Trading Equity Millipede Concept by Concept

After looking ar the Monthly chart, I saw two charts that have a decent looking monthly trend.

EurJpy and GbpJpy.

As I said in previous post, will be adding into EurUsd as long as I have open positions, and it keeps making higher swing highs, and lows.

If my positions get stopped, EurJpy will probably be my most likely pair for the week. That is the game plan for the moment.

Just wanted to mention, I have little to no confidence in this entry strategy. I believe 30 pip stop loss on daily, and moving stops to BE so soon is a big mistake. I am trading it the way Graeme stated, just to see the results. I am pretty sure I know what they will be.

Even reading his description gives some major hints at this not being a good entry.

He said you trade until you have 5 positions. Wait 6 months, each position will be around 1200 pips.

You will have losses around 1500 pips.

Let's think about that a minute....

You are taking, at most, 1 trade a day. 5 trades a week. Now it will actually be less, there will be days where you cannot get to BE, but lets assume everyday.

When I first started this thread, I took 19 trades. Had around 50% breakeven, 50% loss.

I know it is only 19 trades, not near enough to be accurate data, but let's just go with that. I had zero open positions left.

Ok, 1500 pips loss at 30 pips per trade. 50 losing trades, 50 BE trades. 100 trades give or take. That is 4 to 5 months of trading, everyday.

He keeps mentioning 50:1 RR, like it means something. RR is a useless number by itself.

I could have 150:1 RR and still lose money. What really matters is how much loss you have for each surviving position. In his example, it is 300 pips.

That is the cost of each surviving leg.

Now, I have to ask myself, if I entered the daily, in a monthly trend, and in line with the daily trend, with a 300 pip stop loss, how many positions would survive before my 300 pip stop got hit.

I would bet the results would be better with the larger stop. Not only that, but, I doubt it would take near as long to establish long term positions.

And I know for a fact, it would be far less frustrating than watching 90%+ of your positions lose or BE for 5 months.

Smaller stops do not neccesarily mean less loss. Higher RR does not necessarily mean more profit.

I love the idea of the method, but, I believe it will work far better with less trades and more reasonable stops.

Btw, I am not advocating 300 pip stop losses by any means.

I will continue this way for a while, just to get a baseline of expectations.

Gap down over weekend took out EurUsd. Long on EurJpy, since it is a Yen cross, have a 70 pip stop loss per Graeme's rules.

Feel better about this pair, clear undeniable trend on Monthly

Results last week
2 Trades on EurUsd
1 BE
1 Loss
-30 pips

Trade 3 on EurJpy is currently - 5 pips.

EurJpy Monthly chart. Obvious uptrend. That is why I chose it for this week.

EurUsd not near as pretty, was a small upward move. Dropped into a range, and is still ranging. I bought it because of how it looked on the daily, should have checked the monthly before and I probably would have moved on. Still signs on the daily that it may go up, not enough room before the top of the Monthly range to try at the moment, IMO.


Above is why I decided to buy. Break of resistance at dashed line, failure to make a new swing low or higher swing low at BOLD line.

Daily on EurJpy looks pretty good as well. If you look at the high to the left, you can see a long wick. That resistance area could give us a little trouble, but otherwise decent looking uptrend. BOLD line higher swing low, dashed line break of resistance area.

The only thing I am really looking for on the Monthly is a trend. If I have a trend on Monthly, I should be looking to buy or sell into that trend. If weekly is not trending, that is ok. I need to see signs on Daily that it is starting to go with trend, if Monthly is trending up, and daily is trending down. I will wait until I see the daily fail to make a lower low, then I will attempt an entry. If it starts making higher highs and higher lows, I will keep buying until it fails to make a higher high. As Graeme said, Buy when it is going up, Sell when it is going down.

Now, I would prefer if Mothly, Weekly, and Daily trends are all in line. Monthly is the most important though.

EurJpy looking good at the moment, of course the day is not over and things can change fast.

Its up over 100 pips, the plan is get to BE and buy again at close of Daily.

So far have had 4 trades.
One loss of 30 pips.
One BE.
2 active one is +120, stop loss on that one is at BE.
The second was just opened, is at -3 currently, stop loss is 70 pips on that one.

Both open positions are on EurJpy

Is nice that we have a position with price over 100 pips from stop loss. Does not mean anything, have had groups of positions much larger disappear before.

Lets see what happens.

I open my position shortly before the close of the candle. The reason for this is, the spread rises a lot at the close of daily on Oanda for some reason. I do not remember it being this way in the past, but it is rather annoying.

Timeframes

These are very important. I only trade the daily, atm. Their are many reasons for this. Limited time is a big one, I can spend a minute or two a day.

Even if I had the time, I would likely still be trading the Daily. I used to trade the 5 minute chart, a lot. I became fairly decent at it. I have also traded the 5 minute, and left positions open to run for extended periods of time. It takes a lot of positions when trading with stops appropriate for the 5 minute, before getting one that runs for a week or more.

About halfway through the equity millipede, everyone was trading off the 5 minute charts.

I am not against the 5 minute charts, but, at least in the beginning, I do not believe it is a very reliable way to build long term positions.

5 minute charts are useful for stacking a position or two onto an existing position. When price is moving well, it is easy to get a position in and get to BE with little risk.

After everyone started trading the 5 minute charts, there was little to no mention of Daily, Weekly or Monthly.

Not even sure if the people were even aware of the long term trend.

We are trying to build positions on the Monthly trend. How likely is that to happen, if you do not even know what that is?

Starting out with the leverage Graeme recommends, you have limited positions. I have 50:1 margin on most majors, 20:1 on Jpy. I can only hold 5-6 positions on Jpy comfortably.

Later on, when I need to take a lot more shots, lower timeframes may be used to stack a few on good price movement.

It most definitely will not be my main position building strategy though.

My first trades on EurUsd probably should not have been taken at this stage. No real trend on Monthly, etc. I had just started, opened my charts, saw reason to buy, and pulled the trigger. That will happen, I hope it does not happen much.

Graeme took a lot of trades in a day. If you pay attention though, you will realize each position is very tiny percent of his capital.

He started with 6 figure account. I am assuming 100k, could have been more.

At one point he mentioned his account balance was 7x. He also had 170 positions open at $20 per pip.

We can assume his account BALANCE was at minimum 700k. His net asset value would have been much, much larger than that.

7k would be 1 percent. At $20 per pip, 350 pips would be 1 %. The punts he was taking on the 5 minute charts would not be much risk.

Losing 20 pips would be $400. .05% risk. Not 1%, 1/20th of a percent. Will be a long time before my account is anywhere near that point.

Several pairs trending at the moment.

AudUsd
AudJpy
GbpJpy
EurJpy

Several pairs are also approaching monthly resistance lines.

EurUsd
UsdJpy
GbpUsd

Keeping an eye on them for a break or bounce.

Sticking with EurJpy until it turns on me.

Still a bit before the close, likely will not be adding today. Yesterday's position is negative still. Will not have more than one position at risk at one time, until account grows a bit.

2 still open on EurJpy
Position 1 +106
Position 2 -18.7

Way too early yet to give them cutesy pet names.

Not that I would anyway, not really my style.

Not sure if I will be entering today either, candle has barely moved my direction at the moment after a 40ish pip retrace.

1st position +135
2nd position +11

We have about 5 hours, price could move a lot in that time. Not sure how much it would have to be up before moving to BE, definitely quite a bit more than it is up currently.

Below 30 pips, will definitely not move stop loss.

Would prefer to see 60+. I would most definitely like to get a third position in. But, it will not do any good if I lose the second one in the process.

Will be checking back around the close, and making the decision then.

Price has not moved much, nothing to do today but wait and try again tomorrow.

Both positions still in, market still has not moved much.. May not get another trade this week.

Have funded a second account, will look to start trading Joe's method next week.

If you are not familiar with Joe's method, I will post the information on it over the weekend.

Not sure how welll Joes method works, have never traded it. Have seen several people on the forum trade it.

One in particular traded it very profitably for a month or so, then stopped.

He had made several thousand pips, and caught the very beginning of the UsdJpy trend change from bear to bull.

If he had held, the positions could still be running today up around 8-9k pips each. He had quite a few stacks on as well.

of course, that was years ago, I think.like 7 years ago, could have been more.

Joes method is in Building an Equity Millipede thread.

I will be trading as it is described in the thread except. Instead of using 4 hour for my timeframe, I will be using daily.

And Joe only sold the signals, I will be taking both signals, buy and sell.

I am going to continue with Daily Open method as well until I have a full group of positions.

Have also attached a pdf about Joe's method, is called the flying buddha trading method.

When I first read about Joe's method I kind of glossed over it. Later on I realized, Joe's method describes equity millipede only on a smaller scale.

The only thing I can think of it does not give examples of is the way he hedges.

Anyway, when I explain it this weekend I will show the parallels between the two methods.

I believe trading Joe's method will give a lot more understanding to the equity millipede.

Have a little bit more time today than I thought I would. So, will go ahead and outline the original rules of Joes method. And then I will show the rules I will be trading.

There are two indicators, I do not trade indicators and place little relevance on them.

For the most part, you can look at a charr and see anything the indicator is showing you. And you can usually see it a bar or more earlier. Anyway, not going to bash indicators, if you like them and find benefit in them. Then you do you.
Joe would only sell, no real reason, he just did.

Anyway, this system uses 2 Ema's, a 5 and 10 set to the close. We are not waiting for a cross, or for price to cross them, or anything along those lines.

We are looking for 2 things, is the 5 above the 10, for a sell. And, did this bar close above both EMA's with no part of the bar touching it.

Even the wick does not need to touch them. This is what Pipeasy called a Flying Buddha (FB) The original system looks for signals on the 4 hour chart. A flying buddha is the entry signal.

Once the FB is formed, the entry would be at the open of next candle. Stop would be above high of the FB.

Another entry would be attempted at the 50 fib line of previous candle.

They would also try to stack on all the lower TFs as well. 4 hr, 1 hr, 30 min, 15 min and 5 minute. Stacking would continue as long as a bull bar did not close above the last bear bars open.

When a bull bar does close above the last bear bar, half of the positions would be closed. If down trend resumed, stacking would also resume. The trade continues until enough bull bars close above bear bars to close entire position.

And that is Joes system. Next post will highlight the parallels between this and the equity millipede.

Parallels

The equity millipede is about buying into the trend, adding positions when it is going your way. Holding positions until you have a reason to exit.

Graeme begins by looking for a reason to buy or sell. When he sees a reason, he will buy it on higher time frame, he calls this a probe. When it starts going his way, he will add positions.

When it is a really good trend, he will stack aggressively by going into lower time frames and stacking as many as he can.

He will hold and add to these positions until it stalls or starts going against him. When he sees weakness in the trend, a stall, failure to make a higher swing high in an uptrend, lower low in uptrend etc. He will take some positions off, to cover any loss, add a little profit, reset his scorecard to zero, and get it off his mind.


The FB would be the opportunity he sees.
The entry would be his probe.
He would begin adding when it proves him right.
If it keeps going his way he would stack more on lower timeframes.
Would keep going until he gets a danger sign, in this case a bar closing against him.
Resume if trend resumes.

Differences, Joe would close out all of his positions, Graeme would likely only close a few, or maybe half. When the opportunity is over, Joe would be out. Graeme, instead would keep a portion, and look for opportunities in other pairs.

The resemblance is uncanny. And it answers quite a few questions, like, when do I take profit. Well, when you start to see trouble.

Next post will outline how I will be trading this.

Last two posts I showed the original Joe's method. And showed some parralels between it and equity millipede.

Now, this is how I plan to trade it.

I will be using Daily instead of 4 hour. Mainly for time management reasons. My entry and stacking will be done on Daily most of the time. If I have extra time, I may go to 4 hr or 1 hour to stack. This may happen occasionally, probably not often though.

Joe would enter at the open of the bar, I will not be. The reason for this is, you often see strings of three or four flying buddhas together. A lot of times the last will work, all the others would fail.

To keep out of some of these failed FB's, I will not enter until the low of the FB is broken. So, an order would be placed a couple of pips below low of FB if I am selling. Stop will be a few pips above the high.

Of course, I will also be buying on an opposite signsl. They called these Sinking Buddahs(SB).

I will only trade one flying buddah at a time, if I am still in a FB trade, I will not be looking for others.

The trade could last for weeks, or even months if it is a good opportunity. Not all of them will of course, there will be failed entries, slightly profitable entries, BE entries and very profitable ones. It also msy take a while to get a really good one.


I will be fully exiting these trades as well, if it works well, it may become another entry method to build my millipedes in the future.

Benefits of flying buddah.

Often needs a smaller than usual stop loss, flying buddahs are often smaller bars.
When price shoots away from MA it often comes right back to it. This will often allow you to get to BE even on unsuccessful ones.
Can signal large retracements and trend reversals very early.

Drawbacks

Low hit rate. He claims around 40%.
Nothing magical about the bar, not even sure if there is any edge to it at all, other than giving you a specific, consistent place to enter, and put your stop etc.