Bytebodger's Pip-Burning Journal

I've been trolling around these forums now for a few months and started posting several weeks ago. I'm currently trying to refine a system based on Parabolic SARs, so I'm going to use this journal as an honest reflection of my progress (or lack thereof) and to flesh-out any necessary details of the system. Whenever possible, I'll try to post charts to illustrate my system. Like many other journal writers, I am hoping the posting of this data will force me to truthfully evaluate the merits of my system and my money management techniques.

My account currently sits at $2,824.71. Hopefully I will be able to document a steady increase in that value. We shall see...

Here is the first trade in my journal:

Buy 2 EURGBP @ 0.6828, SL @ 0.6813

If you look at my attached chart, will see that I'm looking at an hourly chart. Aside from basic price bars, I use an MTF Parabolic SAR indicator and stochastics. The white dots represent the 1-hour PSAR values. The magenta dots represent the 4-hour PSAR values. I will only make trades that go in the direction confirmed by both PSAR values. So at this moment you can see that the 1-hour and 4-hour PSARs are both bullish.

Once I have a confirmed direction from the PSARs, I am using stochastics for entry. In this particular case, last hour confirmed a positive bounce of the stochastic signal line, so I went long with 2 lots.

I plan to skim small profits (almost like scalping), while still hoping for the occasional home run. To do this I am buying 2 lots. If the 2 lots go a combined $20+ into the green, I will close 1 lot and move the SL on the second lot to BE.

My default SL when opening a position is half of the daily range for that given pair. However, if the most recent PSAR point provides a tighter SL level, I will use that instead. For example, the daily range for EURGBP would have given me a SL of 0.6800, but the PSAR point was at 0.6813, so I used that instead.

I'm going to check positions at the opening of each hour. If the hourly PSAR moves against me, I will close the position. I will also use subsequent PSAR points to incrementally tighten my SLs.

Trade update (new trades in bold):

Buy 2 EURGBP @ 0.6828, SL @ 0.6814
Buy 2 EURCAD @ 1.5044, SL @ 1.5022
Buy 2 AUDUSD @ 0.8336, SL @ 0.8299

Hi Byte,

How to get the 4 and 1h of the psar on the same windows?

Thank you in advance for sharing

Doura

The 1-hour is placed on the chart in the usual way. To get the 4-hour on the chart, go to View -> Navigator. From the Navigator window, find the custom indicator (mine is called #MTF_PSar) and drag it onto the chart. When you drag it onto the chart, choose a timeframe of "240".

Trade update (new trades in bold):

Buy 2 EURGBP @ 0.6828, SL @ 0.6817
Buy 2 EURCAD @ 1.5044, SL @ 1.5024
Buy 2 AUDUSD @ 0.8336, SL @ 0.8299
Sell 2 AUDNZD @ 1.1305, SL @ 1.1353

Trade update (new trades in bold):

Buy 2 EURGBP @ 0.6828, SL @ 0.6819
Buy 2 EURCAD @ 1.5044, SL @ 1.5029 = stopped out @ 1.5029 (-30)
Buy 2 AUDUSD @ 0.8336, SL @ 0.8307
Sell 2 AUDNZD @ 1.1305, SL @ 1.1343
Buy 2 CADJPY @ 108.33, SL @ 107.88
Buy 2 EURUSD @ 1.3545, SL @ 1.3518
Buy 2 CHFJPY @ 98.67, SL @ 98.41

Total: -30
Winning Trades: 0
Losing Trades: 1

I look forward to following your journal.

The relationship between stochastic and 4Hr PSAR seems almost inverse. I guess because of the long vs short time frames.

I experimented with using RSI oscillator instead of stochastic and got a few more trade opportunities.

Good luck with the new system.

Trade update (new trades in bold):

Buy 2 EURGBP @ 0.6828, SL @ 0.6821 = stopped out @ 0.6821 (-14)
Buy 2 AUDUSD @ 0.8336, SL @ 0.8344 = stopped out @ 0.8344 (+16)
Sell 1 AUDNZD @ 1.1305, SL @ 1.1305 = closed 1 @ 1.1289 (+16)
Buy 1 CADJPY @ 108.33, SL @ 108.33 = closed 1 @ 108.48 (+15)
Buy 2 EURUSD @ 1.3545, SL @ 1.3531 = stopped out @ 1.3531 (-28)
Buy 2 CHFJPY @ 98.67, SL @ 98.49 = stopped out @ 98.49 (-36)
Buy 2 EURJPY @ 162.75, SL @ 162.75 = closed 1 @ 162.89 (+14)
Buy 2 NZDUSD @ 0.7391, SL @ 0.7353
Sell 2 USDCAD @ 1.1088, SL @ 1.1088 = closed 1 @ 1.1075 (+13)
Buy 2 USDJPY @ 120.31, SL @ 120.17

Running Total: -34
Winning Trades: 5
Losing Trades: 4

Trade update (new trades in bold):

Sell 1 AUDNZD @ 1.1305, SL @ 1.1298
Buy 1 CADJPY @ 108.33, SL @ 108.33
Buy 1 EURJPY @ 162.75, SL @ 162.78
Buy 2 NZDUSD @ 0.7391, SL @ 0.7353
Sell 1 USDCAD @ 1.1088, SL @ 1.1088
Buy 2 USDJPY @ 120.31, SL @ 120.31 = closed 1 @ 120.43 (+12)
Buy 2 GBPJPY @ 238.57 = closed 2 @ 238.44 (-26)
Sell 2 GBPUSD @ 1.9800, SL @ 1.9839

Running Total: -48
Winning Trades: 6
Losing Trades: 5

Trade update (new trades in bold):

Sell 1 AUDNZD @ 1.1305, SL @ 1.1298 = stopped out @ 1.1297 (+8)
Buy 1 CADJPY @ 108.33, SL @ 108.33
Buy 1 EURJPY @ 162.75, SL @ 162.85
Buy 2 NZDUSD @ 0.7391, SL @ 0.7353
Sell 1 USDCAD @ 1.1088, SL @ 1.1088
Buy 1 USDJPY @ 120.31, SL @ 120.31
Sell 2 GBPUSD @ 1.9800, SL @ 1.9837

Running Total: -40
Winning Trades: 7
Losing Trades: 5

Trade update (new trades in bold):

Buy 1 CADJPY @ 108.33, SL @ 108.46
Buy 1 EURJPY @ 162.75, SL @ 162.85 = stopped out @ 162.84 (+9)
Buy 2 NZDUSD @ 0.7391, SL @ 0.7353
Sell 1 USDCAD @ 1.1088, SL @ 1.1088
Buy 1 USDJPY @ 120.31, SL @ 120.31 = stopped out @ 120.30 (-1)
Sell 2 GBPUSD @ 1.9800, SL @ 1.9833

Running Total: -32
Winning Trades: 8
Losing Trades: 6

You will notice from the (very) early results that my win rate seems to be decent and I'm basically treading water. (I know that the current pip tally is negative, but I'm currently sitting on a few winners that have yet to reach conclusion.) For the most part, I'm fine with this. My theory is that if you can "tread water" during the average days you keep yourself in the game and, occasionally, you have one of those big days.

But my early results also highlight a quandary that I currently have regarding money management. I've heard a lot of people in other forums say that they open with multiple lots then, when the position moves X amount into the positive, they take some profit and move the SL on the remaining position to BE. That is exactly the strategy I'm employing now. I open with 2 lots and, if the overall position goes $20+ into the green, I close the first lot and move the SL on the second to BE. But this also provides for strange results. Consider the following:

Since I open with 2 lots, if the position goes against me and gets stopped out - let's say, at -20 pips - I've really suffered a 40-pip loss (20 pips x 2 lots). If the position goes positive, I lock in 10 pips of profit on the first lot and then I hope that the second lot keeps running. If the position then turns against me, at least I can say that I managed to skim 10 pips of profit out of it. However, if the position continues to go positive, it now has to travel farther to offset the losses that I realize when I get stopped out of a loser.

So, let's say that with the numbers I'm referencing above, I close the second lot at +20 pips. This means that the whole position made me 30 pips (10 pips on the first lot + 20 pips on the second lot). So when the price moved against me by 20 pips, I realized a 40-pip loss (2 lots x -20 pips). But when the price moved in my favor by 20 pips, I only realized a 30-pip gain (10 pips on the first lot + 20 pips on the second lot). The obvious result is that I need to maintain a winning percentage above 50% to break even - or, I need to have a few of the "runners" that go a long way into the positive to offset the losers.

I'm not saying that this is necessarily a bad thing. I'm just trying to figure out if this is really the best approach to money management. Am I really gaining any advantage by opening with 2 lots and then closing the first after a set level of pips have been reached? Would I be better off just opening 2 lots from the start and letting them run their course? Or should I be looking at other techniques for getting into/out-of the position? I've toyed around in the past with feathering techniques for moving into/out-of positions in a staggered manner, but I'm not really sure if any of these techniques really provide an improved return, or simply a different distribution of returns?

Hi Bytebodger

This is my first post, but here goes...

I totally caught on to your system as I like the simplicity very much. I changed the Stoch settings to 8,3,3 as it is my opinion that one gets better signals. I cannot agree more with your observation about the money management. I opened 3 trades today of which 2 are still running. I'm aiming for at least 20 pips profit per trade on 1 lot. I do not enter with more that one lot, because if I'm wrong I will loose with 2 lots. I also do not place a stop loss (I keep a metal one) as this gets hit too often and then I loose valuable pips. I'm a newbie so I know that my way of trading will probably not be passed by the experts, but so far it has been working for me.

Please keep up the posting as I'm following you and enjoying this very much. I do believe in MTF trading, but it has to be simple like your system.

Trade update (new trades in bold):

Buy 1 CADJPY @ 108.33, SL @ 108.55
Buy 2 NZDUSD @ 0.7391, SL @ 0.7353
Sell 1 USDCAD @ 1.1088, SL @ 1.1088
Sell 2 GBPUSD @ 1.9800, SL @ 1.9829
Sell 2 AUDCAD @ 0.9212, SL @ 0.9249
Buy 2 EURGBP @ 0.6840, SL @ 0.6828
Buy 2 EURUSD @ 1.3545, SL @ 1.3532
Buy 2 CHFJPY @ 98.75, SL @ 98.53

Running Total: -32
Winning Trades: 8
Losing Trades: 6

Good luck with your trades. I'm not pushing this system for anyone else, but if you think it suits you, then I'd be happy to hear how you do with it.

As for money management, I'm going to stay with my current strategy, but I would love it if someone could explain to me why this strategy is superior/inferior to other methods. Like you said, when I'm stopped out, I'm stopped out for the full 2 lots, but this also gives me a "free ride" on some positions that have moved positive when I can lock in a small TP and then let the rest run. I just don't know if, in the long run, those home runs will be frequent enough to make this strategy advantageous.

And as for your SLs, you have to find a style that suits you, but I will give you the standard thinking from almost everybody who posts in these forums - USE SLs. That doesn't mean that you have to use tight SLs. Heck, maybe you open all of your positions with a 150-pip SL, which is almost the same as using no SL for short-term trades.

But please consider this: You probably have not been doing this long enough to see what happens when a central bank decides to intervene in the currency markets. It is NEVER announced beforehand and when it happens the currency could move 400 pips, 500 pips, or more in a matter of minutes. Yes, these occurences are extremely rare but they do happen. If you are lucky enough to be on the right side of this occurence then it is like money from heaven, but what if you are on the wrong side? Are you willing to accept a 500-pip loss on your next trade? I'm not trying to lecture you - I just want to make sure that you have considered such a possibility.

.....Sorry couldn't resist......Happy trading

Bytebodger

I do not want to drag this on, but I do agree with you. One always has to have a stop loss, maybe not always meaningful with regards to the price action but at least to have some protection. When I spoke about not having a stop loss I meant not having a stop loss close, i.e. 20 pips etc.

I will follow you posts. Maybe I'm wrong.

Trade update (new trades in bold):

Buy 1 CADJPY @ 108.33, SL @ 108.55 = closed 1 @ 108.64 (+31)
Buy 2 NZDUSD @ 0.7391, SL @ 0.7356
Sell 1 USDCAD @ 1.1088, SL @ 1.1088
Sell 2 GBPUSD @ 1.9800, SL @ 1.9829 = closed 1 @ 1.9783 (+17)
Sell 2 AUDCAD @ 0.9212, SL @ 0.9249
Buy 2 EURGBP @ 0.6840, SL @ 0.6829
Buy 2 EURUSD @ 1.3545, SL @ 1.3532
Buy 2 CHFJPY @ 98.75, SL @ 98.53

Running Total: +16
Winning Trades: 10
Losing Trades: 6