personally find that my wins and losses come in waves. I believe with this type of MM the wins can taken the best advantage of good conditions while the losses are kept in check until such a time comes around.

I have 8 losses on this example which would be a lot to me (I think I have had 8 once back when I was starting) and I would be a little disappointed but even 8 losses (7 withdraws) is far from breaking the bank and it could easily take 3x this punch and quickly regather the losses in a just a couple 3x net trade runs.
Click to Enlarge

Name: Capital Weightlifting.JPG
Size: 213 KB

Lalu Sep 13, 2015 6:57am | Post# 10

nice plan. Good luck.

Matts Micro Sep 13, 2015 8:22am | Post# 11

nice plan. Good luck.
Thank you Lalu. Sticking to the plan was hard at first (I always wanted to take the trading account lower than -1 net trade) but being working at it and is now concrete.

Cheers,
Matt

Edit: I'm not sure but perhaps the bolded text doesn't read well. What I meant was that I always wanted to risk another level down to try to recapture the profit levels above rather than withdrawing from the Principal account at the -1 net trade....

Matts Micro Sep 13, 2015 2:14pm | Post# 12

There is an area that I haven't touch on with the previous examples. When I am trading it is rare that I have perfectly round 2:1 trades especially because I am a discretionary trader. If I see that my trade is unlikely to make a full TP I may close it early or I may use a trail stop. The same goes if I see a trade in red and can see it is likely to got to the full stop I may shorten the stop or just close it early. When I say this however, please don't get it confused with fear and greed. If I choose this course of action I have to have strong reasons, the same sort of reasons for taking the trade in first place. If I see my original reasons going up in smoke and see reasons for the reversal I will close mid trade.

So the rule in this case is similar to my "Level" trading. To recap- I trade 10% of the current level from Principal account regardless if my balance is above or below it until I hit another Level (up or down), (as I stated in opening). The rule I am pointing at here however is based on the Trading account. I am after 3x 2:1 trades but... what if the I only made 50% gain on the first trade? The rule I use here is that I use the original R:R as if I was starting from the beginning and disregard that 50% gain. If I happen to close early again and manage 50% gain again (tongue twisting) then I will have satisfied the first 2:1 Trading Level and move onto the second. So the 2:1 R:R is set in stone until the next level is reached. I wont increase the R:R if I have reached just half a level, but importantly, different to the Principal account rule, I will always trade the lowest 2:1 Trading level until I am above the next level. I will do another example tomorrow to illustrate what I mean.

There is an exception to this rule that I touched on in the opening but will explain in my next post.

GoldTheHun Sep 14, 2015 4:37am | Post# 13

Don't get me wrong pls, I don't want to discourage you or critical of you.

2:1 RR translates to approximately to %67 losses, %33 wins. If I understand correctly, you need 3 wins in a row to bank some money. 3 Wins in a row becomes 0.33 * 0.33 * 0.33 = %3.6. Meaning that probability wise you bank the money %3.6 of the time.

This mm method must be evaluated with monte carlo simulation to see whether it is feasible or not.

Just my 2 cents.

Good Luck...

Matts Micro Sep 14, 2015 5:18am | Post# 14

1 Attachment(s)
Just added this over all example to the opening post. I am still to do a partial closes scenario but will do soon.
Click to Enlarge

Name: Capital Weightlifting2.JPG
Size: 248 KB

Matts Micro Sep 14, 2015 5:33am | Post# 15

Don't get me wrong pls, I don't want to discourage you or critical of you. 2:1 RR translates to approximately to %67 losses, %33 wins. If I understand correctly, you need 3 wins in a row to bank some money. 3 Wins in a row becomes 0.33 * 0.33 * 0.33 = %3.6. Meaning that probability wise you bank the money %3.6 of the time. This mm method must be evaluated with monte carlo simulation to see whether it is feasible or not. Just my 2 cents. Good Luck...
Hi. I appreciate any input but you made an important mistake in your calculations. It is something very misunderstood in the Rags to Riches thread and it is why I highlighted it several times during my explanation.

+3 net trades is not 3 trades in a row it is just three more wins versus losses. For example:

Trade #1 = Win now at +1 net trade
Trade #2 = Win now at +2 net trades
Trade #3 = Loss now at +1 net trade
Trade #4 = Win now at +2 net trades
Trade #5 = Win now at +3 net trades.

Also you are equating a trading method to that of throwing dice. I appreciate your input but trading isn't about randomness and odds it's about research understanding.

Cheers,
Matt.

Matts Micro Sep 14, 2015 5:53am | Post# 16

1 Attachment(s)
Just thought I'd share a typical 2:1 trade. This is one I am in atm with a risk reward of roughly 45:90 pips. It may or may not complete but if it has another break downside I may be looking at moving the stop to break even (I have quite a few break even trades when trading 2:1).
Click to Enlarge

Name: eurjpy #16.png
Size: 67 KB

GoldTheHun Sep 14, 2015 6:00am | Post# 17

{quote} Hi. I appreciate any input but you made an important mistake in your calculations. It is something very misunderstood in the Rags to Riches thread and it is why I highlighted it several times during my explanation. +3 net trades is not 3 trades in a row it is just three more wins versus losses. For example: Trade #1 = Win now at +1 net trade Trade #2 = Win now at +2 net trades Trade #3 = Loss now at +1 net trade Trade #4 = Win now at +2 net trades Trade #5 = Win now at +3 net trades. Also you are equating a trading method to that of throwing...

I apologize. You are absolutely right. I misunderstood your mm method ...

Good Luck

Matts Micro Sep 14, 2015 6:06am | Post# 18

{quote} I apologize. You are absolutely right. I misunderstood your mm method ... Good Luck
All good I like to be challenged, it makes me think.

GL

GoldTheHun Sep 14, 2015 6:18am | Post# 19

{quote} All good I like to be challenged, it makes me think. GL
Thanks. One question:

Do you step down the risk after 1 loss? I understand that you step up the risk after a win.

Matts Micro Sep 14, 2015 6:27am | Post# 20

{quote} Thanks. One question: Do you step down the risk after 1 loss? I understand that you step up the risk after a win.
On the first try the answer is no. You just top up the Trading account from the Principal account so the risk stays the same. If you already have the first or second level up and you lose then the answer is yes. You drop the risk back to the previous level.


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