I've filled 10 buy orders since the last low in the EUR/JPY, so I'm now long a crazy 253 units in this account. It's actually in positive territory tonight. 
Here's the current situation:
Here's the current situation:
- Joined Oct 2006 | Status: Member | 1,074 Posts
Ok, in the interest of continuous improvement, I'm making a few significant changes to the method I'm using with EUR/JPY. I'm still basing the method on the research project I did on price structure, but I'll now be taking more of my findings from that research into account.
In particular, instead of just looking at the most recent leg and the median reaction to it, I'll be using the wider context of where that leg is in the overall structure to decide whether to place orders. One of my findings was that trends tend to have a median of 4 legs (including pullback legs) before being interrupted by either a range contraction or range expansion leg. So if a trend is "old" with 3 or more legs already existing, it makes more sense to place orders in the opposite direction. Similarly, if the trend is "new" it makes sense to place orders in the direction of that trend. So I have created a decision table to reflect all the various possible situations and my responses to them. Here it is:
The next improvement I'm making is how I place the orders. Instead of setting up a sequence of multiple orders, I'll be placing only a single order behind the 250-pip reversal threshold. As the leg continues and the threshold moves, I will move the order and increase its size every 50 pips. Its size in units will be based on how many even 50-pip levels are between the beginning of the leg and the order, just like I was doing before. So instead of having a sequence of orders like 1,2,3,4,5,6, I will only have the sixth order there. As price continues to move, I would replace the 6 unit order with a 7 unit order at the next even 50 pip mark. By placing the order BEHIND the reversal threshold (instead of using a 100-pip buffer like I was doing before) I ensure that there will not be multiple orders filled in the same leg. Once the order fills, it is because the leg direction has reversed, and I'll be looking at placing an order in the other direction behind the new leg's reversal threshold.
This change will have the effect of drastically reducing the position sizes I'm holding at any given time. I may have to increase my unit size to compensate for this, but I'll see how it goes first. Some of these legs are so long, causing the pending order size to grow so much that I may be fine just keeping the unit size where it is.
I still have the large 253 unit long position on EUR/JPY now, but I've canceled all the other open orders. Then I placed a single order based on the new method. The chart below shows how this works.
The last completed leg was a pullback in a downtrend. The current leg is now heading down, so my next order would be a buy order above it, behind the reversal threshold. I use the table above to determine whether to place this order. If the last completed leg is a pullback, the rule is that I only place the order if there are at least 3 legs in the existing downtrend. The condition is met, because this downtrend already has four legs (2 main trend legs and 2 pullbacks so far). So this trend is getting "old", and I'm ok to place buy orders.
So I place the order just behind the reversal threshold at 154.50. The current downleg started close to the 157.00 level, so we count 157, 156.50, 156, 155.50, 155, 154.50, for a total of 6 units for the order size.
And there we have it. Going forward I'll be using this improved approach and see how it works.
In particular, instead of just looking at the most recent leg and the median reaction to it, I'll be using the wider context of where that leg is in the overall structure to decide whether to place orders. One of my findings was that trends tend to have a median of 4 legs (including pullback legs) before being interrupted by either a range contraction or range expansion leg. So if a trend is "old" with 3 or more legs already existing, it makes more sense to place orders in the opposite direction. Similarly, if the trend is "new" it makes sense to place orders in the direction of that trend. So I have created a decision table to reflect all the various possible situations and my responses to them. Here it is:
The next improvement I'm making is how I place the orders. Instead of setting up a sequence of multiple orders, I'll be placing only a single order behind the 250-pip reversal threshold. As the leg continues and the threshold moves, I will move the order and increase its size every 50 pips. Its size in units will be based on how many even 50-pip levels are between the beginning of the leg and the order, just like I was doing before. So instead of having a sequence of orders like 1,2,3,4,5,6, I will only have the sixth order there. As price continues to move, I would replace the 6 unit order with a 7 unit order at the next even 50 pip mark. By placing the order BEHIND the reversal threshold (instead of using a 100-pip buffer like I was doing before) I ensure that there will not be multiple orders filled in the same leg. Once the order fills, it is because the leg direction has reversed, and I'll be looking at placing an order in the other direction behind the new leg's reversal threshold.
This change will have the effect of drastically reducing the position sizes I'm holding at any given time. I may have to increase my unit size to compensate for this, but I'll see how it goes first. Some of these legs are so long, causing the pending order size to grow so much that I may be fine just keeping the unit size where it is.
I still have the large 253 unit long position on EUR/JPY now, but I've canceled all the other open orders. Then I placed a single order based on the new method. The chart below shows how this works.
The last completed leg was a pullback in a downtrend. The current leg is now heading down, so my next order would be a buy order above it, behind the reversal threshold. I use the table above to determine whether to place this order. If the last completed leg is a pullback, the rule is that I only place the order if there are at least 3 legs in the existing downtrend. The condition is met, because this downtrend already has four legs (2 main trend legs and 2 pullbacks so far). So this trend is getting "old", and I'm ok to place buy orders.
So I place the order just behind the reversal threshold at 154.50. The current downleg started close to the 157.00 level, so we count 157, 156.50, 156, 155.50, 155, 154.50, for a total of 6 units for the order size.
And there we have it. Going forward I'll be using this improved approach and see how it works.
- Joined Oct 2006 | Status: Member | 1,074 Posts
The price on EUR/JPY moved down enough for me to move the buy order down by 100 more pips to 153.50 and increase its size by 2 units. Then the downleg reversed, so I have a filled order for 8 units long.
Next, since we're now in an upleg, I have to determine whether or not to place a new sell order below that leg. I look at the table in the last post and see that since the last completed leg was a range contraction, I do NOT place an order behind this new leg. This makes sense, because the range contraction leg indicates a high likelihood that the downtrend is over, so I wouldn't want a pending sell order down here.
Now according to the new and improved method, I should just be long 8 units here. Of course I'm actually long 261 units because of the leftover trades from before I made the revisions. So what to do with the "extra" 253 units I have?
Since the likelihood is increasing for a price rise, I decided to just place a 500 pip stop behind the highest point of the upleg for these 253 units. That stop (which doesn't show up on the chart below) is currently at 148.50. I'll be moving it up in 50 pip increments, and will begin tightening it up when we get to the point where I place the next sell order.
Next, since we're now in an upleg, I have to determine whether or not to place a new sell order below that leg. I look at the table in the last post and see that since the last completed leg was a range contraction, I do NOT place an order behind this new leg. This makes sense, because the range contraction leg indicates a high likelihood that the downtrend is over, so I wouldn't want a pending sell order down here.
Now according to the new and improved method, I should just be long 8 units here. Of course I'm actually long 261 units because of the leftover trades from before I made the revisions. So what to do with the "extra" 253 units I have?
Since the likelihood is increasing for a price rise, I decided to just place a 500 pip stop behind the highest point of the upleg for these 253 units. That stop (which doesn't show up on the chart below) is currently at 148.50. I'll be moving it up in 50 pip increments, and will begin tightening it up when we get to the point where I place the next sell order. - Joined Oct 2006 | Status: Member | 1,074 Posts
That downleg extended below the stop I had for the large portion of the long position left over from before I modified the method. My modification came a bit late, because that position was much too large, and caused a huge loss when it hit the stop.
Anyway, I'm now just long 8 units at 153.50.
The downleg has completed and was a LHLL, making it a trend leg. So when the current upleg started, I began moving an increasing sell order below it. However, when the current upleg passed the last high, it became a range expansion leg (LLHH), so I cancelled the sell order according to my decision table. This is because the range expansion leg has interrupted the resumed downtrend that was in progress, which is a bullish sign.
So now I have no open orders. Here's the chart:
Anyway, I'm now just long 8 units at 153.50.
The downleg has completed and was a LHLL, making it a trend leg. So when the current upleg started, I began moving an increasing sell order below it. However, when the current upleg passed the last high, it became a range expansion leg (LLHH), so I cancelled the sell order according to my decision table. This is because the range expansion leg has interrupted the resumed downtrend that was in progress, which is a bullish sign.
So now I have no open orders. Here's the chart:
- Joined Oct 2006 | Status: Member | 1,074 Posts
Because of the big loss in the EUR/JPY position portion of the account, the overall account was down a freakin', whopping, big honkin' 39.8%. 
Yay me for forgetting not to overtrade...
Way to go.... Cap the dumbass.
On a brighter note, I have been trying out a new method in the little experimental part of the account, and that's up 21% in a week! The method involves using statistics to determine a minumum price range that is likely to be covered by the next daily bar. I then place a buy order at the low of this small range and a sell order for the same amount at the top.
The historical probability of both orders being hit is 81%, leaving me with a little profit and a flat position at the end of most days. 1% of the time, neither order is hit, and the other 18% of the time there should be a situation where I'm left either long or short, because only one order was hit. In these cases I have a simple decision tree that I'm testing out to determine which orders to place for the next day based on the current open position and whether or not it's in profitable territory.
More on this as it develops....
Yay me for forgetting not to overtrade...
Way to go.... Cap the dumbass.
On a brighter note, I have been trying out a new method in the little experimental part of the account, and that's up 21% in a week! The method involves using statistics to determine a minumum price range that is likely to be covered by the next daily bar. I then place a buy order at the low of this small range and a sell order for the same amount at the top.
The historical probability of both orders being hit is 81%, leaving me with a little profit and a flat position at the end of most days. 1% of the time, neither order is hit, and the other 18% of the time there should be a situation where I'm left either long or short, because only one order was hit. In these cases I have a simple decision tree that I'm testing out to determine which orders to place for the next day based on the current open position and whether or not it's in profitable territory.
More on this as it develops....
- Joined Oct 2006 | Status: Member | 1,074 Posts
The downleg on EUR/JPY has passed below the prior low, making this a HHLL range expansion leg. Therefore, I've cancelled the trailing buy order. I'm still long 8 units at 153.50 with no open orders.
I think I'm liking this new modification.
It keeps me from building up my position size until there's clear price action in the direction of the position.
I think I'm liking this new modification.
It keeps me from building up my position size until there's clear price action in the direction of the position.
- Joined Oct 2006 | Status: Member | 1,074 Posts
hey man..
I just skimmed through your thread. It came to my mind that you might like this: http://www.forexfactory.com/showthread.php?t=26044
maybe you've already seen it .. but makes life a lot easier =) just need to behave yourself and have patience. works extremlely well on the daily TF
...and rubbed my burning eyes for about 10 minutes before leaving.
I'm sure it works for some people, but I wouldn't be able to make sense of all that clutter.
- Joined Oct 2006 | Status: Member | 1,074 Posts
I was able to move my trailing sell order by another 100 pips and increase its size to 10 units last night. Sometime since then, EUR/JPY reversed leg direction again and the order filled. We're now in a downleg, and I'm short 2 units (my original long 8 units minus the 10 I just sold) at 149.00.
Now here's why there is no buy order behind this upleg:
Now here's why there is no buy order behind this upleg:
- Joined Oct 2006 | Status: Member | 1,074 Posts
I'm still doing daily trades in my other little experimental sub-account, based on statistical levels that are likely to be reached by each new price bar. That account is now up about 45% in a little over a week! 
Each day I place both a buy and sell order for the next day, placed at locations where they are both likely to be hit. So far, I've only had one day where one of the orders was hit while the other wasn't, leaving me with an open position. On that occasion, the other open order was hit later the following day, flattening my position out again for a profit.
Eventually of course, I'll run into situations where there is an open position left at a loss. The question is whether these frequent daily wins will more than make up for the larger losses which will happen once in a while. Hmmm...
Anyway, here's a chart for the last three days:
Each day I place both a buy and sell order for the next day, placed at locations where they are both likely to be hit. So far, I've only had one day where one of the orders was hit while the other wasn't, leaving me with an open position. On that occasion, the other open order was hit later the following day, flattening my position out again for a profit.
Eventually of course, I'll run into situations where there is an open position left at a loss. The question is whether these frequent daily wins will more than make up for the larger losses which will happen once in a while. Hmmm...
Anyway, here's a chart for the last three days:
- Joined Oct 2006 | Status: Member | 1,074 Posts
The notes on the EUR/JPY chart sum up the current situation, so I won't repeat it here in the post.
- Joined Oct 2006 | Status: Member | 1,074 Posts
Down 14.2% last week.
Time to go back to the drawing board...
Time to go back to the drawing board...
- Joined Oct 2006 | Status: Member | 1,074 Posts
I skipped last week as I was still "at the drawing board" but that week was down 2.3%. This week the account was down another 35.5% on the weakness of the NZD/USD combined with my increasing position there.
Anyway, I am switching to a more FA based approach which attempts to identify the strongest and weakest currencies. I'll be trying to position myself into trends and add to my position as the trend continues, looking for those "black swan events" in which the big profits are waiting.
Here are links which show the details of my new FA-based approach:
http://www.market-geeks.com
http://market-geeks.com/newsreleases.php
Anyway, I am switching to a more FA based approach which attempts to identify the strongest and weakest currencies. I'll be trying to position myself into trends and add to my position as the trend continues, looking for those "black swan events" in which the big profits are waiting.
Here are links which show the details of my new FA-based approach:
http://www.market-geeks.com
http://market-geeks.com/newsreleases.php