Building an equity millipede

I must admit that find Graeme`s manifestly sincere concern for the welfare and prosperity of a host of complete strangers to be quite touching. What a great guy!

hi as e thread is huge anyone got idea where is e summary of the thread ? thanks =]

Good afternoon, all

Thank you for the warm compliments.

From the recent messages, there are currently 3 traders with a firmly established portfolio of positions spread out across various pairs. All 3 traders currently hold at least 8 open positions each. Positions range from smaller 150 pips to larger at over 1000 pips. From the statement received one particular trader has settled most of his debt/losses incurred.

It does not matter if these accounts are live or demo. It is thrilling to see that traders are taking advantage of the main movement on the higher timeframe and I sincerely hope that this would be the start of something extraordinary for these traders. I will continue to support them to see that they completely grasp the trading approach.

An important set of questions was raised which will undoubtedly pop up later on.

What is a rough estimate of time/growth to consider diversification?

Very good question and here is a direct answer for those who asked.

Any position that has grown 500 pips is worth considering to diversify.

Any position that draws close to 1000 pips of growth is fully ripe.

Any position less than 500 is still growing.

Remember that you are trying to take large slices out of main movements on weekly/monthly and main movements move much much much more than 500 pips.

If a position grew 400 pips then reversed back to breakeven then that particular short term move is not even worth considering. You should re-assure yourself that the bad opportunity passed and something greater is lurking around the corner.

Aiming for 1000 pip growth is excellent A+. More would be better however there are factors to consider. If you had a larger drawdown during the consecutive weeks of ranging periods then it would benefit your psyche to consider diversifying earlier to replenish your losses or close to.

Dont forget that many of the main movements on the weekly chart move much more than 1000 pips. However, I believe that a 1000 pip growth or close to is taking a generous slice of the main movement. But you will also be adding more positions in the following weeks that will continue to grow covering new grounds as the price continues on.

Having said the above, never stop adding more positions into the main movement. Not as aggressive as the beginning of the move however just a respectful 1 or 2 attempts per week. You will never know until you participate. Just because it moved 2000 pips doesnt mean it is 'due to' expire. Flip through your charts and look at pairs that moved 4000+ pips or more.

All 3 traders have informed me that they are still unsure what to do. They have a growing portfolio but how do they keep it productive.

For what is worth, here is my answer: If you like to bank that 500 pip position then do so. However, dont forget your obligation to continue adding positions under the anticipation that the main direction will continue. 2 things can happen and both will be beneficial.

1. You bank 500 pip to watch the price stall and reverse with all the wrong indications going against you. You might lose little on the last few attempts but overall you exited at a better time for the 500 pip position.

2. You bank 500 pip to watch the price continue on. As long as you continued to add new positions, you will find that the new positions will now cover the new ground covered by price.

Hence, if you think it is time to do so then do it. But preferably at least 500 pip growth. But never develop a timid fearful manner and start closing every position at 500 pip. You will stun your potential profit as the biggest money is when you capture the biggest move. A least few positions in a year will be so large that it will propel your capital to new heights.

Kudos to you gentlemen. I respect your privacy but if it is of no great concern other readers would be most eager to read about your current trading approach/stats. It is to your discretion.

Hope I answered all your questions.

EDIT: By the way, G, the feeling of no control is exactly what you should feel. What exactly can we control in the markets?

Sincerely,

Graeme

Thanks for the insightful comments Graeme. My order is in place to sell at 1.3487. Now retesting the neck line at 1.3520. I believe the real show will start tomorrow after the RBA states the rate and the ensuing commentary. Provided the news from Pakistan don't turn every thing upside down.

Regards,
Muntu

Hi Graeme and it is good to see some posts from you again!

Some really great posts recently. I admit to having failed over the past couple months. Twice I was in what turned out to be great positions that ended up running very far but I either got out way too early and never re-entered or instead I exited the trade at the right time, but instead of adding to my winner over the days, I was scaling out. I'm disgusted in myself that I have been unable to succeed at this like some of the other members have. Full respect to those few that seem to be making millipedes.

While I LOVE the general acceptance of uncertainty that you present - all we can do is participate and see what happens. This is almost zen like, and I love that point of view with trading. However, there are some aspects of this approach that I still have not yet accepted and they are my own problem - not a criticism of what is shared by you!

I find the notion of a small average loss (from memory avg less than 15 pips) to encourage reckless entries having the attitude of, "oh well, it's only 15 pips which is nothing when I'm shooting for 500+". It tends to put me into an over-trading mindset AND it also puts me into a scared money mindset where I get shaken out repeatedly thinking of only taking a small loss to keep the avg loss low.

I greatly struggle with the homerun attitude because it can be months until this happens. I have no other income besides trading so I need an approach that can feed me as well as allow for growth.

When you combine those 2 points above together, what happens is that you lose so frequently trying to participate and stack that when you finally get a winner, you get scared to give back the profits. Yeah I know, have faith right? Its easy to say, but I can't tell that to my bank when they ask for my mortgage payments Because of the need for an income combined with a low win%, I become a scared trader.

Again, all the points above apply to me and my mindset and are in no way a criticism of the approach.

With kind regards,
MK

Good evening, Midknight

Thank you for your question and it is great to see you again.

I read your post twice before typing this reply.

You mention several golden points.

"Almost zen like"

There are several contradicting factors in trading that plays havoc in any trader. Unfortunately, these contradicting forces are necessary within an entity of simultaeous application.

In other words,

stacking is a very important tool however it can trigger gamble-esque traits yet we need to stack despite the evident pitfalls. It is just too much power in the wrong hands..

allowing positions grow for days and weeks may fulfill your bigger expectations/greed but it could also attract fear and anxiety yet we place blind faith in our focal interpretation and endure further.

over worrying at specific take profit level when any take profit amount past a 'certain minimum growth (500 pips)' is already acceptable. Perhaps greed forces you to endure few more days or fear forces you to close the position out.

The problem lies within above factors of contradictory terms yet the need to be applied equally in ones trading approach. Great inner strength is required to keep emotions on even keel.

Average loss per position that I have explained is a 'means to estimate ones losing space and volume.' And the necessity for such means is to re-assure and ascertain the bleed whilst keeping our emotional intact by knowing that you are on top of your losses. Traders main focus is to deploy positions in the main movement of the year and taking a very large bite out of it. It might take just few ammos or it may take few hundreds of ammos however you will find that the potential profit outweighs most setbacks unless the setbacks/losses are caused by lack of skill/impulse trading. I assume that traders have their 'one thing' ready to deploy their positions accordingly.

However, if your currently supporting yourself and your family on income derived from trading, not only will this attract 2 factors of contradicting emotions, greed and fear but a greater strain overall. Market moves slower to most traders expectations.

With position trading, you can potentially cash out everytime a main movement on any pair moves 1000+ pips that you have managed to catch and profit taking amplified. Pending on the pip value, such single payoff at end of every 1000+ pip movement could be few thousand of dollars or could even be few hundred thousand dollars.

Start slow. $1 per pip is my recommendation for most starters. Trust me when I say that with a solid trading approach you will soon (2-4 years) find yourself cashing out extremely large cheques. Although you may groan now and wonder how long it will take, once you arrive you will most likely say that it was a quick journey. Keeping a day job is recommended.

x3000 of your pip value should be available in your trading account:

$3000 then $1 per pip
$6000 then $2 per pip
$30000 then $10 per pip
$60000 then $20 per pip

However, I place extra extra psychological padding by keeping the above figure as the 'bare minimum.' To be extra safe I recommend x9000 of your pip value to be available in your trading account or before upgrading your pip value to the next level. Increased pip value may increase your potential profit but it also increases the potential risk. To increase profit, you need to increase your 'exposure' by have interest in more pairs.

For those who wonder just how much money is available.

Just 2 standard lots with just 2 positions at just only 800 pip growth each is already $32000.

Having just said that.... you do know/aware that as we currently speak many of the pairs are currently moving forward for the next 1000+ pip movement on the weekly charts.

Count every main movement of every pair in forex and then expanding your operation both into weekly and monthly. You will find overlapping interest when taking trades for both weekly and monthy but of different outcome as you would take profit on different scale. A gigantic difference in profit.

There are stupendous wealth to be made for the strongest who can remain humble in their pursuit.

Hope this helps and none of your input was considered as a criticism however to be fair I also welcome criticism as I too am still a learner.

One thing that does concern me is the fact that your trading income supports your living. If you chase it usually runs away..

Sincerely,

Graeme

Apologies but the day has taken its toll on me.

I will return tomorrow to reply to the new messages and the questions in the thread.

Good night all

Sincerely,

Graeme

Thank you for your efforts Graeme! You've certainly put some of the pieces of the puzzle together in my head.

Exits are tough. Every time you are either early and missed out on more profit or you are closing out your position and gave a percentage back. It's funny that traders spend all their time on entries when they should probably be focusing on the exit.

To overcome this psychology one idea I had was a timed based exit. Lets say something like close 1/2 of all positions over 1000 pips every quarter. This would allowed for a scheduled check (if that is something you desire). Also it removes the desire to find the top tick in your positions that you are in and keeps focused on more participation. When that one day a quarter rolls around you can see where you stand and reap the reward of some of your fruit.

In Jesse Livermore's book, "How to Trade in Stocks", at the end of every year he would cash out every single position he had and sit in a bank vault with all of his cash reviewing his trades and planning the upcoming year.

This is the same idea, yet not as extreme.

Current trades. Loading just as a place holder.

Thanks
TS

Thanks again graeme !
This month has been crazy good nice trending all over wonder if the markets has changed or it is my perception of it I see the possibilities everywhere !?
and this month has been really good for my selfesteem and belief of this system.
I have also noticed that I just the last weeks has gotten what graeme says about entering the market. Before I was laying all attention of my mind in finding the perfect entry with 15 pips stop but that was not for me!
I've noticed that if I instead use that focus on the overall picture my trades live longer.
I now use larger stops 30-50 but i rarely let them get hit. I instead lay weight to having the big picture on my side and then the momentum on my side. Much less stress and actually less average loss per trade in the end.
I have also started looking at stacking in another way. I stack kinda heavy maybe to heavy after reading the last post of greame but still in this market we had the last weeks it has worked. The important thing i try to remember is that i stack like the big boys my average in the position in the currecny pair is more important than where exactly i entered and stacking is vital!!!

Linear risk vs. "syntethic exponetial growth" i call it


http://img19.imageshack.us/img19/6972/thismonth.pngManaged to offset my losses and then some and still got a boat load in open trades

I'm unable to send PM's, so I'm left with no option but to clutter up the thread with my comments. Like many here, I very much appreciate your teaching, Graeme. I am a 34 year-old male, married with two young boys, and living on a small farm in the Midwest. I grow produce for local markets in the summer, and spend most of my time playing with my children and just living life with my family. We live on very little, but we are happy, sheltered, and well fed. What more can one possibly ask for?

Trading is so intriguing to me (particularly your style of trading) that I'm afraid I couldn't walk away from it even if I wanted to. Fortunately, I value my capital and keep my risks small enough that blowing an account is not really a possibility at this point. I have done very well learning how to enter the markets risking very little of my capital. I never risk more than .5 percent of my account on any given trade. It has been extremely frustrating watching good entry after good entry fly back to break even after quite significant gains. Nevertheless, though my account is presently down after several months of attempting this method, I clearly see the light at the end of the tunnel.

Let me give one example: Several weeks ago I bought xag/usd risking the usual .5 percent of my account. At one point the position was up over 20% of my account! It has come down considerably since then, but the lesson is clear: holding on to winning trades will bring enormous gains that will wipe out a multitude of minuscule losses.

Thank you for your efforts, Graeme. I look forward to telling you of my donations to charity.

Good morning, all

Hanselfx - Thank you for sharing your indicator. Sharing is caring and Im sure there are traders who will benefit from any help they can receive.

Tradestar - In range. Watch the breakout out of the range. Probe either direction but the focus is ofcourse on the main trend and the momentum when breaking out.

Pip-pirate - Excellent. Just on a side note, can all traders see that negative swap, positive swap becomes irrelevant when dealing with portfolio of mixed positions in various pairs.

Farmerellis - Thank you for sharing. Wishing you only the best with your trading career.

Sincerely,

Graeme

A reply I just sent to a trader that I believe will be beneficial to other traders who are contemplating to raise lot size to increase/hasten profit.


Good afternoon, xxx

In regards to raising lot size; I hope this doesnt happen to you however you will find hard to change back to smaller lot size once you tasted the bigger. This coupled with factors of greed and fear will most often lead to disastrous outcomes. Imagine experiencing another -1500 pips before your next 6000 pip profit only to blow out your account cause the next -1500 pip on the larger lot size now means all of your newly grown account is under jeopardy again.

You will find with raising lot size may increase your potential profit but it will also bring increased/same/constant risk. If you keep increasing your lot size the only thing that remains constant is the same level of 'threat' that may cause irreparable destruction of ones capital.

I personally opt for this 'threat' to diminish as I progress along. Your total capital should be getting stronger and stronger as you trade making the next -1500 pip drawdown a laugh and nothing more. It should get easier and easier as the time passes. You will know 'maybe' it is time to upgrade your lot size to the next level when -1500 pip becomes nothing more than a smirk.

Microsoft started with 15 employees and thought that they will have maximum 35 exployee operation. They now have 150,000. It is strange how things we expect is delivered undervalued whilst things we undervalue most often return to surprise us.

To increase profit, the only way safe, logical, sensible way is to increase your exposure by participating in more pairs with the same/main lot size. Period.

Sincerely,

Graeme

EDIT: Added little more detail

Hello Graeme,

I am truly enjoying the new insights that your bringing into this thread. Even though one can argue that it has already been said, for me the different ways of looking at one subject or topic really lets me getter a better grasp of the picture. The puzzle pieces coming together slowly.
I had just one question and I apologize if it has already been answered in the past.

In regards to a support/resistance being broken for you to enter with a position, do you only enter when there is a big momentum movement with that break of support/resistance? The reason I ask is because there are pairs (such as the GBP/CHF) that are breaking support but not with momentum. I am of course talking about the higher TF's. As well, do you enter with a probe in anticipation of a breakout or do you want to see the breakout first.

Anyways, my apologies for rambling on.

I am very grateful for the work you have put into this thread.

All the best,
Ardi

Excellent thread Greame,

I have one question... would the same methods work if we took half our positions as intraday profits leveing the rest to grow a position..

so for instance we are up 50 pips, close 1/2 lot, leave the other 1/2 at b.e to grow, repeat with all stacked positions,

rinse and repeat everyday?

Greetings Graeme,

I thought very hard on how to start this post, but came to no conclusion.


Either it’s my poor English, or I really can’t find the right words to thank you. I’m grateful for all the information that you have contributed to this thread; “long term trading” concept, variety of entering methods, money management , the higher timeframe hindsight , psychology , diversification , … .


It’s nearly three years that I’ve been introduced to this market. Lost about 70 percent of my account trying different entry “methods”. 33% growth was due to FTI’s teachings which brought me back to 60 percent loss of initial balance. Five months ago I started reading, understanding, digesting and trading your long term trading “concept”. Thanks to you my account grew 25% for a total of 50% loss from when I first started trading. I withdrew the profit to enjoy. I didn’t use your entry methods (because of having a full time job in a bad timezone!), only the concept of keeping trades for infinity growth. I know it’s too early to quit my day job and call myself a trader but I think I’m on the right track.


My gratitude also goes to everyone that has contributed to this thread.


Thank you again,


Eiman

Graeme,


I remember an early post from you which explained how one could make a 100 percent profit on his/her $5000 account placing about five 0.1 lot positions and keeping them for six months averaging 1200 pips per position. Considering Eur/Usd which has about 100 pips daily fluctuation, one would experience 100(pips)*5(positions)*$1(per position) = $500 of daily account waves. That is 10% of initial account. (Being polite)Wouldn’t you define that as overexposure? (Being real polite)How much oscillation of equity is not acceptable?


Eiman

Thank you Graeme for the wonderful insights..

Eagerly waiting for your upcoming book too..

Just my reflecion im currently in a state where I alteast think I can't put on any more trades as the volatility of floating equity can be as high as 15% on any day. I still think though that using this system you could potentially let the volatility be higher than if I were trading my old system.

The reason for this is RISK I dont have any risk after the trades are at BE. and after I have closed out a few trades and offset the initial drawdown and also added some padding to soak up the losses on future trades.

I could just leave my trades and not even log in for 1 year and come back and even if everyone of the trades i have open right now are closed out I would still be in profit from when i started out. some trades though could have survived for several 1000pips.

I think its far from optimal trade management however but I wouldn't of been able to be in this position of win win in the first place if I didn't let my trades run free from the start.
I guess its a matter of finding a balance where you let your profits run but you diversify often enough to have a smooth equity curve.

Using graemes methods in a trending market can quite easily let you get on a line of trades in a pair and that will make you floating equity highly volatile but in the end if you risk is controlled its a matter of profit optimizing after that.