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  • #21
  • May 14, 2007 3:51pm May 14, 2007 3:51pm
Quoting farimir
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.
Oh OK - please disregard my previous post then. I think your approach makes perfect sense.

On one hand, I really like the process of using the SAR points for progressive SLs. I hate automated trailing stops because they can take you out of a winning position based on fast, temporary spikes. However, I really like doing manual trailing stops. But if you do manual trailing stops, the question becomes how to determine where to set those SLs. The SAR values solve that problem.

On the other hand, this can still lead to SLs that are too tight. Take a look at this morning's trade on EURGBP. The first green arrow shows where I went long this morning on my first trade. The second green arrow shows where I went long on my second trade this afternoon. As you can see, the first trade would have been a winner - but I was stopped out based on my progressively-tighter SAR-based SLs. And in homage to Murphy himself, the price directly reversed and headed back upward after falling to a level necessary to take out my SL.

So the jury is definitely out on the SAR-based SLs. For the time being, I will continue to use them - but any SL runs the risk of taking you out of an otherwise-profitable trade. I will continue to monitor the situation...
Attached Image (click to enlarge)
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  • #22
  • May 14, 2007 5:27pm May 14, 2007 5:27pm
Trade update (new trades in bold):

Buy 2 NZDUSD @ 0.7391, SL @ 0.7363
Sell 1 USDCAD @ 1.1088, SL @ 1.1077
Sell 1 GBPUSD @ 1.9800, SL @ 1.9800
Sell 2 AUDCAD @ 0.9212, SL @ 0.9232
Buy 2 EURGBP @ 0.6840, SL @ 0.6832
Buy 2 EURUSD @ 1.3545, SL @ 1.3535
Buy 2 CHFJPY @ 98.75, SL @ 98.57
Buy 2 CADJPY @ 108.84, SL @ 108.60

Running Total: +16
Winning Trades: 10
Losing Trades: 6
  • #23
  • May 14, 2007 7:38pm May 14, 2007 7:38pm
Trade update (new trades in bold):

Buy 2 NZDUSD @ 0.7391, SL @ 0.7363
Sell 1 USDCAD @ 1.1088, SL @ 1.1070 = stopped out @ 1.1070 (+18)
Sell 1 GBPUSD @ 1.9800, SL @ 1.9800 = stopped out @ 1.9800 (+0)
Sell 2 AUDCAD @ 0.9212, SL @ 0.9220
Buy 2 EURGBP @ 0.6840, SL @ 0.6834
Buy 2 EURUSD @ 1.3545, SL @ 1.3537
Buy 2 CHFJPY @ 98.75, SL @ 98.75 = closed 1 @ 98.88 (+13)
Buy 2 CADJPY @ 108.84, SL @ 108.61

Running Total: +47
Winning Trades: 12
Losing Trades: 6
  • #24
  • May 14, 2007 10:17pm May 14, 2007 10:17pm
Trade update (new trades in bold):

Buy 2 NZDUSD @ 0.7391, SL @ 0.7363 = closed @ 0.7391 (-34)
Sell 2 AUDCAD @ 0.9212, SL @ 0.9220 = stopped out @ 0.9215 (-6)
Buy 2 EURGBP @ 0.6840, SL @ 0.6836
Buy 2 EURUSD @ 1.3545, SL @ 1.3539
Buy 1 CHFJPY @ 98.75, SL @ 98.75 = stopped out @ 98.76 (+1)
Buy 2 CADJPY @ 108.84, SL @ 108.66
Sell 2 USDCAD @ 1.1053, SL @ 1.1067

Running Total: +8
Winning Trades: 13
Losing Trades: 8

Well, it's been a big nothing day. Lots of trades. Winners. Losers. At the end I'm basically in the same place, minus about $20 on commissions. That's OK - I'm not discouraged - I'm actually feeling pretty good about this. If I can get through as many days as possible at or close to break even, I will be in perfect position for the occasional home run.
  • #25
  • May 15, 2007 8:59am May 15, 2007 8:59am
Ouch........................

Quoting billser
.....Sorry couldn't resist......Happy trading
  • #26
  • May 15, 2007 4:59pm May 15, 2007 4:59pm
In analyzing yesterday's results, I have gained some more insight about the question of how many lots to open and when to close them. I was originally wondering if there is any benefit to opening two lots and closing one when it had reached a small profit, as opposed to just opening two lots and letting them both ride for the life of the trade.

The answer lies somewhere in the distribution of results for your system. In other words, if you are working a system in which you expect to have long-running positions, positions which will frequently turn into big gainers (or big losers), then it is probably more prudent just to let both lots run for the life of the trade. In other words, if you are expecting to have a long run with this trade, then it is more profitable to have all of your lots in play for the life of the trade.

However, if you expect that many of the trades will realize only a modest gain before ultimately falling back to BE (or a loss), then it is advantageous to lock in a small amount of profit with one lot, move the SL to BE, and then hope that the second lot enjoys a long run - knowing that most likely, it will not.

Yesterday my strategy of closing one lot after a small profit actually gained me 20+ pips. This happened because the second lots on these trades often fell right back to BE and closed out. If I had held both lots open for the duration of the trades, many of them would have ended up with no profit - or a loss - whereas many of them in fact yielded a small profit that added up over the course of the day.

Of course, this equation would have been different if I had enjoyed any big winners. So the question of how many lots to hold open for the life of the trade needs to be assessed on a system-by-system basis. If your system is one which aims for frequent home runs, then you should probably leave all lots open until the trade's conclusion. But if you believe that your system if unlikely to yield many home runs, then you need to have a way to capture the small wins, while still keeping part of the position open as you hope for the occasional runner.
  • #27
  • May 15, 2007 5:08pm May 15, 2007 5:08pm
I didn't post any trades today because last night was absolutely horrible. I went to bed late and before I did, I saw a number of perfect set-ups coming into play. So I had about 8 different pairs running as I fell asleep and I set my alarm to get up and check them in several hours.

Three hours later, all of my positions had been stopped out. Granted, with my rigorous use of SLs, none of the losses were huge, but getting 8 small losses stacked up in a row still ends up being a large portion of your account. In all, I drained about $250 out of the account, so I'm "back to the drawing board".

This is not to insinuate that my previous strategy is defunct, but I need to re-assess some aspects. For one, I think that I need to use some more discretion when employing SARs for SLs. Sometimes the SAR sits at a beautiful point for a SL. However, on many of my failed trades last night, the SAR was very tight when I opened the position and this led to very tight stops. I noticed this as I was opening the positions, but I didn't want to second-guess my process at the last minute, so I went with it and it came back to haunt me.

I also need to figure out what to do when I get many trade signals at once. Part of me says to trade all signals. When I pick-and-choose, inevitably, the ones that I don't trade end up being the most profitable and the experience is very frustrating. I was also trying to trade all signals because on most days, having many different positions open seems to act as a form of diversification. Yes, some trades inevitably tank, but others seem to soar and the in the end, the net result - positive or negative - seems to be rather muted.

But last night the market moved against EVERY ONE of my open positions. Yes, some of my positions were plays against the same currency, but that doesn't totally explain the massacre. I knew before last night that it was always possible to lose any given trade, but when you have a larger number of positions open, it makes you rather incredulous to see them ALL lose.

So again, I have some assessing to do...
  • #28
  • May 15, 2007 7:03pm May 15, 2007 7:03pm
I've been watching this with interest as PSAR is one core element in the way I trade. Since I know this works, if tuned to a trader's style, I didn't want you to ditch it too soon.
My only proviso would be to consider going back to demo (assuming you're live ATM) while you refine this.
First up I would add that PSAR's strength is also its weakness, ie it was designed to always keep you in the market, and act as a stop and reverse method of trading (I expect you know that, but others picking up this thread may not). Wilder designed it, as so many indis we use, for the equity markets, and I'm not sure it copes with the volatility of FX without a re-think.
I'll tell you how I use it and, with some discretion applied now, has not let me down in several months of live, forward testing.

  1. Determine trend from daily chart
  2. Apply your favoured long term MA
  3. Wait for pull backs to the MA
  4. Place limit/stop orders above/below the price using PSAR dots as guides, looking at price action as price approaches the MA
  5. If you set the stop after your trade is actioned, set the intial stop to where the PSAR dot has switched to indicate the trend has been resumed. If the stop setting is too big for you then pick a number.
  6. In the early stages, give price room to breathe, but I don't use PSAR as a stop-loss position until it closes up VERY near to price towards the end of a price run

I take my direction from the daily, and now move down to 4hr/1hr charts to look for tighter entries. Initially, when I first started working on this, I set blind buy/sell orders (with no discretion) simply setting sell orders, and adjusting upwards with the PSAR dots under price bars until the price was hit when price reversed. Same with downtrends, set buy orders above price, again based on PSAR dots, until price reversed and started climbing up. I made positive gains doing this, but now I only trade with the major trend, so all the counter-trend trades that happened previously have been eliminated.
I've attached an image to whet your appetite.
Hope this helps, and if it doesn't, ask a moderator to delete this post.
Good luck in your search, either way, but stick with it.

Attached Image
  • #29
  • May 15, 2007 9:33pm May 15, 2007 9:33pm
Quoting PeterFM
I've been watching this with interest as PSAR is one core element in the way I trade. Since I know this works, if tuned to a trader's style, I didn't want you to ditch it too soon.
Thank you for your response! I'm definitely not ditching this, but as you'll see from my subsequent post, I'm actually working on a few systems simultaneously. Some will probably see this as a sign that I am foolishly chasing systems, but I see it more as a sign of ADHD.

I am fairly certain that this whole PSAR approach is a good approach - so I'm certainly going to continue pursuing it, and your advice is very helpful.

Quoting PeterFM
My only proviso would be to consider going back to demo (assuming you're live ATM) while you refine this.
Funny thing about that. I really have a hard time trading demo accounts because I can't maintain interest/concentration on "play" money. The money tends to focus me, even if it means that I absorb some losses in the process of learning. I've tried trading micro lots as well, but I tend to make decisions that I wouldn't make with "real" money because it feels like I'm playing penny poker.

Quoting PeterFM
I'll tell you how I use it and, with some discretion applied now, has not let me down in several months of live, forward testing.

  1. Determine trend from daily chart
  2. Apply your favoured long term MA
  3. Wait for pull backs to the MA

I was previously using the 4-hour PSAR to indicate the longer term trend - but that may not be long enough. What do you think about using the daily PSAR for this purpose? You are using the 200 MA, but that also has the ability to keep you out of rather extended retracements. I think the daily PSAR might still be more responsive to my trading style.

Quoting PeterFM
Place limit/stop orders above/below the price using PSAR dots as guides, looking at price action as price approaches the MA
This is an excellent point. It has already been mentioned that I might be able to get better entries and avoid whipsaws by using the PSAR values for entry points. I don't think I should ignore this point any longer.

Quoting PeterFM
In the early stages, give price room to breathe, but I don't use PSAR as a stop-loss position until it closes up VERY near to price towards the end of a price run
Agreed. The PSARs should not be used for all SLs. I think that was a key mistake in my previous approach.

Quoting PeterFM
Hope this helps, and if it doesn't, ask a moderator to delete this post.
Good luck in your search, either way, but stick with it.
Your feedback helps immensely. I'm actually working on two processes simultaneously, which you'll see in a subsequent post, but I'm definitely not dropping this approach.

Thanks again.
  • #30
  • May 15, 2007 9:46pm May 15, 2007 9:46pm
Quoting Bytebodger
I also need to figure out what to do when I get many trade signals at once. Part of me says to trade all signals. When I pick-and-choose, inevitably, the ones that I don't trade end up being the most profitable and the experience is very frustrating. I was also trying to trade all signals because on most days, having many different positions open seems to act as a form of diversification. Yes, some trades inevitably tank, but others seem to soar and the in the end, the net result - positive or negative - seems to be rather muted.
OK, I've made a command decision on this one. I have 19 different pairs that I monitor for trades. I don't necessarily want to trade 19 pairs simultaneously, but I prefer to monitor a greater number of pairs because I feel that I have a better chance of catching good trade set-ups. Having said this, as is obvious from my post above, this can also leave me overexposed if I have too many trades at the same time.

So this is what I'm going to do. I will continue to monitor all 19 pairs, but I will not open more than one trade against any given currency. For example, I currently monitor AUDCAD, AUDJPY, AUDNZD, AUDUSD, and EURAUD. However, I will only open live trades against one of these pairs at a time. This is because they all share AUD as a common element. The same goes for AUDUSD, EURUSD, GBPUSD, NZDUSD, USDCAD, USDCHF, and USDJPY.

I think this will keep me from being overly exposed while still allowing me to monitor a large number of pairs for potential trades.
  • #31
  • May 16, 2007 2:40am May 16, 2007 2:40am
Quoting Bytebodger
I was previously using the 4-hour PSAR to indicate the longer term trend - but that may not be long enough. What do you think about using the daily PSAR for this purpose? You are using the 200 MA, but that also has the ability to keep you out of rather extended retracements. I think the daily PSAR might still be more responsive to my trading style.
What I've done is give you the basis for a method, not exactly the full method as I work it. I've evolved mine to suit me, and felt sure you'd prefer to find your own style as well. So, the MA I picked is a common one, try others if you like. But the real bedrock of my method is to watch the dailies, and take my cue from them.

That's my trend guide. Use the lower TFs to refine entries. If there's consolidation, and I feel unsure, I look for other pairs to trade. I haven't tried to turn this into a range trade method yet, but with experience, and commonsense, it could be done, perhaps.
Quote
This is an excellent point. It has already been mentioned that I might be able to get better entries and avoid whipsaws by using the PSAR values for entry points. I don't think I should ignore this point any longer.
Absolutely, I still get the odd failed trade, but by setting orders based on PSAR I keep out of trouble generally.
Quote
Agreed. The PSARs should not be used for all SLs. I think that was a key mistake in my previous approach.
Agreed, but, as I said, can help in later stages of a long run.
Quote
Your feedback helps immensely. I'm actually working on two processes simultaneously, which you'll see in a subsequent post, but I'm definitely not dropping this approach.

Thanks again.
Look forward to it
  • #32
  • May 16, 2007 7:38am May 16, 2007 7:38am
Bb and PeterFM...............I have really enjoyed following your recent dialogue, please continue!
  • #33
  • May 16, 2007 7:51am May 16, 2007 7:51am
Quoting BeachBum
Bb and PeterFM...............I have really enjoyed following your recent dialogue, please continue!
It's been a long time coming, posting anything about my strategy, but feel real confident in it now. Even my wife is close to letting me put some proper funding behind this . I'm not sure she's 100% convinced it's not gambling!!!
I have to feel something for those that struggle to find ways to scrape 10 - 20 pips from each trade, and hunt for them all day long. Those days are long behind me now, and as I said in another post somewhere else ..' I'm bloody bored now'.
  • #34
  • May 16, 2007 8:15am May 16, 2007 8:15am
Hello Bb......

Just an observation on this, nothing more. My 'Fozzy' trading experience has taught me that this approach does not really work all that well. In theory it sounds good, but 'not necessarily' in real trading. I think it depends on which other currency your selected "overly exposed" currency is matched with. For example: if it's the JPY, it will trade differently against the CAD then it will against the USD. Some backtesting might be in order to establish a more defined criteria before summarily applying this rule. I've done that for the Fozzy Daily; and now for the most part just take all trade signals regardless of the 'correlation factor'. I lose some, but win more!

Quoting Bytebodger
OK, I've made a command decision on this one. I have 19 different pairs that I monitor for trades. I don't necessarily want to trade 19 pairs simultaneously, but I prefer to monitor a greater number of pairs because I feel that I have a better chance of catching good trade set-ups. Having said this, as is obvious from my post above, this can also leave me overexposed if I have too many trades at the same time.

So this is what I'm going to do. I will continue to monitor all 19 pairs, but I will not open more than one trade against any given currency. For example, I currently monitor AUDCAD, AUDJPY, AUDNZD, AUDUSD, and EURAUD. However, I will only open live trades against one of these pairs at a time. This is because they all share AUD as a common element. The same goes for AUDUSD, EURUSD, GBPUSD, NZDUSD, USDCAD, USDCHF, and USDJPY.

I think this will keep me from being overly exposed while still allowing me to monitor a large number of pairs for potential trades.
  • #35
  • May 16, 2007 9:20am May 16, 2007 9:20am
Quoting BeachBum
Hello Bb......

Just an observation on this, nothing more. My 'Fozzy' trading experience has taught me that this approach does not really work all that well. In theory it sounds good, but 'not necessarily' in real trading. I think it depends on which other currency your selected "overly exposed" currency is matched with. For example: if it's the JPY, it will trade differently against the CAD then it will against the USD. Some backtesting might be in order to establish a more defined criteria before summarily applying this rule. I've done that for the Fozzy Daily; and now for the most part just take all trade signals regardless of the 'correlation factor'. I lose some, but win more!
This is great feedback. To be honest with you, almost immediately after making my "command decision" last night, I realized a shortcoming of this approach.

Last night I had three trades going - AUDNZD, EURCHF, and USDJPY. Now, according to my new policy, this effectively locked me out of even considering any new trades. This happened because there are none of my 19 monitored-pairs that don't correlate to AUD, EUR, USD, or JPY. Sure, I don't want to be over-exposed, but I don't want to shut down my opportunities either.

I'm still trying to unlock the answer to the exposure issue. I am currently opening 2 lots on each trade and I close 1 lot when the trade goes $20 in my favor. At any point in time, it is not uncommon for me to have 3-6 open positions consisting of 3-10 total lots. That night when everything blew up, I had 4 open positions that had not reached a profit level (8 open lots) and I received trade signals on 4 more pairs (which led to me opening 8 more lots). So I had 16 lots open on my account which, given my account size, is a bit excessive for my tastes and it came back to haunt me.

The knee-jerk answer is to say that I should just lower my lot size. I could open trades with 1.0 lot and then close 0.5 lots when the positions reaches $10 of profit. The problem is that this leaves me underexposed during most trading days. At any given time, I probably have 3 or 4 positions open and I don't really want to have a half lot open on those positions.

Maybe the answer is that I don't throttle myself according to my exposure to any given currency. Instead, maybe I put a hold on any new positions after I reach X number of open lots?

For example, with my current account size, I don't think I should have any more than 10 open lots. Anything more than that starts to make me uncomfortable. So I could just take all trade signals until I reach a total of 10 open lots across all my positions. Once that point is reached, I put a hold on opening any new positions. As soon as I close a lot (or it's stopped out), that would then open the door for me to consider new trades.

This approach would still feel a little artificial to me, but it's not quite so limiting as saying that I will be exposed to no single currency more than once at the same time.
  • #36
  • May 16, 2007 10:32am May 16, 2007 10:32am
Quoting BeachBum
Hello Bb......

Just an observation on this, nothing more. My 'Fozzy' trading experience has taught me that this approach does not really work all that well. In theory it sounds good, but 'not necessarily' in real trading. I think it depends on which other currency your selected "overly exposed" currency is matched with. For example: if it's the JPY, it will trade differently against the CAD then it will against the USD. Some backtesting might be in order to establish a more defined criteria before summarily applying this rule. I've done that for the Fozzy Daily; and now for the most part just take all trade signals regardless of the 'correlation factor'. I lose some, but win more!
Exactly my thoughts. I must admit that there are a few of the biggies I stay clear of atm, but that is historial fear more than any failings in my method. I got burned big time on a couple in the early days and haven't shaken it out of my system yet, but eyeballing them tells me the fear is irrational. The one pair I rarely trade is EURGBP, only 'cos it moves so slow, it means I have capital tied up too long.
But as BB says, a signal is a signal, it's just a case of trading within your lot allowance (if you know what I mean).
As of now I have 17 positions in 9 pairs, 13 with 5 lots, 4 with 2 lots. Up in some, down in others.
  • #37
  • May 16, 2007 11:15am May 16, 2007 11:15am
Quoting PeterFM
But as BB says, a signal is a signal, it's just a case of trading within your lot allowance (if you know what I mean).
Actually, I would appreciate some clarification on "lot allowance". Do you mean that you have a total lot allowance for each position - regardless of how many positions you already have open? Or do you mean that you have a total lot allowance for all your combined positions?

My previous post means that I am currently thinking that I should have a lot allowance for each position - but that I should also have a total lot allowance for all my combined positions.

If you don't have a limit on the total number of lots for all your open positions, then let me ask you this hypothetical question: If you logged in one day and found that you had legitimate trade signals on every pair that you monitor, would you then proceed to open a trade on every single pair? Would the lot size on those trades be the same as if you only had a single trade open?

I know that the "right" answer to this conundrum is different for every trader - the solution must fit your own risk tolerance. But I would find it very helpful to know how you or BeachBum would handle such a situation. I know from reading BB's posts in the Fozzy forum that he also monitors 19 pairs. So it seems as though the three of us are all monitoring a fairly large set of pairs for potential trade set-ups, so you must have run into this scenario before.
  • #38
  • May 16, 2007 11:19am May 16, 2007 11:19am
Several posts ago I alluded to the fact that I'm working on two systems concurrently. I'm not yet ready to post the details of the second system yet, but I wanted to post a few screen shots to show a few of the great trades that I've been in on today. I was thrilled to see the bottom drop out of the EURUSD almost immediately after I shorted it. For the most part, my forex experience has been extremely frustrating. But every once in a while, it's a lot of fun.
Attached Image (click to enlarge)
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  • #39
  • May 16, 2007 11:22am May 16, 2007 11:22am
And here's my USDJPY trade that's still live from last night. In case, you're wondering, these ARE a few cherry-picked examples. I've already had some losing trades with this. But overall, I'm up nicely in the last 24 hours. I'll post more details later.
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  • #40
  • May 16, 2007 11:50am May 16, 2007 11:50am
Quoting Bytebodger
Actually, I would appreciate some clarification on "lot allowance". Do you mean that you have a total lot allowance for each position - regardless of how many positions you already have open? Or do you mean that you have a total lot allowance for all your combined positions?
Well, I have to put my hands in the air and own up to something.....I don't use, or very rarely use, STOPS . What I'm doing at the moment is seeing if I can make money trading blind on every signal, with the minimum of discretion. The long term aim is to refine this down to be able to KNOW when a trade is as near an 'A' trade as possible in this market. So my basic lot size is 0.05, sometimes 0.02 (but then I add lots at PSAR dots to bring me up to 0.05 overall in the trade). Currently I have 0.73 lots at risk.
Quote
My previous post means that I am currently thinking that I should have a lot allowance for each position - but that I should also have a total lot allowance for all my combined positions.

If you don't have a limit on the total number of lots for all your open positions, then let me ask you this hypothetical question: If you logged in one day and found that you had legitimate trade signals on every pair that you monitor, would you then proceed to open a trade on every single pair? Would the lot size on those trades be the same as if you only had a single trade open?
Yes, and I'd probably go straight in with 5 lots (0.05). But bear in mind I never place a market order, I always use limit/stop orders so the market would determine if a trade is on...NOT ME
Quote
I know that the "right" answer to this conundrum is different for every trader - the solution must fit your own risk tolerance. But I would find it very helpful to know how you or BeachBum would handle such a situation. I know from reading BB's posts in the Fozzy forum that he also monitors 19 pairs. So it seems as though the three of us are all monitoring a fairly large set of pairs for potential trade set-ups, so you must have run into this scenario before.
I doubt any serious trader would play the game the way that I am. All I know is it works, and I've not had a losing month since the year started. Could be luck...could be the market favours this method at the moment...could be the Holy Grail ...could be in for a rude awakening...could be in for a comfortable retirement blah, blah, blah
At least one of us will still be trading in a year's time, hopefully it will be all three of us
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