Snowballing On The Corrective Waves (A Complete Trading System)

A Complete Trading System

A good mechanical trading system automates the entire process of trading.
The system provides answers for each of the decisions a trader must make while trading. The system makes it easier for a trader to trade consistently because there is a set of rules which specifically define exactly what should be done. The mechanics of trading are not left up to the judgment of the trader.
If you know that your system makes money over the long run, it is easier to take the signals and trade according to the system during periods of losses. If you are relying on your own judgment during trading, you may find that you are fearful just when you should be bold, and courageous when you should be cautious.
If you have a mechanical trading system that works, and you follow it consistently, your trading will be consistent despite the inner emotional struggles that might come from a long series of losses, or a large profit.
The confidence, consistency, and discipline afforded by a thoroughly tested mechanical system are the key to many of the most profitable traders’ success.

The Components of a Complete System

A Complete Trading System covers each of the decisions required for successful trading:

��

Markets - What to buy or sell

��

Position Sizing - How much to buy or sell

��

Entries - When to buy or sell

��

Stops - When to get out of a losing position

��

Exits - When to get out of a winning position

�� Tactics - How to buy or sell

Further Study

Where do you go from here? There is no substitute for experience.

If you want to become a trader, you must start to trade. There is no substitute.
You must also make mistakes.
Making mistakes is part of trading. If you don’t start trading using actual money—and enough money that it affects you when you win or lose—you
won’t learn all the lessons of trading.
Paper trading is not a substitute for trading with real money.
If you aren’t using real money, you won’t learn how hope, fear, and greed affect you personally.
At the same time, it is important to get a thorough understanding of the fundamentals of trading. Armed with this knowledge you will make fewer mistakes, and you will learn much more quickly from the mistakes that you do make.

Here are some suggested areas for further study:

Trading Psychology

Trading psychology is the most important aspect of trading, and understanding yourself and your own personality as it relates to your trading is critical. This journey is much more about making a sincere and open-minded attempt to understand your own personal psychology than it is about finding the magic psychology book with all the answers.

Money Management

Money Management is the most important aspect of a mechanical trading system.
Controlling risk in a manner that will allow you to continue trading through the
inevitable bad periods, and survive to realize the profit potential of good systems, is absolutely fundamental. Yet, the interplay between entry signals, exits and money management is often non-intuitive. Study and Research into the state-of-the-art in money management will pay enormous dividends.

Final Warning

There are a lot of individuals who try to sell themselves and their advice as “expert.”
Don’t blindly accept the advice of these self-proclaimed experts. The best advice comes from those who aren’t selling it, and who make their money trading. There are many books and biographies that give insights into the habits of those who have been—or who are—successful traders.
Learning how to become a good trader—or even an excellent trader—is possible, but it requires a lot of hard work and a healthy dose of skepticism. For those of us who have chosen this path, the journey never ends. Those who continue to be successful will never reach their destination, but will learn to find joy in the journey itself.

Hi Stake
Excellent english.
You can go on

The components of a Complete System

1. Markets - What to buy or sell
   
2. Position Sizing - How much to buy or sell
   
3. Entries - When to buy or sell
   
4. Stops - When to get out of a losing position
   
5. Exits - When to get out of a winning position
   
6. Tactics - How to buy or sell
   

Well, the purpose of this thread is that to combine the excellent technique shared by Mr. Spieler (http://www.forexfactory.com/showthread.php?t=95721) with the Elliott wave theory in order to obtain a greater operational safety through a system whose only limit is that of exposure to big DD in case of a huge trend moove...

All the components listed above have already been explained in detail by Mr. Spieler, then this is the starting point and you need to familiarize yourself with this methodology before you continue reading this thread!!!

There is a short summary of Spieler's Trading System that you find attached below.

So, why this thread?

We have listed the components of a complete system, it appear to contain all the necessary components but if we read more carefully we can easily realize that this list is not complete, I have deliberately omitted a fundamental component, I'm talking about the Available Balance:

Capital available to us is as crucial as the rest of the system, too often we want to address the markets in a state of under-capitalization and this sounds like a sure death sentence!

But at the same time I think I can say that this condition is quite common and that in case of necessity few of us will be able to draw on a reserve loot to save themselves!!!

Sure we spoke about the importance of Position Sizing (that we will see in detail as well as other concepts) and Money Management but here is also manifested the need to reduce significantly the risk to be in LARGE DRAWDOWNS in case of a huge trend moove...

Well, under the assumption that what I'm saying comes from my experience of real live trader and my own approach to trading and hence more or less acceptable, I would like to begin from a preliminary observation:

- The only way to manage a win and a loss position is by size snowballing.
There is no other way. One increases the profitabilty bottom line and the other a recovery protocol. The MO you will find in Art of War.
This is a capital game, therefore no alternative are possible.
The relativity of the size snowball is important that over-extension in % counts can kill the biggest fish in the water.

- If the weakness seen in the previous principle may be a situation of big DD in case of a huge trend moove, then the only chance we have to avoid the possibility of this situation is to try to predict in advance the Impulse direction of the market so that we can implement our operations on the Corrections to the impulsive motion...

R. N. Elliott had the merit of developing an innovative theory to analyze the market from a strictly technical and physiological ...

characteristic of this theory is to be able to classify the market moves as the waves that follow one another, with order and continuity and physiologically over the time. The uniqueness of the theory is to study the market based on investor sentiment, and every wave represents a variation of that sentiment. The mathematical basis of this theory is the development of the "golden" sequence of Fibonacci numbers_

This in essence the basic principle: once we have identified a cycle of Elliott of higher degree (for those who have no confidence with the Elliott theory and its application, there will be the time to discuss!) through the different TF and through the various grades of the cycle, we are going to work only on the corrective movements of this cycle. In this way we can significantly reduce the risk to be in a big DD and then correct defects of this system. Attention: when I talk about "defects" I refer not to the system itself that works well, if we are not under-capitalized, but I'm talking about the common condition of under-capitalization.

Hi Stake
Could you explain precisely by an example your snowball strategy ?
Please could you use a bigger police in your messages ?

Signing up. Looking forward how to make Spieler safer.

Lenoxer

Count me in....
Im pretty sure that I can help with predicting the impulse direction of the market!

Regards

I've been experimenting with snowballing for some time, mostly thanks to Spieler and FTI. Count me in.

hi ,
i've been reading spieler's thread almost since the begining, but never posted! i think it's an excelent method, using it with a sound mm!
this new approach made by stake drew my attention, although he must explain a bit his snowballing concept (something like martingale???) i am not familiar with elliot waves, but commited to learn!
looking forward....

Yeaaah
A great coder with us.
Thx Forexflash

Look at these charts, certainly easy to see that we are immersed in a Down trend (The charts that I will post here do not have indicators, we must learn to observe the evolution of the markets without distractions!!!), but through the counting of elliott waves maybe we can get some valuable information for our operations...

certainly we are in a bearish configuration proved by the fact that the medium-term trend is DN as the long-term trend, but through the analysis of cycles (impulsive cycles and corrective cycles of different degree) we can see that there is a clear implication bullish...

Well at this point we must understand how to use these precious information. We must remember that we are not directional trader, but at the same time we must be careful and never be against the trend!

So if through our analysis we can predict possible bullish implications, this will mean that from now we will enter the market only in buying (LONG), so whenever we have a negative divergence (-0.25 %, I apologize if many topics are left without sufficient depth, such as explanations of the pattern, the Spieler's Trading System, the principles governing the theory of Elliott etc. But I can not investigate all topics ... but I will be happy to respond and resolve any doubts if they are not too many!!!) we take position in the market following the rules of the Spieler's Trading System (on the contrary if we are in the opposite situation, when we have a bearish implication) ... In this way we can significantly reduce the risk to be in a big DD, this is because buying or selling on market corrections, we are able to ensure that the next impulse wave back the price on our side and then on the our neutral point...

It's certainly an impressive tool to envisage the trend.
But what's exactly your snowballing concept ?
Regards

Dear friends, I want to say thank you for your participation, you have to believe me, the topics are very many and I am sure that I can count on your help ...

Once again I apologize for my horrible English!

Regards, Stake.

Hi Madscalp, the concept of snowballing is equivalent to the concept of Adding Units ...

obviously there are many systems that use this methodology, in this particular case we are going to use the excellent technique shared by Mr. Spieler, as I said this is not the only system but certainly one of the best!

What we need to work:

- Broker Requirements: leverage available 1:400/Accoun Types: mini and micro accounts (the possibility to trade micro lots will be useful to us if we choose to trade the hedge instead of taking a direct position in EURCHF, this is a discretionary choice, even if in reality is not quite the same thing, but if we choose to do trade the hedge then we need to work with a neutral position. For example: Lots Ratio 0.10 EurUsd/0.13 UsdChf)_

- Available Balance: is not advisable to work with an initial balance less than 5.000 $.

At this point we would emphasize the importance of position sizing:

My approach used a volatility-based constant percentage risk position

sizing algorithm.

Position sizing is one of the most important but least understood components

of any trading system.

Algorithm: 1% of Account

ATR(14)Daily * Price

- I prefer not to attach the chart that I use with this system, because it could shift the focus on indicators (I would like to stress that all the indicators that I use do not have the task of providing signals, but only to provide a better overview especially in times of market unrest)

Probably some of you will have identified the error in the H1 chart...

you could at least mention from where its taken ... the snowballing although a great tool , its not to be used without a full understanding of the concept ...

I think I have stressed several times that the condition needed to continue reading the following thread is the full understanding of the Spieler's Trading System!

The components of a Complete System

1. Markets - What to buy or sell
   
2. Position Sizing - How much to buy or sell
   
3. Entries - When to buy or sell
   
4. Stops - When to get out of a losing position
   
5. Exits - When to get out of a winning position
   
6. Tactics - How to buy or sell
   

Well, the purpose of this thread is that to combine the excellent technique shared by Mr. Spieler (http://www.forexfactory.com/showthread.php?t=95721) with the Elliott wave theory in order to obtain a greater operational safety through a system whose only limit is that of exposure to big DD in case of a huge trend moove...

All the components listed above have already been explained in detail by Mr. Spieler, then this is the starting point and you need to familiarize yourself with this methodology before you continue reading this thread!!!


Regards, Stake.

The system works like this: (the rules apply the same for inverse situation)

Once we have established the possible implications (bullish or bearish) of the market through the analysis of elliott waves, suppose a bullish implication as at this time... then whenever EurChf show a negative divergence versus the previous day close We place our buy order (trading the hedge, EurUsd/UsdChf, exploiting their relative correlation or taking a direct position in EurChf) managing positions by size snowballing following the rules of the table below, taking into account the nervousness and volatility of the market as may be necessary to delay our action...

1lot -0.25( or +0.25 of course) – Exit half at 0.00, other half close to 0.25
lot 2 -0.25 – Exit on 0.25 pb/ re-enter at -0.50 from previous exit
lot 3 -0.25 – Exit on 0.25 pb/ re-enter at -0.50 from previous exit
lot 4 -0.50 exit 0.25 pull back (pb) - re-enter at -0.50 from previous exitNote: If first 4 entries in and no pullback then delay lot 5 until -1.0 not -0.50Exit on -0.50 not -0.25and re-enter on -1.0 from previous exit
lot 5 -0.50 exit 0.25pb – re-enter at -0.50 from previous exit
lot 6 -1 exit 0.50 pb – re-enter at -1.00 from previous exit
lot 7 -1 exit 0.50 pb – re-enter at -1.00 from previous exit
lot 8 -2 exit 1 pb – re-enter at -2.00 from previous exit
lot 9 -2 exit 1 pb – re-enter at -2.00 from previous exit
lot10 -3% double lots exit 2pb -– No re-entry, just hold until pb


For all entries and re-entries involving moves of +/- 0.25% or +/-0.50%, always wait for intraday move from last entry/ exit or from the daily close using which ever is the furthest away. (Conservative Approach)

For all entries and re-entries involving moves of +/- 1.0% or greater, always enter simply from last entry/ exit point.

Math Calculation of the Divergence using Price Levels:

+ 0,25% = Price Level * 100,25%
- 0,25% = Price Level * 99,75%
+ 0,50% = Price Level * 100,50%
- 0,50% = Price Level * 99,50%
+ 0,75% = Price Level * 100,75%
- 0,75% = Price Level * 99,25%
+ 1,0% = Price Level * 101%
- 1,0% = Price Level * 99%
+ 1,25% = Price Level * 101,25%
- 1,25% = Price Level * 98,75%...

** Here we do not have the time to revisit the Spieler's System, and also this is not the place ...

im not interested in the system , i said u should mention where this excerpt is taken from (fti's thread), snowballing needs a proper understanding and reading the thread is the only way to get some bit understanding of the concept and MO ...

Of course, the step was taken from a passage of FTI's Thread, but you are wrong when you say that I have not mentioned the source (although this would not be a problem, a valid concept remains always a valid concept!!!)...

In any case I referred to this in the thread mentioned here several times!

I would add that the concept of the snowballing is not a recent invention but it is part of a broader approach to trading, it would be incorrect to think of this concept as a concept with an unique development...

Perhaps you referring specifically to the use of the term and not the concept that expresses but this makes no difference!

Regards.