Hello everyone,
Yesterday I read somewhere about a system that apparently has been working nicely for one folk who's reputedly doubled up his account in a year. I thought I could post here a summary of that system because I found it quite interesting but the system itself is not mine.
Alright, it's basically a carry trade system working around two currency pairs: NZDCHF and AUDJPY. The system pays no attention to Technical Analysis stuff. In fact, apparently the guy traded it without charts. The entry is meaningless, it's all about money management and collecting the end-of-the-day swap interest. I know NZDJPY and AUDJPY would harvest a better yield, but the choice of choosing NZDCHF instead of NZDJPY is to not become too JPY-dependent and therefore spreading risk a little bit.
Ok, the parameters are as follow:
1) take two entries, one long on NZDCHF and the other also one long on AUDJPY. Entries can be taken at any time. Like I said, the system does not pay attention to trends, support/resistance or any other T.A. element. So close your charting platform to avoid temptations.
2) Money Management is the key of this system: each entry should not be more than 1% of your account. Perhaps 1 standard lot in each pair per 100,000 dollars on the account? This is were the whole system is based on and where the tweaking and optimization process should focus upon.
3) There is no stop loss to be punched in.
4) At this point, there are two possibilities: price either goes up or down from entry.
5) If it goes up for 100 pips close the position, bank the pips, and re-enter the trade with 1 lot.
6) If it goes down, re-enter with another lot when price goes to -100 pips in order to bring the average entry level down. Only one entry on each pair may be taken per day, preferably before midnight to collect further swap interest. But at any rate, only one entry per day per currency pair.
7) If at the end of the day the result is less than -100 pips, do nothing. Sit tight and keep collecting the swap interest. The ideal scenario would be price to remain flat-lined for eternity to keep cashing in the interests every day and never threatening you with a margin call.
8) From now on, it's all about the average position in each currency pair. Let's assume price has gone down to -100 pips on AUDJPY and another lot is entered, bringing the average position on that pair to -50 pips. There are two lots opened, one at +0 and the other one at -100, thus average is -50 (let's discard spread cost for the time being for the sake of simplicity).
9) The next day if price keeps plummeting down and the average gets to -100, then add a third lot bringing the average further down once again. If the average remains below the -100 pip mark, do nothing and collect swap interest x 2 (since we have two lots open).
10) The point of this system is to keep adding up one lot (maximum 1 lot per day per currency pair) as long as the average remains above -100 pip loss in order to keep bringing that average down until it catches up with price, while in the other hand we keep multiplying the lots in order to generate more and more swap interests at the end of the day.
11) If upon having added an extra lot the average is still above the -100 pip mark, add another lot the next day. Remember, just one position per day.
12) Eventually, when the downtrend is finished or retraces enough so your average position catches up and thus your average is at +0 pips, exit out all positions on that currency pair. The two currency pairs are to be traded independently from each other, like if they were two different trading accounts.
13) By exiting when average = +0, we have lost no money from the trades themselves but we have earned shitloads on the interest rates via compounding lot after lot.
14) Once all positions are closed, start from the beginning buying one single lot on that currency pair.
15) The key concept of this system is to trade small enough to be able to withstand an enormous drawdown so your average can finally catch up with price without hitting your margin call. Lot-size must be finely tuned so we can take a -2000 pips (or larger!) drawdown and still the margin call would not be flagged. You never know how long a possible downtrend might last, so it's crucial to be able to survive a potentially long-ass downtrend while grinding up the swap interest (and thus increasing the account margin).
Alright guys, that's the system. The creator claimed to have doubled up the account within one year by scrupulous money management rules and tons of patience. AUDJPY gives out 8.4 dollars per lot off the swap interest, and NZDCHF about 5.5 dollars per lot. Those few dollars compounded lot after lot after lot, added to an occasional +100 pip win (read point #5 above) here and there could indeed make the system work out in the long term as long as a sensible money management equilibrium is found so we can even survive the mother of all downtrends.
I am testing this system on demo, but it's a long term strategy that will require many months of live testing before being able to draw a conclusion.
I leave this thread open for discussion.
Cheers and safe trading to all.
Yesterday I read somewhere about a system that apparently has been working nicely for one folk who's reputedly doubled up his account in a year. I thought I could post here a summary of that system because I found it quite interesting but the system itself is not mine.
Alright, it's basically a carry trade system working around two currency pairs: NZDCHF and AUDJPY. The system pays no attention to Technical Analysis stuff. In fact, apparently the guy traded it without charts. The entry is meaningless, it's all about money management and collecting the end-of-the-day swap interest. I know NZDJPY and AUDJPY would harvest a better yield, but the choice of choosing NZDCHF instead of NZDJPY is to not become too JPY-dependent and therefore spreading risk a little bit.
Ok, the parameters are as follow:
1) take two entries, one long on NZDCHF and the other also one long on AUDJPY. Entries can be taken at any time. Like I said, the system does not pay attention to trends, support/resistance or any other T.A. element. So close your charting platform to avoid temptations.
2) Money Management is the key of this system: each entry should not be more than 1% of your account. Perhaps 1 standard lot in each pair per 100,000 dollars on the account? This is were the whole system is based on and where the tweaking and optimization process should focus upon.
3) There is no stop loss to be punched in.
4) At this point, there are two possibilities: price either goes up or down from entry.
5) If it goes up for 100 pips close the position, bank the pips, and re-enter the trade with 1 lot.
6) If it goes down, re-enter with another lot when price goes to -100 pips in order to bring the average entry level down. Only one entry on each pair may be taken per day, preferably before midnight to collect further swap interest. But at any rate, only one entry per day per currency pair.
7) If at the end of the day the result is less than -100 pips, do nothing. Sit tight and keep collecting the swap interest. The ideal scenario would be price to remain flat-lined for eternity to keep cashing in the interests every day and never threatening you with a margin call.
8) From now on, it's all about the average position in each currency pair. Let's assume price has gone down to -100 pips on AUDJPY and another lot is entered, bringing the average position on that pair to -50 pips. There are two lots opened, one at +0 and the other one at -100, thus average is -50 (let's discard spread cost for the time being for the sake of simplicity).
9) The next day if price keeps plummeting down and the average gets to -100, then add a third lot bringing the average further down once again. If the average remains below the -100 pip mark, do nothing and collect swap interest x 2 (since we have two lots open).
10) The point of this system is to keep adding up one lot (maximum 1 lot per day per currency pair) as long as the average remains above -100 pip loss in order to keep bringing that average down until it catches up with price, while in the other hand we keep multiplying the lots in order to generate more and more swap interests at the end of the day.
11) If upon having added an extra lot the average is still above the -100 pip mark, add another lot the next day. Remember, just one position per day.
12) Eventually, when the downtrend is finished or retraces enough so your average position catches up and thus your average is at +0 pips, exit out all positions on that currency pair. The two currency pairs are to be traded independently from each other, like if they were two different trading accounts.
13) By exiting when average = +0, we have lost no money from the trades themselves but we have earned shitloads on the interest rates via compounding lot after lot.
14) Once all positions are closed, start from the beginning buying one single lot on that currency pair.
15) The key concept of this system is to trade small enough to be able to withstand an enormous drawdown so your average can finally catch up with price without hitting your margin call. Lot-size must be finely tuned so we can take a -2000 pips (or larger!) drawdown and still the margin call would not be flagged. You never know how long a possible downtrend might last, so it's crucial to be able to survive a potentially long-ass downtrend while grinding up the swap interest (and thus increasing the account margin).
Alright guys, that's the system. The creator claimed to have doubled up the account within one year by scrupulous money management rules and tons of patience. AUDJPY gives out 8.4 dollars per lot off the swap interest, and NZDCHF about 5.5 dollars per lot. Those few dollars compounded lot after lot after lot, added to an occasional +100 pip win (read point #5 above) here and there could indeed make the system work out in the long term as long as a sensible money management equilibrium is found so we can even survive the mother of all downtrends.
I am testing this system on demo, but it's a long term strategy that will require many months of live testing before being able to draw a conclusion.
I leave this thread open for discussion.
Cheers and safe trading to all.
