Little and Often

In the never ending quest for system perfection, I have learned... there is no such animal. Still, I work toward that goal.

My journey with "Little and often" (L&O) as a trading system, started with the goal of designing a system that makes many small "little" profits and yet trades quite "often" so as to have those small profitable victories add-up to a substantial amount.

The challenge, as many veteran traders know, is the "Black Swan" event (the one event that the system can't handle) will eventually happen and wipe out any gains. In essence, risk goes up with the number of trades that are opened.

Now L&O has evolved to where the "little" part now focuses on the number of trades and the "often" part is now focused on the profitable trades. In essence... I now trade very little, but am often profitable.

FF has always had a goodly amount of fine traders who have been willing to help the rest of us. It is in this spirit that I share what I have and at the same time, trust those further ahead on this path to offer any advice.

The goal is to take the system further from an artform and more into science. I would love to see MT4 advisors replicate this, but that is a bit beyond my skill level.

The method follows in the next message...

I've attached the most current chart setup that I use. This one shows the Euro as of 8/17/08. As you'll see, I use multiple time frames (MTF) and take into account everything from the Weekly to the 15MIN time-frames (I will also switch to a Monthly on occasion).

I use Stoch's and RSI. I use Stoch's to show trend direction and RSI to give me an idea of how much "fuel" is still left in the current trend. This is where the "art form" plays a part. I don't get the trend from one time-frame, rather I get the trend from viewing the smaller slices of all of them at the same time. This is rather difficult to explain and I would suggest you experience it if you haven't yet. Regardless, using MTF in this way has proven highly accurate for both trending.

On the actual price charts, I use 3 moving averages. A 4, 13 and a 50. The thicker lines are the 50, the skinniest is the 4.

Here's the general idea...

In this case the charts show that the odds are the Euro is headed south. The goal is to open a few trades during any recovery periods, but only where the most profitable potential would be. This is where the MA's come in.

With the trend being DOWN (and RSI still signaling there is time left) I would look to place SELL orders only. Around 10pm EST I'll take a look at the MA's across all the time-frames and I'll find the ones that coincide with one another.

For example, using the attached pic, the MA's of the 4H and 1HR both show around 1.4700 (on the 4H, it's the 4-Day MA on the 1HR it's the 13-Day MA). The more MA's that coincide the stronger the SELL order at that point as it shows a stronger resistance level.

I would place a SELL LIMIT order at 1.4700 with a S/L of 50 pips (1.4750).

Then I sleep. In the morning (6am) I close any open trades and cancel any that haven't been triggered.

In a way, it's like trapping. I set the traps where I expect the best trades will be and if the pips walk into them the traps are sprung. If the move is too strong the traps automatically lets the pips out (after a 50 pip loss). Otherwise, it contains them until I check the traps and collect any pips that are in them.

I do this with 7 pairs, but will only set 3-5 traps a night depending on the setups I see. (In real trading, this setup isn't strong and I would look for a better one). Very often I find none of the trade setups were triggered, but then... that's the idea. The system is built to conserve my capital, expand it or limit losses to it. In that way there is only a 33% chance of loss, a 33% chance of gain and a 33% chance of staying even.

There is no reason for the 10pm and 6am times other that I sleep during that time. I love the idea of a system that doesn't require me to stare at it all night! I believe the same theories work during the day, but my day job precludes me from testing this.

I'm interested in any thoughts...

Based on the L&O Pip Trap system... here are the traps I've set for tonight.

Remember, my goal is, by morning, to have profitable trades or no trades at all.

Nothing triggered yesterday... here are the setups for tonight...

Trapped 14 pips yesterday for a total of 14 pips since this journal started.

The traps for tonight are...

Last night the Kiwi trap triggered, but I closed the trade according to the plan of closing trades around 6am (regardless of position).

Last night was a net loss of 5 pips for a net total profit of 9 pips since journal start.

Here are the traps set for tonight...

No traps triggered last night...

Here are the traps for tonight...

No traps triggered for Friday...

This week begins with the system showing 9 pips profit since this journal started.

Here are the traps for tonight...

Nothing triggered in previous setup, and there were no traps set for the yesterday.

Here are tonights traps...

Nothing triggered last night...

Here are tonights traps...

One trap triggered last night for loss of 9 pips. System at 0 pips now since this journal started.

Here are the traps for tonight...

Nothing triggered last setup...

Here are the traps for tonight...

Nothing triggered last night...

Here are the traps for tonight...

One trap triggered for a 50 pip loss...

Here are the traps for tonight...