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Non-hedge Grid Style Trading and Money Management

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  • First Post: Dec 13, 2006 10:59pm Dec 13, 2006 10:59pm
  •  permanentjaun
  • | Joined Oct 2006 | Status: Member | 655 Posts
Hello all,<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o></o>

<o> </o>

I've been doing more thinking about forex lately and how to profit from it. I've done a little reading as well and come up with the following forex ideas - <o></o>

<o> </o>

1. The market moves up or down. Plain and simple. There is no third option. You can't lose by the market going sideways. You can only lose if the market goes up when you're short, or it goes down when you're long. "But the market is going sideways when it's ranging," you would say. Well how big is the range? What if you were only looking for 10 pips when it ranged 40 pips each way. Could you not profit from the range? Or what if your TP/SL was large enough such that the market could range inside your TP/SL zone and not trigger either of them until it broke the range? The market goes up or down, simple as that. <o></o>

<o> </o>

2. Indicators, trendlines, and the like don't make for a better system. Sometimes they work, sometimes they don't. It is only in hindsight that we can curvefit indicators to see what we should have used. Can you tell me why price breaks through one resistance level, but not the next? What point is the real 2 point in a ABC123 method? When do we know when to follow MACD or when it is diverging? In the end these tools should only really make the decision to go long or short. Many times they can not, and I find them useless. BECAUSE.....<o></o>

<o> </o>

3. There are pips available anywhere on a chart. You don't need to wait for an MA cross or RSI crossing 0 to enter a trade. If you enter a trade randomly anywhere on a chart you will always have the possibility of winning or losing on that trade. Why do we need to wait for an indicator to tell us it's now time to trade? As I said, the indicator should only tell us to go long or short. Unfortunately most indicators lag terribly or have levels where they can not give us a buy/sell decision effectively.<o></o>

<o> </o>

4. Therefore, money management is the most effective tool we can use to produce a winning system. You can have a 95% successful system, but then lose it all on those 5% losers. You can have a 30% successful system and make huge profits. <o></o>

<o> </o>

Thus, I propose the following idea for a system. It's a grid type.<o></o>

<o> </o>

Enter a trade randomly anywhere, up to you. Place a TP and SL equidistant from your entry point. So say your spread is 3 pips. You would place a TP of 47 and SL of 50 since when you enter the trade you are already 3 pips closer to the SL. This way price needs to move 47 pips to hit the TP and 47 pips to hit the SL. <o></o>

<o> </o>

From this I will say at this point in time you have a 50/50 shot of winning the trade. In that aspect your system is 50% successful, but the spread would slowly eat away at your profits if you randomly went long or short. The next part to the system would be to base the buy/sell decision off of price action. <o></o>

<o> </o>

Say your original entry was a buy. The SL was hit as price moves down. Immediately you enter a sell trade from the exact point your long trade hit it's SL, thus placing you in the correct direction of the current movement. You now do the same for this trade of having a SL of 50 and TP of 47. <o></o>

<o> </o>

If the TP is hit for this sell order as price continues to drop then immediately enter another sell order with the same 47 TP and 50 SL. If that gets stopped out then immediately reverse the position to a buy with 50 SL and 47 TP. This makes the decision to go long or short easy in hopes that we have caught enough momentum that the current movement will continue to close out another winning trade.<o></o>

<o> </o>

On it's own I think the system could produce positive results. I can not backtest since I don't have EA programming knowledge, but I will say I believe that the system is more than 50% successful since we allow price to dictate the buy/sell decision. I expect that momentum carries itself through price levels. <o></o>

<o> </o>

Do not try this system off of a 47 TP and 50 SL. I was only giving those numbers as example. We would need to find a TP/SL zone that is small enough to take profits easily and frequently, but be large enough to not whipsaw many trades in a ranging market. In that case, as I mentioned earlier, the ranging market would fit inside the tp/sl zone and not trigger anything until a trend ensues. I think something close to a 20-30 TP/SL combination would prove effective. This would allow us to have a TP/SL zone of 40-60 pips and allow for plenty of intraday ranging, while still only requiring 20-30 pips in one direction to bank profits. So on the larger ranging periods it could still take profits. <o></o>

<o> </o>

STILL! The idea is that the system is successful based on the money management. What are strategies we can use to increase gains and cut our losers?<o></o>

<o> </o>

Some ideas of mine are:<o></o>

<o> </o>

1. If you have consecutive winners, add to your winners. Meaning if you would win a trade, don't close it, just open another trade on top of it to add to your position. Keep adding to your position every 20-30 pips. Then as soon as one of those positions gets stopped out, close all of the open positions. This way you let the first opened trade run for a long time. The problem is you risk not being able to lock in profits on the first trade. <o></o>

<o> </o>

2. Or if you want to close out trades to lock in profit you could still institute a system of increasing your lot sizes as you win more consecutive trades. The problem here is if you win 2 trades and increase lot size on the third, but lose, then you're effectively eliminating all the profits from the 2nd trade and perhaps erasing the first winning trade as well. <o></o>

<o> </o>

3. People will hate me for saying it, but you could try martingaling. Since it isn't so random of a system, it would depend on our TP/SL levels to determine how many consecutive losing trades in a row we can expect to encounter. The larger our TP/SL zone is the more unlikely it is we'll be caught in a ranging market to get whipsawed. I'm not so sure I like the idea though since you can only put so little towards a trade in case you do get a long losing streak. This means profits are coming in very very slow.<o></o>

<o> </o>

4. What if for consecutive winners you let the first trade ride, but the positions added to it afterwards close out regularly? Then when the first of the additional positions gets stopped out, close the original trade as well. Again, this risk is losing the profits and only breaking even on the first trade. <o></o>

<o> </o>

5. For consecutive trades look for increasing or decreasing TP's. What if we assume that as we enter more trades after consecutive winners the trend will slow. So perhaps after 2 consecutive winners of hitting 47 TP we only look for 37 on the 3rd and 4th trades, then 27 on the 5th, 17 on the 6th, etc.. Or we could reverse that and look for 17 on the original, 27 on the second, 37 on the 3rd, etc.. The problem of increasing the TP levels is to do so we might have to increase our SL as well to keep our system at 50% success. So as we increase our TP/SL and get stopped out on the bigger trades then it erases profits from previous winning trades. I'm not sure how leaving the SL constant would do. <o></o>

<o> </o>

6. We could combine the increasing decreasing methods from the 5th strategy. So we could look for 17 pips on the first trade, 27 on the second, 37 on the 3rd, and 47 on the fourth. Then on the 5th trade we would decrease back to 37, on the 6th trade back to 27, 7th back to 17. This would follow the idea that in the beginning a trend will be picking up steam and then losing steam at the end. Again, we risk losing pips from our winning trades as we also increase the SL when we increase our TP levels.

<o> </o>

7. What if, for example, we entered one trade with a TP/SL of 30/30. Then say our trade moves towards our TP 20 pips. We then add to our current position by adding another lot in the same direction, but with the same TP/SL of 30/30. This way we stagger our profits. When the first trade takes profit the second trade will be 10 pips towards it's goal of 30 TP. If it goes another 10 pips we enter another trade in the same direction just like how we added the 2nd trade on top of the 1st.

What's nice about this idea is we never add to the losing trades. We aren't hedging, so don't add to a trade that might get stopped out. What could be nice about this though, is that when you enter the second trade, it will get stopped out before the original trade gets stopped out if the market were to turn on us. So we could have a system where once the second trade gets stopped out we also close the first even though it didn't drop to that level yet. This way our losses would be -30 and -10 for the two trades as we enter a new trade in the opposite direction.

We only enter one position and again wait for it to move 20 pips in our favor to add the 2nd position. This way if it again turns on us we are only losing the -30 on that one trade rather than -30 and -10. It's also nice because it offers areas where we allow the market to turn on us without erasing all of our profits. What if we have two trades triggered, the first profits, and the second loses. We would be even out of the two trades while allowing ourselves to recognize the turn in momentum early and capitalize on the new reverse trend. The problem with this idea is we may have been better off just by entering a new trade when one trade hits its TP or SL rather than staggering the trades since we close out the original trade with the second instead of allowing it to possibly close in success. We will assume it wouldn't though since price just dropped 30 pips against us and momentum will carry it further. The benefit to staggering, again, is being able to recognize the new trend early on and being able to ride it for longer than waiting for one trade to close out on us.
<o></o>

<o> </o>

<o> </o>

I think a system as simple as this could be very consistently successful if we just know how to manage our money. How do we capitalize on the 50% winning trades? I leave it up to the rest of you to offer suggestions, advice, tips, an EA, backtest results, etc.. I am a member of the KISS method club. I don't want to look at 20 indicators, memorize chart patterns and have to wonder if it will hold up. What if the pattern is showing to sell on a 4 hour chart, but to buy on a 30 minute chart? <o></o>

<o> </o>

I don't care for all that. I am accepting price action to dictate the decision. All I'm trying to do with these ideas is to get a ride on it's back and take pips when I can. <o></o>

<o> </o>

I offered the possible exit strategies and money management ideas just to get the ball rolling. I also mentioned them to show that there are probably hundreds of possible ways to trade a system like this just off of the exit strategies itself. Please offer up any strategies I have no mentioned. This is an open discussion as I need your help to build this system. Thanks. Matt<o></o>
  • Post #2
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  • Dec 13, 2006 11:04pm Dec 13, 2006 11:04pm
  •  hilmy83
  • Joined Jun 2006 | Status: Do NOT tilt | 5,708 Posts
the best way to build the system is to test it out...forward test with a LIVE account..let's get to it. We'll see how this 'random' entry theory works out
Working towards CME membership
 
 
  • Post #3
  • Quote
  • Dec 13, 2006 11:15pm Dec 13, 2006 11:15pm
  •  itme
  • Joined Aug 2005 | Status: Member | 2,217 Posts
My idea:

I suggest that you enter your trades at the Entry Prices for my Trade Experiments, in the direction I recommend. Employ a stop of 100 pips and a target of 100 pips.

There are people here who think I am generating my trade signals randomly. Maybe I am. So assume I am.

I bet if you back test this approach you will find a better than 50% success rate. There are about 300 entry prices and directions (buy or sell) you can employ at my thread to back test.

If you put the data into a simple spreadsheet then you can even see what would have happened if you varied the range from 50 pips to 100 pips to 150 pips, to 200 pips, etc.

You can also test what would have happened if you had traded in the opposite direction that I recommended.

I am employing a method, but maybe I'm deluded and my method is madness.

With your system combined with my "system" we can find out if there's any method to my "madness", and we might even come up with an efficient trading system.

What do you think of this idea, permanentjuan?
 
 
  • Post #4
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  • Dec 13, 2006 11:23pm Dec 13, 2006 11:23pm
  •  twinchell
  • | Joined Apr 2006 | Status: Ousted Member | 540 Posts
Quoting permanentjaun
Disliked
Since it isn't so random of a system, it would depend on our TP/SL levels to determine how many consecutive losing trades in a row we can expect to encounter.
Ignored


Isn't this completely contradicting? You have a random entry and you're saying the system isn't random. I wouldn't assume you could "expect" anything from a "random" entry. Good luck...
 
 
  • Post #5
  • Quote
  • Dec 13, 2006 11:48pm Dec 13, 2006 11:48pm
  •  SunTrader
  • Joined Mar 2006 | Status: Trade the reaction not the news! | 10,206 Posts
1. The market moves up or down. Plain and simple. There is no third option. You can't lose by the market going sideways. You can only lose if the market goes up when you're short, or it goes down when you're long. "But the market is going sideways when it's ranging,"

Ah, wrong.

Unless of course your idea of ranging is moving between 100 pips one way and then the other. I would guess there aren't many traders here that can afford to have a 100 pips stop so why bother testing for it if it is not practical. Nice in demo mode or an excel spreadsheet . Not the real world though. Now if you got the big bucks, well then go get 'em tiger.
 
 
  • Post #6
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  • Dec 14, 2006 12:10am Dec 14, 2006 12:10am
  •  permanentjaun
  • | Joined Oct 2006 | Status: Member | 655 Posts
Quoting SunTrader
Disliked
1. The market moves up or down. Plain and simple. There is no third option. You can't lose by the market going sideways. You can only lose if the market goes up when you're short, or it goes down when you're long. "But the market is going sideways when it's ranging,"

Ah, wrong.

Unless of course your idea of ranging is moving between 100 pips one way and then the other. I would guess there aren't many traders here that can afford to have a 100 pips stop so why bother testing for it if it is not practical. Nice in demo mode or an excel spreadsheet . Not the real world though. Now if you got the big bucks, well then go get 'em tiger.
Ignored
You quoted me and the left out the part explaining why I said you don't always lose in a ranging market. For the market to range it is still moving up and down. Correct? Well what if your TP/SL was just 10 pips and the market ranged 20-30 pips each way. You would still be able to take profit from this ranging market. The system would trade it just as if it were trending. Or you could have a TP/SL of 20-30 pips such that there was a total of 40-60 pips allowed for the market to range before a trigger was traded. So you could allow a ranging market to range and have no trades triggered. It would just be dead time waiting for the market to exit its ranging phase.

I think people could afford 100 pip TP/SL. Trade a micro lot broker and that's only 1 dollar. Trade a minilot and it's only 100 bucks. You could probably survive even with only $2000 if you didn't get greedy.

The point was, you only lose/make money when the market goes up or down. It would require a lot for this system get whipsawed into several losing trades for a long period of time and that would depend on the size of the ranging market and the size of your TP/SL. I doubt that market would stay in that perfect balance for long to jeopardize your account if you used sound money management.
 
 
  • Post #7
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  • Dec 14, 2006 12:13am Dec 14, 2006 12:13am
  •  permanentjaun
  • | Joined Oct 2006 | Status: Member | 655 Posts
Quoting twinchell
Disliked
[/size][/font]

Isn't this completely contradicting? You have a random entry and you're saying the system isn't random. I wouldn't assume you could "expect" anything from a "random" entry. Good luck...
Ignored
I meant that in two aspects.

It's random entry because you don't care what price you enter at. Hell, enter at an extreme high. The system will automatically correct itself such that you're trading in the direction of the current movement. That is how the system isn't random. The market will eventually dictate what direction your trades should be.
 
 
  • Post #8
  • Quote
  • Dec 14, 2006 12:19am Dec 14, 2006 12:19am
  •  permanentjaun
  • | Joined Oct 2006 | Status: Member | 655 Posts
Quoting itme
Disliked
My idea:

I suggest that you enter your trades at the Entry Prices for my Trade Experiments, in the direction I recommend. Employ a stop of 100 pips and a target of 100 pips.

There are people here who think I am generating my trade signals randomly. Maybe I am. So assume I am.

I bet if you back test this approach you will find a better than 50% success rate. There are about 300 entry prices and directions (buy or sell) you can employ at my thread to back test.

If you put the data into a simple spreadsheet then you can even see what would have happened if you varied the range from 50 pips to 100 pips to 150 pips, to 200 pips, etc.

You can also test what would have happened if you had traded in the opposite direction that I recommended.

I am employing a method, but maybe I'm deluded and my method is madness.

With your system combined with my "system" we can find out if there's any method to my "madness", and we might even come up with an efficient trading system.

What do you think of this idea, permanentjuan?
Ignored
Haha. Not sure what to say. Are you saying your system, my system, or both would be better than 50% correct?

What are the 300 entry points from your thread? Are you saying you've called over 300 picks that are similar to my method and you've come up with a better than 50% success rate?

I guess I can't really answer your question till I read up on your method. Matt
 
 
  • Post #9
  • Quote
  • Dec 14, 2006 12:27am Dec 14, 2006 12:27am
  •  permanentjaun
  • | Joined Oct 2006 | Status: Member | 655 Posts
Quoting hilmy83
Disliked
the best way to build the system is to test it out...forward test with a LIVE account..let's get to it. We'll see how this 'random' entry theory works out
Ignored
That's the problem. Say I wanted to use a TP/SL of around 20-30 pips. That could mean making several trades in a matter of seconds or a few quick minutes. I don't think I could manually trade that. I would like some help from others to build a simple EA that we can demo trade to get results.

Of course eventually the EA might get complicated if we do find that instituting increasing/decreasing TP levels, lot sizes, or any other method mentioned works best. I think right now I'd like to just see what the success rate is for varying TP/SL levels when placing trades in the direction of the price. Perhaps 50 pip levels allows for too much of the trend to occur without us banking pips and it reverses on us before getting consecutive winners. Perhaps 10 pips is too small and stops us out too often as well as gets caught in ranging markets on an intraday time frame. My opinion of a 20-30 TP/SL is just that, an opinion. I'm just trying to get the ball rolling with my concepts of the market and how to capitalize on them. Matt
 
 
  • Post #10
  • Quote
  • Dec 14, 2006 6:43am Dec 14, 2006 6:43am
  •  fukinagashi
  • | Joined Apr 2006 | Status: King of Fools | 153 Posts
Quoting permanentjaun
Disliked
I think right now I'd like to just see what the success rate is for varying TP/SL levels when placing trades in the direction of the price. Perhaps 50 pip levels allows for too much of the trend to occur without us banking pips and it reverses on us before getting consecutive winners. Perhaps 10 pips is too small and stops us out too often as well as gets caught in ranging markets on an intraday time frame. My opinion of a 20-30 TP/SL is just that, an opinion. I'm just trying to get the ball rolling with my concepts of the market and how to capitalize on them. Matt
Ignored
OK

The SL/TP which are set with the open of each trade are only for security and are about 150% of the entered value. In reality will my EA close the Orders at exactly the price entered as TakeProfit (minus automaticaly calculated Spread)/StopLoss. This is necessary to be able to analyse the success/failure of the last trade, without to rely on the Trading History.

Now backtesting and optimizing a random EA can quickly become a "Heisenberg's Cat" issue , so for testing I offer a "cheat". If DirectionFirstTrade is 1 the first trade will be long, if it is -1 it will be short. Only if this variable is 0 shall it actually use the RandomGenerator for the first trade.

RiskInPercent is for the MoneyManagement Module. 3 means 3% Risk.

Have fun and let me know what you think.
Attached File(s)
File Type: zip NHGST&MM_V1.zip   16 KB | 1,002 downloads
 
 
  • Post #11
  • Quote
  • Dec 14, 2006 10:00am Dec 14, 2006 10:00am
  •  Mecer
  • | Joined Nov 2006 | Status: Member | 20 Posts
Hello people,

I apologize if this post offends some folk over here, but I have read quite a few of permanentjaun’s lengthy threads and theories. They are great and having a creative lateral thinking mind is a real gift. I involve myself with statistics as well from time to time and with regards to the threads, this one included the following:

It would appear that permantnentjaun is forgetting one very obvious and necessary fact to be in place before a system could be considered a trade option. All this 50/50 stuff is all fine and well IF you somehow get a positive expectancy from the rule set. With NO positive expectancy (aka EDGE), money management in any form is worth squat. In this and other cases made by him, I would venture to say that at most, it will simply magnify a horizontal (break even) equity curve.

I wish for once that permanetjaun would actually do some actual research into the theories before getting too exited; I have yet to find one set of examples or spreadsheets or any sign that he actually puts effort into so real research. As stated, it is fantastic to have a lateral thinking mind, but perhaps a slight adjustment on his behalf toward actual research, could pay off greatly when he starts using his experience from real research when thinking up new magic.

It is great to fly on clouds of probability and odds etc, but like with all things that go up, they have to come back down, unless there is an opposing force keeping them up, in this case that would be a positive expectancy which is totally different than simple 50/50 odds etc.

Saying that 50/50 odds will equal an equal amount of events to make or loose equal amounts of money is just a complicated way of saying that you start with say $1000-00 today, you do 5000 trades and in 4 years time you still basically have $1000-00 excluding brokarage which would eat away at the capital after each trade and possible carry trade interest.

The only way to make profit is to say sure, we have 50/50 chance of having and equal amount of events make or loose an UNEQUAL amount of money ( the loosing side HAS to be smaller than the winning side ) It is as simple as that.

The worse the probability, say 30/70, the larger the winning side needs to be in proportion to the loosing side (not per trade basis, but on average).

It is this balancing and adjusting to the one side if the other side of probabilities increase or decrease that give the edge to move forward, the and not remain stagnant no matter how many trades get’s placed.

It is this simple, honestly it is !!!

It’s easy to loose people in a info overload flood on a thread like this and thus the points I address here will probably never be addressed.

Blessings,

Mecer
 
1
  • Post #12
  • Quote
  • Dec 14, 2006 10:12am Dec 14, 2006 10:12am
  •  SunTrader
  • Joined Mar 2006 | Status: Trade the reaction not the news! | 10,206 Posts
Well said.

Theories are great for the lab.
 
 
  • Post #13
  • Quote
  • Dec 14, 2006 11:08am Dec 14, 2006 11:08am
  •  hilmy83
  • Joined Jun 2006 | Status: Do NOT tilt | 5,708 Posts
thus proving...that forward testing is king!
Working towards CME membership
 
 
  • Post #14
  • Quote
  • Dec 14, 2006 11:31am Dec 14, 2006 11:31am
  •  permanentjaun
  • | Joined Oct 2006 | Status: Member | 655 Posts
Don't worry about offending people. Although I will say there are theories I have researched. Check out the daily range strategy where I did some comprehensive excel backtesting. As mentioned, I don't know how to code an EA so to backtest and forward test this would be a huge task to get accurate results. That's why I didn't provide any results for this thread. I was hoping someone who can code EA's would come forward with results.

So then your point is we can expect no gains because the expected payouts are the same correct? I did mention the possible strategy of allowing the winners to run when consecutive streaks occur. That would allow for greater payouts. Or increasing TP targets on consecutive wins to bring in more profit on winners. Those were just a couple of ideas.

I'll ask this question then. Can we still use the same idea of price dictating buy/sell, but with a TP of 100 SL of 50? That is what you're suggesting in this model. Maybe 50 TP, 25 SL or 50 TP 40 SL so that you theoretically gain 25% on winners.

I'd still like to question price action as a decision maker for trades. You brought up good points that need to be talkedabout. Having varying TP levels is very much a part of money management. Doesn't mean these ideas have to die. Matt

Quoting Mecer
Disliked
Hello people,

I apologize if this post offends some folk over here, but I have read quite a few of permanentjaun’s lengthy threads and theories. They are great and having a creative lateral thinking mind is a real gift. I involve myself with statistics as well from time to time and with regards to the threads, this one included the following:

It would appear that permantnentjaun is forgetting one very obvious and necessary fact to be in place before a system could be considered a trade option. All this 50/50 stuff is all fine and well IF you somehow get a positive expectancy from the rule set. With NO positive expectancy (aka EDGE), money management in any form is worth squat. In this and other cases made by him, I would venture to say that at most, it will simply magnify a horizontal (break even) equity curve.

I wish for once that permanetjaun would actually do some actual research into the theories before getting too exited; I have yet to find one set of examples or spreadsheets or any sign that he actually puts effort into so real research. As stated, it is fantastic to have a lateral thinking mind, but perhaps a slight adjustment on his behalf toward actual research, could pay off greatly when he starts using his experience from real research when thinking up new magic.

It is great to fly on clouds of probability and odds etc, but like with all things that go up, they have to come back down, unless there is an opposing force keeping them up, in this case that would be a positive expectancy which is totally different than simple 50/50 odds etc.

Saying that 50/50 odds will equal an equal amount of events to make or loose equal amounts of money is just a complicated way of saying that you start with say $1000-00 today, you do 5000 trades and in 4 years time you still basically have $1000-00 excluding brokarage which would eat away at the capital after each trade and possible carry trade interest.

The only way to make profit is to say sure, we have 50/50 chance of having and equal amount of events make or loose an UNEQUAL amount of money ( the loosing side HAS to be smaller than the winning side ) It is as simple as that.

The worse the probability, say 30/70, the larger the winning side needs to be in proportion to the loosing side (not per trade basis, but on average).

It is this balancing and adjusting to the one side if the other side of probabilities increase or decrease that give the edge to move forward, the and not remain stagnant no matter how many trades get’s placed.

It is this simple, honestly it is !!!

It’s easy to loose people in a info overload flood on a thread like this and thus the points I address here will probably never be addressed.

Blessings,

Mecer
Ignored
 
 
  • Post #15
  • Quote
  • Dec 17, 2006 11:36am Dec 17, 2006 11:36am
  •  GreatYves
  • | Joined Aug 2006 | Status: AKA DareDevil | 527 Posts
Hi Permanent, Hi like your creative thinking too as most genious idea of this era are out of creative communicating minds as you searching for the light.

We are talking theory here since it's not even backtest.

My opinion: I think you grid system could be working, only if TP/SL value is dynamicaly fine tune regarding market volatility , too big a value, tp/sl don't get hit at all, too small, you get only small profit for risk involved, median value is a sure looser. So you need to fine tune tp/sl value in between medium-small value so that more profitable trade get hit. I guess a 25-35 pips on sl/tp on volatile market hour and a smaller 10-15 pips on ranging hour might have chance of success. But now the spread start to eat all the profit. So it have to be a very good EA then on low spread pair...

This can be extremely challenging for EA to follow such a system. Unthinkable for a human brain, even on one time frame/one pair to do it properly unless you get very fast a placing market orders on news event day.

Suggestion: Many EA freely available gives results. Or,

Try ITME's calls... I did not back test but i think they are more then 50/50 acurrate.

If he/she offer it to you, don't let that chance pass true, probably the greatest mind over here is ITME.

Me i use a trend following signal. It is also more then 50/50 accurrate.

As somebody said before with 50/50 random call even the best MM will only amplfy a flat equity curb... So you need at least a good signal.




Quoting permanentjaun
Disliked
Don't worry about offending people. Although I will say there are theories I have researched. Check out the daily range strategy where I did some comprehensive excel backtesting. As mentioned, I don't know how to code an EA so to backtest and forward test this would be a huge task to get accurate results. That's why I didn't provide any results for this thread. I was hoping someone who can code EA's would come forward with results.

So then your point is we can expect no gains because the expected payouts are the same correct? I did mention the possible strategy of allowing the winners to run when consecutive streaks occur. That would allow for greater payouts. Or increasing TP targets on consecutive wins to bring in more profit on winners. Those were just a couple of ideas.

I'll ask this question then. Can we still use the same idea of price dictating buy/sell, but with a TP of 100 SL of 50? That is what you're suggesting in this model. Maybe 50 TP, 25 SL or 50 TP 40 SL so that you theoretically gain 25% on winners.

I'd still like to question price action as a decision maker for trades. You brought up good points that need to be talkedabout. Having varying TP levels is very much a part of money management. Doesn't mean these ideas have to die. Matt
Ignored
Harmonics and Pitchfork using korHarmonics from TradingArsenal
 
 
  • Post #16
  • Quote
  • Dec 17, 2006 12:27pm Dec 17, 2006 12:27pm
  •  GreatYves
  • | Joined Aug 2006 | Status: AKA DareDevil | 527 Posts
What if using TP/SL is a sure way too loose? Haven't you notice how many time the darn SL get hit before the price turn in the way of the trade? You start looking at all the reasons why it doesn't work, You did all your home work and you go with your gutz, you foresee the price at an hipothical target and you trade towards it! And as always wit 90% of traders here you loose! Not because the targets is not hit but mostly because your SL get hits before.

How can we fix this?

I played and fiddle (and loose money too while learning a lot..)with so many signal indicators like asctrend, bagovino method, sidus method, ADX, JMA, AMA, and other that i finally come up
with my own signal that i decided to follow eyes close (after a lot of manual backtest to fine tune it).

I came to conclusion that SL and TP is garbage invented by the brokers and profit them much more it profit you.

The idea is to come up with a signal that you know will make you do more good trade then the bad one so you can fully cash in the good signal instead of stopping your win at a preset TP, and also it will make you fully pay the bad trade. But these will be compensate by the good ones.

The rest is money mangement.

My idea on money management:

Tell me i"m crazy but What is the idea behind trading only 1-5% of your trading account???? Decide on the amount you are willing to risk, and trade it 100%. When signal reverse, reverse it 100%. A trading account is 100% risk capital too me. The rest is in my bank account.

If your drawdowns is to big, the problem is the LEVERAGE. 100:1 is suicidal. 200:1 is not even serious. Oanda is 50:1 and i can still triple an account in 2 week.
20:1 is manageable and make spike and news feels like small bumps on the forex highway.

Lower your leverage will have the same effect as trading less but you will pay less to the broker in spread. So this big 150 pips bad trade will feel like only a 30 pips loss on a 20:1 leverage system. The overall effect is that it's smooth out all the zig zag effect, keeping margin call away, and letting your trade follow your signal without beeing stop by STUPID SL.

I wished i get better MM. so i listen to all suggestion.
Harmonics and Pitchfork using korHarmonics from TradingArsenal
 
 
  • Post #17
  • Quote
  • Dec 17, 2006 2:41pm Dec 17, 2006 2:41pm
  •  witchazel
  • | Joined May 2006 | Status: Member | 292 Posts
I have actually tried a method like this before and tested it live with 1cent pips. The method was like this:

Basically there are resistance lines every X pips. I went for 25pips on euro, the whole numbers seemed to get hit more often and the euro has 2pip spread for me.

Everytime the price crossses a resistance line 2 orders are put in, one short, one long. t/p=25, s/l = 10.

I did optimize it so when the t/p was met it just changed the stop loss (because it was time for a new trade) and i didnt loose the spread again.

The system worked alright, it had a profit ratio of 1.2 which is profitable but would take 900 trades to double my money.

I forward tested it for a month so that month might have been optimal for the system. I did not back test it as backtesting in mt4 is joke (i have found you can forward test for a month, then back test on same chart and you get different results).
 
 
  • Post #18
  • Quote
  • Dec 18, 2006 7:53am Dec 18, 2006 7:53am
  •  SunTrader
  • Joined Mar 2006 | Status: Trade the reaction not the news! | 10,206 Posts
Lose - to come to be without (something in one's possession or care), through accident, theft, etc., so that there is little or no prospect of recovery: I'm sure I've merely misplaced my hat, not lost it.

Loose - free or released from fastening or attachment: a loose end.
 
 
  • Post #19
  • Quote
  • Dec 19, 2006 12:47am Dec 19, 2006 12:47am
  •  THK
  • | Joined Dec 2006 | Status: Member | 4 Posts
Hi everybody, i want to share something i've learned in my short forex life and help a little bit permanetjuan and all my fellow traders here...

First i want to express my agreement with GreatYves, and about Stop loss, something you've got to have in mind is the fact that stop losses are created by brokers, this is the way they can use you as a counterpart in their trading process, as you know, if somebody is buying, there has to be somebody selling to complete the trade, and stop losses is the perfect solution for creating this healthy atmosphere (for them).

So, starting from this, Tight Stop Loss = Quickly Stop Loss, if you dont believe, ask yourself (i think most of people here have used a signal service,) if everytime you try a signaling system wont you get wiped out? that's because the Target Profit s considerably far away in relationship with the SL, as a consequence of this, your SL is hit before your TP.

If you are still doubting it, try a signal system and use the SL as TP and the TP as SL. (i've read this in somewere and i tought it was a joke, but isn't this logical? if you end up losing and the cause of it is the SL, then use it as your TP)

So, here is my contribution, if the SL is considerably away from you, is less the chance to get caught, you would say, "but if it get hit, wont it be a bigger loss?", well this is wen leverage comes into play... dont use it too high, cause it will eat you alive, this leverage thing is another scam from the brokers, cause you'll pay more spread (and lose a lot more)

Or you don't like this solution? try mine... NEVER USE A STOP lOSS

In my point of view "Stop Loss" is a manipulated name for "Lock Profit", made once again by the brokers, this tool is not for cutting a loss, if you buy and the price go against you and you want to cut it, then SELL, but if you buy and the price go in your way, the use the SL to lock some profits as the price continue to go up...

Sorry this long post, but is painful to see so much people losing his savings in such a stupid way, i never use stop loss from a time ago, and let me tell you that since then, i've only have to bank a loss once, and it was for protecting the margin, (and it didn't ate my profits at all...)

Prove it and you'll see...
 
 
  • Post #20
  • Quote
  • Dec 19, 2006 1:49am Dec 19, 2006 1:49am
  •  permanentjaun
  • | Joined Oct 2006 | Status: Member | 655 Posts
Just to chime in:

I'm currently exploring the turtles method. It uses a not often utilized idea of entering and exiting the market as well as managing money. The system was created as a project back in the 80's and is one of the most famous trading stories ever.

Anyways, for their system they calculated a value off of the ATR, your account size, and the dollars per point which is essentially what each pip is worth to you. From this calculation you could trade many different markets with the same risk. For example, trading 1 lot in GBP/USD might be the same risk as playing 5 lots in a less volitile currency. This spread the risk across the board.

There were no set SL and TP levels until the trader determined their entry. It changed week by week based on the ATR. The initial SL was 2 N which is really just 2 ATR. Then the exit strategy would be to use the 10 day low in long positions and 10 day highs in short positions. This allowed for the SL to trail not by a set number of pips or ATR, but determined by the price movement occuring at the time. People using the method also did not enter their orders automatically. They manually entered them so their brokers would not see their hand and where they intended on trading.

Of course this throws out my entire idea of the grid strategy. I suggest you all take a look at the turtle strategy though. It is almost mind blowing how simple it is, although many people are adding their own tastes to it. I may abandon the scaling in that the system calls for. Otherwise the principles of the system are great because it:
1.Lets runners run.
2. Cuts the legs of losers.
3. Equalizes risk across many markets while also managing money.
4. Very mechanical and doesn't allow for any discretion even in manual trading.

Thats all for now. Not sure what this does for the thread.
 
 
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