Dion's Pyramid

What good is daily interest if it is in a 400x1 account?

Might as well light a match to it.

On the contrary. In a race to the finish line, which is what this is, 400:1 produces 4X more interest than 100:1.

That's a pip a day. 100 days goes by, there's an extra 100 pips put into your account to pay for commission on the hedge or to get you to level 11.

I wouldn't sprint too early or you might find yourself walking after the first mile of the race watching all your competitors run right past you.

twinchell..

I don't get it....in carry trade..the more leverage you have the better it is....i being doing EA and indicator trading for past couple of years..in there the less leverage you have the better...

However, in carry trade.,.its the opposite...the more leverage you have the better.

So with 400:1 you will have more money to park in..to get more interest than with 1:100. its not raise to the finish line stuff.

Here the main purpose is not to get PIPS..though its good if it comes in the way..BUT to gain interest and carry it.

and the added advantage is with more leverage, you get to go with less margin and set a high stop loss.

Spider I see your point. You are looking at this system as a way implement a high interest carry system. I was looking at it from a $1000 to $1,000,000 sprint over 2 months or so.

Level 6 was reached today on the NZD/JPY pair. $1000 invested on 11/28/06 would now be $35,000 + interest. A margin call would close the trade at $5100 (+410%.)

If only I would have known....

I think it's time to investigate the idea Spiderforex brought up... The use of a lower risk pyramid in conjunction with carries to create a high yield carry system. Spider, correct me if I am wrong:

I start with fundamentals. New Zealand fundamentals can be found at this site. You have to search a little bit:

http://www.nationalbank.co.nz/economics/regional/

Can you imagine the NZD/JPY moving up 2500 pips in 2007? Suppose I had $1000 in my account, and I bought 60 nanolots at every 100 pip increment. As the price moved up, my account could absorb more damage, as shown here:

http://www.forexfactory.com/forexfor...5&postcount=45

I'd hold my position and exit after a predetermined gain (say 2500 pips.) This is a long term strategy. I look to collect interest throughout the year, and ultimately collect these gains:

60 contracts: 2491 pips = $13,451
60 contracts: 2391 pips = $12,911
60 contracts: 2291 pips = $12,371
..... etc.. etc.....
60 contracts: 291 pips = $230.91
60 contracts: 191 pips = $153.94
60 contracts: 91 pips = $76.97

Not sure what this is when you add it up, but should be over $100K. That does not include interest!

There is no hype on this thread, folks. This trading is not risk free, but creates an reasonable risk/reward situation in my opinion.

The beauty is that I would buy all contracts with profit from the supporting legs underneath the entry point, and never invest more than my initial $1000. If the price reversed 500 pips, my account could handle it (assuming the reversal happened after 1000 pip gain or so.) I'd stay in the position because I only risked $700 on the play, and hope it would recover to the eventual 2500 pips.

I think this is a very interesting idea. I am also thinking that diversifying on multiple uncorrelated high interest pairs might be smart.

Agree? Disagree? What do you think? How can we improve it?

The backtest (starting July 1, 2006) would have turned $1000 into $71,000 as of today.

Predetermined exit is critical because this play is based on an uptrend. Should the price reverse completely, the profit would disappear and a stopout is very possible. If 10 or more legs are open, a stopout results in a positive trade.

I will backtest other high interest pairs later...

60 nanolots entered long at each red dot.... daily interest per leg is $6 ($.10/day X 60) The riskiest part of the trade is after the first 5 entries, where the 300 pip reversal nearly stopped it out. However interest would have kept it alive.

I want to take the Spider pyramid one step further... Suppose one decides not to be greedy and stops adding positions after 15 (consider not adding any new positions to the backtest.) Because legs are paying $6 a day each in interest, and 15 would have been opened, the account would gain $23,000 a year in a sideways market...

Not bad.

Thanks TD,

WOW! thats planning.

NZDJPY pair is least volatile and pays the highest interest with respect to the least margin required...most people have a notion that..GBPJPY pays the highest interest, but its NZDJPY..which pays double the interest with the same margin plus the PIPS value is 2.5 times than GBPJPY with equal margin and is 50 percent less volatile than GBPJPY.

The choice to go with NZDJPY is good for carry trade and trend direction.

Here are some statatics.

<table x:str="" style="border-collapse: collapse; width: 294pt;" border="0" cellpadding="0" cellspacing="0" width="392"><col style="width: 48pt;" width="64"> <col style="width: 48pt;" width="64"> <col style="width: 48pt;" span="2" width="64"> <col style="width: 56pt;" width="75"> <col style="width: 46pt;" width="61"> <tbody><tr style="height: 12.75pt;" height="17"> <td class="xl23" style="height: 12.75pt; width: 48pt;" height="17" width="64">NZDJPY</td> <td class="xl24" style="width: 48pt;" width="64">1H</td> <td class="xl23" style="width: 48pt;" width="64">4H</td> <td class="xl23" style="width: 48pt;" width="64">Day</td> <td class="xl23" style="width: 56pt;" width="75">Week</td> <td class="xl23" style="width: 46pt;" width="61">Month</td> </tr> <tr style="height: 12.75pt;" height="17"> <td class="xl23" style="height: 12.75pt;" height="17">H-L</td> <td class="xl24" x:num="">7</td> <td class="xl23" x:num="">32</td> <td class="xl23" x:num="">75</td> <td class="xl23" x:num="">170</td> <td class="xl23" x:num="">353</td> </tr> <tr style="height: 12.75pt;" height="17"> <td class="xl23" style="height: 12.75pt;" height="17">O-C</td> <td class="xl24" x:num="">16</td> <td class="xl23" x:num="">15</td> <td class="xl23" x:num="">36</td> <td class="xl23" x:num="">85</td> <td class="xl23" x:num="">168</td> </tr> </tbody></table>

Above are the Average PIPS moved for the time periods in high-low and open-close since 1999. The mean avaerage would be close to it and would show the real picture for now..however for the sake of maximum average movement and drawdown average is taken.


So the most on average PIP can move in either direction is 353. so we could safely take our stop loss around that or say 500.

Now,

<table x:str="" style="border-collapse: collapse;" border="0" cellpadding="0" cellspacing="0" height="276" width="262"><col style="width: 119pt;" width="158"> <col style="width: 45pt;" width="60"> <tbody><tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt; width: 119pt;" height="20" width="158">Total 85 months</td> <td class="xl24" style="width: 45pt;" width="60">7 years</td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20"> </td> <td class="xl24"> </td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20">highest in High low</td> <td class="xl24" x:num="" align="right">909</td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20">highets in open close</td> <td class="xl24" x:num="" align="right">619</td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20">above 500 h_l</td> <td class="xl24" x:num="" align="right">10</td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20">above 500 o_c</td> <td class="xl24" x:num="" align="right">2</td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20">high_low_negtive</td> <td class="xl24" x:num="" align="right">909</td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20">open-close-negative</td> <td class="xl24" x:num="" align="right">619</td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20"> </td> <td class="xl24"> </td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20">high_low_postive</td> <td class="xl24" x:num="" align="right">660</td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl24" style="height: 15pt;" height="20">open-close-positive</td> <td class="xl24" x:num="" align="right">607</td> </tr> <tr style="height: 15pt;" height="20"> <td class="xl25" style="height: 15pt;" height="20"> </td> <td class="xl25"> </td> </tr> </tbody></table>During the past 7 years..the highest PIP increase was 909 and it was one time event and that was in the downward direction..the higest PIP increase in the postive direction was 660.

However, of the 85 months we had the trading in NZDJPY only 10 times the market has moved above 500 PIPS month on month in either direction.

We could safely keep a bench mark of 500 PIPs as the least likely drawdown or 350 PIPS as the likely drawdown.

If we keep a 500 PIP spider net, we would be 88 % on the safer side of trade and if we agreesively trade for six month with get in and get out strategy our safety net would increase by 92 percent.

So in effect..in both ways NZDJPY pair would work out..long term and short term..if you wanna play short term...trade aggrisivelly and if you wanna trade long term trade with pyramid. both forms of trading shows a very high level of winning.

Even if NZDJPY does not move 2500 PIPS there is every chance that, NZD will increase there interest rate to 0.50 or 0.75 % and in case Japs decide to increase their rate to another 0.25 to 0.50..we would still have some what higher percentage gain in interest by march 2007 form NZDJPY.

Implied volatility is getting lower and lower each passing year in NZDJPY and the carry trade pairs that would mean that in 2007 we would see less fluctuations and more trending.

Uk will definately increase there rates, no way to go for those folks by second querter and when they do...JPY pairs will jump up.

The only truth in carry trade is, the year 2007 will be identical to 2006..these news and hoopla are just mist to cover up the reality.

Its only factoring now because WE ARE IN THE GAME!

Skip 2007 and picture 2008 and everything would look same here.

Its our phycology thats keeping us away our dreams.

Great statistics Spider.

I believe the best approach is to put $1000 entries on multiple uncorrelated pairs that pay high interest.

If just one works out, it will more than make up for any losses.

----------------

I have a second idea for the Spider Pyramid. Considering the backtest was nearly stopped out, a safer wagering system would look like:

leg 1: 60 long
leg 2: 55 long
leg 3: 50 long
leg 4: 45 long
etc. etc.

The cadence of the reduction has not been determined, although I used 5 in this example. A reduced cadence will allow for a larger stopout. Unfortunately the account won't grow nearly as large as a fixed lot pyramid.

Multiple uncorelated pairs would work out in the long run and would take most of the swings.

Spreading the funds around is a good way to balence.

We would first put in big amount and then slowly build up with the PIPS and interest earning..making a nice rock solid pyramid.

I think of all my findamental and technical analysis for NZDJPY, of all elliot has to offer or gann principles .NZDJPY has a room to go up to complete its shoulder.

I think....We have another 700-800 PIPS or more safely in our net.

Im a dreamer and i love to dream..hell yeah...i love to celebrate before i taste success

Ye..all people..Open the doors of playboy mansion...de'all spider is coming to weave the magic...who wants to spend time in new york library..when you got playboy bunnies for few worth less dollars

Folks spend 50 % of your money on your dreams next year and invest the rest in Gold.

IF We LOOK REALLY LONG TERM, Forex trading is a JOKE..I was a fool running with indicators and EA for 1 h and 4h trading and watching up and down movements of currencies.

THE FACT IS dollar will GO DOWN....REALLY >>REALLY>>>>DOWN and REST OF THE CURRENCIES WILL GO UP>>>>REALLY>>>>REALLY>UP.

Its the daily fighting of up and down PIPS ...is what expands and shrinks my account.

I will just go long..thats it..no watching pips daily now..only looking the chart at the end of the months.

Hello. I have yet another installment of Pyramid philosophy.

If you've read the thread, you know that this is an unorthodox trading methodology. It is pure speculation with attractive risk reward. I challenge traders using traditional TA/fundamental methodologies to explore the pyramid and argue it's pros and cons.

First, I'd like to say that I don't "celebrate prematurely" as Spiderforex does. I celebrate AFTER I've made my money... celebration clouds judgement. "Realism" is my middle name.

I've backtested the GBP/JPY pair and the pyramid would have turned 1K into 145K in 8 months. I find that compelling.

The Yen is weakening across all JPY pairs.... thus this pyramid would have worked out on in a variety of situations. But what happens if the Yen stabilizes and gains strength? The pyramid weakens. New pyramids entered into the market would crash.

That being said, trading a pyramid is a shot in the dark. You get lucky or you don't. The nice thing is, the risk/reward of speculation is very attractive. You are risking $700 in order to make 100K... 200K... whatever the market gives.

My philosophy is to "never trade into the wind." That is, a pyramid is a long term strategy that benefits from carry interest. Trading a pyramid long term into a negative interest position adds more risk to the trade. Perhaps I would consider a negative interest pyramid with the GBP/USD because the negative carry is very small... and volatility historically has been large.

I challenge traders reading this thread to seriously consider the pyramid's potential. Scrutinize it. Look at it for what it is.

Red dots are entries of 50 nanolots.

Good one to attack GBPJPY.

I think it has potential to cross 250'ish mark by the end of the year may be more.

My only doubt is if we go with the perticular pyramid and since our account balence will be in US dollar..will it not effect some what on the total balence when we buy GBP with dollar for the pyramid...our account in effect will shrink when we convert our GBP holding to USD and again convert back to GBP in the coming months.

In the coming months, we would require subsequently more dollar to buy GBP as the pyramid goes up..BUT it will not be sufficient to effect the pyramid structure but it could be taken into account. but its not a MAJOR think to look into right now.

Bloomberg says that NZD will raise rates to 0.25 points on jan 25 meeting..so even if JPY raise rates on jan 17-18 or NOT..which is a greater posibility expect NZD to go still up.

Yeah...and to stamp the point of TIME that "we are the person of the year"...Home surfer , trader..who would have thought that on the day when the worlds two most powerfull nation goes to holiday break...the market will jump to 200 PIPS..

Hope everyone caught the PIPS...its the indication to come folks...the markets is not governed by central banks anymore..its folks like you and me...will have a good hand in the coming years.

dude.....look at where nzdjpy is going going gone

Are u in ...

..just get in...

Pyramid is ROCKING FOLKS...

Spider... mind sharing your entry/exit strategy?

How many lots did you enter? What's your stopout?

How many lots will you enter on your second leg and when?

Thanks,
Tom

I entered 1 Lot at margin 13.99 USD, I'm using NF as my broker with No STOP LOSS at the begining with a deposit of 500 USD. Next I entered another lot at 13.99 with 100 PIPS stop loss. Now, every 7 days, I will enter 1 Lots each and plan to exit or take out my lots after six months.

Good Luck.

Hi there, i'm interested in this subject and want to explore further.. just ran across the thread yesterday so will try to put some thought to it and see about contributing in some way.. i see potential here, wish we had jumped this idea earlier since i really knew that we had hit a major swing low last year and i was working some small/medium term trades long on NZD/USD but then i got side tracked from using fundamentals and made big forrays into investigating other trading systems (losing money to get on a faster track) but i'm determined.. Elliot waves very serious for many months, and then programming indicators / EAs (i am a long time programmer by trade, primarily Java now), etc..

maybe some kind of agressive 'buy the dips' scenario could be envisioned and keep it simple? would have been nice to buy big when stochastics hit 20 over the past months.. (daily chart)

i've got a bunch of unfinished EAs at the moment, have lots of ideas i've been working on but not quite to the point that i've followed through with forward testing anything since that step will take a bunch more of my limited time and so many interesting ideas out there on this forum and others that i haven't been ready to commit yet (although using as indicators/alerts). one of my EA ideas uses a 'trailing buy order' concept pyramiding with the trend, another variation on this one i intended to use on volatile pair trails a buy order with the trend all the time with very small targets.

nice move catching the start of this leg in november! unfortunately looks like a correction happening now, so i guess i have some time to work on some scenarios and try to catch the next train.. thanks for the thread.

Cheers,
Scot