Building an equity millipede

Good morning all

A warm welcome to everyone here. Hope you are all safe and sound wherever you may be.

Before I begin, I wish to let all readers well aware that the purpose of this threads existence is of positive intentions. So please respect the fact that Im here because im willing to contribute.

I do not wish to participate in any ego-measuring contest, babysitting, or downright arguments. No need to prove myself to anyone. What is offered is what you will get if accepted as is.

I welcome questions and I will answer your question if I find that it will also benefit other readers.

Unfortunately, I find the necessity for the above points mentioned as there is blatant amount of testosterone being thrown around this forum. There is simply too much debris amongst the vast number of posts and i cant help but wonder if our initial good intentions is getting buried amongst the junk.

Moving on.

Im a live trader. I have been trading live for 2 years. This is relatively short amount of time to be considered successful which I whole-heartedly agree. However, with all bias aside and after reviewing my trading strategy (which I happen to review at a constant basis), I can say with a degree of certainty that I will be profitable for the many years to come.

I have owned and managed import/export/distribution companies in my time, so it was no surprise when I phased into currency trading. When outsourcing overseas contact the foreign exchange rate plays a vital role as it has a direct impact on profit margin and the competitive edge. In a sentence, I had to forecast an expectancy of rise/fall in the price of goods in lieu with growth/decline of inventory demand. I had a constant tab on politics, and economics of both the country I reside and the country of our interest.

Exchange rate effects the overall operation of an import/export business. I have imported from surgical bandages, plastic bags, furniture, cars, electronics, sunglasses and much more. In the past, my company was outsourcing various types of surgical bandages from Taiwan to supply a number of hospitals. For a lengthy period of time, Taiwan dollar declined against the rise of Australian dollar. I did not focus on daily price changes but as long as I was buying bandages cheaper than the previous year I was happy. I was very content to see the price of bandages getting cheaper by yearly. During my tenure as the main operating executive of a large i/e/d company my main responsibility was basically buying goods as/when cheap as possible and continue buying them cheap or cheaper. Now when I look back I smile at noticing that all I was doing was following the yearly trend and the bandages I was purchasing before is now my positions in forex. It is an uncanny resemblance in my perspective.

Moving on.

Thank you for your interest so far. Hope my life stories haven’t bored you however I find it necessary to reveal enough of me even though I feel exposed. I must admit im slightly reclusive and coming this far is out of ordinary for me.

Running a business has its ups and downs but the difficulties I had when I first started with forex was a completely different stress on a different level. At least in a business you have a reliable counsel in which you pay for advice however in forex there is advice everywhere and most of them completely free. Whenever I hear free advice I make sure my credit card is tucked away and my scepticism turned on high.

When I started in forex, I sought after the most expensive advice. It’s a habit that has grown on me. After all I could receive my forex trading was nowhere profitable. Capital wasn’t a problem for me so I started off live trading as soon as I worked out the buttons from demo. I kept my lot size relatively small.

From what I say might be already know to many and the obvious however traders fail cause they don’t action the obvious. Smoking kills, then quit. Action the obvious.

I quickly compiled a list of things that didn’t work for me:

 

1. Indicators, especially moving average crosses that indicates entry/exit.
2. Divergences
3. Smaller time frames
4. Advice from forums
5. Advice from mass media

There was just too much information for my head to get around. I nosed around from forum to forum, post to post, looking for the perfect set of indicators that gave me entry and exits. Then I knew entry is not important.

There are no guarantees in life. You can never control your future but the future will control you. With me, I find the indicators/systems more obtrusive to the clarity of the bigger picture in forex. Im sure there are many successful traders with the perfect set of indicators tweeked at the best setting possible and you have my respect for something that I couldn’t simply accomplish.

I wasn’t in a rush to make money as I already have a very comfortable lifestyle. The most likely reason I didn’t give up in forex was probably the resemblance to what I do at my own company, which in return gave me confidence.

I stopped looking for daily/weekly profits. Traders focus too much on instant fulfilment. I also stopped using stop losses for most part of my trading. During my unsuccessful periods, I find that stop losses confirms my loss and just giving money to the brokers. I still use stop losses (sometimes) but they are much further apart. I can do this cause im comfortable and confident with my trades.

If I asked you, ‘lets play a game. Everytime you roll this dice, you need to pay $100. This is the reward: you win $1000 eveytime you roll 6 and lose your $100 on 1,2,3,4,5. Would you play?’

Some will say no, cause they cant see the bigger picture. Looking at indicators probably forecasting the next 2 or 3 throws.

Smart ones will say yes. Obvious reasons. But, how long will you last? Can you handle streaks of 20 or more losses? Perhaps you have the will to handle the stress but maybe not the capital?

I found my dice game. It wasn’t in any forum or paid advice. It was just doing what I was already doing in my business.

Moving on.

My contribution wont sway many traders and it will be interesting to watch how this all works out. But if you are open-minded like I was when I first traded, then you too will receive a blueprint to a trading plan that guarantees to be beneficial of enormous proportions.

Currently, I’m holding a number of positions across several pairs. This is live trading (all numbers/dates are approximate so please don’t hold it against me):

*All my positions have always been 2 standard lots each.

 

1. GBP/JPY – 14 positions; 4 surviving from around 160.000, August 2009. 8 surviving from around 155.000, August 2009. 2 surviving from around 147.500, January 2010
2. EUR/USD – 21 positions; 10 surviving from around 1.46600, December 2009. 11 surviving from around 1.41100, January 2010

I do have other positions however not as large as above. You can work out my profits if I closed them now. Also this is all profit as few of the ‘legs’ I have closed out in the space of months, which covers most of my total losses in establishing these positions.

These results are far from impressive however it pleases me greatly to know the return on my initial capital.

When I mentioned ‘the obvious’ and traders not following the obvious are this: The only thing obvious about forex markets is the trends. It pays you or destroys you.

For me, monthly trend is the main trend. I tend to look at last 1-3 years of movement.

My main and primary objective is building a pyramid of positions in lieu with the main monthly trend of the previous years. I enter from daily charts under guidance of weekly trend at market open (asian) and hope that the position survives the fluctuations of the day and transforms into another leg on my equity millipede.

More often than preferred, the daily position does not survive the price action of the day and most likely end up as a –30 pip loss (this is based on eur/usd). This does not worry me as im most interested in movements that start from the beginning of the day and charge forward following the intended weekly/monthly trend. Also it is comforting to know with a degree of certainty that when I decide to conclude all my positions after maturity, just a few of my bigger legs from my equity millipede will cover losses and the remaining as profits.

I do not care about ‘moderate’ small losses that occur when trying to establish my positions that will survive. As long as I do not try many times in one single day (and this is very important). This is also similar to my business, as I need to order an inventory before sourcing out distribution. Taking pain for gain.

If today is going to be a bear candle then whereabouts is the higher price? If we are in a downtrend (which is also in lieu with down weekly trend) and (unknowingly) today is going to be another down day. THEN tomorrow when we look back today, where is the most likely place for a position to survive?

It is at the near the top… Near the open of the daily candle. This insures that you catch the major move of the day + highest probability that the position will survive the pullbacks of next day (and the next 2-3 years hopefully).

A position that survives for extended weeks, months turns into a tremendous profit and you will be very pleased that you risked a very small fraction of its gigantic return to establish that position. I cant help but smile.

You need to allow the time for a caterpillar to turn into a butterfly.

As mentioned above, I do enter at the very start of market with a hard stop loss. Also I have a very simple 5,10 ema moving averages to give me clues on the strength of trend and the likely hood of mass traders entry. I despise any system based on sma/ema crosses but I would like to know the strength of the move by looking at the space between the moving averages. Also a 200 ema as a long term moving s/r and that’s it for my indicators but I have few more tricks for entries.

Moving on.

BUMP

Whilst i've yet to see the direction of this thread, i note with interest the threads you have been to and the past discussions you have had.

I hope this thread will continue along those lines

Best of pips

MPP

Come on guys....

Let the man speak, it's his thread. Like anything else if you don't like what you read you can always change the channel.

Amazing, i just spent good 30minutes typing the next post and the site went down and it has perished in peril.

Continuing on with the entries.

Entry is discretionary however I weigh the importance of the survivability of a position as most important which is near the top of the daily candle in a weekly down trend or bottom of the daily candle in an uptrend.

My hard stop gets hit often and when they are hit this signals for me to watch the market for another re-attempt. I will do a maximum of 2, 3 (rarely) re-entry per day and this is based mostly on support/resistance, reliable price patterns, and breakouts. Price that needs to be broken out is my favourite. Although I will go with the flow, Im biased towards my main weekly trend. Hopefully when you are ready to trade, you are efficient with the usage of support/resistance, few reliable price patterns and know the difference between a good/not so good breakout setups. This is entirely another story and you will need to do your homework.

I have had few positions placed on same day that has survived nearly a year. The price never came back to its entry. However, I will never try too hard to get a positive position in every day because most positions that does survive a day might not survive a month, or even 2 months. Can you handle that? Losing streaks of 20 or more.

What i say next will be interesting. Even though I had satisfying trades with great result I was looking at ways to enter more because I thought more positions meant more profit. However increased risk doesnt necessarily increase profit.

Once again, I scouraged the forums, magazines, and few seminars for another method. Back then I thought more methods meant more positions which hopefully meant more profit. To be honest, I find forums to be more stressful than the market itself. This endeavour cost me alot of unnecessary money. I stopped searching and just continued what was working.

My step down from a trader to a searcher gave me a full scope of the frustration and the struggle as I can test both sides of the world. Things are overly complicated than they are. You need to stop listening and throw out that guide book. Fortuantely I had it easier as I had alot more than necessary capital and a business that secured me financially and also taught me to be a trend trader before even stepping foot in the arena.

With all honesty, forex trading is simple. You can ask million questions on the forum and get burned, ravaged by the poster after you till no end. Stop, calm down, listen, and look for the obvious.

Moving on, and nearly at the end..

Bingo... U R Rite!

There is more to it than the bulge. I believe this was one of the lines i used when i was dating my wife.

I say the same here. Even though my posts lack any charts, defined set entry/exit points, but there is definitely more here than the bulge. And all this is definitely a trading strategy nonetheless. For the intellectual traders they will pickup how/why my method works. It is obvious.

I feel no loss at sharing but disappointed after reviewing my posts that i may have not conveyed my strategies properly in depth.

However I do know that most searchers are looking for a system with numbers telling them what to do and less words. They wish to think less, but ironically you are at the right place.

Moving on.

Good morning all

It is a beautiful sunday morning here.

Looking back at yesterday's posts; I have covered my main trading principle and my entry strategy. I would like to touch base on what you have read so far and hope to give you a different but positive look at what I meant.

1. Position trading
Position trading is as exciting as intraday, swing. I find it much more exciting. Majority of traders are seeking the rush to be in the action constantly. They like to execute orders, close orders with profit, make an excel spreadsheet and enter their weekly profit, log into forum and boast their demo accomplishments and henceforth. And to add further damage, keen avid new traders will soak their comments and 'adapt' it. Now at the end of the day if they both find success then it was all worthwhile but you will find them sitting here behind their so called 'already known and preached principles' just garnishing in attention but not necessarily contributing positively. Call me cynic or realist?

Position trading has some of the best risk:reward. You actually risk much less for a greater reward. Yes, we do not execute as many orders as some new traders would prefer but if its excitement these new traders are all looking for then it is very exciting to see my legs on my millipede grow as the time goes. Once you shift your trading to 'longer' time frame you will find trading less stressful and more meaningful. And please dont stay on demo too long. You make progress but also in parallel you are growing a set of habits that will be a big surprise for its inefficiency once you start live. I have tested both sides of the world.

Also, I believe there is a common belief that position trading requires alot of starting capital. I was planning to address this on a separate post however will address it here. NO, you dont require a large starting capital. If you want to know, and if i were to suggest for the new traders;

USD $5000 for 4-6 positions @ $1 per pip (0.1 lot size)

The above is very realistic and very achievable however dont quit your day job yet. Try and keep a few thousands dollar in your savings account for backup and most importantly psychological safety.

Example of a common scenario;
You wait. Then you wait some more. You notice on monthly chart that gbp/jpy is dropping going down (its not hard, you look at last 10-15 candles preferably or less), you switch to weekly and see that price is above/near/just below the 200ema. I prefer the price to be somewhat 'near' to the 200ema. You enter on daily chart at beginning of market with hard stop loss (this is not a golden rule and as i mentioned in earlier posts, entry is discretionary) or do your homework and work out a low risk entry somewhere 'near' the open.

Moving on, if this position survives the fluctuation of the day, move the s/l to breakeven on the following day. You now have a leg on your millipede. BUT, you will find that often this hard earned leg will die some days, weeks later. I will be very suspicious if a leg dies months later... Something has gone wrong with the main trend. If you enter in a good trend you improve the chance that the leg will survive. And we like our leg soldier to be breathing and working for us.

Do this until you have 4-5 legs and preferably stop adding. Let time go past.

6 months later..

You will find avg pip per position will be 1200 (hypothetically)

1200 pip x 5 positions = 6000 pips. $1 per pip will be $6000

However, $6000 wouldnt be all profit as you definitely had to endure few small losses trying to establish your positions. Lets take off 1500 pips which is alot more than probably required but hey, this is an example.

So total net profit will be $4500. Hmmm... that would be almost 100% return on capital..... (in 6 months)

And this is a very sensible estimation

Im planning to close out 3 of my legs in gbp/jpy if it doesnt continue downtrend on weekly in the next week or two cause i dont like the looks of the current market. Weekly downtrend from the beginning of the year was not even great. And even in poor trends like this.. it is very profitable

Probably close out my medium sized legs; 3 positions x 1500 pip = 4500 pip total @ $20 per pip.

I entered all 3 positions in the space of 2 days and was fortunate enough to catch an eye-popping momentum (this could also be another 'way' for you to enter). I had zero loss to accumulate these 3 positions. My risk:reward? Could have added more but then again..

I will be pocketing $90000 for 6 months. Sometimes I wish I was 20 years younger doing this...

Sorry deb..

Get the gist?

Moving on.

Good afternoon all

Hope you are spending time with your loved ones. The older I get, I find the bond you have with your loves ones are so very important. It is not the waterfront penthouses, fast cars or victoria secret model girlfriends but the sentimental links you preserve with the ones you dearly love and care. There are plenty of times when money does come across relationships but manage them well and keep money out of equation as much as possible.

Continuing on with my previous post. Today, we were touching base on what I posted yesterday. Point 1 was about the importance and the power of long term trend trading (position trading).

Now for point 2.

2. Entries

Yesterday, I mentioned in my post that I open a position at the start of the new daily candle (which for me is open of asian market, 9am sydney time). I believe the common myth about trading the asian market is a big no no. Some of the reason why traders will avoid asian market is that most movements happen during UK business hours. I agree. I would also agree more if I was a pure intraday trader looking for great bursts of momentum or a 5 minute scalper who needs the participation of the greater number of traders. I consider myself standing above all this (in a non-egotistical way).

The most important thing to position building happens from entry. First you must be sure about the weekly trend. Its very simple. Open weekly chart and see what happened in the last 20-40 bars. Moving down? Then its down. Moving up? Then its up. Weekly trend is not going to change just because you finally arrived at the scene with a demo account. Please get over it, you're not that big.

All im interested is the 'area' of the daily candle where the chance for my position to survive not just todays price action but tomorrows and hopefully for the next 2-3 years. We want price to never come back to our entry. Where do you think this will happen? It will happen near the open of the candle. But sometimes the movement is so powerful that on some days any position on any area of the candle would have survived. Consider them a huge addition to your profits. With practice you will know with a certain degree of certainty when these candles will occur

These days I continue to enter at the beginning of each new daily candle but not all the time. Experience has shown me that some areas are already 'exhausted' for any new legs to be created. Something like this just comes from experience (and good reference from weekly charts). There are no set rules.

Furthermore, some days I will use a hard stop 70 pips for jpy cross or a 30/40 pips for eur/usd but some days I know that stop loss is not necessary. BUT I will put an alert in my mt4 to message me instantly to my cell phone at extreme movements. Situation varies and so does my actions.

Occasionally, when I choose to monitor a uk session and I see a great setup forming. I look at s/r, trendlines and will enter at a minimal risk and as soon as it moves positive i will move my stop loss to breakeven and walk away.

My favourite is areas where price needs to breakout. This is an obvious statement, and yet alot of traders dont action the obvious. Price doesnt want to breakout but needs to breakout. I will go with the eventual flow but im biased towards main weekly/monthly trend. I request that you look into breakout.

If I were to give a hard advice for the intraday orientated traders is to buy when the price is above todays open and sell when the price is below todays open. This way you are in line with the trend.

Intraday movement doesnt interest me. What I am interested is the open price of the daily candle.

Conclusion is that I enter on the open of new daily candle towards the main weekly trend however, i do look at 5/10ema to see if the price is sensible and whether it is a new momentum or phasing out/retrace. I also keep in mind s/r and trendlines but do not entirely focus on anything particular. One thing I want to be damn sure is my main weekly trend.

Cant explain it any further, you must do your own research from here.

Entries is like learning to swim. You need to practice and one day you will realize that you were so much better than few weeks ago. It will come to you.

Moving on.

when i have big posts to make i set them out in a word doc first for this reason - then copy paste them in

great read so far - got some catching up to do with your post - will try to keep up

I live by this. I may miss some trades, but I never get my ass kicked around by the market trying to time turnarounds.

Nice posts.

Refreshingly sensible thread.

Wish there were more like it!

All the best!

Good evening all

Thank you for the warm remarks. It makes the effort worthwhile.

There are terrible events happening across the globe; environmental, political and biological. Let us not forget that we are fortunate individuals to have an opportunity to even discuss matters like forex at our leisure. Unfortunately my children will never grasp the full scope of their fortunate existence as they never had any insecurities.

Hence, you will never forget your learning phase in your trading career. It will outshine in your memory everytime you open your platform.

It is now Sunday evening and I must admit I have enjoyed contributing to the forum this past weekend. I feel obliged to help traders as I also received such unconditional help.

I have yet to explaine other subjects like; money management, psychology, exit options, mid term exits, profiting short countertrends. And I will re-attempt on another weekend.

Till then stay safe.

Graeme

Good to see something using a chart beyond 4 hrs and not being leveraged to the hilt.

The power of participation.

This is my next subject. It flows concurrently with my points on entry. In my previous posts I have explained what I perceived as the reason why entry is important however it shouldnt be the only focus of your trading.

Alot of traders tend to focus 'pinpoint picture perfect entries' and 'razor sharp profit producing exits.' My personal take on entry is that as long as you clearly define the main momentum and have the ability/skill to see where you currently stand in that momentum this will give you the first reasons to why you should enter/exit. You need to read the road signs.

I understand entry/exit plays an important role if you aim for constant 80pip take profit with 40pip stop loss. You are looking too closely. Take a step back. What you conceive as 80pip profit is only a ripple in the ocean and you have just stopped yourself looking at the bigger picture and settled with just entree. Unknowingly you might still be focusing too much on todays profit or this weeks profit.

You are forgiven for sloppier entries when you start but as long as your position is towards the main trend you are already in good shape. Entries will improve over time. As far as entries are concerned, we want minimal risk entries (do your homework) that will give that position an opportunity to reach its full potential hopefully 8000 pips later.

And you will reap exponential rewards if you let it happen. Nobody knows where the market will be heading and this shouldnt hinder you in anyway. You need to participate to what is happening. You need to be in the market to make it happen. If its up then BUY, if its down then SELL. Yes, you have heard it before but do you know what it means and how to implement it?

Every month I receive an email from my regional offices showing me how much it would cost to buy another 100,000 units of a particular good to be imported. I take three looks. One look at the current price i need to pay and two looks at previous prices i paid before which is price one month ago and price one year ago. If its cheaper I place an order and sign off on the cheque and thats that. If its not then I dont. Then I dont sit there and twidle my thumbs and look exasperated. I ring the appropriate regional office and tell them to try export more of our goods to that particular country. If this blip of price fluctuation continues for months then I would shift my operational views with that particular country from importing to exporting.

I request that you think about my story. You might learn something.

Currently I have bundles of positions. Just like my business I categorise positions accordingly even though they may be from same pair of currency. Each bundle is different to each other and I treat each bundle as each individual entity. As long as that particular bundle exits completely with profit then its mission accomplished. I have bundles of positions that are sell and bundles of positions that are buy. They are not offsetting each other as you might perceived to be. Yes they may be from the same capital pool but I treat them as two different scenarios.

To help you understand, in some weekly trend, you will find that there are corrections. And this correction can last from days to weeks even. Even though last 8 months was down, the price right now is telling you up. Go with the flow and participate. Be in the action. You can speculate on the sideline with your certified indicator/system or be in the game and bring home the trophy and the prom queen home.

Review a week or two later (or more preferably) and you will see that your new legs becomes a solid profit making machine. This set of new legs is a different group to your main group of positions on the main trend. Keep your bias on the downtrend as this was your main trend for the last 8 months but you will have opportunities to make profit on the correction. Just like my export and import business.

Once the trend resumes, your main group of positions will continue producing profits and you have opportunities to add positions to this group once again with greater probability of surviving.

When I comeback from my dinner arrangement I will try and answer the PMs you kindly sent. Thank you

Moving on.

Good evening all

I like to mention something that should be the basis of your thoughts when you read about a system/method.

Many system/methods that claim xx% win rate concerns me on several factors.

First, how did the poster arrive at such xx%? I have seen scores of systems that claim anywhere from 50% to 90%. Some even lower. To justify any short expectancy the poster will then quote their r:r to prove that their numbers show profit. Profit is not the problem but the reliability of such numbers.

For example, there is a popular game called baccarat at most casinos these days. Its a simple game where you either bet the banker to win the next round of hand or the players side. Basically a coin toss but much more elaborate. I happen to have extensive knowledge in statistics (especially in gambling) and nothing below is conjured. This is hard facts.

In regards to the odds,

If you bet on banker to win, then your chance of winning is (roughly) 49%
If you bet on player to win, then your chance of winning is (roughly) 49%

When you win, they pay you 1:1.

Bet $50 on banker and you won, then you receive your $50 and then your win of $50. Total $100 back

So, either side you place the bet you are on the losing side already because you are not 50%. This is possible because casinos implement rules such as if banker wins on 6 then its only half win or other various small measures. These small measures ensure the casino to always have the upper hand and win rate of 51%. SO the difference is 2%.

Even though casinos only make 2% of all gross bets they still make millions every year. This is possible because the turnover of hands is quick and in the tens of thousands per day across dozens of tables.

Now that I have your mind thinking. Lets go back to our example.

A system posts 50% success rate and recommends risk/reward to be 1:2. This is still fantastic. If this was possible in casino, it will shutdown in a day.

So it looks good on paper, but here is where everything goes wrong. According to the system rules you could only realistically enter 10-20 times a week. Could be more but this is just example. To achieve this you need to consistently watch the market most of the time and be ready to execute your order. Now all this is fine as long as it works out at the end. BUT do you know how many 'rounds' of investment is required to prove such edge? It is in the tens of thousands. You actually need tens of thousands, even hundred thousands to prove an edge. Because the paramater is infinite you need to burn thousands of rounds to give a hard number and consider it as the edge.

The fluctuations are huge. After 500 'rounds' you could be well into profit but another 2000 'rounds' later you find yourself minus. Smart readers are already aware of this and implement sound r:r. But please take a step back and ask how long did the poster really try their system before posting on forum. They claim 50% win rate from what? 6 months of live testing? 40 attempt a week? That is still only 1000 times. You cannot claim that you have a system that works 50% of the time with results after only 1000 tries. Unknowingly you may be more or less gambling in the markets.

Fortunately, if the same poster turns out to be a successful trader. His/her success will be the result of having a defined edge in the market and the other saving grace will be their sound r:r. But what they will find (if they adhere to the same system for 10 years) is that the claim they made 10 years ago about the win rate wasnt even close (and unnecessary). They may be profitable after 10 years but it wasnt the success rate but their personal edge in the market. Something to consider closely.

You only need to be sure of only one thing in the market to make money.

Moving on.

This is only theory. If there is any win system out there, then Robot

can be implemented based on that and then you sleep while robot makes $.

So? more likely there is no winning strategy at all, other than

Insider information, that's what bosses on the Wall Street using, otherwise

it's just a gambling. Cause really, placing so much money on just 10-30 pips

movement is a gambling. What is not gambling: buy EURCHF (on very low margin) and sell when it

hit 1.45-1.50 next year or 2. (just an example)