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Super Carry Trade Trading System

  • #441
  • May 20, 2008 10:13am May 20, 2008 10:13am
I have a question for those who are trading the original Dreamliner rules. Does anybody ever set limit orders for the average in entries, the ones where you place a market order 200 pips below the current average? Yes, I know they are supposed to be market orders, but what's happening to me now is this.

I'm in a trade with two danglers, and I'd like to get the average down, but everytime the market drops 200 pips below my current average, I'm not there to enter at the market. When I check the trade, it's back within it's 200 pip range. I do understand that this is part of the system, gaining interest while the trade tries to get a direction, so I'm probably just being impatient. I'm just curious to see how others deal with this, or if you deal with it at all.


Cheers,
Richard
  • #442
  • May 20, 2008 11:32am May 20, 2008 11:32am
Limit orders are best, otherwise you'll likely miss the opportune time/price.

One other thing... I believe it's best to avoid the 10 pip incremental action, as the cost of the transactions due to the spread is enormous. Instead, simply open & close every 50 - 100 pips after the currency has a material dip. For example, if you open & close every 10 pips, after a 100 pip movement, you'll only earn about 50 pips (due to the slippage and spread) on 10 transactions; however, you'll earn about 91 pips on 1 transaction or about 80 pips on 2 transactions. Of course, the drawback is the exposure while awaiting a 50 - 100 pip move (i.e. the market could move against you and erase the incremental profit). Nonetheless, I think what I'm suggesting is a more cost effective approach that will yield less danglers.

Hopefully this makes sense...

Walt
  • #443
  • May 20, 2008 12:38pm May 20, 2008 12:38pm
Quoting jones247
Limit orders are best, otherwise you'll likely miss the opportune time/price.

One other thing... I believe it's best to avoid the 10 pip incremental action, as the cost of the transactions due to the spread is enormous. Instead, simply open & close every 50 - 100 pips after the currency has a material dip. For example, if you open & close every 10 pips, after a 100 pip movement, you'll only earn about 50 pips (due to the slippage and spread) on 10 transactions; however, you'll earn about 91 pips on 1 transaction or about 80 pips on 2 transactions. Of course, the drawback is the exposure while awaiting a 50 - 100 pip move (i.e. the market could move against you and erase the incremental profit). Nonetheless, I think what I'm suggesting is a more cost effective approach that will yield less danglers.

Hopefully this makes sense...

Walt

Thanks Walt,

Yes, it does make sense. Earlier in the thread Scottie proposed a similar action, but uses a more hands on approach. Some one else (it might have been you) mentioned it was similar to Dirk DuToit's Bird Watching. I like this approach because it's such an easy to manage method, and as such dropping the limit ladder of orders makes a lot of sense. Even Dreamliner looked into dropping the limit orders.

So Walt, I guess you are actively trading this. How many and what pairs are your trading? I noticed some discussion earlier about diversifying but I don't know that anything was settled. All I know is, I like this and I want to implement it live ASAP.


Cheers,
Richard
  • #444
  • May 21, 2008 9:49am May 21, 2008 9:49am
I'm using a combination of Dirk's Bird Watching system and Dreamliner's system, with unique modifications to make it my own. Currently, I apply it on 3 - 4 currency pairs simultaneously. Ultimatley, it's all about developing your own style/system that's based upon trading fundamentals. These fundamentals include proper money/risk mgmt and following the trend. The big diffuculty is following the trend! However, with good MM one could offset going against the trend for an extended period of time. In my opinion, price action and market fundamentals (economic metrics and news) are the best determining factors for trend.

Then again, timing is everything... fooled by randomness...

Walt
  • #445
  • May 21, 2008 9:34pm May 21, 2008 9:34pm
... Also, the U.S. Stock Market tend to correlate with the direction of the US based currency pairs...

Walt
  • #446
  • May 22, 2008 7:06pm May 22, 2008 7:06pm
My update on this system, I just closed all my trades since the current price is above my average price. So far I have experienced 400 and 800 pips down two cycles. Still demo using 1 mini lot, spacing 10, take profit 20, seeing more than $3000 draw down one time. Current profit $1300 in 2 weeks.
I think the system works as long you can handle the draw down.
  • #447
  • Edited 7:17am May 25, 2008 7:17am | Edited 7:17am
Quoting patrick25
My update on this system, I just closed all my trades since the current price is above my average price. So far I have experienced 400 and 800 pips down two cycles. Still demo using 1 mini lot, spacing 10, take profit 20, seeing more than $3000 draw down one time. Current profit $1300 in 2 weeks.
I think the system works as long you can handle the draw down.

1 minilot= 10,000? and what is your account size?
  • #448
  • Edited 9:11am May 25, 2008 9:10am | Edited 9:11am
Quoting patrick25
My update on this system, I just closed all my trades since the current price is above my average price. So far I have experienced 400 and 800 pips down two cycles. Still demo using 1 mini lot, spacing 10, take profit 20, seeing more than $3000 draw down one time. Current profit $1300 in 2 weeks.
I think the system works as long you can handle the draw down.
correct on the draw down.

if you have a t/p of 20 that will give you 2 danglers (probably 3 with spread) on each run up. in order to average this in properly, you probably should have 2-3 entries at each entry location in addition to the stop orders. this would give you 2-3 mini lots to begin the round. i would want 40-60k in the account if running this.

Scott
  • #449
  • May 27, 2008 5:36pm May 27, 2008 5:36pm
Ok, just finished the thread. This has some aspects of the carry grid EA.

I'm a little confused on why not to start a new ladder every 200 pips down.

Is this correct: Establish a long position with no tp. Place buy stops above in 10 pip steps with 10 pip tps.

If price drops 200 pips, establish another long with no tp and place buy stops above with the same 10/10 scenario. Close all when price is above the average and re-start.

Some have said to only check once a day or so, but what do you do if price had been below the 200 pip threshold and has come back? Why not just place a new long limit in advance of the 200 decline, and then build its ladder when it's hit?

Another confusing point is, I read that someone had 20 or 30 danglers. How many danglers do you get per ladder -- 2-3? Does 20-30 danglers mean they had 10-15 ladders established? That's a 2,000 to 3,000 drop with no retracement?

Sorry for the long post, but if anyone can clarify it would be appreciated.
  • #450
  • May 27, 2008 6:52pm May 27, 2008 6:52pm
Anyone using the advanced buy stop script posted by BigHope?
It looks like it works fine except for the lot size. I'm trying to change lot size to .02, but it won't take. It still opens for 2 lots. Any ideas? Yes, I recompile after the change, and yes my broker accepts .02.

Quoting bighope
here's another buy stop script for MT4 with variable TP function; variable spacing function; and all previous variable functions.
with this script you can set your first buy stop order just one point above the bid price or other points
your second position 20 point above your first position or some points you desire
also set 20 point tp or else

for newbies in mt4 please place this script in :

C:\Program Files\"your broker mt4 name"\experts\scripts

example for interbankfx customers:

C:\Program Files\Interbank FX Trader\experts\scripts

to modify the variable :
just right click the Adv_buy_stop_script in the navigator window in your MT4
change your variables (please check to always have ";" in the end of your variable value )
click compile

Please remember this is script not an EA ;

hope it's help
  • #451
  • May 28, 2008 7:46am May 28, 2008 7:46am
Hi,

Is the general consensus to add one position to a negative average position per day in order to reduce the average negative position, until such time as it closes in the plus?

Or...is it to add positions enough to keep average position above -200, and then sooner or later a plus day will cancel out the deficit...only time is the vairable.

I've been playing around with this in a hundred different ways. Always seem to come back to Dreamliner's rules. Am testing both of the above variations.

I wrote an Excel spread sheet & tested over 10 years data & both Long as well as Short. This is truly a profit monster. Need to address the Drawdowns somehow. Scary!!

This methodology is by far the best I've run across. Hats off to Dreamliner and everyone else who's particitated in this great thread.

Peter O
  • #452
  • May 28, 2008 8:41am May 28, 2008 8:41am
Peter O, in all your testing, have you determined an optimal lot size per 1k of account value?
  • #453
  • May 29, 2008 9:25am May 29, 2008 9:25am
Quoting petero
Hi,

Is the general consensus to add one position to a negative average position per day in order to reduce the average negative position, until such time as it closes in the plus?

YES

Or...is it to add positions enough to keep average position above -200, and then sooner or later a plus day will cancel out the deficit...only time is the vairable.


NO


I've been playing around with this in a hundred different ways. Always seem to come back to Dreamliner's rules. Am testing both of the above variations.

I wrote an Excel spread sheet & tested over 10 years data & both Long as well as Short. This is truly a profit monster. Need to address the Drawdowns somehow. Scary!!

This methodology is by far the best I've run across. Hats off to Dreamliner and everyone else who's particitated in this great thread.

Peter O
I agree with your praise of this method and concern about drawdown.
I will not tolerate more than a 25% drawdown PERIOD. If you open a small account that won't wipe you out if it is blown, this can help solve the problem. For example. If you have $100,000 capital, put 25% in a forex account and follow dreamlines rules. If you are wiped out, it's only 25% of your total capital. You would need to get 33% on 75k to go back even at 100k after a wipeout of the forex account. (30% loss requires 43% to get back even. 40% requires 67% to get back even. and so on)

I have chosen to currently only trade NZD/USD (less volatile). I don't use 200p below price of buydown. (for me I use 1 atr (10) ) drop. Also, I use a 15 pip PT on ALL POSITIONS I OPEN ....ALL....so I never have a dangler. I use a 10 pip gap between PT and buy limit orders when I first begin and as long as I only have one position open my position size remains 1% .

Even when price drops, I use 15 pip target on new low position and when PT is hit, I open another new position with a 15 pip PT if no lower position is open and the price is more than 1 atr(10) below average price. This position and buy limits are 1/2 the original positions and Buy limit sizes.

This method completely eliminates danglers and greatly reduces drawdown. Additionally, I use 20% of capital as initial and buy limits and only 10% on the buy down positions and buy limits above the new low 2nd position.... etc. ( for $10,000 account position is $2000 initial and $1000 on buy downs ... and this roughly means 1% oanda position and .5% as described by dreamliner) Further, when my total exposure equals account balance, I open buy down only when price is 2 x ATR (10) below average price. When total exposure is 2 x my capital, I go to 4 X ATR(10) and I start taking losses from the top positions. This means I open a buy down position and close my very first position only at a loss. (This is greatly reducing my total risk and the loss is small because of previous interest and PT target profits. If my situation of losses taken plus current open position losses exceeds 25% of my total capital, I will close everything and start over.

Also, I don't forsee massive unwinds without having some fundamental information that tells us there is a problem. If fundamental situation is changing, I will get out of particular pair. For example...NZ economy starts tanking and NZD interest rate is going to decline, while USD is seen as rising or being stable. I will be out because fundamental is not in line. And because of my conservative buy down strategy and no danglers, I would be out with 10% or so loss at most (wild guess) without considering previous interest and PT gains.

Probably go USD/JPY, USD/CHF in this situation. In any event, I am going to trade the pair or pairs which have steady rising rates on base and steady to falling on secondary currency and will stop trade at profit or loss when this fundamental condition changes. If I were trading GBP/JPY I would use 1/2 or less the position size I use on NZD/USD.

Here is example scenario 10k account:

Open with $2000 position

Price: 7700 PT 7715 BUY LIMIT 7725 PT 7740 BUY LIMIT: 7750 and so on.

Let's say first position PT hit second not;

I now have 1 position at 7725 and current ATR(10) is 100

At 7625 price (1 atr(10) below average) I open $1000 position with PT +15 and buy limit + 25 (7650) etc.

If overnight first position at 7625 hits PT and only original 7725 position is open and price is 1 ATR(10) below average price, I open new position with PT 15 and new buy limits ( position sizes 1/2 original.

This method should only when hell freezes over have danglers I believe.

I hope this is all clear enough.
  • #454
  • May 29, 2008 9:47am May 29, 2008 9:47am
Very interesting twist, Ftraderx. I'll give it a try.

I think I'll have to download Oanda's platform to see the lot sizes you're using. I have never seen lot sizes described that way, other than in reference to Oanda. What would a 20% position size be on a 50k account? Obvioulsy that's 10k, but how do they extrapolate that to a position size?

And you mention buy limits for positions executed above the current price. That's a buy stop everywhere else, so Oanda must be a bit unique.
  • #455
  • May 29, 2008 9:53am May 29, 2008 9:53am
Very Interesting method. It's hard to think about switching right now since my method is soaring through the roof in profits right now. Of course that's because the markets are going up, when they go down the drawdown becomes hard to manage.

Can you please explain "ATR" and how to use it? I don't know what that is, is there an indicator or something for this?

Thanks for your contribution.

Quoting ftraderx
I agree with your praise of this method and concern about drawdown.
I will not tolerate more than a 25% drawdown PERIOD. If you open a small account that won't wipe you out if it is blown, this can help solve the problem. For example. If you have $100,000 capital, put 25% in a forex account and follow dreamlines rules. If you are wiped out, it's only 25% of your total capital. You would need to get 33% on 75k to go back even at 100k after a wipeout of the forex account. (30% loss requires 43% to get back even. 40% requires 67% to get back even. and so on)

I have chosen to currently only trade NZD/USD (less volatile). I don't use 200p below price of buydown. (for me I use 1 atr (10) ) drop. Also, I use a 15 pip PT on ALL POSITIONS I OPEN ....ALL....so I never have a dangler. I use a 10 pip gap between PT and buy limit orders when I first begin and as long as I only have one position open my position size remains 1% .

Even when price drops, I use 15 pip target on new low position and when PT is hit, I open another new position with a 15 pip PT if no lower position is open and the price is more than 1 atr(10) below average price. This position and buy limits are 1/2 the original positions and Buy limit sizes.

This method completely eliminates danglers and greatly reduces drawdown. Additionally, I use 20% of capital as initial and buy limits and only 10% on the buy down positions and buy limits above the new low 2nd position.... etc. ( for $10,000 account position is $2000 initial and $1000 on buy downs ... and this roughly means 1% oanda position and .5% as described by dreamliner) Further, when my total exposure equals account balance, I open buy down only when price is 2 x ATR (10) below average price. When total exposure is 2 x my capital, I go to 4 X ATR(10) and I start taking losses from the top positions. This means I open a buy down position and close my very first position only at a loss. (This is greatly reducing my total risk and the loss is small because of previous interest and PT target profits. If my situation of losses taken plus current open position losses exceeds 25% of my total capital, I will close everything and start over.

Also, I don't forsee massive unwinds without having some fundamental information that tells us there is a problem. If fundamental situation is changing, I will get out of particular pair. For example...NZ economy starts tanking and NZD interest rate is going to decline, while USD is seen as rising or being stable. I will be out because fundamental is not in line. And because of my conservative buy down strategy and no danglers, I would be out with 10% or so loss at most (wild guess) without considering previous interest and PT gains.

Probably go USD/JPY, USD/CHF in this situation. In any event, I am going to trade the pair or pairs which have steady rising rates on base and steady to falling on secondary currency and will stop trade at profit or loss when this fundamental condition changes. If I were trading GBP/JPY I would use 1/2 or less the position size I use on NZD/USD.

Here is example scenario 10k account:

Open with $2000 position

Price: 7700 PT 7715 BUY LIMIT 7725 PT 7740 BUY LIMIT: 7750 and so on.

Let's say first position PT hit second not;

I now have 1 position at 7725 and current ATR(10) is 100

At 7625 price (1 atr(10) below average) I open $1000 position with PT +15 and buy limit + 25 (7650) etc.

If overnight first position at 7625 hits PT and only original 7725 position is open and price is 1 ATR(10) below average price, I open new position with PT 15 and new buy limits ( position sizes 1/2 original.

This method should only when hell freezes over have danglers I believe.

I hope this is all clear enough.
  • #456
  • May 29, 2008 10:03am May 29, 2008 10:03am
Hi Dreamliner,
Yes indeed, these 3 days your method has been collecting pips step by step.
Play small this can be a passive income for years to come. Thank you for sharing.
  • #457
  • May 29, 2008 10:05am May 29, 2008 10:05am
In this example, isn't your 7725 positon considered a dangler?

Quoting ftraderx
.... Here is example scenario 10k account:

Open with $2000 position

Price: 7700 PT 7715 BUY LIMIT 7725 PT 7740 BUY LIMIT: 7750 and so on.

Let's say first position PT hit second not;

I now have 1 position at 7725 and current ATR(10) is 100

At 7625 price (1 atr(10) below average) I open $1000 position with PT +15 and buy limit + 25 (7650) etc.

If overnight first position at 7625 hits PT and only original 7725 position is open and price is 1 ATR(10) below average price, I open new position with PT 15 and new buy limits ( position sizes 1/2 original.

This method should only when hell freezes over have danglers I believe.

I hope this is all clear enough.
  • #458
  • May 29, 2008 10:09am May 29, 2008 10:09am
Dreamliner, in one of your earlier posts, you mentioned that you were also trading this on 2 other pair. Are you using the same rules for those pairs -- the 200 pip drop, etc?
  • #459
  • May 29, 2008 10:15am May 29, 2008 10:15am
Quoting BenQ
Dreamliner, in one of your earlier posts, you mentioned that you were also trading this on 2 other pair. Are you using the same rules for those pairs -- the 200 pip drop, etc?
Hi Ben, yes same rules. I'm interested in your "no dangler" approach. What is ATR and is there an indicator that you use for it?
  • #460
  • Edited 7:26pm May 29, 2008 10:25am | Edited 7:26pm
It's not my approach, it's ftraderx's. But it does sound interesting. I have this ATR indicator. Place on a daily chart, and change the setting to 10 is I think what's he's doing.

Edit: Oh, and it means average true range.

Quoting Dreamliner
Hi Ben, yes same rules. I'm interested in your "no dangler" approach. What is ATR and is there an indicator that you use for it?
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File Type: mq4 ATR.mq4   2 KB | 449 downloads
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