27/23 System for USD/CHF --$10,000 to $1,100,000 in 2 years?

Quoting vdeluca

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I read the entire thread in Moneytec about this system. It is based on a profit target of only 50 pips per week, and continuously increasing your trade amount as your account grows in value. It is used on the USD/CHF because of its high volatility. With Swissy, you should be able to get 50 pips profit per week pretty easily. According to the poster on moneytec, since January 2003 he has had 44 weeks of 50 pip profit, 3 weeks of losses, and a couple of weeks of 10-20 pip profits.

This is the essence of the system: At the completion of the 7am-8am ET candlestick, you place a buy stop entry at 27 pips above the close of this candlestick, and a sell stop enty at 23 pips below the close. Set 50 pip stop losses.

Your profit target is only 50 pips each week. If close to 12 noon you are up only 20 pips for instance, you take the 20 and come back tomorrow to try to get the other 30. At 12 noon, you close out your position. Once you realize 50 pips profit, you are done for the week-- no more trading. The principle here is that excessive trading is generally not good for your account.

If you start with a $10,000 account, you trade 1 lot until you have $11,000. then you trade 1.1 lots ($11 per pip); $12000, 1.2 lots ($12 per pip) etc. After 1 year you will grow your account to $70,000, and after 2 years your account will be $1,100,000. I have not tried it yet, but if you look at the historical USD/CHF charts you will see that big daily moves are fairly common, especially on the short side. The objective of this system is not to hit grand slams but instead to realize slow but steady growth of your account.

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Quoting vdeluca

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you trade 1 lot until you have $11,000. then you trade 1.1 lots ($11 per pip); $12000, 1.2 lots ($12 per pip)

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Quoting digetman

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How do you trade 1.1 lots? I don't think FXCM will allow you to trade partial lots.

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Quoting doragio

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I think they're referring to a full lot of 100K, in which case you can do a mini account and scale it in 10k increments.

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Quoting digetman

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So then what happens when you hit 2.5 lots? I guess you will have to have one regular account and one mini account?

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Quoting digetman

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How do you trade 1.1 lots? I don't think FXCM will allow you to trade partial lots.

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Quoting digetman

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How do you trade 1.1 lots? I don't think FXCM will allow you to trade partial lots.

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Quoting vdeluca

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At the completion of the 7am-8am ET candlestick, you place a buy stop entry at 27 pips above the close of this candlestick, and a sell stop enty at 23 pips below the close.

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Quoting PaulYShimada

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The basic problem with the system as described by VDeluca is the aspect of Money Management. The proposal assumes beginning with $10,000 equity and then each entry enters with one full lot, nominally, $1,000. That represents 10% for each entry. Please pay more attention to trading systems research; do not focus too much on entry and exit subsystems.

No sane professional trader (or experienced amateur) would risk 10% equity per trade!! The generally accepted level of risk is 1 to 2% per entry, and no more than 5% in the market at one time.

The best reference that I have found that discusses a COMPLETE TRADING SYSTEM includes the following major subsystems: what to trade, how much to risk (position sizing), when to buy or sell (signals), stops, and planned exits (I have ignored tactics). The reference is an excellent system that was designed by Richard Dennis, the legendary trader who turned a legendary commodities trader, including foreign exchange, who eventually turned US$400 into US$200 million, and gained additional fame for his Turtle experiment in the 1980’s. You can download his COMPLETE system at www.OriginalTurtles.com. I use the Turtle Trading system for position sizing (including scaling up) and stops. Those were his system's most sophisticated concepts.

I use mathematical indicators for entry and exit (trend and cyclic) that I programmed from concepts I researched on the WWW. I have done quite a lot of research regarding the aspect of money management, a.k.a. risk management. It is generally agreed that if your tech. analysis system is at least half-way sensible (via back testing), that your success or utter ruin will be determined by your risk management system and adherence to it.

To recap, trade 1-2% of equity per trade and risk no more than 5% concurrently in the market. (See the Turtle Trading System regarding the relationship between the level of correlation among concurrent trades and position sizing.) In our business, we have witnessed dozens of $10,000 accounts that were rendered crippled or destroyed within 2 to 4 weeks when 10% of equity was used per entry. Please note, that a mini account with only $1000 starting equity is just as risky if $100 is risked per trade.

Why is 10% too much? Consider that if 10% is risked for each trade, you can afford to lose only about 9 trades because the 10th trade would likely encounter call margin. Most traders will not lose 90% of their equity; they usually quit after losses of 40% to 60%. What are the odds of 6 losses out of 9? Probability suggests that the odds are ONLY 1 out of 64. Well, are you willing to be wiped out with those odds? Try running a simple BASIC program to simulate 64 trades, each with 50% win/loss probability. Alternatively, try flipping a coin; 1/64 sounds low until you realize what is at risk!

It seems that many participants in the discussion were enamored with the apparent simplicity of the system and the very attractive hoped for result; that was merely the first of the twins of doom--greed and fear.

May the Trend be with you,
Paul Y. Shimada

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Quoting merlin

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btw, that link to originalturtles.com gets redirected to some other site. is this right?

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