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Super Carry Trade Trading System

  • #401
  • May 8, 2008 10:18am May 8, 2008 10:18am
Quoting Rainman
I like the concept of this system. I wonder if you guys would comment on the use of a fifo broker with this system. I use MBT and they average all of your positions. So, for example: after the initial entry the price drops 200 pips, I would place a market order and then set up the buy stop ladder with TP's back up to the initial entry and beyond as per Dreamliner's rules.
Ex:

Initial entry 1 lot @ 100.00
2nd entry 98.00
Rainman, you are going to have to keep track of your trades still because you will always have 1 more position showing up than you are going to sell.

so you will need to set up a spreadsheet showing what your entries were.

you will have a position with the dreamliner system at each of the tops and one position at each entry starting with the second entry. those bottom positions are critical to averaging in the price and they have no take profit.

one nice thing about mbt is the agregate will show you what your overall position value is so when the position starts to become profitable, you will know it without haveing to do any math, but you will still need the math to know what your exit should be.
  • #402
  • May 8, 2008 11:10am May 8, 2008 11:10am
Everyone,

I've read through this a couple of times and I think I'm getting the hang of it. The math aspect is a little difficult for me, figuring the averages and all, so thanks to those who have put together the spreadsheets.

I think I understand the differences between Dreamliner's original and Scottie's adaptation, but I do have a question. In Dreamliner's, all of the position sizes were the same, but in Scottie's after the initial entry the position sizes are double the first entry. First of all, do I have that correct, and second, what it is the purpose of doubling? I guess it's to bring the average down quicker but I want to be sure I have this right.

Also Scottie, it seems evident that you don't care about the swap/rollover since you are in both long and short. I guess after time the two just cancel each other out?

By the way, this is awesome. Thanks to Dreamliner for starting this and to all who have participated.


Thanks,
Richard
  • #403
  • May 8, 2008 1:04pm May 8, 2008 1:04pm
Quoting Richard7
Everyone,

I've read through this a couple of times and I think I'm getting the hang of it. The math aspect is a little difficult for me, figuring the averages and all, so thanks to those who have put together the spreadsheets.

I think I understand the differences between Dreamliner's original and Scottie's adaptation, but I do have a question. In Dreamliner's, all of the position sizes were the same, but in Scottie's after the initial entry the position sizes are double the first entry. First of all, do I have that correct, and second, what it is the purpose of doubling? I guess it's to bring the average down quicker but I want to be sure I have this right.

Also Scottie, it seems evident that you don't care about the swap/rollover since you are in both long and short. I guess after time the two just cancel each other out?

By the way, this is awesome. Thanks to Dreamliner for starting this and to all who have participated.


Thanks,
Richard
hi Richard,

if i'm not mistaken, in dreamliners system, he would start with a stop entry grid. the second position was initiated at 200 or greater down with one position that had no tp and above that was a grid of stop orders. and this is repeated as necessary to collect the profit.

consequently, the first grid will give you a position at the top, the second grid will give you a position at the buy location and at the second top.

what i did with it is rather than run the position to the top and collect profit all the way up, i didn't us the grid, but i still have the same number of positions. the positions with no tp subsequent to the initial entry in dreamliners is required in order to average in the price to make a profit when the smoke clears as it is with mine. i just chose not to run a grid up from there and left both positions at the entry. this saves the spread, but doesn't change the system fundamentally at all. when i enter using ibfx on the second position, i place 2 positions of the same size. if that is all i need for the trade, then i kill the initial position and one of the second positions. the other position remaining is to collect any additional profits should the market continue up - in essence starting a whole new round.

about swap, yes, i initially thought i would run it as long only, but when i ran some tests, i make just as much profit going short as i do going long. which dwarfs the swap, so i ignore interest. however, during carry unwinds, you will end up net long and gain interest during that whole time till the longs can get averaged in.
  • #404
  • May 8, 2008 1:09pm May 8, 2008 1:09pm
It just dawned on me! This strategy is vritually the same as Dirk Du Toit's strategy from his book Bird Watching in Lion Country. Low leverage (gearing) in one direction is the key to success!! The challenge is that it's very difficult to predict the direction of the currency pair over the next week/month/year. Although the rule of thumb is to trade in the same direction as the fundamental trend, this becomes more subjective when comparing one timeframe to another. Personally, I'm not a fan of the 10 pip incremental TP because it creates more danglers when a reversal occurs. Also, there's a huge opportunity cost due to the spread on each 10 pip trade. Simply letting the trades run 50 - 100 pips before the TP, then afterwards waiting for the pullback before re-entering a new position is the best strategy in my opinion. In actuality, Dirk's method is most similar to Knighttrader's approach, which served as the model for Dreamliner's system. In any event, with proper money management and good discretion, any number of variations to this system can be successful.

Walt
  • #405
  • May 8, 2008 6:25pm May 8, 2008 6:25pm
Quoting Scottie
hi Richard,

if i'm not mistaken, in dreamliners system, he would start with a stop entry grid. the second position was initiated at 200 or greater down with one position that had no tp and above that was a grid of stop orders. and this is repeated as necessary to collect the profit.

consequently, the first grid will give you a position at the top, the second grid will give you a position at the buy location and at the second top.

what i did with it is rather than run the position to the top and collect profit all the way up, i didn't us the grid, but i still have the same number of positions. the positions with no tp subsequent to the initial entry in dreamliners is required in order to average in the price to make a profit when the smoke clears as it is with mine. i just chose not to run a grid up from there and left both positions at the entry. this saves the spread, but doesn't change the system fundamentally at all. when i enter using ibfx on the second position, i place 2 positions of the same size. if that is all i need for the trade, then i kill the initial position and one of the second positions. the other position remaining is to collect any additional profits should the market continue up - in essence starting a whole new round.

about swap, yes, i initially thought i would run it as long only, but when i ran some tests, i make just as much profit going short as i do going long. which dwarfs the swap, so i ignore interest. however, during carry unwinds, you will end up net long and gain interest during that whole time till the longs can get averaged in.
Thanks a lot. I must admit, the light bulb is coming on a bit slow on this one. I'll keep messing with it till I get comfortable.

I notice you're using an hourly chart for entries. What do you do if you miss a second entry, like overnight or some other time away from the computer? Just let it go and see if it hits your average, and if not just look for a new entry?


Thanks again,
Richard
  • #406
  • Edited 8:37pm May 8, 2008 8:26pm | Edited 8:37pm
I learn visually therefore I will start posting my charts with entries based on Scottie's strategy. I will only trade long for now, but once I am comfortable with the strategy then I will multi-task, like Scottie, and place long and short trades.

Starting Balance: $10,000.00
Leverage: 200:1
Account Type: Standard
Initial Lot Size: 0.05/$0.50 cents per pip
Averging-in Lot Size: 0.10/$1.00 dollar per pip

First Entry: Long @ 202.93
Recent High: 204.39
Average Price: 203.66 (202.93+204.39)/2

Note: Now we wait for a buy signal.

TimeFreedom
Attached Image (click to enlarge)
Click to Enlarge Name: scottie_gbpjpy_05-08-08_01.gif Size: 12 KB
  • #407
  • May 8, 2008 9:37pm May 8, 2008 9:37pm
Quoting TimeFreedom
I learn visually therefore I will start posting my charts with entries based on Scottie's strategy. I will only trade long for now, but once I am comfortable with the strategy then I will multi-task, like Scottie, and place long and short trades.

Starting Balance: $10,000.00
Leverage: 200:1
Account Type: Standard
Initial Lot Size: 0.05/$0.50 cents per pip
Averging-in Lot Size: 0.10/$1.00 dollar per pip

First Entry: Long @ 202.93
Recent High: 204.39
Average Price: 203.66 (202.93+204.39)/2

Note: Now we wait for a buy signal.

TimeFreedom
I don't understand why you show the red section if you haven't had a MA crossover in the up direction yet which is required for your first buy.
  • #408
  • May 8, 2008 9:49pm May 8, 2008 9:49pm
hey scottie..... a question on this here if ya have the time......


Quoting Scottie
another cool thing. since i didn't actually have a buy stop, the "system" doesn't know whether i entered the trade at the front side of the move or the back side of the move.
"system" doesn't know , has me puzzled.... what is the benefit in the "system" not knowing what side of the move the trade was entered.....h


//----------------

the dreamliners dangler issue can be largely avoided by placing the trades in a different manner....
to trade and code, keep both simple... no call to impress....h
  • #409
  • May 8, 2008 10:12pm May 8, 2008 10:12pm
My understanding is that we should always have one open long trade initially.

TimeFreedom

Quoting Abnormalone
I don't understand why you show the red section if you haven't had a MA crossover in the up direction yet which is required for your first buy.
Edit: I read Scottie's posts again and you are right. We should wait for a buy signal first. Thanks for the heads up.

TimeFreedom
  • #410
  • May 8, 2008 11:31pm May 8, 2008 11:31pm
Scottie

When you close multiple positions like post #383 will it make any difference which position you leave open? Highest or lowest price or pick one closest to average?
  • #411
  • May 9, 2008 7:35am May 9, 2008 7:35am
Quoting Abnormalone
I don't understand why you show the red section if you haven't had a MA crossover in the up direction yet which is required for your first buy.
abnormalone, the beauty of this system is that mistakes are forgiven and you can at least break even on them. it may take a month, but it will work.

Scott
  • #412
  • May 9, 2008 7:38am May 9, 2008 7:38am
Quoting Richard7
Thanks a lot. I must admit, the light bulb is coming on a bit slow on this one. I'll keep messing with it till I get comfortable.

I notice you're using an hourly chart for entries. What do you do if you miss a second entry, like overnight or some other time away from the computer? Just let it go and see if it hits your average, and if not just look for a new entry?


Thanks again,
Richard
Richard, i will set price alerts on the chart, because much of the time, the asian market sets the charts for an entry off the london session.

if i miss an ehtry, i don't think it will matter for this system. i kind of wish i missed my last one, but a live trial is whats needed to test my psycological impact to see if it will work for me. not that the system won't work.

Scott
  • #413
  • May 9, 2008 7:44am May 9, 2008 7:44am
Quoting hayseed
hey scottie..... a question on this here if ya have the time......




"system" doesn't know , has me puzzled.... what is the benefit in the "system" not knowing what side of the move the trade was entered.....h


//----------------

the dreamliners dangler issue can be largely avoided by placing the trades in a different manner....
Hayseed,
that is an interesting question. i realized this when i made an entry long and it was really a mistake. i looked back and low an behold, i could have made that entry long prior to the 209 high. then i though, i don't really sell the top, so why not place 209 as my high. since it is my initial entry, the "system" won't care.

so, i intend to make half of that move in profits somewhere else.

for those who follow Fibonacci, if you just looked at your second entry and your last top, you could throw a fibb retracement on there and your first target would be the 50% line.

Scott
  • #414
  • May 9, 2008 7:48am May 9, 2008 7:48am
Quoting TimeFreedom
My understanding is that we should always have one open long trade initially.

TimeFreedom



Edit: I read Scottie's posts again and you are right. We should wait for a buy signal first. Thanks for the heads up.

TimeFreedom
TimeFreedom,

if you were to open a long and a short at the same time, you would be net flat, so does the first entry really matter?

i'm playing with synthetic hedging on an aggregate style account. the math works, but to be honest, i don't see it yet. we'll see when the smoke settles.

the ibfx account is doing just what i expected during the lovely down move.

scott
  • #415
  • May 9, 2008 7:50am May 9, 2008 7:50am
it appears to me that this system normalizes down to.
waiting for a high.
take the first entry long after the high after the ma's point up,
and take all profits at the 50% area.

wait for the next high and repeat.

if it doesn't work, average in until it does.
  • #416
  • May 9, 2008 7:52am May 9, 2008 7:52am
i'm a geek, if you are not a geek, then there is still time.
  • #417
  • May 9, 2008 10:00am May 9, 2008 10:00am
Quoting Scottie
i'm a geek, if you are not a geek, then there is still time.
Scottie, I notice you're a civil engineer. I'm a guitarist, so the extent of my math is six strings, twelve scale notes, and twenty four frets. Beyond those numbers I am in uncharted territory, so it may take a little time for me to reach geek status.

Presently I am running a forward test on Dreamliner's original, and am awaiting a long entry a'la Scottie. I'm only trying longs until I get the hang of it, then I'll work on the hedge thing. I am also waiting for one of the usual naysayers to come along and p**s on the campfire, telling us it won't work. As of now, I'm pretty much sold on this and am looking for reasons why it won't work.

In the meantime, I'll be backtesting this till I get it, and any further tips or help will be appreciated. Thanks for helping us (me) out Scottie.


Cheers,
Richard


PS--- Remember the movie "Revenge of the Nerds"? Maybe there should be one like "Day of the Geeks" or the like. I dunno. Thank God for geeks.
  • #418
  • May 9, 2008 10:19am May 9, 2008 10:19am
It won't work. Sorry I could not help myself.
  • #419
  • May 9, 2008 10:24am May 9, 2008 10:24am
Quoting PTOURNIS
It won't work. Sorry I could not help myself.
Thanks. Whew, I'm glad that settles it! On to the next system. http://www.forexfactory.com/images/icons/icon12.gif
  • #420
  • May 9, 2008 1:13pm May 9, 2008 1:13pm
Quoting Abnormalone
Scottie

When you close multiple positions like post #383 will it make any difference which position you leave open? Highest or lowest price or pick one closest to average?
Abnormalone, i think that it would be best to close the first position. in the end, it really doesn't matter, but the first one could be quite negative against you or quite positive in your favour. it just seems like you would like to clean that up so that your averaging is easier to calculate. if you have an aggregate style broker, it wont matter at all because they average everything.
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