Weekly 80/20 Setups | Page 24 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Trading Systems or Trading Setups 9 replies

Brainstorming Session: OctaveJay's Weekly n Daily Trade Setups 61 replies

Intraday setups with Weekly TF 30 replies

High Probability Trading Setups for the Currency Market 6 replies

Current Weekly Price Action Setups 1 reply

Attachments: Weekly 80/20 Setups
Exit Attachments

Weekly 80/20 Setups

  • #461
  • Aug 21, 2008 3:05pm Aug 21, 2008 3:05pm
Fj,

yes, the weekly.

I dont have an indicator of the 20-week slope for backtesting, but the moves were so fast, I dont think you would have caught up.

those big moves started on 27/2/06, 16/8/07, 7/2/08.

If anybody got an indicator for the 20-week slope, I would very much like to have it.
Math, do you have one?
Can`t be a SMA?

take care
  • #462
  • Aug 23, 2008 2:24am Aug 23, 2008 2:24am
Quoting Flyjetz
I wouldn't say I have the most experience. I've only been trading live since February. I have learned two things from the "USD saga". One is to not get greedy with return expectations by clamping down on the amount of capital being risked per trade. This system needs a lot of "wiggle room". The next is to not be overly exposed to one single currency. The USD was involved in 13 of the 26 currencies I traded. I got caught in a situation where half my open trades were long the USD. This was the first time I manually intervened in the system to prevent further capital loss. I've adjusted how I trade the system (less risk and less single currency exposure), but have not adjusted the system. The lessons have been learned and I won't repeat those mistakes again.
Fj,

With the USD it was the first time you intervened in the system to prevent further capital loss.

Now that your system is currency balanced, would you expect not to intervene ever again and let the 20-week slope catch up with the culprit?

I`m especially thinking of the JPY, which can be quite volatile.

If you think that you might have to intervene again in the future, would it not be better to have a well thought out rule when and where to step in?
  • #463
  • Aug 23, 2008 8:05am Aug 23, 2008 8:05am
Quoting yonnie
Fj,

With the USD it was the first time you intervened in the system to prevent further capital loss.

Now that your system is currency balanced, would you expect not to intervene ever again and let the 20-week slope catch up with the culprit?

I`m especially thinking of the JPY, which can be quite volatile.

If you think that you might have to intervene again in the future, would it not be better to have a well thought out rule when and where to step in?
The idea is NOT to intervene. I think I've made it very clear that I still consider myself a NEWBIE of sorts to Forex trading. From the beginning, I said that risk management was the number one rule to this system. I thought I had studied it well enough and positioned myself well enough that I would not have to manually override the system. But the USD turned unexpectedly, and I was caught on the wrong side with 13 pairs. The drawdown got to a point that was too uncomfortable for me. That is why I stepped in. Now that I am repositioned in a more balanced way and taking less risk per trade, I feel that I have given the system the ample room that it needs to run without any intervention. So to answer your question, I do not intend to intervene again.
  • #464
  • Aug 23, 2008 3:03pm Aug 23, 2008 3:03pm
Fj,

thank you for your clear answer and good trading to you


rcwso and mathematician,

as far as I know, these two were the only others here who trade this system live.
could you guys give us a follow-up how yous are doing?

thanks
  • #465
  • Aug 27, 2008 11:09am Aug 27, 2008 11:09am
Quoting yonnie
Fj,

yes, the weekly.

I dont have an indicator of the 20-week slope for backtesting, but the moves were so fast, I dont think you would have caught up.

those big moves started on 27/2/06, 16/8/07, 7/2/08.

If anybody got an indicator for the 20-week slope, I would very much like to have it.
Math, do you have one?
Can`t be a SMA?

take care
Do I have an indicator for the 20-week slope? If you mean do I have some indicator file that you can plug into MT4 or something like that, then the answer is no, I don't.

I just calculate the 20-week average slope using Excel. Here's how you do it:

  1. Make two columns in Excel, one for the weekly highs and one for the weekly lows. Record the most recent 20 weeks of highs and lows.
  2. Make another column that will be the midpoint. This is calculated as (H+L)/2, so using Excel formula notation that would be something like this: C1 = (A1+B1)/2
  3. Make yet another column to store the percent change between the midpoints each week (you might call this the week-to-week slope). Let's say column C holds the midpoints. Also, let's assume that C1 is the oldest data and C20 refers to the most recent week. Then the percent change would be: D2 = C2/C1 - 1. Since we must compare two weeks to get one calculation, you will only get 19 "week-to-week slope" calculations. Note: You could leave the oldest slope in there every time you update the data each week. Then you would get 20 slope calculations, but I never bothered to do that.
  4. Finally you can calculate the 20-week average slope. Simply take the average of the 19 (or 20) week-to-week slope calculations. You can use Excel's built-in average function for this. Ex) AVERAGE(D2 : D20)

Actually it is, effectively, an SMA. However, it's applied to the week-to-week slopes, not to any direct price.

  • #466
  • Aug 27, 2008 11:47am Aug 27, 2008 11:47am
Quoting yonnie
Fj,

thank you for your clear answer and good trading to you


rcwso and mathematician,

as far as I know, these two were the only others here who trade this system live.
could you guys give us a follow-up how yous are doing?

thanks
Yes, I was trading this system live. Not surprisingly, I got caught on the wrong side of the USD rally. I was heavily exposed to the USD at the time, so it was devastating to my position.

I chickened out and stopped trading this system. That's why I haven't been posting here in a while. My positions are still open, but I have stopped moving the stop-loss orders according to the weekly 80-20 level projections. Instead, I set all my TPs to slightly ahead of the entry price. Essentially I am just going to let it sit, ride it out and hope that some of the trades come back to a slight positive and trigger my TP. Of course the worst case is that price just keeps slipping and I get a margin call. I'm not too worried about that since I have such a small amount of money at risk in that account. Luckily, my total position is net positive in terms of the interest rate differential. So I am making a little bit of interest every day just by holding this position. I guess I am temporarily a carry trader.

In the end, it's actually a good thing that we got caught in this mess. Every trading system/method has its ugly side. You want to know what that ugly side is, and we are fortunate to have seen it relatively early on. Now that you know the worst(?) of it, you can plan/adjust accordingly to avoid such a catastrophe in the future.

As for me, I don't think this system is a good match for my personality. Although the simple mathematical model and mechanical nature of it is a great match for me, the erradic swings are not. I simply do not have that kind of appetite for risk. In stark contrast to this system, I have actually switched to a non-mechanical, ultra short-term scalping method. That seems to suit me much better.

Clearly this system requires careful management of currency exposure, as FJ mentioned early on. So perhaps it is a matter of having a few favoured currency pair, and then only placing additional trades if it reduces your total exposure. So the trading signals and execution are completely mechanical and emotionless. Fly has boiled it down to a science. The decisions about which of those signals to take and careful management of exposure is probably more of an art.

I liked Fly's idea about trading only a special set of pairs that leave every currency equally represented, e.g. EURUSD, EURJPY, EURGBP, EURCHF, GBPUSD, GBPCHF, GBPJPY, USDJPY, USDCHF, CHFJPY. Here every currency is represented in four pairs. By the way, in mathematics, this is called a complete graph since every combination of two points is connected. See the attachment.
Attached Image
  • #467
  • Aug 27, 2008 12:32pm Aug 27, 2008 12:32pm
Quoting mathematician
Yes, I was trading this system live. Not surprisingly, I got caught on the wrong side of the USD rally. I was heavily exposed to the USD at the time, so it was devastating to my position.

I chickened out and stopped trading this system. That's why I haven't been posting here in a while. My positions are still open, but I have stopped moving the stop-loss orders according to the weekly 80-20 level projections. Instead, I set all my TPs to slightly ahead of the entry price. Essentially I am just going to let it sit, ride it out and hope that some of the trades come back to a slight positive and trigger my TP. Of course the worst case is that price just keeps slipping and I get a margin call. I'm not too worried about that since I have such a small amount of money at risk in that account. Luckily, my total position is net positive in terms of the interest rate differential. So I am making a little bit of interest every day just by holding this position. I guess I am temporarily a carry trader.

In the end, it's actually a good thing that we got caught in this mess. Every trading system/method has its ugly side. You want to know what that ugly side is, and we are fortunate to have seen it relatively early on. Now that you know the worst(?) of it, you can plan/adjust accordingly to avoid such a catastrophe in the future.

As for me, I don't think this system is a good match for my personality. Although the simple mathematical model and mechanical nature of it is a great match for me, the erradic swings are not. I simply do not have that kind of appetite for risk. In stark contrast to this system, I have actually switched to a non-mechanical, ultra short-term scalping method. That seems to suit me much better.

Clearly this system requires careful management of currency exposure, as FJ mentioned early on. So perhaps it is a matter of having a few favoured currency pair, and then only placing additional trades if it reduces your total exposure. So the trading signals and execution are completely mechanical and emotionless. Fly has boiled it down to a science. The decisions about which of those signals to take and careful management of exposure is probably more of an art.

I liked Fly's idea about trading only a special set of pairs that leave every currency equally represented, e.g. EURUSD, EURJPY, EURGBP, EURCHF, GBPUSD, GBPCHF, GBPJPY, USDJPY, USDCHF, CHFJPY. Here every currency is represented in four pairs. By the way, in mathematics, this is called a complete graph since every combination of two points is connected. See the attachment.

Just out of curiousity how are you scalping, any particular method/style or Timeframe? I only ask because I scalp and was looking to potentially put some of the earnings into a longer term system such as this but decided against it as there is just too much $ to make scalping
  • #468
  • Aug 27, 2008 7:31pm Aug 27, 2008 7:31pm
hi guys,

thank you Math for your reply.

I reckon this strategy should do well over the next few months.
With all the main economies being in a downturn, we are entering a ranging market; that is my opinion but I might be wrong.

If I were to play this system, I would have emergency exits in place.
So for EUR/USD, uptrend, last swing 1.5300 - 1.6000.
If price goes through 1.6000 thats normal, but if price goes down through 1.5300, well thats not normal and thats where I feel there should be an exit.

So if you`re buying @ 1.5800 and price goes down to 1.5300, a 500 pip loss there`s nothing wrong with that.
Price is still in the normal range.

BUT: price goes down through 1.5300, we should be looking for the exit.
I would propose to give a little wriggle room under 1.5300. but once price closes the day under 1.5300 or 1.5250 or 1.5200 (whatever you prefer) just exit the trade.
I would wait till the day`s close, `cos price might come back from the low of the day and close above 1.5300.

If you follow this exit strategy, you would have been stopped out twice since December 2005 on this pair.
Once 20 December 2007 when it resumed its trend straight away, and the other time recently, where this exit could have saved you big dollars.

what do you people think?
  • #469
  • Edited 11:30pm Aug 27, 2008 11:16pm | Edited 11:30pm
so to resume my earlier post........

so that are the exits of the trending pairs taken care of.
with the trending pairs, I would only trade with the trend,
because I dont want too many premature exits.

Now as to limiting the exposure to the pairs where there is no clear trend.

I think I would exit when the price rises or drops through the ceiling or bottom of the swing range in the same way as for the trending pairs.
these pairs I would trade long AND short.

In following a system like this, everything is still mechanical and an early exit hardly takes up any time at all.
At the end of the day you can check if the price is still within the range and if not, exit the trade according to your specifications early the next trading day.

The advantages are obvious:
1. minimising risks; you cant blow up your account.
2. after exiting your trade you have money available for the next trades, which might turn out to be profitable instead of being in a losing trade for months on end.
certainly if this trade is interest-negative.
3. peace of mind
4. you might be able to increase the margin you are trading, because the risks are limited now and the profits will be greater in the end.

For the moment I would trade all pairs long and short, because trends have been broken and until there is a clear trend again there is no need to go short or long only.

what do you think guys?
  • #470
  • Aug 28, 2008 10:10pm Aug 28, 2008 10:10pm
Yonnie,

I think it all comes down to personal preference on how you want to manage your risk. If your position sizes are so big that when a pair goes outside it's "normal" range, you are losing sleep, then yeah, some type of hedge position like you advocate is probably going to help you sleep better. You are absolutely right, prior to this recent USD rally, if I had some type of hedge against abnormal movements, I would be a lot happier right now. On the flip side, I have reacted in a way that tries to stay true to the system, and keep it from getting too complicated. This system needs a lot of room to maneuver. By decreasing risk per currency, and decreasing pairs traded, I know I am already sleeping better. Regardless, it still goes back to the number one rule in Forex, Risk Management. Whether you accomplish that through position sizing or some type of hedging is up to you.
  • #471
  • Aug 30, 2008 7:21am Aug 30, 2008 7:21am
Quoting fxRichard
Just out of curiousity how are you scalping, any particular method/style or Timeframe? I only ask because I scalp and was looking to potentially put some of the earnings into a longer term system such as this but decided against it as there is just too much $ to make scalping
I started reading Linux Troll's "Simple Scalping" thread. There are over 200 pages on that thread. I stopped on page 25 and started practicing. It's been going well.

The key for me was to have a small daily goal: Make 10 pips a day. With a goal like that, you've got your work cut out for you. It's an easily attainable goal and it prevents you from over-trading and making stupid mistakes. You can easily get rich from 10 pips a day, if you compound every day. Plus some days I make more because I might catch a bigger move.

I think having a profit goal is a good idea for any trading system/method. Decide on some time period (one day, one week, etc.) and set a goal that you should...no must, meet every period. What if you have a losing trade? No problem, just get out of it quickly and make the money back with another trade. You want your time period and profit goal combination to be such that there are plenty of opportunities for you to meet your goal even if you have to recoup some losses.

You want to be consistently making money every period. It can be a small goal like 10 pips. Consistency is king.
  • #472
  • Edited 7:56am Aug 30, 2008 7:35am | Edited 7:56am
Quoting mathematician
I started reading Linux Troll's "Simple Scalping" thread. There are over 200 pages on that thread. I stopped on page 25 and started practicing. It's been going well.

The key for me was to have a small daily goal: Make 10 pips a day. With a goal like that, you've got your work cut out for you. It's an easily attainable goal and it prevents you from over-trading and making stupid mistakes. You can easily get rich from 10 pips a day, if you compound every day. Plus some days I make more because I might catch a bigger move.

I think having a profit goal is a good idea for any trading system/method. Decide on some time period (one day, one week, etc.) and set a goal that you should...no must, meet every period. What if you have a losing trade? No problem, just get out of it quickly and make the money back with another trade. You want your time period and profit goal combination to be such that there are plenty of opportunities for you to meet your goal even if you have to recoup some losses.

You want to be consistently making money every period. It can be a small goal like 10 pips. Consistency is king.
...... I know this method very well, pm sent
  • #473
  • Aug 30, 2008 12:16pm Aug 30, 2008 12:16pm
Hello, I did not read all the posts but get the trading method basis. And I am surprised you don't place any stop loss. I think your profit could be really better with money management and stop loss particulary, would'nt it ?
  • #474
  • Aug 30, 2008 3:54pm Aug 30, 2008 3:54pm
Quoting yonnie
hi guys,

thank you Math for your reply.

I reckon this strategy should do well over the next few months.
With all the main economies being in a downturn, we are entering a ranging market; that is my opinion but I might be wrong.

If I were to play this system, I would have emergency exits in place.
So for EUR/USD, uptrend, last swing 1.5300 - 1.6000.
If price goes through 1.6000 thats normal, but if price goes down through 1.5300, well thats not normal and thats where I feel there should be an exit.

So if you`re buying @ 1.5800 and price goes down to 1.5300, a 500 pip loss there`s nothing wrong with that.
Price is still in the normal range.

BUT: price goes down through 1.5300, we should be looking for the exit.
I would propose to give a little wriggle room under 1.5300. but once price closes the day under 1.5300 or 1.5250 or 1.5200 (whatever you prefer) just exit the trade.
I would wait till the day`s close, `cos price might come back from the low of the day and close above 1.5300.

If you follow this exit strategy, you would have been stopped out twice since December 2005 on this pair.
Once 20 December 2007 when it resumed its trend straight away, and the other time recently, where this exit could have saved you big dollars.

what do you people think?

I am quiet ok with you. This strategy could be profitable but as with all strategies you have to put a maximum stop loss. If the range is 700pips (1.53 / 1.60) so it means that you go short at 1.5930 and long at 1.5370. Your TP for a long is 1.5930 it means 560 potential pips. We have to get the % of winning trade to get the best risk/reward ratio. But if we accept that we want to win 2 if we risk 1 (0.5 ratio), so we can place a stop loss 280 pips under our entry point (560/2), it means a stop at 1.5090. We could also place a trailing stop if the range is big coz it may be a trend that begins.
It is just a way of thinking, your feed back is welcome !
  • #475
  • Aug 30, 2008 4:02pm Aug 30, 2008 4:02pm
Quoting hmaoui
I am quiet ok with you. This strategy could be profitable but as with all strategies you have to put a maximum stop loss. If the range is 700pips (1.53 / 1.60) so it means that you go short at 1.5930 and long at 1.5370. Your TP for a long is 1.5930 it means 560 potential pips. We have to get the % of winning trade to get the best risk/reward ratio. But if we accept that we want to win 2 if we risk 1 (0.5 ratio), so we can place a stop loss 280 pips under our entry point (560/2), it means a stop at 1.5090. We could also place a trailing stop if the range is big coz it may be a trend that begins.
It is just a way of thinking, your feed back is welcome !
....to say you that we have to know how many lots we can buy (the main question). Before answering this question I can say you to trade this system you should have a big capital or access to nanolots !!! If we accept a maximum of 3% of our capital as our maximum risk per trade, we should have 93000$ to trade 1lot !!! (93000x0.03)/10 = 280 pips. So you have only 2 choice : trade safely with a very big capital or trade with a small one but at your own risk....Remember that you have to risk 25% of your capital if you have 11200$ ! Do you think it will be profitable on the long term ?
  • #476
  • Aug 31, 2008 12:22am Aug 31, 2008 12:22am
Quoting hmaoui
I am quiet ok with you. This strategy could be profitable but as with all strategies you have to put a maximum stop loss. If the range is 700pips (1.53 / 1.60) so it means that you go short at 1.5930 and long at 1.5370. Your TP for a long is 1.5930 it means 560 potential pips. We have to get the % of winning trade to get the best risk/reward ratio. But if we accept that we want to win 2 if we risk 1 (0.5 ratio), so we can place a stop loss 280 pips under our entry point (560/2), it means a stop at 1.5090. We could also place a trailing stop if the range is big coz it may be a trend that begins.
It is just a way of thinking, your feed back is welcome !
I did actually a manual backtest from 1 December 2005 till
now on EUR/USD with a SL of 100 pips under the swing low. I never went short, `cos that would have been not profitable with this uptrending pair.

I bought at fib10 and sold at fib75.
Because of the trending nature of this pair over this period I only had 11 trades with 2 losing trades.
I was only invested for 251 days out of 982 days.

The total profit would have been 3,193 pips.

But lets be honest: anybody would have made money on this pair as long as you didn`t go short as the trend was so reliable.

I dont want to go into this further, because this thread is about trading Fj`s system and any improvements for this system
  • #477
  • Aug 31, 2008 4:18pm Aug 31, 2008 4:18pm
Quoting yonnie
I did actually a manual backtest from 1 December 2005 till
now on EUR/USD with a SL of 100 pips under the swing low. I never went short, `cos that would have been not profitable with this uptrending pair.

I bought at fib10 and sold at fib75.
Because of the trending nature of this pair over this period I only had 11 trades with 2 losing trades.
I was only invested for 251 days out of 982 days.

The total profit would have been 3,193 pips.

But lets be honest: anybody would have made money on this pair as long as you didn`t go short as the trend was so reliable.

I dont want to go into this further, because this thread is about trading Fj`s system and any improvements for this system
Yes you're right and that is the reason why you should test this strategy in live and not on the past
  • #478
  • Aug 31, 2008 4:38pm Aug 31, 2008 4:38pm
Quoting yonnie
I did actually a manual backtest from 1 December 2005 till
now on EUR/USD with a SL of 100 pips under the swing low. I never went short, `cos that would have been not profitable with this uptrending pair.

I bought at fib10 and sold at fib75.
Because of the trending nature of this pair over this period I only had 11 trades with 2 losing trades.
I was only invested for 251 days out of 982 days.

The total profit would have been 3,193 pips.

But lets be honest: anybody would have made money on this pair as long as you didn`t go short as the trend was so reliable.

I dont want to go into this further, because this thread is about trading Fj`s system and any improvements for this system
Yes you're right and that is the reason why you should test this strategy in live and not on the past
  • #479
  • Sep 1, 2008 12:38am Sep 1, 2008 12:38am
Great to see that things are still going strong for many of you. I was taken out of the system for a few weeks due to some issues with my work schedule. Flyjetz, I am sure you understand that. TDYs, upcoming PCS and more TDYs. I plan on jumping back in really soon. Yes, I had been trading this live and doing fairly well with regards to pips won vesus lost. I did take a good hit when several of the pairs took a dive and kept on going. Well, time for me to read the posts and try and catch back up. It may be a few weeks before I have anything positive to offer.

RCWSO
  • #480
  • Sep 3, 2008 7:58pm Sep 3, 2008 7:58pm
Hi all

I’ve been away last two weeks on holidays, sorry I didn’t reply yet.

The method I use is based on Flyjetz’s, is twisted to a daily system. Basically this kind of trading is called channel trading (if I’m not wrong), we set a low and a high levels and we trade between those levels in the assumption that the price will return at least to the middle of the channel.

The method I use has the following parameters:
· Midpoint – I use the for the midpoint the pivot point (H+L+C/3), because it seems to be more centred with the last known price (the Close) then the one of Flyjetz.
· Length – I use the same of Flyjetz but I average the last two days.
· High and Low - As Flyjetz I use 80 and 20 levels, calculated the same way.
· Direction – For direction I use the following rule, if (H-C >= C-L) I go long, else I go short, on a daily base long term trend doesn’t seems important, every day the price travels between high and low, as long as our channel is in the middle of them it’s ok.

Rules:

  1. No stoploss.
  2. Create pending orders for the 10 pairs last mentioned by Flyjetz at approximated 0:00 GMT (my time), only one direction (buy or sell).
  3. Cancel all pending orders not executed at 12:00 hours GMT.
  4. Close all open trades at the end of the day.

This system is totally mechanical, so it can be accurately backtested.

Flyjetz system have a discretional component, that is, not defining when close the open trades that didn’t reach TP at the end of the week, so it can’t be backtested.

My system (I created based on Flyjetz system, and I don’t know if someone create the same or identical system yet) as some improvements over Flyjetz, closing every open trade at the end of day forces the trader to be disciplined and prevents from becoming emotionally attached to a losing trade that is slowing draining traders account. I’m sure that was the case of the last turning of the EURUSD, that most users of this system had large drawdowns. The tests I did suggest that my system adapts quickly to a changing market, and work on different market conditions.

To Flyjetz:
My backtesting is somewhat automated, but using 5 years data I get about 500 trades for each pair (I think is that what you want to know, English isn’t my mother language, and I didn’t understand very well your question).

To yonnie:
My testing’s show that on a weekly system using my rule of close all open trades at the end of the week is more profitable if pending orders not executed at Wednesday are cancelled. According to Flyjetz rules open trades aren’t closed at the end of the week, and there isn’t any clear rule when to close those trades, so it can’t be backtested as I said before and therefore I can’t compare results from both systems.

Regards

0 traders viewing now