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Attachments: Non-hedge Grid Style Trading and Money Management
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Non-hedge Grid Style Trading and Money Management

  • #21
  • Dec 19, 2006 11:52am Dec 19, 2006 11:52am
Amazing, simply amazing. 1 post and 1 loss. It must be Synergy.
  • #22
  • Dec 19, 2006 12:32pm Dec 19, 2006 12:32pm
THK? Yea. Have fun without the SL, buddy.
  • #23
  • Dec 19, 2006 8:35pm Dec 19, 2006 8:35pm
Indeed, i'm having it permanetjuan, and the fact that i only have one post, suntrader, doesn't mean that i haven't been around from some time, that 1 post mean that i don't use the forums to learn how to trade... i used this forum because i see that permanentjuan is in a very good path and i wanted to contribute a little bit.

This market requires a lot of common sense and logical thinking, in fact, my best systems came out when i was far away from the computer...

I've read in somewere an analogy, this market is like a speedway, if you sit too close to the road, you'll see the vehicles moving so fast that you can't barely identify what's moving, even worst if you are using binoculars (1min charts, 5min charts, 10 minutes charts, etc) while the people who know how to trade are sitting in a mountain watching all the cars and they see it moving slowly, like ants, they can see and predict even when will be a mess with the cars behind looking at the cars of front... did you get me? (sorry my english)

Just think about it a little bit, do you thing the big players are trading this way, using 60 pips Stop Losses? Do you think they are guessing?
  • #24
  • Dec 19, 2006 8:48pm Dec 19, 2006 8:48pm
No you're correct. I don't think a complete loss of SL is really the way to go about it though. The big players still have a point where they know things have turned against them and it's time to take the losses. I think you should think of it then as a SL in that you NEED to exit all positions at that point. Don't think. Don't analyze and try to prove to yourself the trade is still going to end in profit. The losses will just keep adding up.

That is why I mentioned the avenue that the turtles method approached stop losses. It was based on the volatility of the market being traded. It would also be a mental stop as they did not want to reveal their hands to the market since they managed such large positions. So there should still be a SL that you dedicate yourself too fully.

It can come in the form of a price above a S/R level. It could be a value based off the volatility of price. It could be a trailing stop. It could be a MA cross or Parabolic SAR shift. Point is, there needs to be a stop loss in some shape or form in your system.
  • #25
  • Dec 20, 2006 12:13am Dec 20, 2006 12:13am
One thing i've learned from this is, the less you cut the losses, the more you profit from the market, i know is hard to believe, it cost me a big time to understand that, and that's what some people here is facing, the truth is that this approach i mention, have some other stuff behind it, let me explain in a little more detailed way...

Starting from the fact that, fundamentally, the first thing the traders want to know for trading decisions is the Interest Rate, and all the others indicators try to figure what the interest rate will be in the coming days. The banks from all the countries are always trying to balance the movement of a currency, that is, if a currency moves so fast in one direction, lets say, 500 pips in a matter of days, they will use his powers to attempt to bring the price back, to achieve price stability, giving speeches, etc, they have an arsenal of methods for doing this. This is what gives the "volatility" to the market, and that's the "Fibo Retracements", and the "support/resistance points", and etc.

The point is, and that's why i'm explaining this, that the price will ALWAYS come back, sooner or later.

In his magic marketing tricks, the brokers point you, from different sources, that you must never let to run a loss thinking that the price will go back in your favor, and let me tell you that this is absolutely FALSE, of course, if you have a 200:1 leveraged position, you'll clean your account before it actually happens, but let me repeat you, they price WILL come back in you favor, if you don't close the trade, you just have to give the trade enough room for it to happen, this is made with low leverage and considerably far away SL, because you have a limit, if your SL is hit, the drawdown wont be too much because you're using low leverage, and it will happen probably once each three months.

To understand this avoiding SL approach i use, is needed a complete trading mentality change, and i don't want to be a "know-it-all" kind of person, just want to help a little bit from what i've learned...
  • #26
  • Dec 20, 2006 12:19am Dec 20, 2006 12:19am
lost 70K thinking that way since 11/21. gave myself 700 pips leeway, and the market ran it for no apparent reason. Yes, you are mostly right. Mostly...
  • #27
  • Dec 20, 2006 2:02am Dec 20, 2006 2:02am
Yes this is possible. If you can hedge then this rings even more true. That is the basis for many grid systems. If you're not grid trading and don't have hedge capabilities then what's the point of holding on to the trade? You could be sitting out waiting to go back into profit for months or even longer. In that time you could have made 20 or more trades to cover your losses and been profiting a lot more for a lot longer.

What if you had taken a short position in GBP/USD in February of 2002? You'd be down 5000 pips and waiting for it to come back. Even just a short position from earlier this year could have left you down 1000 pips and waiting for it to come back all year.

The strategy works, just like martingaling methods work. I would say go for it. But for them to work effectively you need to trade less than 1% per trade so when you are grossly wrong on a trade it doesn't activate a margin call as you sit the sidelines for months.

I agree that prices do always come back, but it's just not worth it IMO. I'd rather move on to the next trade knowing I can make more money by trading and not sitting the sidelines. Its utilizing compounding to make it easier to reach profit targets rather than needing 1 trade to do it for me. Matt


Quoting THK
One thing i've learned from this is, the less you cut the losses, the more you profit from the market, i know is hard to believe, it cost me a big time to understand that, and that's what some people here is facing, the truth is that this approach i mention, have some other stuff behind it, let me explain in a little more detailed way...

Starting from the fact that, fundamentally, the first thing the traders want to know for trading decisions is the Interest Rate, and all the others indicators try to figure what the interest rate will be in the coming days. The banks from all the countries are always trying to balance the movement of a currency, that is, if a currency moves so fast in one direction, lets say, 500 pips in a matter of days, they will use his powers to attempt to bring the price back, to achieve price stability, giving speeches, etc, they have an arsenal of methods for doing this. This is what gives the "volatility" to the market, and that's the "Fibo Retracements", and the "support/resistance points", and etc.

The point is, and that's why i'm explaining this, that the price will ALWAYS come back, sooner or later.

In his magic marketing tricks, the brokers point you, from different sources, that you must never let to run a loss thinking that the price will go back in your favor, and let me tell you that this is absolutely FALSE, of course, if you have a 200:1 leveraged position, you'll clean your account before it actually happens, but let me repeat you, they price WILL come back in you favor, if you don't close the trade, you just have to give the trade enough room for it to happen, this is made with low leverage and considerably far away SL, because you have a limit, if your SL is hit, the drawdown wont be too much because you're using low leverage, and it will happen probably once each three months.

To understand this avoiding SL approach i use, is needed a complete trading mentality change, and i don't want to be a "know-it-all" kind of person, just want to help a little bit from what i've learned...
  • #28
  • Dec 20, 2006 2:35am Dec 20, 2006 2:35am
Quoting THK
The point is, and that's why i'm explaining this, that the price will ALWAYS come back, sooner or later.
you are obviously right about this. there are only 2 times that the market hasn't come back, the high and the low of a pair EVER.

That said it brings 3 issues.

1) there is a chance that when you are in the market it will set its all time high or all time low
2) position size would need to be calculated based on all time high and all time low, so with out a huge bank account and without trading 1 cent lots you wouldnt be able to position yourself with any certainy.
3) frequency. the formula for trading is (winrate * payrate) ^ frequency. the number of trades you make effect your bankroll the most. (please dont assume i mean you should trade 20 times a day, trades should be made only when you good reason to make them) If you are locked in a trade for 2 months at a time your frequency will hurt and your bankroll will not grow.

I will also have to say that the there are professional forex brokers out there. they dont try to figure out how to make you lose in the markets, they are not trying to trick you and they dont win by you losing. if anything they can be blamed for trying to get you to trade more frequently, thats how they make their money. When money is lost in a market the trader has only themselves to blame, if you blame the broker then you are taking the power out of your hands to fix it. and as a side note, even if the broker is shady, you should only allow it to happen once, after that it goes back to being your fault.
  • #29
  • Dec 21, 2006 12:11am Dec 21, 2006 12:11am
I never said i wont ever close a trade, i just said to give enough room to the trade to breathe, because a too close SL has too much posibility to get hit, and by ramdom reasons that you can't control. let me put it clear...

As you know, the market spend most of the time ranged, and sometimes it has a trend. The average range (in a daily chart) is about 300-400 pips, which happen to be the Key resistance/support levels that analysts mention in teir analysys. You just have to mark the tops and the bottoms of this range, and below the bottom line would be the time to exit the position when the trade go against you (if buying). Inside this range it will be pure volatility you can't barely control, you just have to buy when the price is close to the bottom line, and sell when its in the top, simple as that. But if i use a too tight SL i will get killed so many times... do you understand it a little better now? I didn't claimed to never close a losing trade, i've claimed to never use a stop loss to cut the losses, i preffer to use it for locking profits.

The point of all this post i've made is one thing i've learned, is to be over the volatility that the market offers all the time, a too tight SL trader is like a person trying to fight a fire from inside the fire; you will probably see when the flames born, but you'll burn, i'm instead trying to turn it off from outside, and i can feel the heat, but i won't get burned...

And Permanentjuan, can you please point me where the turtles method you talk about is located?
  • #30
  • Dec 21, 2006 1:26am Dec 21, 2006 1:26am
I don't think this link should be removed, hopefully. It's a very useful website.

http://www.forexlisting.com/go/turtl...stem_rules.htm

Thats the basic turtle history and idea. The ideas aren't very groundbreaking today as we use ATR and other such ideas. It is ground breaking because it is a complete system. Entries, exits, SL, money management, strategies, etc.
  • #31
  • Last Post: Dec 21, 2006 8:10am Dec 21, 2006 8:10am
I don't knpw how others feel but I like my stop getting hit. It tells me I was wrong and time to re-think what the market is telling me.

Nasdaq bubble stocks are not currencies obviously, but how many who bought up near the alltime highs for many internet stocks waited and waited for them to come back.

Currencies of all major markets are considered the best for trendiness. Once they get in a trend it is a good ride. That is unless you are wrong. Then it is the ride to ruin.

You can go broke taking profits (too soon that is) and also not cutting your loses. Trade execution to me means "killing your loses".
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