Hi all, recently i've stumbled upon a very good basket trading system, thread link as below.
https://www.forexfactory.com/thread/...with-trader101
The concept is to basically open a demo account which serves as an "indicator", then open 14 trades in succession as below.
Buy:
EURGBP
AUDJPY
EURJPY
NZDUSD
GBPUSD
GBPJPY
USDCHF
Sell:
GBPCHF
EURCHF
USDJPY
NZDJPY
EURUSD
CHFJPY
AUDUSD
If you care to double check, the pairs exactly net off against each other, giving you a hedge.
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The variation i'm trying to share is, why not use the above in Live Account instead?
During the course of testing the Trader101 method, i noticed the "hedging demo account" profit/loss is always ranging between around -5 USD and +5 USD region (assuming using all 0.01 lot), it will never go past double digit profit or loss. So the drawdown is severely controlled, as well as profit potential.
What we need here is only a simple EA, which is to quickly execute all 14 trade at once without having to manually place it 1 by 1 (for the lazy people), and then the most important element of the EA is to close all trade when X profit is reached, no SL needed. If you're paranoid then give it a max -10 or -15 USD SL to prevent the 0.00001% of unfortunate event from happening.
I would say the TP to be at 3 USD and not wait for the extreme at around 5 USD, you could also set it at 1 USD profit to have a quicker frequency of TP, all up to you.
Once the TP is hit, we will immediately place a new set of 14 trades again, but in reverse order, which means whatever pair that is in the Buy section will now become Sells, vice versa. This is based on the assumption that the temporary direction inefficiency wont continue for much longer and expect a mean-reversion kind of methodology. Just hold the net loss till you net profit and you'll never lose again.
Finally, let's talk about the disadvantage of this system, it requires big capital while the profit potential is severely limited. You need high leverage (some broker offer 1:2000 which is the ideal scenario) and as little capital as possible to not skew the profit %. I can open 14 trades of 0.01 lot at account size of 60 USD, assuming i use the max leverage in my broker. The profit table will be as below:
3 USD profit at 60 USD balance = 5% profit
30 USD profit at 600 USD balance
300 USD profit at 6,000 USD balance
3,000 USD profit at 60,000 USD balance
I'm not sure about you, but to me, 3000 USD per closed trades can give me a very high standard of living in my country. So plan your account balance goal to achieve the desired profit. Work hard and save money to achieve your ideal account balance.
In order for the EA to work optimally, you need a VPS for 24/7 guaranteed uptime, the average VPS monthly cost is about 20 USD, so it means you'll need at least 6,000 USD account balance to make this worthwhile, anything below that you'll have to monitor it manually as the VPS cost exceeds your profit.
TP enough times at the 6000 USD balance, coupled with salary from your day job, eventually you'll reach 60000 USD balance and start earning some serious money. You can consider scaling down your leverage while maintaining your profit % if you want to have a sense of peace of mind, some brokers will auto scale your leverage down once your account reached a certain size.
Let me know your thoughts.
https://www.forexfactory.com/thread/...with-trader101
The concept is to basically open a demo account which serves as an "indicator", then open 14 trades in succession as below.
Buy:
EURGBP
AUDJPY
EURJPY
NZDUSD
GBPUSD
GBPJPY
USDCHF
Sell:
GBPCHF
EURCHF
USDJPY
NZDJPY
EURUSD
CHFJPY
AUDUSD
If you care to double check, the pairs exactly net off against each other, giving you a hedge.
///////////////////
The variation i'm trying to share is, why not use the above in Live Account instead?
During the course of testing the Trader101 method, i noticed the "hedging demo account" profit/loss is always ranging between around -5 USD and +5 USD region (assuming using all 0.01 lot), it will never go past double digit profit or loss. So the drawdown is severely controlled, as well as profit potential.
What we need here is only a simple EA, which is to quickly execute all 14 trade at once without having to manually place it 1 by 1 (for the lazy people), and then the most important element of the EA is to close all trade when X profit is reached, no SL needed. If you're paranoid then give it a max -10 or -15 USD SL to prevent the 0.00001% of unfortunate event from happening.
I would say the TP to be at 3 USD and not wait for the extreme at around 5 USD, you could also set it at 1 USD profit to have a quicker frequency of TP, all up to you.
Once the TP is hit, we will immediately place a new set of 14 trades again, but in reverse order, which means whatever pair that is in the Buy section will now become Sells, vice versa. This is based on the assumption that the temporary direction inefficiency wont continue for much longer and expect a mean-reversion kind of methodology. Just hold the net loss till you net profit and you'll never lose again.
Finally, let's talk about the disadvantage of this system, it requires big capital while the profit potential is severely limited. You need high leverage (some broker offer 1:2000 which is the ideal scenario) and as little capital as possible to not skew the profit %. I can open 14 trades of 0.01 lot at account size of 60 USD, assuming i use the max leverage in my broker. The profit table will be as below:
3 USD profit at 60 USD balance = 5% profit
30 USD profit at 600 USD balance
300 USD profit at 6,000 USD balance
3,000 USD profit at 60,000 USD balance
I'm not sure about you, but to me, 3000 USD per closed trades can give me a very high standard of living in my country. So plan your account balance goal to achieve the desired profit. Work hard and save money to achieve your ideal account balance.
In order for the EA to work optimally, you need a VPS for 24/7 guaranteed uptime, the average VPS monthly cost is about 20 USD, so it means you'll need at least 6,000 USD account balance to make this worthwhile, anything below that you'll have to monitor it manually as the VPS cost exceeds your profit.
TP enough times at the 6000 USD balance, coupled with salary from your day job, eventually you'll reach 60000 USD balance and start earning some serious money. You can consider scaling down your leverage while maintaining your profit % if you want to have a sense of peace of mind, some brokers will auto scale your leverage down once your account reached a certain size.
Let me know your thoughts.