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Scaling In System for Trending/Ranging Currencies

  • Post #1
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  • First Post: Edited Nov 21, 2008 6:50pm Oct 12, 2007 2:32pm | Edited Nov 21, 2008 6:50pm
I am starting this thread in order to develop a system based solely on scaling into a position.

Here are some rules to start with, to be built upon later:

1) Make only one trade per day per currency pair (preferably at the same time of day)

2) When a trade goes against you by 75 or more pips (depending on the pair), add to the position in order to bring your cost basis down to the average of the entries. Do this each day, as long as the price remains below 75 pips from the initial entry to average down the price even further.
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3) Depending on the pair, if the price drops less than ~75 pips, do nothing.

4) When a trade goes in your favor by any significant amount (this depends on how many positions you have on - ie. 25 pips if one position, 12.5 pips if two, etc..) close out the position and take profit.

5) Re-enter the trade immediately after taking profit with one unit at the current price.

6) Use small enough lot sizes that if there is a big spike against you, it doesnt wipe out your account.

7) Do this on a trending or ranging currency pair to capture the most profit

8) Do this on a currency pair that pays positive swap

Thats it for now... Nothing toooo crazy.

Im currently testing this on USD/JPY, EUR/JPY, and GBP/JPY with long positions and getting outstanding results - over 40% gain in accout balance in the last 2.5 weeks. I am curious, however, how this strategy will fare for EUR/GBP - this currency has been in a small range forever and seems well suited for the strategy.
Quoting El Nacho
2) When a trade goes against you by 75 or more pips, add to the position in order to bring your cost basis down to the average of the entries. Do this each day, as long as the price remains below 75 pips from the initial entry to average down the price even further.
Wow, you are brave.

I wish you the best,
andersenws
"Youth is the trustee of prosperity." - Benjamin Disraeli
Quoting andersenws
Wow, you are brave.

I wish you the best,
andersenws
*Those who dare, win*

This system obviously involves some discretion and should be executed on small lot sizes (also without a crazy amount of leverage). I will do a manual backtest on this strategy on the mother of ranging currencies - EUR/GBP - and report back the results. Something tells me there is much profit to be made without spending too much time at the screen using this strategy on E/G.
this can work with microlots/small positions scaling in at key levels.
its all about managing the risk vs. reward.
also try to take trades where the swap will work to your advantage.
if u cant sleep at nite, then u are WAY over leveraged.
pip amount 'against you' needs to be determined for each pair and u must consider the recent range of the pair.

good luck!
Quoting fx_ninja
this can work with microlots/small positions scaling in at key levels.
its all about managing the risk vs. reward.
also try to take trades where the swap will work to your advantage.
if u cant sleep at nite, then u are WAY over leveraged.
pip amount 'against you' needs to be determined for each pair and u must consider the recent range of the pair.

good luck!
Hi Ninja,

Have you tried something similar before? What were your results? Care to share any stories/tips? What kind of risk/reward would you recommend?

Thanks!
The market is dipping today. This should be a good test of whether this strategy is sustainable... I will post my holdings a bit later.
this is very similar to a strategy at Oanda forum !

the guy doubled his a/c in a year or less after he failed in many other strategy so he try this out......

he uses 1% of his funds each time and only average down after 100-200 pips , checking the market once a day.

he will close out when in profit, any profit and start over again.

another guy there modified the method so that he will follow the price down and place an order just above the new low and he'll add new positions after price go at least 200 pips his way and place orders ahead of the market price........he tripled his a/c in less than a year..........
OK, my account is down about 30% from its high in the last week or so. Seems like the market is turning around... This should be a great test to see if it can weather the storm.
Floating P/L:-3 822.18
Attached Image (click to enlarge)
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Quoting El Nacho
Floating P/L:-3 822.18
Where are your charts?
What do you mean? Which charts are you referring to?

Quoting WHTenn
Where are your charts?
There are 2 sure ways for a margin call:-
1. trading without a stop loss
2. continuously adding to a losing position.
Progress:

Currently up 68% in 5 weeks...


These results are not truly representative of the returns I will get in my real account. I will be trading smaller lot sizes at lower leverage. I would estimate that the gains would be 7-10 times lower... but still, between 7-10% in 5 weeks aint bad ; )
Can you expand on how you chose your entry direction, and on Item 2 below. Please give an example of how you determine the lot size to average in. Also, can you please post a statement. Thanks.

Quoting El Nacho
I am starting this thread in order to develop a system based solely on scaling into a position.

Here are some rules to start with, to be built upon later:

1) Make only one trade per day per currency pair (preferably at the same time of day)

2) When a trade goes against you by 75 or more pips (depending on the pair), add to the position in order to bring your cost basis down to the average of the entries. Do this each day, as long as the price remains below 75 pips from the initial entry to average down the price even further.

3) Depending on the pair, if the price drops less than ~75 pips, do nothing.

4) When a trade goes in your favor by any significant amount (this depends on how many positions you have on - ie. 25 pips if one position, 12.5 pips if two, etc..) close out the position and take profit.

5) Re-enter the trade immediately after taking profit with one unit at the current price.

6) Use small enough lot sizes that if there is a big spike against you, it doesnt wipe out your account.

7) Do this on a trending or ranging currency pair to capture the most profit

8) Do this on a currency pair that pays positive swap

Thats it for now... Nothing toooo crazy.

Im currently testing this on USD/JPY, EUR/JPY, and GBP/JPY with long positions and getting outstanding results - over 40% gain in accout balance in the last 2.5 weeks. I am curious, however, how this strategy will fare for EUR/GBP - this currency has been in a small range forever and seems well suited for the strategy.
better to average in the price at bigger deficits like -200 pips just in case of a big unwind like in july/august.........unless you trade small enough to withstand drops of 2000-3000 pips.

or you can sell half of your units at a loss and then buy when prices come back up after a huge drop.
  • Post #16
  • Quote
  • Edited 4:40am Nov 4, 2007 2:42am | Edited 4:40am
Quoting El Nacho
Nothing toooo crazy..
Actually, this is a little nuts

What you are describing is basically like a martingale method, if I understood correctly. You will win on most compounded trades until you hit a trend reversal and lose all the money you made in a year in about a week. I've seen it happen, not in a story, right IN FRONT of me.

Good luck.
Virtue finds and chooses the mean. Aristotle, Ethica Nichomachea
Has anyone tested this successfully with a live account? I mean with a real account and real amounts of money and not some 1$ lots?

I am asking because all this sounds great but does anyone do it for real with enough money that would hurt if it got lost
scaling in/out, requires a macro view of economic fundamentals, i have tried scaling methods through chart trading and i just find it almost impossible as technicians do not tend to hold any bias against price action unless we have a trigger which can be long or short regardless of the trend.

A system which incorporates a fundamental view on price will allow scaling methods to work much better imo.

Sample system would be,

Issue :
Feds agressively lowering interest rates,

Analysis :
Over long run we are not interested in and USD Longs.

Method :
Scaling. Sell USD rallies based on charts.

This is of course just a skeletal example.
Jest,

You've got the right idea... Thats exactly the way Im doing it. If you just blindly make trades and use a martingale strategy (like many are assuming), failure is right around the corner... But, combining this strategy with a medium to long-term fundamental view (and short term technical view) of the currency in question has much potential. Im currently up slightly over 80% in about 6 weeks (albeit on a demo acct - live account would be up about 10%).

Thanks for the post!
Quoting El Nacho
Jest,

You've got the right idea... Thats exactly the way Im doing it. If you just blindly make trades and use a martingale strategy (like many are assuming), failure is right around the corner... But, combining this strategy with a medium to long-term fundamental view (and short term technical view) of the currency in question has much potential. Im currently up slightly over 80% in about 6 weeks (albeit on a demo acct - live account would be up about 10%).

Thanks for the post!
Hi El Nacho,

How's your system working now? Is it still profitable?

Walt
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