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  • #41
  • May 16, 2007 1:24pm May 16, 2007 1:24pm
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? Yes...Or do you mean that you have a total lot allowance for all your combined positions? No...but I do limit my TOTAL exposure using a percentage of my account at risk based on my own personal "level of comfort".

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. Could be lot allowance..OR..percentage of account at risk.

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? This would 'never' happen, but there have been occasions when I felt the need to limit my number of open trades because I did not want to put too much of my account at risk. "Comfort level" again. So I pick the very best trades and pass on the others. But it's not unusual for me to have 7 or 8 trades open at the same time. However, when a trade moves far enough into profit for me to move my S/L to B/E, I will do so because from that point onward my account is no longer at risk and I can comfortably open additional trades.

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.
..

Unlike Peter, I don't have the 'cahones' to trade without stops...............
But I do like to use multiple lots; at least three, sometimes more, scaling out as the trade progressively moves into profit. Sometimes only one or two lots hit profit; sometimes the last one will run a very, very long time in my favor. HTH!
  • #42
  • May 16, 2007 1:44pm May 16, 2007 1:44pm
I am VERY glad that I started this journal. Feedback like this is really helping me to sort through these issues.

Quote
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? Yes...Or do you mean that you have a total lot allowance for all your combined positions? No...but I do limit my TOTAL exposure using a percentage of my account at risk based on my own personal "level of comfort".

OK, so we're sort of talking about the same thing. I am designating a given number as my maximum exposure in terms of lots. But when (not "IF"!) my account increases, I will also increase my maximum lot exposure. So those lots really represent a percentage of my total account.

Quote
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? This would 'never' happen, but there have been occasions when I felt the need to limit my number of open trades because I did not want to put too much of my account at risk. "Comfort level" again. So I pick the very best trades and pass on the others. But it's not unusual for me to have 7 or 8 trades open at the same time. However, when a trade moves far enough into profit for me to move my S/L to B/E, I will do so because from that point onward my account is no longer at risk and I can comfortably open additional trades.

That's very helpful to know. So, in general, trade all signals - up to a point. On most days, you probably never even come close to that point - but it's nice to know that I'm not crazy in thinking that at some point it's reasonable to put a governor on the open positions - even if my signals tell me to keep opening more trades.

However, you just opened my eyes to an excellent point. In setting a lot-limit on my open positions, I was counting ALL open lots. But some of those open lots really represent no risk at all and shouldn't be counted in the equation.

Consider my current EURUSD trade. I sold 2 lots at 1.3572. When the position moved strongly in my favor, I closed the first lot at a profit and I moved the SL on the remaining open lot to 1.3572. Even though this is, technically speaking, an open lot in my account, it really represents no risk to me. I plan to close it (probably some time this afternoon) for profit but, in the worst case scenario, the price reverses very hard against me and I end up with no gain/loss on the lot.

So when I count all the open lots in my account in an attempt to determine how many more I can safely open, I really shouldn't count those lots that are already locked up with a SL at BE.

Going back to my earlier example, I had 8 lots open - all of them slightly in losing territory - when I chose to open another 4 trades (therefore opening 8 more lots). This means that all 16 lots were truly in danger of going against me and, alas, they did. But it may have been feasible to open up some of those trades if my existing lots were already locked into BE.

Good, good stuff
  • #43
  • May 16, 2007 1:53pm May 16, 2007 1:53pm
Quoting BeachBum
..

Unlike Peter, I don't have the 'cahones' to trade without stops...............
But I do like to use multiple lots; at least three, sometimes more, scaling out as the trade progressively moves into profit. Sometimes only one or two lots hit profit; sometimes the last one will run a very, very long time in my favor. HTH!
This gives me an idea...

I'm currently trading, for the most part, in whole lots. (A "whole" lot with MB Trading is not the same as a "standard" lot with most brokers. I've heard people refer to a standard lot as $100k worth of currency. But with MB Trading, a whole lot is $10k worth of currency.) If the trade moves into profitable territory, I close the first lot with a small profit and move the SL on the second lot to BE. Then I wait to receive a sell signal before closing the second lot.

I'm wondering if I shouldn't modify that strategy slightly. I don't really want to open a third lot on new trades. So maybe I close the first lot when I can lock in a small profit, then, when I see a sell signal, I close only half of the remaining lot and place a trailing stop on the open half lot.

In the best case scenario, I lock in a small profit on the first lot. I lock in a larger profit on a half lot. Then, on the chance that my sell signal is inaccurate, I could even realize an extended profit on the final half lot.

I'll have to think about this one a little bit...
  • #44
  • May 16, 2007 2:45pm May 16, 2007 2:45pm
Quoting Bytebodger
So when I count all the open lots in my account in an attempt to determine how many more I can safely open, I really shouldn't count those lots that are already locked up with a SL at BE.

Good, good stuff
There's a man whose judgement on this I respect beyond all measure and, if I understand it correctly, he says your position size should be based on available margin at any given time.
So, depending on where you're stop-losses are set that determines how many lots to play on any new trade.
I know in theory that 'free trades' are, in our minds, money in the bank, or at worst, money not lost, but I'm sure, in the long-term, control of overall exposure is the answer.
I'll know when I'm trading $100k lots, won't I
  • #45
  • May 17, 2007 8:30pm May 17, 2007 8:30pm
Well, I've made another command decision. I am dropping the hourly charts. They're killing me. I got waxed again last night and it happened, not because my "system" or my "process" was flawed, but because I can't check the market every single hour. I'm only human. I have to sleep some time. So before I went to bed, I traded the signals I saw. While I slept, new signals arose and since I was asleep, I didn't trade those signals. Do you want to take a wild guess as to which signals turned out to be profitable and which ones turned out to be a total waste of money??? In the end, I think this just confirms my previous advice from BB and PeterFM indicating that, whenever possible, it's better to trade ALL signals in your system.

The problem is that while I'm trading hourly charts, it's just physically impossible to monitor/trade all signals, so I inevitably end up missing some signals and Murphy dictates that those will be the most profitable signals. Therefore, I'm dropping back to daily charts.

Stepping back to daily charts should repair my circadian rhythms and allow me to look at the market in a slower, and more rational, light. I had previously resisted trading daily charts because part of me believes that there is more money to be made with a disciplined, active, intraday approach. But I need to wake up and realize that I'm not a full-time professional trader and daily charts are more conducive to my current resources.
  • #46
  • Edited May 18, 2007 8:23am May 17, 2007 8:37pm | Edited May 18, 2007 8:23am
With my new daily approach, I am combining two strategies. My first trade with these strategies is as follows:

Sell 1 EURCAD @ 1.4836, SL @ 1.4913

From the attached chart, many of you will recognize this as a "Fozzy trade" - with a twist. I spent a great deal of time reading the entire Fozzy trade and I believe it is a profitable system, but I have trouble deploying it personally because many of the traders in the Fozzy thread talk constantly about exactly which Fozzy crosses to take and which ones to avoid. There are multiple variations of the Fozzy and they all revolve around further filtering the Fozzy crosses.

Well, my own variant is to add a parabolic SAR to the daily chart (with a Step value of "0.04"). I will then trade all RSI crosses that are confirmed by the SAR. In my attached image, you can see that the RSI is crossing below it's moving average AND the SAR is showing a bearish signal - so I took a short position. I am using 70% ATR as the stop loss value. If you further analyze this chart, you will also see that there are several losing RSI crosses in the past few weeks that I would have avoided because they were not confirmed by the SAR. Of course, the SAR filter does not avoid all whipsaws - no system does - but I think it does a pretty decent job of making the RSI crosses more like "no-brainers".
Attached Image (click to enlarge)
Click to Enlarge Name: 20070517 eurcad1.gif Size: 18 KB
  • #47
  • May 17, 2007 8:52pm May 17, 2007 8:52pm
Trade update (new trades in bold):

Sell 1 EURCAD @ 1.4836, SL @ 1.4913
Sell 1 AUDUSD @ 0.8235, SL @ 0.8289
Buy 1 GBPCHF @ 2.4235, SL @ 2.4125
Buy 1 USDCHF @ 1.2274, SL @ 1.2186

I am attaching the chart for AUDUSD. This is a very simple system. I'm sure that someone else has worked on this already, but I've never heard it described elsewhere. I only use the ADX indicator. I don't trade crosses of the +DI and the -DI and I don't trade crosses of the main indicator (the thick blue line) over any particular level. Instead, I look for times when the main indicator dips down but starts to move back upward and either the +DI or the -DI rise above it. If the +DI climbs above the rising ADX, I go long. If the -DI climbs above the rising ADX, I go short.
Attached Image (click to enlarge)
Click to Enlarge Name: 20070517 audusd1.gif Size: 19 KB
  • #48
  • May 17, 2007 10:38pm May 17, 2007 10:38pm
Hi Bb..............welcome back to the Dailies (and a modified Fozzy)........
  • #49
  • May 18, 2007 3:31am May 18, 2007 3:31am
Quoting BeachBum
Hi Bb..............welcome back to the Dailies (and a modified Fozzy)........
I'll second that, never tried the fozzy, but welcome to some spare time and sleep
  • #50
  • May 18, 2007 12:12pm May 18, 2007 12:12pm
Quoting BeachBum
Hi Bb..............welcome back to the Dailies (and a modified Fozzy)........
Hahaha - well, it's FAR too early to draw any conclusions, but my first Fozzy trade is looking beautiful. It's currently up 115 pips and I've moved the SL to BE. My three ADX trades have been up-and-down and are currently a combined -16 pips. Of course, this neither confirms the Fozzy nor invalidates the ADX. However, I do think I'll start compiling my results separately, so I can benchmark the relative success of each method.
  • #51
  • May 18, 2007 3:59pm May 18, 2007 3:59pm
I started this journal, in part, because I wanted to have a place to account for my successes - and my failures. If I am going to improve my trading performance I must first be able to own up to my past performance and make adjustments accordingly.

I have not maintained my overall pip tally in this journal because I'm still hopping between methods - something that I realize needs to stop. My current process is to trade the daily bars and I have 4 open trades in this process which are accounted for in previous posts. I will "reset" my pip tally and post progress on it throughout coming weeks. But in the interest of proper accounting, I will share that my MTM account value is, at this exact moment, $2,392.58. If you look back at the first post in this journal, you will see that this is a rather precipitous fall.

If this were the result of simply having a down week in an otherwise consistent market approach, I wouldn't mind so much. But this obviously is not the case. I can look back at the week's trades and draw many small lessons, but one overriding message screams out at me: Once you have a system, trade ALL signals in that system. Picking and choosing will kill you.

When I started the week, I had one nasty night where all of my SLs were taken out. This led me to question my exposure and over the next 24 hours I filtered through trading signals based on which trades I already had open. In perfect accordance with Murphy's Law, I missed a number of big winners the very next day. So I absorbed the big losses without reaping the benefits of the big wins.

I was also trading hourly charts. I know that some people trade hourly charts profitably, but this process came back to bite me again this week. On Wednesday night I stayed up just long enough to open some more losing trades, but the winning trades were signaled (and past) as I slept. Once again, Murphy proved his place as the god of the markets.

So I have stepped back to the daily charts. By making trading decisions once per day, this will allow me to see ALL trading signals in my system. This should get me on board for all of the losses AND all of the winners. Once I am hitting losers AND winners, I will then be able to more accurately assess the merits (or lack thereof) of my methods.

As the week closes, I have 4 open trades and I'm sitting on about 115 pips of open profit - but those profits are illusory because I haven't yet closed the trades. We will find out next week just how profitable these new trades are.
  • #52
  • May 20, 2007 5:52pm May 20, 2007 5:52pm
Trade update (new trades in bold):

(F) Sell 1 EURCAD @ 1.4836, SL @ 1.4798
(A) Sell 1 AUDUSD @ 0.8235, SL @ 0.8289
(A) Buy 1 GBPCHF @ 2.4235, SL @ 2.4125
(A) Buy 1 USDCHF @ 1.2274, SL @ 1.2186
(F) Sell 1 USDCAD @ 1.0895, SL @ 1.0944

* The (F) and (A) values indicate whether this is a Fozzy trade or an ADX trade. You will also see from my new attached image, that I am trying to indicate Fozzy-or-ADX status on the chart itself. If the trade arrow indicator is shown in the RSI window, it's a Fozzy trade. If the trade arrow indicator is shown in the ADX window, it's an ADX trade. I will also compile results separately and in aggregate for comparison purposes.
Attached Image (click to enlarge)
Click to Enlarge Name: 20070520 usdcad.gif Size: 18 KB
  • #53
  • May 20, 2007 6:02pm May 20, 2007 6:02pm
Bb.............it's nice to see that you have finally decided to "come out of the closet" as a Fozzy trader..............

Quoting Bytebodger
Trade update (new trades in bold):

(F) Sell 1 EURCAD @ 1.4836, SL @ 1.4798
(A) Sell 1 AUDUSD @ 0.8235, SL @ 0.8289
(A) Buy 1 GBPCHF @ 2.4235, SL @ 2.4125
(A) Buy 1 USDCHF @ 1.2274, SL @ 1.2186
(F) Sell 1 USDCAD @ 1.0895, SL @ 1.0944

* The (F) and (A) values indicate whether this is a Fozzy trade or an ADX trade. You will also see from my new attached image, that I am trying to indicate Fozzy-or-ADX status on the chart itself. If the trade arrow indicator is shown in the RSI window, it's a Fozzy trade. If the trade arrow indicator is shown in the ADX window, it's an ADX trade. I will also compile results separately and in aggregate for comparison purposes.
  • #54
  • May 20, 2007 7:32pm May 20, 2007 7:32pm
Quoting BeachBum
Bb.............it's nice to see that you have finally decided to "come out of the closet" as a Fozzy trader..............
Yes, I'm outed! To be honest, it took me a while to reach this point for a couple of reasons:

  1. It was hard to figure out which version of the Fozzy to trade. The Fozzy is a great method, but it's not the Grail - you probably need to apply a filtering technique (as I am doing with SARs) and you need to work out your own processes for SL and TP levels. It took me a while to work this out for myself.
  2. I had to come up with a secondary method to compliment the Fozzy. I can understand discretion in the trading process, but there are some days/weeks/months when the Fozzy can go very quiet. I know that you don't want to overtrade, but I have yet to see a day/week go by without good opportunities to trade, so I wanted to make sure that I had another solid method to compliment the Fozzy.

  • #55
  • May 20, 2007 8:36pm May 20, 2007 8:36pm
I've been thinking a lot about the trading debacle that has been my last several weeks and I've come to a significant conclusion: I've been trying too hard to be successful at forex trading. That may initially sound ridiculous, but think about this in a larger context.

I like to play chess and I've been studying it on-and-off now for several years. While it does take tremendous effort to improve your chess game, I can tell you that at some point you just need to put down your book on chess theory and actually play some games. Studying is good, but too much studying can actually lead you to start running in mental circles. You start throwing out good ideas before you've even had a chance to discredit them over a real chess board.

Athletes often review film of their previous performances. There is a lot to be learned from looking at your previous games. But once you've reviewed the film and learned all there is to learn, you need to turn off the TV and actually go back out to the playing field. Reviewing film is helpful - but only to a point.

Consider what I've been doing doggedly since February. I have put in hundreds of hours of backtesting going through every possible strategy I could envision. In that process, I have eliminated many useless strategies - but I have also talked myself out of many solid strategies as well.

Now I'm not saying that you shouldn't backtest. I'm a huge fan of backtesting and forward testing. But you have to understand exactly what CAN be achieved by backtesting and what can NOT. You also have to understand how real-time results play into the backtesting equation.

When you're backtesting, you can eliminate a bad strategy in hours, or even minutes, depending upon your methodology. But once you have settled on a strategy and you begin to trade it live, you cannot disqualify a strategy nearly as fast. I actually think that backtesting has taught me to hone in on extremely minor imperfections that would only present themselves over months or years of data. So it's very difficult to then switch gears back to live trading, where minor imperfections cannot reasonably be identified until dozens, hundreds, or even thousands of trades have occured.

If you're an analytical individual like myself, it's extremely difficult to sit on your hands and avoid disecting every single trading result. This is why I say that I've just been trying too hard. I need to sit on my hands for a while and just monitor the results of my current approach, as difficult as that might be...
  • #56
  • May 21, 2007 4:32pm May 21, 2007 4:32pm
Trade update (new trades in bold):

(F) Sell 1 EURCAD @ 1.4836, SL @ 1.4682
(A) Sell 1 AUDUSD @ 0.8235, SL @ 0.8262
(A) Buy 1 GBPCHF @ 2.4235, SL @ 2.4171
(A) Buy 1 USDCHF @ 1.2274, SL @ 1.2253
(F) Sell 1 USDCAD @ 1.0895, SL @ 1.0897
(F) Sell 1 AUDNZD @ 1.1252, SL @ 1.1305
(F) Buy 1 EURJPY @ 163.64, SL @ 162.91
(F) Buy 1 GBPJPY @ 239.50, SL @ 238.33

As you can see, I received 3 new Fozzy signals today. I originally thought that I would be doing more ADX trading, but early signals have swung in favor of the Fozzy. I'm currently sitting on +$300 worth of open positions, but that is all just funny money for the time being because I have yet to close a single trade since I moved to the dailies. I have 1 position - EURCAD - which has been my home run and on this trade I have locked in at least minimal profit. In theory, all of my other remaining 7 positions could all end in the negative, although I am currently in the green in aggregate.
  • #57
  • May 21, 2007 4:39pm May 21, 2007 4:39pm
I wanted to post the chart that I used today to make my EURJPY trade. (It is almost identical to the chart that I used to make my GBPJPY trade.) This chart illustrates, for better or for worse, one side effect of using a SAR filter on Fozzy trades. Fozzy signals can, at times, be prone to reversals on consecutive days when the RSI dances around the MA. By using the SAR filter, I only take half of these signals.

Of course, whether or not this trade is profitable remains to be seen (in the last 20 minutes, both EURJPY and GBPJPY have immediately turned against my trade, but we're a long way from any conclusion on these). If nothing else, the SAR filter allows me to jump confidently on the RSI crosses without worrying so much about next-day reversals.
Attached Image (click to enlarge)
Click to Enlarge Name: 20070521 eurjpy.gif Size: 19 KB
  • #58
  • May 21, 2007 4:51pm May 21, 2007 4:51pm
If you've read my previous posts, you know that I have paid the price for picking-and-choosing signals. Now that I've switched to trading the daily bars, I have vowed to trade ALL signals. Today was the first day that I felt the need to take a deep breath and remind myself to stick to my guns.

You see, today I had the most wonderful experience of having 5 open positions and staring at a "wall of green" all day long in my trading station. When I went to bed last night, I was up ~$110. When I logged in this morning, I was up ~$325. That value fluctuated somewhat throughout the day, but never strayed too far from +$300. So tonight I go in to evaluate my open trades and I have "hold" signals on all of them. I adjusted my SLs, but my "system" says to keep all of these trades open. Then I looked for new trades, and I found 3 new Fozzy signals. So I have dutifully opened those positions as well.

But here is one of the (many) psychological pitfalls of trading. I KNOW that a profit is not truly a profit until you CLOSE the trade. But I'm human and, like almost every other human I know, when I look at my open trades and see that I'm up $$$, I start to already think of that money as being "in the bank". Now I have new trade signals, and every new signal to trade makes me feel like I'm that guy at the blackjack table who's having a wonderful, lucky night but he's just too stupid to get up and cash out and you KNOW that he will eventually walk out a loser.

Yes, I understand that this is not identical to gambling (although it shares significant characteristics) and if I am applying a consistent method, then I should stick to that method and trust in its ability to provide long-term gains. But part of me wants to just close all the positions and start fresh so I can sit back and gloat about my +$300 win. Of course, I could have done that on Friday when I was up +$100 and closing at that time would have shut me out of today's gains.

Logic assures me that I am doing the right thing. Hopefully, the markets will reward my newfound consistency.
  • #59
  • May 21, 2007 5:18pm May 21, 2007 5:18pm
Hi Bytebodger,

I like your style! This is turning into a great journal

I'm currently sitting on a few hundred pips profit too with only one position having a few locked in. It's so tempting to cash them in isn't it lol - however, we both know that you don't grab the real biggies unless you stay patient and let those profits run until your system tells you to take them.

Best of luck and stick to it - you're doing great

Kind Regards
Steve
  • #60
  • May 21, 2007 5:25pm May 21, 2007 5:25pm
Quoting Bytebodger
Logic assures me that I am doing the right thing.The markets will reward my newfound consistency.
I've made a small edit to your last sentence
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