Note: This is a rather long preamble. The Method Narrative is posted later. I believe that my methodology, thought process, and personal angst is important to understanding how this method operates. I wanted to share with the reader. I believe in this method. To understand it is to understand yourself.
I’d like to open a new thread with something that I’ve been working on. I’ve had several inquiries from FF members, so I thought I’d post here, share the idea, and request…no, welcome…some feedback as to what path to take to perfect this method.
I’m not ready to post the method yet. I have things left to do (like corrected spelling, etc.) but I’m going to try to get it up Sunday Night Nov.30.
I’ve done a narrative of the method, as well as my thought process in arriving at my actions. Included, too, will be a summary…short version of the narrative. I’ll post account history, with brief explanation, too.
I’ve done testing on FX-SOL for 2 reasons:
- I like the platform very much.
- It allows a hedge….you can simultaneously buy & sell the same pair.
I should be on IBFX or something which supports MT-4 because MT-4 seems to be the universal vehicle for information exchange on this forum.
I’m not on IBFX because:
- You can’t hedge the same pairs…they cancel out.
- Punching in trades is tedious for me & subject to frequent error
- Reviewing trades is not as straight-forward as with FX-SOL.
But, I’ll probably switch to IBFX soon, if I get a lot of participation on this thread because we might need to exchange information often & need to do so easily. And it would be available to everyone.
On IBFX, you can run 2 sub-accounts for the hedge thing, but that means once funded for live trading, one must keep an eye out for account balances & make transfers as necessary. Not the end of the world, I suppose.
This method is based loosely on Dreamliner’s Super Carry Trade Trading System.
Many FF members took part in testing his method and it appeared quite profitable for a while.
It was based on the GBP-JPY, but could be used on most any pair. His primary objective was the daily swap rate, then $ 22.00 per day for a regular account.( that’s $5700 per year in free interest, folks). He then developed a hybrid style of essentially grid trading and buying - in to losing positions to average down in order to get profitable on the inevitable rebound. It featured a sort of stepped grid creep getting you in then out every 10 or so pips. All was profit except for the last 2 positions, which were at the top of the spike, and they fell all the way down, collecting negative pips, unclosed. So you had to deal with that every day, day in & day out.
Dreamliners method was most impressively profitable for all of the spring ’08 and most of summer ’08. I did some testing on MS Excel of GBP-JPY data back to 1997. I programmed the spreadsheet to do all of the steps as if the method had been traded once daily, with only 1 basis position on a Long GBP-JPY, and never an increase in position size. Well, from Jan. 1, 1997 thru Feb.1 2008, on a mini account, margin of $100, the end result was something like +183,000 pips.
I took into account no account balance. If the thing went negative, I could see where & why. But, it always came back. So, with Dream Liner’s method, it’s a sure bet…except for account size.
That’s impractical. But had my curiosity up enough to look further.
I tried the SHORT side of GBP-JPY…….results not so good, but close. Within 40,000 pips. Not bad!
So I tried other pairs. Pretty much the same results. Various results, but virtually all pairs results landed in the stratosphere. I’m very very interested, now.
But, I had to figure a way to reduce the draw-downs. They were absolutely scary, at times. But as long as you “believed”, your position would always come back for a handsome profit…eventually.
Come late summer & early fall, several folks were testing this method. They were writing EA’s to trade it (which is when I lost interest in the thread & set off on my own research) and some were gone live & making some nice profits.
I can’t stand EA’s. The discussion quickly devolves from the method to perfecting the EA, and then to adjusting the method to allow the EA to work. VooDoo trading!!! Pure BS!
Then came the Carry Trade Collapse….never mind calling it an “un-wind”. I think everyone was blown-up from that one. I know there were some folks who were trading live in a pretty serious way…I really hope that they weren’t hurt too badly. It was like showing the candy to a child…..promising plenty more if they did such & such…..then never giving it to him/her. You know the type…
I’d participated in some trading strategies, and some of them blew-up. But, when this one un-raveled, it was just like someone ripped out my heart. Strange…especially when I realized that there were people in this LIVE and they had just taken a REAL hit. I’d corresponded with many of them through the development of the Dreamliner system. A lot of people contributed to that system. A lot of them put in some heavy duty work, too.
The topic which was central to discussions, around which all other discussions revolved, was the draw-down. It could wipe you out in a heartbeat. You needed infinite funds to trade the Super Carry Trade so to support the draw down, occasional as they were. If you have infinite funds, why trade Forex? US T-bills are so much more inviting!
I refined my Excel work. I focused on price movement and ATR relationships, statistical probability that something may repeat perform so many days in a row, etc. I narrowed down to looking at each pair separately and evaluating its price movement characteristics. Some currency pairs are “market makers” and others are “followers”. But these precarious positions can change from day to day. I got a good education of how momentum ripples through all the pairs, and their reaction as observed through what we perceive as volatility and price action.
So, I’ve come up with this method. I’ll Post Sunday PM after some necessary editing work.
I’ve worked it & flogged it since around March 2008. Sometimes throwing it aside in frustration.
What I’ve posted (later) really only came together a month or so ago, and then, I made a major adjustment in my SL policies. So, at the moment I haven’t much corroborating data to show that this may be a “go”. But I feel familiar enough with price action now, and after the last adjustment, the Method was all of a sudden doing what it was supposed & expected to do. So, I’m pretty comfortable with it right now.
This Method, called PMM Price-Money Management is just what it is.
Money management and reacting intelligently to what the market has done, not what it might do.
Cover your butt, minimize (or eliminate) your losses, and don’t worry about the profits.
I’m new to Forex trading. I’m no guru. I’m not setting-up to sell this. Hell, I don’t even know FOR SURE if the concept holds water. If it’s a keeper, then it will belong to the Forex Factory Community. If not…oh well….to the re-cycle bin, Robin!
I discovered this site, Forex Factory, in 2006 and I’d thought a beam of sunlight had shown on me from my PC screen. I have learned some incredible new things on here. I’ve gone beyond chasing the “Holy Grail” on the “Trading Systems” thread and now I really only follow certain people’s willingness & kindness to share what they’ve learned & have participated in subsequent discussion. I’m more oriented to gaining an overall understanding than just looking to be shown the latest new new thing, which will retire me in 3 months.
I’ve learned that this market has a pulse. It lives. It’s periodic table core elements are greed and fear. Human emotion runs this market. It doesn’t. How one can understand human response to stimulus, how one reacts with greed, how one reacts through fear, how one reacts to the reaction…how one responds to response….that’s the Forex market. That is what I’ve based PMM Method on. My observations of this market…and hundreds…thousands of mistakes….each of which bearing a lesson. It’s as much human psychology as it is financial wizardry.
I’ve run testing on demos since I discovered Forex. I opened a small demo account & blew that one up. I opened several other demo accounts & eventually blew them up. I opened a live micro account & blew that up too. All of my demo accounts’ balances have diminished into the ash heaps of “what could have been”. But still I keep slogging. You all know the drill.
I have probably a dozen demo accounts, each doing something different. From all of this I am learning & growing. The market is the market. If I can identify & then minimize my screw-ups, then I’ll be OK. And, thanks to the great leverage in Forex, probably I’ll wind-up better than OK.
There’s some great work on here. Great insight. FF people should be proud that they’ve been able to maintain the integrity of this site, and therefore it’s high quality. This is the Best Site on Planet Earth, according to Stocks & Commodities magazine. I hope that I may be able to contribute to this collection of good work and good will. I’ve gained so much from here. I’d like to give a little back.
This is a little something to share with my new friends on FF. I so deeply appreciate my experience on this site to date that words can not express. There is some very intelligent people and some very successful traders, too. From what I’ve seen, assistance, comment, advice, criticism is all freely given here. You folks can be firmly supportive, bluntly candid, brutally honest, extremely tolerant, but never purposefully mean or unkind. This community is really a class-act.
My thanks goes to Dreamliner and his Super Carry Trade Trading System, flawed as it turns out that it was, at least in my opinion, for making me think about what is really happening day to day in this Forex Market. It really opened my eyes to the possibilities which exist if one can approach with a wide-open mind and no pre-conceived notions. But, I think that is what it takes…everything happens for a reason, identify the reason, adjust accordingly, and keep moving. Take nothing to heart. Accept everything for its lessons. These are the fundamentals of personal growth.
Thanks for reading.
Peter O
West Bath, Maine
USA