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Super Carry Trade Trading System

  • #341
  • Apr 23, 2008 3:25pm Apr 23, 2008 3:25pm
Quoting Dreamliner
By the way, here is the original method that I have built mine from: FXKnightRider's post.

The difference of course is that my drawdown is less and profit is more. I did read just now that his max drawdown has been 13%, not 11 like I originally wrote.
I have been backtesting this method on VHands over and over through the big carry trade unwind from the middle of July to the beginning of Oct and I am getting a huge drawdown. Even spacing buy orders apart by 500 to 1000 pips the drawdown is huge. I am getting 50% drawdowns or worse. This is just the FXKnightrider method without the buy stops btw.
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  • #342
  • Apr 23, 2008 3:33pm Apr 23, 2008 3:33pm
Quoting Jared
I have been backtesting this method on VHands over and over through the big carry trade unwind from the middle of July to the beginning of Oct and I am getting a huge drawdown. Even spacing buy orders apart by 500 to 1000 pips the drawdown is huge. I am getting 50% drawdowns or worse. This is just the FXKnightrider method without the buy stops btw.
You're exactly correct. I got a drawdown of 38% a few weeks ago, that was the worst I've had. 38% drawdown for 200% a year may not agree with some people.
  • #343
  • Apr 23, 2008 3:38pm Apr 23, 2008 3:38pm
Please post specific settings you have been using for your back testing.

Did you take swap into account?

Please post all and exact criteria for entering and exiting trades.


Quoting Jared
I have been backtesting this method on VHands over and over through the big carry trade unwind from the middle of July to the beginning of Oct and I am getting a huge drawdown. Even spacing buy orders apart by 500 to 1000 pips the drawdown is huge. I am getting 50% drawdowns or worse. This is just the FXKnightrider method without the buy stops btw.
  • #344
  • Apr 23, 2008 3:44pm Apr 23, 2008 3:44pm
Quoting jeta
Please post specific settings you have been using for your back testing.

Did you take swap into account?

Please post all and exact criteria for entering and exiting trades.
See post #1
  • #345
  • Apr 23, 2008 3:56pm Apr 23, 2008 3:56pm
Quoting jeta
Please post specific settings you have been using for your back testing.

Did you take swap into account?

Please post all and exact criteria for entering and exiting trades.
Yes, swap was taken into account. As far as the settings go I have been experimenting with different ways. These last tests were without the grid of buy stops, it was strictly the "averaging down" part of the strategy. If the price dropped significantly I would place another buy order. 300+ pip drop. I will run another test placing buys on a daily basis when it is dropping and see what happens (closer to the rules in post 1)
  • #346
  • Apr 23, 2008 4:02pm Apr 23, 2008 4:02pm
Quoting Dreamliner
No. I have nothing to prove, and do not have the time nor the inclination to post anything of my trades. All the rules are there, simply demo it for 3 months and see if you aren't up 20% or more.

My purpose is not to spark discussion, nor keep the thread going, but rather simply to share with people my system, put the rules clearly out there. That I have done, the rest is up to others.
Hi Dreamliner, where can I get a copy of the system?
  • #347
  • Apr 23, 2008 4:10pm Apr 23, 2008 4:10pm
Quoting Dreamliner
Super Carry Trade Trading System



1.Enter at any time with a market order
2.Place limit orders (long) at 10 pips above initial entry
3.Place 10 pip profit targets on all limit orders, up to 200-400 pips above current market
4.If market drops (carry trade unwinds) by 200 pips enter a market order once per day, with no take profit, in an attempt to lower the average price of all orders to within 100-200 of current market. Each additional market order lowers the “average” of your orders.
5.Enter limit orders (long) at 10 pips above this market order, up to the orders already entered.
6.At any time you have more than 1 order open, and the market is above the average price, close all orders (Oanda makes this easy to do).
7.If market continues to drop, continue to place orders (as in numbers 4-6 above), attempting to keep the “average price” within 100-200 pips of current price.
This part of the rules I am not sure if I understand. Say it drops 200 pips and then it rangebound at -200, do you still place an order once per day even if it does not continue to drop, so you could essentially have several entires around the same price?
  • #348
  • Apr 23, 2008 4:29pm Apr 23, 2008 4:29pm
I blew up the account doing it that way.

Notice towards the end I didn't place orders on a daily basis, I skipped a few days just because I had a huge number of orders already.
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  • #349
  • Apr 23, 2008 4:35pm Apr 23, 2008 4:35pm
I am not trying to be overly critical of this strategy, I am just trying to make sure I understand the concepts behind it thoroughly. If I have done something wrong let me know.

As I mentioned earlier, I am not testing the buy stop grid as part of it, I am just trying to wrap my head around the averaging down part of the strategy, as on the Oanda thread.
  • #350
  • Apr 23, 2008 7:04pm Apr 23, 2008 7:04pm
In order for a person to reply, I guess you would have to post specifically point by point what you are doing.

I don't know if the system blows up or not. I have not done the back test. Just to point out, make sure you are entering with 1% or less per pair of the AVAILABLE BALANCE at time of entry. This means that if your available balance is 10000, 1% of that is, 100, so you would be trading with 1 pip = 0.001 cents.

Quoting Jared
I am not trying to be overly critical of this strategy, I am just trying to make sure I understand the concepts behind it thoroughly. If I have done something wrong let me know.

As I mentioned earlier, I am not testing the buy stop grid as part of it, I am just trying to wrap my head around the averaging down part of the strategy, as on the Oanda thread.
  • #351
  • Apr 23, 2008 9:51pm Apr 23, 2008 9:51pm
Quoting jeta
In order for a person to reply, I guess you would have to post specifically point by point what you are doing.

I don't know if the system blows up or not. I have not done the back test. Just to point out, make sure you are entering with 1% or less per pair of the AVAILABLE BALANCE at time of entry. This means that if your available balance is 10000, 1% of that is, 100, so you would be trading with 1 pip = 0.001 cents.
I thought the pic I posted would be fairly self explanatory, but perhaps it is too hard to read. On the last test (that blew up the account) I chose an area of the market that had a downturn and then a period of ranging. I used daily candles. I would place a buy order, and then proceed to the next candle. If during that candle it turned positive I would close the long and open another one. When it went against me I would place another long position if it was greater than 200 pips against me. With each candle that followed if it continued going against me or was simply in the negative more than an average of 200 pips, I would add another long position. What happened is it ranged up and down for a long period of time, with me adding more long positions on a daily basis. When it broke out of the range and headed further short, there were so many long positions built up that it didn't take much movement to blow up the account. I used 0.5% position size, or in other words, one standard lot with an account balance of 200k.

On the other test I didn't add longs on a daily basis, only after significant movement short. I ended up with a 50% or so drawdown but regaining it all back and closing at breakeven on a retracement. If that retracement wasn't as large I would have been screwed.
  • #352
  • Apr 23, 2008 10:17pm Apr 23, 2008 10:17pm
Perhaps Dreamliner can comment on all this. It seems your backtest is valid and according to the rules. Perhaps he didn't have these problems because he diversified?


I am very curious what he did during that big big drop myself. I guess using some prudence when markets unravel can go a long way, but I want to know what Dreamliner's thinking was too.
  • #353
  • Apr 23, 2008 10:26pm Apr 23, 2008 10:26pm
Quoting jeta
Perhaps Dreamliner can comment on all this. It seems your backtest is valid and according to the rules. Perhaps he didn't have these problems because he diversified?


I am very curious what he did during that big big drop myself. I guess using some prudence when markets unravel can go a long way, but I want to know what Dreamliner's thinking was too.
I have been purposely backtesting the areas of the market that have the biggest carry trade unwinds to see if the system can handle them. Like you said, with a bit of discretion following the news one could perhaps avoid the big unwinds...........or not. It may be that you might have a few danglers already before you realize a large unwind is happening.

The thing I have not tested it using 0.5 of the available balance, I was just using 1 lot trades across the board. Over all this system works great, especially in rangy markets, but I think it is wise to test the trouble areas of the market to do a bit of "contingency planning".
  • #354
  • Apr 23, 2008 10:52pm Apr 23, 2008 10:52pm
Quoting Dreamliner
Yes I am, though I am reconsidering the "take profit" engine (10 pips profit), as my sons account has grown at roughly the same rate as mine, but with less drawdown, just using the original rules without the take profits.

I'm not sure what is meant by "without the take profits". Are you saying that the 10 pip TP aspect is omitted, or is it that the TP is a different amount than each 10 pips (for example, a TP on every 50 pips)?

thanks,

Walt
  • #355
  • Apr 24, 2008 12:33am Apr 24, 2008 12:33am
It seems that many people on Oanda that had been trading this strategy for an extensive amount of time have blown their accounts due to the recent carry trade unwinding.

If Dreamliner has some time to post his trades, I am sure the people that follow this thread are going to be much obliged.
  • #356
  • Apr 24, 2008 1:32pm Apr 24, 2008 1:32pm
Dreamliner or anyone who can answer the clarifying question

On any day the current price is below 200 PIPs of the average price of your orders, the system requires that another position be put on without TP and additionally that staggered buys be entered at 10 PIP intervals with 10 TP. The question is if after falling below 200 pips on any day and assuming the market recovers somewhat the next day and closes say at a current price of only 120 pips below the average, do we add staggered buys with 10 TP for that day or do not enter any orders that day because it was not 200 PIPs below the average. What I am driving at is the rule that on any day if the closing price is less than the average price of your outstanding buys but does not exceed 199 pip loss, we enter no orders for that day. Is that correct?
  • #357
  • Apr 24, 2008 2:52pm Apr 24, 2008 2:52pm
Quoting Dreamliner
It will end the same time that EUR/USD begins to go back down, the same time that GBP/JPY starts to go up, the same time America begins to climb out of the horrible debt-hole it has dug, the same time fuel prices come down, the same time the mortgage crisis is solved, and the same time the war in Iraq, and the upcoming war in Iran is ended.

We have serious problems in this country that have been building for decades, and though I am an optimist in life, I believe a serious recession is coming because America has been living WAY above its means for WAY too long.

Dreamliner:

I have been using your method with some of my own modifications ( less nav per trade.. .03% on slightly less wild pairs. AUD/JPY). I have averaged about a 5% increase in portfolio size per month for March and April. Two months that were not particularly good. I believe that using just the price action combined with a positive carry will generate at least a 50% return with a very low drawdown.
I appreciate your work on this method and wanted to say thanks.

DrZ
  • #358
  • Apr 25, 2008 4:06am Apr 25, 2008 4:06am
What an interesting thread.
I have never thought of trading like this. It goes against every trading concept I have been trained to believe. Yet the logic is sound - as long as money management is implemented properly.

To Dreamliner and the other contributors to this thread I say "thank you for opening my eyes to a concept way of left field to me".

You have me thinking........
  • #359
  • Edited 7:20am Apr 25, 2008 7:17am | Edited 7:20am
Quoting chuckeepw
Dreamliner or anyone who can answer the clarifying question

On any day the current price is below 200 PIPs of the average price of your orders, the system requires that another position be put on without TP and additionally that staggered buys be entered at 10 PIP intervals with 10 TP. The question is if after falling below 200 pips on any day and assuming the market recovers somewhat the next day and closes say at a current price of only 120 pips below the average, do we add staggered buys with 10 TP for that day or do not enter any orders that day because it was not 200 PIPs below the average. What I am driving at is the rule that on any day if the closing price is less than the average price of your outstanding buys but does not exceed 199 pip loss, we enter no orders for that day. Is that correct?
That's my understanding of the rule. However, be alert for big unwinds and then think about buying only on drops of 400-500, as per post #1.
  • #360
  • Apr 25, 2008 8:59am Apr 25, 2008 8:59am
I'm still reading the thread. This is FACINATING!
I actually devoted all day yesterday to try to get my arms around this thing.
The hell with work!

Just wanted to say THANKS for sharing, Dreamliner.
Thanks everyone, too, for sharing & contributing.
This is really captivating reading....and fortuitous, too.

I was thinking that there must be a better way to confront this Forex beast and still remain basically whole. Though, I've never been one to shy from a challenge. And I've been known to pick myself up & dust myself off & jump right back in... perhaps one too many times. Hence the source of my trepedations.

One thing I need to get straight before the weekend.......

The "danglers" thing has got me spooked.
Now, as I understand things, we deal with them as part of our AVERAGED position cost, and just live with them until such time as we have a plus total AVERAGED position, then we dump everything, regardless if it's + 1 pip (averaged) or + 1000 pips (averaged) & then start the clean slate again?

Am I getting this correctly? Basic concept, at least?
Please help me out here!

This thread is a breath of fresh air. All contributors...THANKS.
This is intelligent discussion here. Lots of learning & sharing going on, too.

And, again, Thank you Dreamliner.
I'd like to tag along for the ride & contribute when I can be of benefit.

Good weekend to all.

Peter O.
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