Caution: Math Geek at Work

Since the position is flat, I can get a read on just how profitable it has been. So far, nothing spectacular. That portion of the account is only up 1.3% from initial value. And it took a long period of drawdown to get there.

On the plus side, the method suits my trading style very well, with the small time commitment, set-it-and-forget-it dynamic, and contrarian philosophy.

Oops! I mis-stated the total gain on my initial investment in the EUR/JPY portion of the account. It was actually 2.2% not 1.3%. A bit better.

The account was up 5.2% last week due to continued gains in the EUR/JPY position and the recovery of NZD/USD. w00t!

I tried a little experiment yesterday during "pick-your-pocket-Sunday" where I applied the contrarian method I use with EUR/JPY to intraday trading.

In the research I did on the price movements of this pair (available in the archives of my site) I found that price becomes less "trendy" the further down the time scales we go. So I used the exact same method I've been posting here, but scaled down for 1-minute bars. I used the same unit size, but I placed orders every 5 pips instead of every 50. The reversal threshold is 25 pips instead of 250 and the buffer zone between a leg's maximum extension and my last order is 10 pips instead of 100.

I ended up making about 10% of the profit that I've realized from the daily TF over the past 5 months. In one day. Hmmmm......

I'll be trying this again a few times this week.

Did another intraday session last night. It lasted for many hours but I found that I can easily multi-task while waiting for the next actionable event to happen. I ended up making about twice what I made on the first intraday session. So in two days I made about a third of what I made in five months with the daily method.

I'm going to continue with the daily TF posts, but I'm also going to move some funds out of my NZD/USD subaccount and open a daytrading subaccount to use this intraday system as well.

So now I'll have:

1. A long term low/no margin NZD/USD carry position
2. A long term EUR/JPY method that I post on here in the journal
3. An intraday EUR/JPY method for daily fun!

My EUR/JPY position has now flipped over to long. Remember that I'm still in that downleg, so I'm still in the mode where I'm placing buy orders above it as it declines. It declined below 161.00 yesterday, so I placed the next buy order which was for 16 units at 162.00. It filled today at some point. Here's the current chart:

I had a bit of an unusual situation occur with the EUR/JPY position involving a missed order placement. Since I haven't covered that in this journal yet, now is a good time.

First of all, the downleg we were in has changed to an upleg. The last bottom was a "pin bar" on Aug. 20 with a long downward tail. This bar went below 160.50 (it almost hit 160 even) which provided room for me to place another buy order at 161.50 given my 100-pip buffer for order placement.

However, I didn't place that order because by the time I checked the position, the downward spike had already happened and price was well above the 161.50 mark again. So I "should have" had an order for 17 units placed and filled at 161.50, but I missed it.

My solution was simply to place the order down there as a limit order. So if price ever comes back down to that level, it will fill as it would have initially. However, I'll only keep that limit order there until the next downleg begins, because that will involve a new series of buy orders and cancellation of all old outstanding buy orders.

Here's the current chart:

Wow, two up weeks in a row! What's the world coming to? The account was up 0.3% this week.

As I mentioned in a previous post, I have also created a third subaccount for daytrading the EUR/JPY method that I've been using. I've had three for three winning sessions with that one so far. w00t!

That 17 unit order at 161.50 filled, so now I'm long 33 units of EUR/JPY.

We've had another switch in direction, so we're in a downleg again on EUR/JPY. This downleg extended slightly below the exhaustion level (before retracing a lot), so I'm clear to begin placing a new sequence of buy orders. I've got the first five buy orders in so far. Here's the chart.

EUR/JPY is heading back up at the moment, and the 5-unit order has filled. That brings my position up to 38 units long.

Yep, back into another drawdown period.

The 4-unit and 3-unit orders also filled, bringing my net position to a total of 45 units long. Then the price plummeted again to a point which gave me enough room to place the sixth order in the sequence. At that point though I had a gap: 1,2, gap 6. So I replaced the 5 unit order (always placing the largest available orders at the best prices), and compensated for that by eliminating the 1 and 2-unit orders.

Here's the current situation.

Wow, I'm actually early with the wrapup. That's because I have an unexpeced day off from work tomorrow, so I'm up late.

Anyway, the account was down a total of 3.4% this week.

On the bright side, the daytrading portion of the account is up over 2% since inception a week or so ago. I have not yet had a losing session there, however, I'm scalping for small gains after long periods of drawdown. Could be a large "black swan" vulnerability there...

I'm up to the 11th order in the sequence on this latest EUR/JPY downleg, and the 11 unit order filled tonight. This brings me to a total of 56 units long. Here's the current chart:

Daytrading:

This small subaccount got crushed earlier this week when I grossly misjudged position size calculations. It's recovering a bit now, but I'm really not a big fan of babysitting trades for hours at a time, so I'm wrapping up the daytrading effort. I'll still use this subaccount for other experiments though.

NZD/USD Carry

I bought more NZD on the continued decline. My margin percent on this account is getting much lower than I like. It's at 23% now, and I really would like it to be in the 50% - 100% range. This is meant as an income subaccount with low/no risk of a margin call.

The overall account performance is going to take a big hit this week unless this "perfect storm" turns around soon.

The downleg in EUR/JPY continued today, making room for the 12th order in the sequence. This left a gap because the 11th order was already filled, so we had this:
5,6,7,8,9,10,gap,12

So I placed another 11 unit order back in its spot, and compensated by cancelling the 5 and 6 unit orders. So now we have this:
7,8,9,10,11,12

Then I started thinking about how nice it would have been if I had been able to participate in the entire huge down move from 170, instead of reducing my short position along the way. So I borrowed a concept from Elliot Wave Theory and brought this method to the next level.

Just like in EW, I can "zoom out" scale and construct larger scale legs which are composed of several smaller scale legs. I show this in the chart below. I can place orders behind this higher level leg as well. These orders are 100 pips apart instead of 50, and they are twice the size of the lower level orders.

The idea behind this is if there is a larger term uptrend, I can participate in it for a long time. Now I could actually continue to build on this idea and create even larger legs constructed of these higher level legs, but I think dealing with just 2 levels may become complicated enought. We'll see how it works out.

Ever thought of using a S/R to enter new trades position instead of the fix pip spread between orders ?

While I put major S/R levels on my charts just as a reference, I don't think they really add any actionable information. Price is just as likely to blow through them as to respect them. That's why I use the "exhaustion levels" supported by my research to trigger the placement of an order sequence. Trying to figure out which S/R levels to use to place a series of orders would just make more effort for no real gain.

Holy crap!

Glug. The huge drop in the Euro put my little daytrading experiment subaccount into a margin call, so it lost like 80% of its value. The main EUR/JPY account is up now though because of the recovery and all my buy orders. The continued decline in the NZD caused further erosion in account value, but I continue to make small purchases into the decline.

All in all, it wasn't as bad as I thought it might be. The overall account was down 12.3% last week.