Thank you for sharing. Looks like you have found something that works for your style of trading.
I am glad I am not the only one who is not able to see into the future and close trades down at Max P/L - at least we know there are two of us who do this.
As to your trading style/system as shown by the EA's you are running, I am curious as to know if you have looked at
1) which one of the two systems (trend or range) generates the most profit per avg. trade per instrument (Forex Pair)
2) which one of these two generates the highest drawdowns per avg trade per instrument
3) what must the market do for the system to be most profitable
4) what market conditions cause this system to suffer its highest drawdown
I like to see you are delving into the concept of creating a 'hedge' between the dynamics of a ranging market vs a trending market. If we were to know in advance which system is applicable on any given time period, we would not need such things, but since none of us can know in advance what the market will do, it seems like you are trying to come up with a solution (by wrapping one system around another) to minimize your losses (effectively hedging) for the various market conditions.
Many of the grid systems I have seen - seem to suffer if they are not tuned to the current market condition for the instrument they are being traded on (and maybe this gives it the 'edge', rather than the actual grid). Meaning that if one were to take a look at the ATR or ADR (or something similar) - and keep their grid at realistic levels (like 10% of ADR over x time period) AND combine this with an exit (like a profit target of .x ADR) they appear to perform better, rather than just keeping the grid level and profit targets static across a variety of instruments. Your comments are welcome as to your experience in this aspect.
Also, I am curious as to get your opinion as to how you believe your discretionary style of turning one system on or exiting 'here' rather than 'there', impacts the profitability of your trading system.
Thank you for your contribution....
As usual, your candor is welcome. I especially like your quote above, and I re-read that book often. I find it very helpful, and simplistic - which is refreshing.
My current thought on that exact sentence you bring forth is the 'ways to make money in the markets ... are very difficult to find', could be ended with 'for those who choose to find it difficult'. It is my belief that our sub-conscience mind plays a big part of our decision making regarding what we decide to do in our interaction with the market. Those who have a good relationship with this aspect may not find it difficult at all to consistently make money. Those that do not, find it an almost impossible task. I am not saying everyone should think this way, but I have seen example after example where people are able to make money, while many others around them lose. I have seen people make money for a period of time, and then begin the slow road of losing it back. And the only common denominator I see from these people is their relationship and thoughts between themselves and the money they put at risk on the markets. Which can ebb and flow over time. Many of the people I see who seem to have a winning 'edge' are people who look at it more like a simple and uncomplicated game, rather than a complicated market for which they must do battle with from people or forces who will be stripping their money from them.
Just a thought, and thank you again for sharing your knowledge.
If we take the logic applied to Post #9 or #10 of this thread, and either hedge a long with a short as price travels through the grid, triggering both longs and shorts at each level, or simply close down the opposing trade (as Killian suggested) keeping only the long at the top of the grid and the short at the bottom of the grid, here is what the grid would look like under the scenario that price had widened to trigger trades at the various levels.
In attachment #1, it shows the difference between triggering orders at each level of the grid (assuming a grid size of 10 pips), and the associated DrawDown at each level. The 'hedged' system takes less of a DrawDown at all points other than where only one long and one short were entered both 10 pips above and below our entry line (0 level).
Attachment #2 shows what I am referring to as the DDR% - or DrawDown Reduction %. This is the percentage of DrawDown we are reducing by using this style of 'hedging' scheme, over a non-'hedged' Grid system.
Attachment #3 shows the resulting graph with the 'hedged' DrawDown in Red, and the non'hedged' DrawDown in Blue.
regarding your explanation in post 13:
you have a trend grid here really......buy above price, sell below price.
a better way to get rid of opposite trades in a trend:
price rises up from 155.00 and a buy order triggers @ 155.10
if you have an open sell trade @ 155.10, this one will be closed out @ BE
if price rises to 155.20, new buy trade @ 155.20 and any sell trade @ 155.20 closed out @ BE
if price drops to 155.10, the buy trade @ 155.10 will be closed out @ BE and a sell trade @ 155.10 will be opened.
during the trading session all trades will be closed when profit target has been reached.
ps: for trend trading a 10 pip interval is too small imo - 20-25 pips is the better option.
Thank you for your suggestion, your logic appears to be very sensible. I will map out an example below to see if it has the same outcome. Also, as for the grid pip size, I would tend to agree with you on increasing the size - I use the 10 pip as the math is easy to calculate for myself and for others to follow. I would think one may want a grid value that is larger than the normal 'harmonics' of the pair - which I believe is what you are suggesting.
So, following along with your logic (correct me if I am wrong here) we have an 10 pip grid with no trades as of yet.
WE'LL STOP HERE
I do have a trending grid system in development, which wont lose much when in a range and profit in trending conditions.
for a pair with a daily ATR of around 100 pips I go from long to short when the change from the last trade is at least 65-70 pips from my testing.
suppose my intervals are 35 pips and from buy to sell is 70 pips:.......buy @ 155.00 - buy @ 155.35 - buy @ 155.70 - buy @ 156.05 - buy @ 156.40 - buy @ 156.75 - buy @ 157.10 - buy @ 157.45 - buy @ 157.80........
price retraces 65 pips - we do nothing....
if it retraces 70 pips or more we have first sell trade @ 157.10 and exit all other trades.
the buys from 157.80 and 157.45 will be at a loss, the others at a profit for a profit overall.
so now we have a sell trade @ 157.10 and the next sell trade is @ 156.75
if price rises from 156.75, we go long again @ 157.45
the sell trade @ 157.10 can be closed out @ BE on the way to 157.45, so you have 1 sell position instead of 2 sell positions against your future buy positions on the way up, but haven`t tested this part.
went myself with 2 positions against, although regularly price wouldn`t go down as far as 156.75 and I had only 1 sell position in loss.
intervals can be smaller than 35 pips: 10-35 pips is alright, provided that the lot number is reduced accordingly and the change from
long to short is kept at 70 pips.
so genasea I wont be buying/selling at every level, but the change of direction must overcome a hurdle first = 70 pips.
trend trading is easy. the real money, including the overall account survival, is in the range trading...
Regardless of the price messages, the rate sometimes changes direction. This is because the operators are trying to get as many people as possible on the train (more customers mean more money is there to be made). So, the message clearly says - we are going up, but it could and it actually does move down with some 150-300 pips before continuing the upper movement. Being a small folks, these 300 pips corrections are very hard to face with our small and tiny accounts. That is why I prefer to play it safe than sorry...
Take a look at the red sell trades arrows. They are limiting the trend's strategy profit, by securing it at an acceptable levels, although far away from the maximum... So, safe or sorry? Which one do you prefer most?
G, I do not want to be some pain in the ass, this is my last post here, unless asked otherwise.
Here is an idea for you for your EA. It is very useful if you could take sides (the traditional way of trading), with the option, if things goes into the wrong direction to be able to exit at little profit, BE or even at a small loss. Here is one example of me trading terribly badly on EURUSD. I am a big fan of EUR falling down, because my biz is USD based and I never miss a chance to get on to the down fall.
On the picture, the slave (the range strategy) is on the right. Today I saw it +$666 at profit (of $1,088 peak P/L), but did not manually close it, which turn to be a huge, huge mistake. Instead, I left the range strategy go with the flow. You can see the range strategy was opening only sell trades. Blocking the way of the trend strategy upwards. Hedging, basically. But the distance is very well calculated, if anything goes wrong, the damage should be minimal.
Although, there is no damage here, I am utterly mad at myself, due to the fact I was thinking very highly of myself, having the confirmation from the price it is going north, still, very fan-like stupid decision at my end. This is so damn foolish, to know the direction, but to be so attached, because of other reasons. Like a guy who is in love but sees no understanding from the other party. Anyway.
Take the nice thing here, taking a side by hedging the "wrong" direction. If you do your calculations right, then, you can trade the traditional way, without risking too much by over trading the right direction, thus reducing the profits from what's obvious...
Last but not least, the direction was unfavorable for this setup. Yet, no big of a damage +$170 (just $1k short at profit, not much), but this is because of the stupidity of the trader, not of the system.
G, I wish everything best with your EA development. Take care.
Very interesting system, I would be curious to hear how your system is working after you get some demo trades under your belt. It sounds like you are being methodical in your approach, rather than discretionary on your entries. How about your exits? And are you activating your system on specific pairs for a specific reason? Also, do you have preferred time of days to active your system for maximize your chance of success? Your proposed system is quite a bit different than what I was thinking, but you never know when you get a chance to learn something from another member here. I am traveling for a couple of days, but I want to run some more price action scenarios through the logic you presented to me to determine how it performs (in relation to minimizing the drawdowns) over a wider range of scenarios. I will post my findings here on that as well, and I appreciate you putting in your thoughts on this matter. If you have any other opinions feel free to propose them as well.
I backtested AUD/NZD manually from 25/3/15 to 24/8/15, so my numbers are correct apart from maybe some slippage.
during that time there were very good trends in this pair from around 1.0000 to 1.1400 and back and forth to 1.1000 from there.
the dd is never more than 200 pips and as I`m prepared to have a maximum dd of 30%, my leverage is 15:1.
starting on 25/3 with a $10,000 account, I ended up with around $50,000 in August.
if your maximum pain threshold is 20% dd, the leverage is 10:1 and you end up with around $ 36,000.
10% is 5:1 and ending up with $23,000.
this system was on all that time.
no need to turn it off seeing that the grid levels are 35 pips apart.
not a lot of slippage when a story breaks this way.
any combination of the levels is ok..........00 35 70 05 40 etc.............or 20 55 90 25 60 etc
in the 1st combination if price hits the last buy order of 1.1005 and if price reverses more than 70 pips, we go short @ 1.0935
after a change of direction (at least 70 pips the other way) and we hit the first trade in the other direction.
so we`re in an uptrend and have mainly buy trades.
when the first sell trade is made, we look at profit/loss of all our former trades and if in overall profit, close out all those trades.
leave the first sell trade.
if the loss is small, we might decide to close out the former trades.
in my backtest I always let the trades run if in loss.
if in loss and you decide to let all trades run, do not forget to close out all opposite trades @ BE when price gets there.
obviously trending pairs would be best for this system, so you will have to work out which pairs are trending at any given time.
I am done travelling for a bit and am able to revisit this. I looked through the grid comparing your and my grid system (Post #25) and realized I have an error. There should be a 'Buy' at grid level 154.9 where I have it marked as a 'Sell'. If we go through the hypothetical example in Post #25, step-by-step, it would look like this:
price rises from 155.01 at entry to 155.10, we trigger a buy order
price rises to 155.20 and another buy order is triggered
price drops back down to 155.10, we have a existing buy order so the buy order is closed. and a sell order is opened
adding to your example...
price drops down to 155.00, another sell order is opened here
price drops again to 154.90, another sell order is opened here
price rises to 155.00 and the existing sell order is closed and replaced by a buy order
price drops back down to 154.90 there is an existing sell order and no buy orders, so do nothing
price drops to 154.80, another sell order is triggered
price rises to 154.90, so we close the sell order and a buy order is placed
price drops to 154.80, the existing sell order is in place, so we do nothing
price drops to 154.70, where another sell order is triggered
price rises to 154.80, the sell is closed, and a buy is triggered
And this is where we stop.
This gives us a current DrawDown of -$50, not -$30 which I had mistakenly put in post #25. This matches the DrawDown of the initially proposed system (-$50) so we have a net gain of $0 between the systems (minus the spread to open a few new positions).
Does this look right to you?
from my research a pair with a daily ATR of 90-100 pips a distance of around 70 pips from long to short is the most profitable.
so its no use talking about 10 pip grid steps in JPY pairs with an even higher daily ATR if you have a trending way of trading the grid with buy stops above price and sell stops below price.
would not even consider trading any other types of grid:
with a trending grid, you can limit your dd while making a decent profit
with mean reversion grid you can make good profits, but the dd can/will blow up your account one day.
for me the choice is easy.
Any1 still using? Seems like grid gensrate positive return after backtest for 5 years..
let me first say that hedging is not part of the grid; sorry to disappoint you!..... we use stop losses.
the drawdown only happens when the first trade or second trade are stopped out....
if you risk 1% of your capital on a trade, you can be stopped out at least a hundred times.
you dont have to watch your trades all the time.....MT4 has a feature that if you have a buy, the stop loss moves up with the price and stops when the price moves down again......if you trade manually, you might miss the first trade in the new direction, but this could also be a blessing.
the profit potential depends entirely on your skill to detect a strongly trending instrument: a ranging one 25% per year minimum, if you catch a flyer over 100% per year.
if there is interest, I`ll continue tomorrow.
I for one am most interested, so please continue your post!
alright, here we go....so we`re looking for an instrument which trends strongly....could be one which just reached a new high/low over the last few years and now trends strongly in the opposite direction like in a V-formation......all visible on the daily/weekly chart i.e. AUD/USD.
generally speaking forex is not the instrument of choice, but rather stock indices, grains, energy, cocoa, coffee etc futures/cfds......%-wise forex doesn`t go up or down that much if you compare it to other instruments.
now we have our grid in such a way that we don`t get stopped out all the time by minor price fluctuations......we take a percentage of the daily movements of that instrument to stay clear of the present price action......bring in the 10-day ATR.....if you choose 0.5 ATR in a strong trend, you`ll get stopped out more often, but you enter earlier and in the end your profit will be higher.......you will need to automate it.
for manual trading choose 0.75 or 1.00 ATR.
Lets say the trend is up, your 10-day ATR is 100 pips, grid is 75 pips, your account is $ 1,500, you risk 1% for each grid step and price is now 1.1000.
buy with 2 trades @ 1.1000: 0.01 lot SL 1.0925 - TP 1.1075 and 0.01 lot SL 1.0925 - no TP.
if price turns and hit the stop losses we lose $ 15.
@ 1.0925 we go short with 2 trades: 0.01 lot SL 1.1000 - TP 1.0850 and 0.01 lot SL 1.1000 - no TP
but the trend does its job and from 1.1000 price does not turn around but hits 1.1075.
we close out one buy trade for a 75 pips/$7.50 profit and we put the other buy trade @ BE.
we enter 2 new buy orders @ 1.1075: 0.01 lot SL 1.1000 - TP 1.1150 and 0.01 lot SL 1.1075 - no TP.
if price turns here, we go the other way and sell @ 1.1000.......our total loss for these 4 trades @ 110.00 and 1.1075 would be $7.50 = 0.5%
this method is a good starting point for beginners....the profit is not so much in the 75 pip TP`s, which is only to smooth the equity curve.
the real profits are made with the BE trades and can run into thousands of pips PER TRADE in a good trend.
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