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Dion's Pyramid

  • #81
  • Edited 2:35pm Jan 4, 2007 1:09pm | Edited 2:35pm
I have worked on this idea in the spirit of Vegas. Cut losses, and let winners run. A pyramid is a devastating weapon of choice when it works. The question is WHEN will it work.

Case and point: In 2006 we saw GBP/JPY move 3000 pips in one direction. It was an investor's dream. But what about 2005? It was sideways the whole year. Trying to pyramid would have lost money repeatedly.

A second example: 2005 CAD/JPY would have been an excellent year to pyramid.... but 2006 was sideways.

You never know when a trending year will hit. It is gambling and chasing pyramids can make you financially poor.

I am stepping down from this thread for awhile. Perhaps some brilliant reader will figure out a way to perfect the hedging strategy I proposed a few weeks ago. A hedge strategy could create a nearly risk free approach.

For now, I will return to graduate school and put forex behind me unless compelling new evidence is presented.

Thank you for your interest.

Tom
  • #82
  • Jan 5, 2007 3:47am Jan 5, 2007 3:47am
Dude...you going...It was very interesting to share ideas with you.

I must say...after few days of euphoria...last two days have being nasty and i lost all that i gained and i was forced to close my trades in NZDJPY..the 300 PIPS swing washed away all the profits i gained over two weeks.

This is all because of speculation that Japs will raise interest rates on jan.18 and bloomberg surveyed analyst and over 70 percent seems to agree that by march BOJ will increase rates by 0.75. im not sure about it though and holding on to my horses but on a stand by mode.

Im very positive and its just a minor blip in long term scenario.

It was nice sharing with you ideas and hope you will return ASAP.

Good Luck !!
  • #83
  • Jan 5, 2007 10:37am Jan 5, 2007 10:37am
Possibly a medium term dip here and we're off again or bumpy until Japan decisions.. i'm thinking this 'end of the carry trade' talk is premature but causing a decent correction here and put a scare into the little guy.. or try to get some people interested in betting carry unwind so the big boys can take their money and keep it going? let's keep up with the fundamentals and work the monthly/weekly price action i'd say. nzd pairs can get volatile.

If you work with monthly/weekly/daily charts and can catch a swing point or breakout on weekly chart that matches some fundamentals then it looks like multi-1000 pip trends are fairly common on some trendy currencies. So i think the key here is not going automated but to learn price action and work with only long term charts and look for and hopefully jump on one of these opportunities. Use monthly/weekly as a guide, daily for entry/exit. I'm thinking trailing stop fixed risk and letting most ride (reinvest) idea rather than hedging.

Futures trading and using options is likely the best way to play the hedging game..

i think these ideas can work and i'm playing with different 'scale in' mm plans on short term trades going with the trend. back testing my wave surfer ea/indicator on longer term charts is showing lots of opportunities to go for a big trend when using generous trail stop method like low of last 15 bars for instance. i'd suggest using some stop/trend reversal signals to decide when to bail rather than mechanically pushing forward..

Spider, one simple idea might be to look at adding contracts only after a down week or a couple of consecutive down weeks if we can fundamentally assume the uptrend. i'll be watching simple daily stochs and macd for an up turn along with price action at a support level, not sure if it's going to bounce 79.5/80/81ish yet..
  • #84
  • Jan 6, 2007 2:59am Jan 6, 2007 2:59am
I agree...I was of the opinion that the shoulder would complete by around 0.92'ish level and took the risk of doubling up too early and got the nasty blow in two days.

I had a 100-200 PIPS buffer..but it went down over 300 and i was forced to manually close the trade.

The fundamentals with NZDJPY is not wroung at all..carry trade would go on even if JPY raise it rates to 0.50 ...by next month we could NZD raining rates as well.

If we play by strict rules and go with 1000 PIPS buffer as the real game is and not get too greedy etc..it could be a nice little carry trade built up.


Next time the NZD goes up...expect it to cross 90'ish level and im building everything on it..one part carry trade another..just trade

Quoting mrSmoothy
Possibly a medium term dip here and we're off again or bumpy until Japan decisions.. i'm thinking this 'end of the carry trade' talk is premature but causing a decent correction here and put a scare into the little guy.. or try to get some people interested in betting carry unwind so the big boys can take their money and keep it going? let's keep up with the fundamentals and work the monthly/weekly price action i'd say. nzd pairs can get volatile.

If you work with monthly/weekly/daily charts and can catch a swing point or breakout on weekly chart that matches some fundamentals then it looks like multi-1000 pip trends are fairly common on some trendy currencies. So i think the key here is not going automated but to learn price action and work with only long term charts and look for and hopefully jump on one of these opportunities. Use monthly/weekly as a guide, daily for entry/exit. I'm thinking trailing stop fixed risk and letting most ride (reinvest) idea rather than hedging.

Futures trading and using options is likely the best way to play the hedging game..

i think these ideas can work and i'm playing with different 'scale in' mm plans on short term trades going with the trend. back testing my wave surfer ea/indicator on longer term charts is showing lots of opportunities to go for a big trend when using generous trail stop method like low of last 15 bars for instance. i'd suggest using some stop/trend reversal signals to decide when to bail rather than mechanically pushing forward..

Spider, one simple idea might be to look at adding contracts only after a down week or a couple of consecutive down weeks if we can fundamentally assume the uptrend. i'll be watching simple daily stochs and macd for an up turn along with price action at a support level, not sure if it's going to bounce 79.5/80/81ish yet..
  • #85
  • Jan 6, 2007 5:33am Jan 6, 2007 5:33am
1) pyramiding is the only way to make a ton of money in short period of time. thats way so many trend traders are in the market wizards book. yet they loose at some point. everything.
2) when pyramiding you can't effectively limit your risk and exposure because for the most of the time you are trading at max position size. every lot you add adds to the risk of loosing current and all profit. for example: if the chance on level 1 is 50/50 and the chance of level 2 is also 50/50 then the total chance of the postion to reach level 2 is 0.5 * 0.5 = 0.25 (25%). and level 3? 0.5 * 0.5 * 0.5 = 0.125 (12.5%), each level cuts the chance in half. you can calculate the chance at level 11 yourselves.
3) you can't scale out effectively if you are constantly scaling in. you have to "know" when to get out. when a retrace is not a retrace but a reversal.

one suggestion would be to have a huge opening position and at each level add only 1/2 from the previus level. at least then you won't loose all your profit.

anyways, it can work but you have to be very, very lucky to time it right.
  • #86
  • Edited 4:58pm Jan 6, 2007 4:45pm | Edited 4:58pm
Quoting piccolo
anyways, it can work but you have to be very, very lucky to time it right.
Agreed piccolo... and the idea is to remove "luck."

What got my mind going in this direction in the first place was.... the market goes only up, down, and sideways. Eventually it will move 1100 pips up or down from its current price.... corrections are unknown.

So to remove luck, we must find a way to stop margin calls on pyramided positions during corrections. I can't emphasize this enough. I hope readers see the vision of this thread.... to create a method of generating huge profits with low risk. Then we'd say to hell with TA and fundamentals.... we have a mathematical trap for random price action.

I'd really like to see this thread get more exposure. Does anyone have any ideas how to bring more people here?

Thanks again everyone.
  • #87
  • Edited 12:52pm Jan 7, 2007 12:25pm | Edited 12:52pm
Quoting moonchild
Actually this trend started much more than a year ago. It actually started around June 2000 when the pair was at 87.80. In other words in about 6 1/2 years it has gone up 9700 pips or so. Don't you wish you have opened a long position then--9700 pips plus daily interest.
This is a powerful quote that came from:

http://www.forexfactory.com/forexfor...29&postcount=4

I think the vast majority of traders are searching for the quick buck. We have become desensitized to long term investing, always looking to take 5 to 100 pips of the table per trade.

Take moonchild's quote. Pyramiding 50 nanolots per 100 pip increment would have turned $1000 into $600,000+ today. The account could absorb a 4500 pip reversal and still make $70,000 a year in interest.
  • #88
  • Jan 8, 2007 4:26pm Jan 8, 2007 4:26pm
fyi i'm back in long on a little basket of these guys. have been buying on the small dips to get up a bit of a low risk starting position and will go to b/e stop soon and then trail as we're likely going to be rangy for a while but still a few hundred pips on the bounce back up possibly. will try to force myself to make decisions based on the longer term charts. help
  • #89
  • Jan 29, 2007 2:32pm Jan 29, 2007 2:32pm
Quoting tdion
Agreed piccolo... and the idea is to remove "luck."

What got my mind going in this direction in the first place was.... the market goes only up, down, and sideways. Eventually it will move 1100 pips up or down from its current price.... corrections are unknown.

So to remove luck, we must find a way to stop margin calls on pyramided positions during corrections. I can't emphasize this enough. I hope readers see the vision of this thread.... to create a method of generating huge profits with low risk. Then we'd say to hell with TA and fundamentals.... we have a mathematical trap for random price action.

I'd really like to see this thread get more exposure. Does anyone have any ideas how to bring more people here?

Thanks again everyone.
In my humble opinion it is not necessary to earn a million in a month. I bet that even if you guys do - you will loose it next one or two months.

Instead of trading on a full margin you can apply compounding to stronger moves and add for example a 100% a month.

First million will be hit in 14 th month if you start with $100.

4 me Dion's pyramid is interesting but rather suicidal strategy. But on the other hand this direction is wotth studying, maybe there is something worthy that can be applied somewhere.

First question to both strategies is: HOW TO FORESEE BIGGER MOVES?

Any ideas?

Take care.
Quidquid latine dictum sit altum viditur
  • #90
  • Feb 6, 2007 4:48pm Feb 6, 2007 4:48pm
Quoting tdion
The more I think about the pyramid, the more I want to cheat and try to send 5K across 5 levels (the blue dots in the graph)....

At 5 levels, I would close 1K and open the same number of contracts in the opposite direction. If the price reversed, I would continue pyramiding in the opposite direction.

Each new level, I would close one of the 1K legs and do the same described in the previous paragraph. This allows me to keep the trade alive, even after a stop and reverse.

I could do this with 10K, giving me 10 legs to reverse a leg after every new level is reached.

More to come....
Tdion,
I really don't think the viewers of this thread understand what you are talking about. With the way forex is, a trader is in a fight with the people who he gives his money to ( Broker) and its you against them and their dirty games. You can get rich quick in forex. Who wants to do something like looking at charts for 6 years when the same can be accomplished in 6 months using mathematics and common sense. One of the worst things you can do is set a stop loss and use the tools the brokers provide. You have to beat them at THEIR own game and you can only do using mathematics without emotion.
BigDog
  • #91
  • Feb 7, 2007 6:01am Feb 7, 2007 6:01am
Quoting JamDown
You have to beat them at THEIR own game and you can only do using mathematics without emotion.
BigDog
What math? Good old fibonacci ratios? BTW I have taken a back seat to this pyramid... maybe some reader will figure out how to make it work. Anyway, I'd like to know your trading plan.

Thanks.
  • #92
  • Feb 7, 2007 6:28am Feb 7, 2007 6:28am
Quoting tdion

we have a mathematical trap for random price action.
T,

That's a beautiful and poetic way to say "remove the risk from trading". That would be a great achievement, then we wouldn't have to read those pesky brokerage house risk disclosures. And more importantly everyone could quit their day jobs and become millionaires.

This is not possible. You are trying to solve a riddle that has no answer. A sharp guy like yourself is very capable of generating a profit trading the markets without the bells and whistles. If this thread proves anything, it proves that you've got one hell of an analytical mind... now go and cash in your chips.

Best of luck,
MM
  • #93
  • Feb 7, 2007 7:11am Feb 7, 2007 7:11am
Quoting tdion
I'd really like to see this thread get more exposure. Does anyone have any ideas how to bring more people here?

Thanks again everyone.
I've loved following this thread, although the math has defeated me more than once. BUT, the concept is appealing. So if you want more input re-title the thread 'Turn $1,000 into $1,000,000 in 6 months', then watch them flock in .
The only problem is that there is a danger that the quality of analysis may go down, exponentially, as the number of posts goes up. Sounds a bit snobbish but that's the truth of an open forum like this.
  • #94
  • Feb 9, 2007 6:28pm Feb 9, 2007 6:28pm
Quoting tdion
The strategy in Post #1 is rigid. There is no room for error.

The strategy in Post #8 gives leniency for 1 reversal beyond 100+ pips. That is unacceptable risk.

So now, here is my first attempt at a complete solution. For those of you following this thread, you've realized that the system doesn't adapt to the market conditions. We need to change that.

Here is what you do in a nutshell. Start with $11,000, treated as 11 individual $1,000 legs. As the price advances 100 pips, exit a leg and put the profit in a reserve fund (DO NOT open a reverse position as with Trojan Warfare.)

It is CRITICAL that you only go long NZD/JPY doing this because the daily interest is a pip. Your account will collect these "bonus" pips to pay for commissions required on a full hedge in the opposite direction. The margin money for the full hedge is the sum of all legs you have exited to that point in time.

Example situation: Level 2 passed: 83 contracts long + 66 contracts long, total margin is about $250. But you only exited 1 leg so far (at 100 pips) so you have 10 x $250 margin you need to create the full hedge in the opposite direction. To pay for this hedge, you use your reserve fund (discussed in paragraph 4.) Full hedge is initiated when the price has gone -90 pips (could be -99 but we don't want slippage to cause a margin call) from the latest entry. The beauty of this strategy is that the hedge is made of pure margin money, therefore you will never lose it (only the commission paid to enter it.) Full hedge offers 1:1 coverage, thus 100% neutral vs. price action. Every day you are in the position, you are gaining money needed to pay the broker to open the hedge until its time to open it.

This system isn't mathematically perfect, but give the average Joe a real shot at making it work. I need constructive criticism.
I have done something like this before and turned 8000 into 4.1 million trading with a 1 pip spread the NZDUSD. 8hrs total trading time. The market turned one day and I had 10k left. It was on a demo so I didnt bother to jump off the roof. It can be do. We should do it.
  • #95
  • Feb 10, 2007 9:40am Feb 10, 2007 9:40am
Quoting JamDown
I have done something like this before and turned 8000 into 4.1 million trading with a 1 pip spread the NZDUSD. 8hrs total trading time. The market turned one day and I had 10k left. It was on a demo so I didnt bother to jump off the roof. It can be do. We should do it.
8000 to 4 mil in a few hours? That's hard for even me to believe. Will you share the specifics of your strategy with us?
  • #96
  • Feb 16, 2007 9:31pm Feb 16, 2007 9:31pm
Quoting tdion
8000 to 4 mil in a few hours? That's hard for even me to believe. Will you share the specifics of your strategy with us?

share your good fortune of one good day ..... LOL
  • #97
  • Feb 18, 2007 5:36am Feb 18, 2007 5:36am
curious to know how to trun 8K into 4Million in 8 hours.that will be in World Genieus Record soon ......
  • #98
  • Mar 2, 2007 10:41am Mar 2, 2007 10:41am
Quoting JamDown
I have done something like this before and turned 8000 into 4.1 million trading with a 1 pip spread the NZDUSD. 8hrs total trading time. The market turned one day and I had 10k left. It was on a demo so I didnt bother to jump off the roof. It can be do. We should do it.
I am curious which broker offer nzdusd with only 1pip spread. Most of them are 5pips.
If you can reproduce the result again, I could gladly deposit 8k.
But instead of trading 8 hours, you only need to trade 7 hours so the profit will be safe!
We will share the profit ofcourse...
  • #99
  • Mar 2, 2007 12:56pm Mar 2, 2007 12:56pm
Hello I jsut read your whole thread your observations are valid but I believe is incomplete.

Why would you need to risk your whole account in an all or nothing bet since even a small amount can quickly turn into a huge gain ? why not just risk say 10% of your equity as a starting point then pyramid that? if equity goes up by 10% then add another 10% worth of lots, etc.

Also its like you are using the margin call as your stoploss and trailing stop, why not just simulate that margin call? say profit from the pyramid falls by a certain amount in $ or %, close all positions.

Another thing I think your system lacks is valid entry and exit points if you combine this with a good trend fallowing system then you could increase the probability of hitting that giant win...

Please correct me if my logic is incorrect...

-Mikhail
  • #100
  • Mar 4, 2007 7:03am Mar 4, 2007 7:03am
Hello Again,

I've been seriously looking to this strategy and thinking of ways to make it usable. I dont know if you thought of this before tdion, so please correct me if I missed something.

What comes to mind with this strategy is Grid trading but somewhat reversed. So the idea is this, say you have $1000. we trade only one mini lot at a time with 100pips as our stoploss, so that we will have at least 10 tries to catch that big winner. So first we straddle the price at 100 pips apart. If say our buy stop is hit, we then put another buy stop 100pips above our buy position for 1 mini lot(level 2). Say we get lucky and level 2 is hit. we now move our stoploss 50 pips away from level 2. So when we reach level 2 worst case is that be get break even. When we get lucky again and we are now at level 3, are stoploss now should be placed 100 pips away so its at level 2 open price. Now at level 3 our guaranteed pips is still breakeven. Now when we get to level 4 we move our stoploss to level 3. our guaranteed pips is now 100. After this we just keep adding fixed lots until our stoploss is hit.

Total Risk $100, only at level 1, level 2 and 3 breakeven and from level 4 and up is all guaranteed profits.

Attached is a chart of GBPJPY with huge profits and actually in this particualr example maximal drawdown is $0.


http://www.forexfactory.com/%5BURL=h...G%5D%5B/URL%5Dhttp://img84.imageshack.us/img84/5730/pyramidqz1.gif

Looking forward to your comments,

Mikhail
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