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Building an equity millipede

  • #221
  • Jul 21, 2010 8:39am Jul 21, 2010 8:39am
Hi pipEASY

I have been doing some testing on this method on EURUSD from the beginning of 2010. I can see that there will be a very large number of losses and a very large number of breakeven trades but the legs that survive more than make up for the losses.

However at the point the long term trend reversed/retraced on EURUSD my very large short gain started to erode at an alarming rate of knots. Would it be possible for you to explain in more detail how you diversify/hedge? You mention entering both buy and sell orders, what prompts you to take one or the other? Is it just whether price closed higher or lower from the day before?

Can you also advise on the gap between new trades/legs? I am using 100 pips on EURUSD, does this sound about right?
Although its a very simple method its actually very complicated to implement!
  • #222
  • Jul 21, 2010 10:49am Jul 21, 2010 10:49am
Quoting pipEASY
Good evening, tommbstone

Apologies for the lack of clarity.

1. Open a demo, 5000USD @ 1:100 leverage
2. Use 0.1 lot size.
3. Choose any currency pair, timeframe
4. You can do this daily exercise on any session
5. So when you open your platform, look at current price. You can use the open price of the asian market. If this current price is higher than open price then you can only enter buy. If current price is lower than open price you can only sell.
6. You can enter as you wish. No method. Just enter when you think it will make profit.
7. Set...
Good morning.. (for me its am) I see that price action fell below the opening so far.
As for your exercise I was not sure about the entry idea until I saw # 6 on your list. Got it now. Its my discretions.
thank you sir
  • #223
  • Jul 21, 2010 12:19pm Jul 21, 2010 12:19pm
Graeme,
Your % is growing exponentially, Its almost like compounding interest but instead of say property where you could expect 5 - 10% per annum, in this method you could be compounding that amount daily!

Please don't disappear from this forum to quickly!
Ben
  • #224
  • Edited 2:58pm Jul 21, 2010 12:51pm | Edited 2:58pm
Hello Graeme,

do you keep currency correlations in mind when you build your longterm positions?


Regards,

TJPLD

EDIT: Just found your post regarding this. Totally missed that. Thanks! Keep up the good work!
  • #225
  • Edited 2:34pm Jul 21, 2010 2:22pm | Edited 2:34pm
Quoting lolek
Dear Graeme, one hypothetical question. You are building your millipede for years now. Open positions are worth very very much. Would you close them all and began to build the new millipede? If not too much, why?

Thank you, Zlatko
Good morning, Zlatko

Good question.

It is your responsibility to keep the flow and the health of your millipede growing. This is one of the easier tasks.

I would never close all my legs at once, however when I notice that main monthly trend is possibly changing, I will diversify but this time will start closing the largest legs of the largest group + the smaller legs of current group im focusing. But never all at once as it could be possible be just a correction.

In my above chart, if I was uncomfortable about keeping legs 1 and 2 for the next 11 months. Somewhere in between when there is a correction that goes against the main trend I will close out leg 2 while diversifying and keep leg 1 further. No need to worry as I have plenty more in my other sub-groups as well.

When diversifying, its not a golden rule for everyone to only close smaller half of legs of current group that is being focused. You have to mix and match. Think logically and sensibly and dont let hard rules of systems pre-define your entry/exits.

Sincerely,

Graeme
  • #226
  • Jul 21, 2010 2:23pm Jul 21, 2010 2:23pm
Quoting oztrader
I got it Graeme ,and I am most grateful for all your sharing and caring.

All the best to you buddy.
Good morning, oztrader

Thank you for the kind compliment.

Sincerely,

Graeme
  • #227
  • Jul 21, 2010 3:20pm Jul 21, 2010 3:20pm
@ PipEasy

Thanks for charts.

EUR/CHF, excellent candidate?

Mounthly down, weekly down, daily down.
  • #228
  • Edited 5:52pm Jul 21, 2010 4:01pm | Edited 5:52pm
Quoting pipz4me
Hi pipEASY

I have been doing some testing on this method on EURUSD from the beginning of 2010. I can see that there will be a very large number of losses and a very large number of breakeven trades but the legs that survive more than make up for the losses.

However at the point the long term trend reversed/retraced on EURUSD my very large short gain started to erode at an alarming rate of knots. Would it be possible for you to explain in more detail how you diversify/hedge? You mention entering both buy and sell orders, what prompts you to take...
Good morning, pipz4me

Good questions.

You should be very worried when you only trade one direction. Since I trade both directions, any change in monthly main trend or prolonged correction doesnt effect me at all.

When you are a position manager, you must think logically and sensibly. If you see there is a major change in the main trend, you do not need to panic and rush in to close out your largest group. How do you know that the change in the main trend is permanent? You cant.

Some traders consider my position management as scaling in and out of the market. You could also look at it that way. Please dont let it bother you that one of the largest leg was up +6000 pips last month but now you are closing it for only +5000 pips. That is greed.

What you can do is anticipate that it might change permanently and the next time you diversify you start closing out few of the largest legs of the largest group + the smaller half of the legs from the group you are focusing. The flexibility is yours. I have never diversified for a loss.

You are correct to say that one of my larger legs will surpass all losses.

Edit: 100 pip gaps per position is viable however during times of great momentum I could add positions that are only 30-40 pips apart.

But can you handle weeks of breaking even? Not many traders can.

I will post a scenario very soon.

Sincerely,

Graeme
  • #229
  • Jul 21, 2010 4:02pm Jul 21, 2010 4:02pm
Quoting tommbstone
Good morning.. (for me its am) I see that price action fell below the opening so far.
As for your exercise I was not sure about the entry idea until I saw # 6 on your list. Got it now. Its my discretions.
thank you sir
Good morning, tommbstone

Great to hear you understand.

This exercise will give you access to aladdin's cave.

Take my word for it

Sincerely,

Graeme
  • #230
  • Jul 21, 2010 4:14pm Jul 21, 2010 4:14pm
Quoting leggo
Graeme,
Your % is growing exponentially, Its almost like compounding interest but instead of say property where you could expect 5 - 10% per annum, in this method you could be compounding that amount daily!

Please don't disappear from this forum to quickly!
Ben

Good morning, Ben

Im glad to hear you see the power of exponential growth.

Yes, you are correct. I have interest in properties and shares as well and realistically I only expect 5 - 12% per annum on my return.

With forex, since Im controlling my risk and reward I expect my efforts to be rewarded properly.

I could close out all my positions today and retire from trading and my final realized profit will be my initial capital 2 years ago multiplied by x7. Lets leave it at that for now.

Sincerely,

Graeme
  • #231
  • Jul 21, 2010 4:19pm Jul 21, 2010 4:19pm
Quoting TJPLD
Hello Graeme,

do you keep currency correlations in mind when you build your longterm positions?


Regards,

TJPLD

EDIT: Just found your post regarding this. Totally missed that. Thanks! Keep up the good work!
Good morning, TJPLD

Thank you for your question.

It is a great question.

Just for other readers please read my answer on post 33

http://www.forexfactory.com/showpost...8&postcount=33

Sincerely,

Graeme
  • #232
  • Edited 4:46pm Jul 21, 2010 4:30pm | Edited 4:46pm
Quoting xman
@ PipEasy

Thanks for charts.

EUR/CHF, excellent candidate?

Mounthly down, weekly down, daily down.

Good morning, xman

Thank you for your question.

I didnt forget about you and kept my promise with the charts.

I just had a long look in my journal before even opening my platform.

My current group that im building started in end of may. I have 5 positions of sell remaining and looks like last 4/5 legs have died recently on breakeven. I also notice that I have 2 buy positions in the same group.

So i have 5 remaining sell positions against 2 buy positions that were added recently, last week or 2. Before i even look at my daily chart, I already know that there was a good downtrend since end of may and last week or 2 was a retrace/correction against the downtrend.

Am I right so far?

To answer your questions after looking at charts:

1. Main long term trend: Down since end of 2007

2. Medium trend: Last 7-8 months has been down with great momentum

3. Short trend: Last 4 weeks have been great downtrend except for the minor correction in the last week or two. But we dont know if this correction could be start of something huge. Hopefully you would have entered as the market dictates and have buy positions on this correction. If the correction was only temporary you will find that the market will kill these buy positions sooner or later. If not, they will grow for you. Look for a low risk setup today near the open of the daily candle either buy or sell and enter as per your own entry method.

Sincerely,

Graeme
  • #233
  • Edited 5:21pm Jul 21, 2010 4:48pm | Edited 5:21pm
Good morning, all

Could we possibly have everyone ask me anything they wish to know?

I would like to start wrapping up the topic.

Sincerely,

Graeme
  • #234
  • Jul 21, 2010 4:54pm Jul 21, 2010 4:54pm
Quoting pipEASY
Good morning, all

Could we possibly have everyone ask me anything they wish to know?

I would like to start wrapping up the topic.

Sincerely,

Graeme
The 5 & 10 EMA you have on your chart do you use that to determine if a short term trend has changed. In other words is it part of the process for diversifying?
  • #235
  • Edited 5:26pm Jul 21, 2010 5:05pm | Edited 5:26pm
Quoting willf
The 5 & 10 EMA you have on your chart do you use that to determine if a short term trend has changed. In other words is it part of the process for diversifying?
Good morning, willf

Great question.

The only purpose of 5/10 ema on my charts is so I can see the angle of the trend and the gap of the 2 lines.

They do not influence any of my trading decisions.

However, I do know that alot of traders base their trading decisions around ema crossovers and sometimes there is a strong movement around these areas. Not all the time but enough times. This gives me opportuntiy to piggyback on other traders for a lower risk entry.

Ema crossover is religiously followed by retail traders.

Perhaps you could build an edge around their misconception. I know I do.

Edit: In regards to the question. I never base my diversification on indicators. I diversify when there was enough time for growth on my positions of the current group that Im focusing on and when Im not sure about the current market sentiments. It locks in an increase in capital balance and gets that group out of my head. Clears the scoreboard.

Sincerely,

Graeme
  • #236
  • Jul 21, 2010 5:35pm Jul 21, 2010 5:35pm
Hi Graeme,

I wondered if you would be able to answer a question I asked previously?

Thank you for your time.

Quoting Someone

Earlier in the thread you mentioned that sometimes you take a trade at the open of a new daily candle instead of trading the lower time frames, I would be very interested to learn what you look for on the daily chart to decide which candles to trade and which to avoid? Do you look for high momentum candles to enter on?

Thank you
  • #237
  • Jul 21, 2010 5:40pm Jul 21, 2010 5:40pm
I maybe wrong but looking at the charts posted I think he waits for a close below/above the daily bar in the trend direction. So I guess that would be a kind of momentum trade.
  • #238
  • Jul 21, 2010 5:50pm Jul 21, 2010 5:50pm
Quoting Someone
Hi Graeme,

I wondered if you would be able to answer a question I asked previously?

Thank you for your time.
Good morning, Someone

Thank you for the question.

Yes, I mention in one of my earlier posts at the start of the thread that I enter from open of the daily candle sometimes.

I would consider entering from enter of the daily candle as soon as it opens if there is a compelling momentum the days before. If I know that I will not be around a computer for the rest of the day I will use a hard stop or no stop when my focal interpretation tells me that it is not necessarily required. I would use no stop if I know all the retail traders are overly excited about the momentum so Im technically piggyback riding on them again.

Somedays when I dont use a hard stop and I enter on open of the daily candle, I will notice when I come back to my computer later in the evening that the price retraced more than 100 pips from the open but now currently positive and going forward in the intended direction. I do not recommend such entry methods for anyone who is currently learning. This type of hindsight comes from alot of practice.

If you are basing your manual entries from daily chart you will most definitely need larger breathing space for your position. I would recommend staying manual entries on the lower timeframe for the time being and you will find that you can perform hard entries on the dailies later on. Its a hindsight that grows with practice. For the last month on eur/chf, I opened a few positions on hard daily open with no stoploss. Something most traders cannot comprehend. I can do this cause I know it will be 20% chance of losing: 80% chance of successul entry at the end of the day. This is something only the advanced and pro traders should attempt. Hope I dont sound like bragging to everyone.

I do 65% manual entries on 1hr, 4hr timeframes. 35% on hard daily opens

Sincerely,

Graeme
  • #239
  • Jul 21, 2010 6:06pm Jul 21, 2010 6:06pm
Quoting willf
I maybe wrong but looking at the charts posted I think he waits for a close below/above the daily bar in the trend direction. So I guess that would be a kind of momentum trade.
Good morning, willf

Good thinking.

However, not all the time. That is once again pre-defining my entry but I bend with the wind. I have many positions that are on the wicks of the daily candle.

Forum member: Someone, is asking about my specific entry method on daily which puts me in an awkward position as I cannot describe the process of my focal intrepretation cause its not a step 1 to 10 kind of thing. This is not someone's fault and I hope I dont offend anyone. Im glad he has brought it out.

May I ask everyone to take a step back to basics and just continue practicing on entries for the next 6 months. You will find amazing related discoveries on the way.

I understand why everyone is asking about my specific entry methods. In their thinking process, they see my profits derived from my entries/participation in the market and they would like to jump into action and try create similar profits which I totally understand as one of the basic to and fro thought process of the strategy section in a forum. However everyone must understand that entries are your own personal decisions. All traders entries must be different as all traders have different focal interpretation.

2 different traders, entering at different times, entering differently, with different risk control, different perception but of the same type of long term approach will find similar success between them.

Something I said about 20 times now..

Hope im not sounding as if im bragging but I know what I say sounds vague to most and I agree. But.

Sincerely,

Graeme
  • #240
  • Jul 21, 2010 6:14pm Jul 21, 2010 6:14pm
pipEASY,

Thanks for the thread.

I was thinking about the use of "hedging", for lack of a better term, in your method. I am, like others here, in the US and can't take advantage of that in my account. However, I would like to see what you think of this possible solution. What if, for instance, I am long 10 positions and get a short signal. Instead of having 10 longs and 1 short, I instead cover 1 long and end up 9 positions long, net? This would continue as signals are given and a person would always be either long or short but not long and short as people outside the US can be. Would the P/L not end up in the same place over time? Maybe I am thinking of this incorrectly, but would like to see if you or anyone else has some thoughts on this.

Thanks

boz
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