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Building an equity millipede

  • #441
  • Aug 1, 2010 7:31am Aug 1, 2010 7:31am
Quoting Chorlton
I
IMO there is little benefit in assessing the drawdown over a short period (such as a few weeks) if the intention is to hold for much longer.

To try to expand on this I'd like to tell a quick story. I was once at a seminar where a graph of a system's drawdown & Equity was displayed. According to the graph (which displayed about 8 weeks of results) the equity kept on falling. My instant reaction and others in the room was why are you showing me the results of a losing system !!??!! However, when the graph was resized to cover the last 5 years...
Good evening, Chorlton

Correct. Absolutely. However, drawdowns must be avoided.

The mind games involved in drawdowns is devastating. You wont be able to sleep with a realized -4000 pips loss and all you have is 2 open positions now at +300 pips each.

The only way to avoid drawdowns..?



Sincerely,

Graeme
  • #442
  • Aug 1, 2010 7:48am Aug 1, 2010 7:48am
Quoting pipEASY
Good evening, Chorlton

Thank you for your question. Apologies that I missed it somehow.

1. I diversify when there was enough growth of the current group and the direction of the market is uncertain. I will diversify to replensih my trade capital and add realized profit to ensure a smooth growing equity. I will always hold largest legs of the group and move them to the group before on the higher level. No set %, diversification is the easier part of my trading.

2. For myself, open of daily candle is 9am sydney time (open of asian market)....
Hello Graeme,

Many Thanks for taking the time to reply, and I hope you don't mind if I ask another question.

With regard to your own trading, do you keep records of your trading stats (current win ratio and worse drawdown) by any chance, and if so would you be willing to post it?

I ask because if someone was able to start trading your own strategy using (i) your exact entries and (ii) employing your exact reasons for diversifying, would an account size of 5000USD (which you suggested for your exercise) be adequate to allow for the amount of drawdown that could occur due to the relatively low win-rate of the system?

I know that one of the main reasons you diversify (by exiting the winning trades) is to neutralise the risk of the longer legs and by doing so (i) top up the account balance / smooth out the equity curve.

However, (even with 1:100 leverage) until that happens could there be the risk that the account balance reaches a point of ruin?

Many Thanks in advance,
Chorlton
  • #443
  • Aug 1, 2010 7:59am Aug 1, 2010 7:59am
Quoting pipEASY
Good evening, Chorlton

Correct. Absolutely. However, drawdowns must be avoided.

The mind games involved in drawdowns is devastating. You wont be able to sleep with a realized -4000 pips loss and all you have is 2 open positions now at +300 pips each.

The only way to avoid drawdowns..?



Sincerely,

Graeme

Hi Graeme,

Firstly, I've only recently joined FF so at the moment each of my posts has to be checked by a moderator which means that there is a delay between me writing a post & my post appearing. Consequently, if i ask a question which you have just answered in a previous post then please accept my apologies.

Hopefully, once I am accepted as a full member I can join the discussion in realtime and keep the topic flowing rather than my current disjointed questions.

In regard to your question about avoiding drawdowns, I would say off the top of my head that one option would be to have a system with a higher win-rate. This could be achieved by (i) being more accurate with ones entries and/or (ii) avoiding those Mrkt conditions which are less favourable for a particular system. In this case, (with this strategy), this would mean avoiding ranging periods.
Another idea would be to regularly exit winning trades which is actually what you are doing when you diversify. However, this point leads me onto another question which I have posted earlier [Aug 1, 2010 8:48am] (and which is currently waiting to be approved by the moderators).

Kind regards...
  • #444
  • Aug 1, 2010 9:02am Aug 1, 2010 9:02am
Thank You PipEasy so much for this thread.

I have a small account
($550.00) with Interbankfx in the US. With this broker, I can trade at a penny a pip (.01) which is the way I like it for now. I don't spend alot of time anymore at the computer because I been losing money for the past
three and a half years. Now, I will be adding funds too my account shortly, to
begin building equity.


Graeme, your style of trading has put things into perspective for me and others that this can be a "business of profitable investing", once you get survivable trades on the board.

So anyway, with Interbankfx, I was going to open a sub- account,
because of no-hedging in the US.
I just want to report to anyone interested, when I was on the phone with them, the person told me they were setting up an office in the UK to allow hedging and they would make an announcement in a couple weeks, We'll see.

But otherwise.... To get an overseas broker for the hedging, are there cases where you might get denied, or redirected to they're NY office for being a US citizen? Anyone have this happen to them?
Thank You again. George
  • #445
  • Aug 1, 2010 9:09am Aug 1, 2010 9:09am
Quoting Gp144
Thank You PipEasy so much for this thread.

I have a small account
($550.00) with Interbankfx in the US. With this broker, I can trade at a penny a pip (.01) which is the way I like it for now. I don't spend alot of time anymore at the computer because I been losing money for the past
three and a half years. Now, I will be adding funds too my account shortly, to
begin building equity.


Graeme, your style of trading has put things into perspective for me and others that this can be a "business of profitable investing", once you get survivable...
Good evening, George

Thank you for the compliment and Im sorry to hear that you have lost your money for the last 3 years. Could you explain why you think you have lost money? I can probably assume/guess however it would be nice if you would share with the community, if you dont mind.

I hope U.S brokers understand that there is no beneficial reason or any technically fundamental reason why buy and sell is considered a wrongdoing. People buy items from UK while living in japan and so does a uk citizen buying items from japan. Its a flow of buy and sell in a two way lane.

Sincerely,

Graeme
  • #446
  • Edited 11:34am Aug 1, 2010 10:04am | Edited 11:34am
Good evening, all

Ozziedave has chosen 7 pairs of currency for me. The first being gbp/usd.

Im not very sure if my next 7 charts, will help your understanding or add more confusion but I hope it helps in some ways.

Before you look at the charts, I just want to say with all earnesty that 2 traders cannot be the exactly same. Its not learning something from a textbook because trading is your very own personal interpretation of the present matter on hand.

I invite all how I 'possibly' use just basic moving higher high/lower low, .00 s/r, and pattern recognition helps me grasp the bigger picture of the market sentiment. This bigger grasp helps me notice trends happening 'before' i move into a zoomed view on 1hr timeframe for razor entries.

It may be alot to digest however believe me when I say I do the next 7 charts all in my head at one glance of an open chart. With all sincerity I hope this helps but I have my concerns. I will follow up with 6 further analysis of remaining pairs.

Price must move from support to resistance of moving higher high and lower lows. They use .00 as stepping stones on the way. Think about it.

First chart shows my complete focal interpretation of last 4 months.

http://img638.imageshack.us/img638/7663/87241355.png
  • #447
  • Edited 11:02am Aug 1, 2010 10:08am | Edited 11:02am
My first focal interpretation of some possible future movement

http://img829.imageshack.us/img829/4346/25467427.png

There are 2 distinct price patterns in forex. Scenario 1 and Scenario 2. Small variations in between but its either one or the other more or less.

http://img822.imageshack.us/img822/4559/93482897.png
  • #448
  • Aug 1, 2010 10:12am Aug 1, 2010 10:12am
Can everyone see that a counter trade is also a start of a new trend? Nobody knows. As long as price is moving up from .00 then im buy, price moving down from .00 then im sell. My biggest helper.

http://img801.imageshack.us/img801/8695/62641285.png
  • #449
  • Aug 1, 2010 10:14am Aug 1, 2010 10:14am
But, Graeme? I see different support/resistance to you, and different range to you. It doesnt matter. Its all relative. At the end the result will be same.

http://img203.imageshack.us/img203/774/78974595.png
  • #450
  • Edited 10:43am Aug 1, 2010 10:18am | Edited 10:43am
How entering at 'every' .00 will be a huge drawdown. And this applies to all systems on this forum that tries to pre-define entries and exits on certain rules/criteria/indicator/eas.


http://img713.imageshack.us/img713/3646/66029990.png

Your potential drawdown from just .00 entries (leaving everything to rules/mechanical decisions)

http://img37.imageshack.us/img37/1246/19281937.png
  • #451
  • Aug 1, 2010 10:40am Aug 1, 2010 10:40am
Good evening, all

Thank you for your patience.

Im not sure if I relayed my meaning clear enough in the last 7 charts. Alot of readers was eager to know how I see the market.

Just like my multi-leveled positions, market sentiment is also multi layered. I do not aimlessly wander around 1hr charts picking every low risk entry possible (even though that is hypothetically what I do). However I do know which pairs of currency to concentrate on. This is very important to know. Its knowing where to hit your opponent with one swift brutal attack.

You must focus on pair of currency that is currently moving for you. Also you need to be trading multiple pairs because there are periods of range where you should be just sitting tight until it breaks out.

Alot of traders know that range goes to trend and then back to range. It is true however do you know how to implement that? By just using moving higher high and lower low support/resistance and moving with the flow and entering at .00 is enough. But you can use your own methods here.

Most important thing I do on the 4hr/daily chart is look for a certain range to happen. I love it when range happens. Although I do lose a 1 or 2 good entries to actually find out that price has now gone into range, I wait and see what happens next as I know it will be a scenario 1 or scenario 2 or a mix of more or less both in a sense. No matter what it is, I implement a mix of counter trade (but following the flow) and mix of within the trend entries which are usually performed at 1hr.

Scenario 2 on gbp/usd was quiet tricky. It wasnt a simple explosion of uptrend but many minor dips with moving HH LL s/r close together. Terrible. I wouldnt waste more than few attempts to such poor movement. And this is very very very important in keeping your capital safe. There is no need to rush in once you know its a trend and try add position at every .00. You have to notice few things that is wrong with the trend.

Its like card counting in blackjack. All we need is a rough idea what it could be in the next 10-20 cards. Thats how professional card counters do. They count until there is only big 10 cards are 'mostly' remaining and they will enter heavily. Yes, they will still have losses but once they take a whiff of soon/potential good row of good cards thats when they signal each other to all jump in and bet heavily. True fact.

And thats what I do. All im doing with my focal interpretation is that, Im sniffing around the higher timeframe, I prod a position here and there, counter trades but following the flow (these are usually the start of trends), I do more prodding until I know that I caught something. I stay awake to add positions in that pair of currency once I know its just full of big 10 cards.

Please think about it. We can only speculate to a 'certain degree' of certainty and then we milk it dry.

Sincerely,

Graeme
  • #452
  • Aug 1, 2010 10:55am Aug 1, 2010 10:55am
Just wrapping up on what we coverd on this thread,

If I breakup this thread for the new readers to navigate around:

First 5-10 pages, importance of long term
10-15, diversification
15-20, exercise to practice entries
20 onwards is mostly entry methods, my personal focal interpretation.
25 onwards is about ignoring the market

It seems like a long way here and I hope it was of help. I try cover the rest of 6 pairs of currency as chosen by ozziedave and then perhaps I really did cover everything I do. The last 6 would mostly cover the importance of not attempting every buy/sell signal.

May I remind you that the fastest person runs 100m in 9.58 seconds. That is humanly impossible to most. However, it is possible cause the fastest person in the world has stepped outside the bounds of normal perception.

Sincerely,

Graeme
  • #453
  • Aug 1, 2010 11:10am Aug 1, 2010 11:10am
Quoting pipEASY
Just wrapping up on what we coverd on this thread,

If I breakup this thread for the new readers to navigate around:

First 5-10 pages, importance of long term
10-15, diversification
15-20, exercise to practice entries
20 onwards is mostly entry methods, my personal focal interpretation.
25 onwards is about ignoring the market

It seems like a long way here and I hope it was of help. I try cover the rest of 6 pairs of currency as chosen by ozziedave and then perhaps I really did cover everything I do. The last 6 would mostly cover the importance...
Graeme,

Thank you so much for the huge effort you put into all your posts. This has been a great education to me and I can't thank you enough. Good karma to you !!!

Bak
  • #454
  • Aug 1, 2010 11:14am Aug 1, 2010 11:14am
Hi Graeme,


Just wanted to say thank you for the detailed charts. I think they will assist everyone in understanding how you see overall price action and entries.

I also wanted to share a tip if you're using MT4 charts. You can save your charts as pictures directly from MT4 by right clicking on the chart, chose "save as picture" and then save the image to an appropriate folder on your PC. This would save you some time instead of having to use the screen grab application.
  • #455
  • Aug 1, 2010 11:19am Aug 1, 2010 11:19am
Thank you for the compliments, bakuli and ozziedave.

Im astounded to hear that you can grab screenshots within mt4. Guess we all learn from each other.

Find a way to sniff the market on higher timeframe. I personally use counter trades with the flow taking both buy and sell. This ensures that Im covering both sides and my first position near the start of anything big that is starting.

Once you know how to sniff the market with your scouts (jessie livermore term), milk it bone dry in the lower timeframe. But please do not stack positions in one given area. I try cover that very soon

Sincerely,

Graeme
  • #456
  • Aug 1, 2010 1:36pm Aug 1, 2010 1:36pm
hello!

in this chart, whit a enter system about .00

-2.800
+1.900
= -900 pips

and another variant whit hedge:

+1000
-800
= +200 pips

is another posibility! and no big reduction.
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd1.gif Size: 28 KB
  • #457
  • Aug 1, 2010 2:10pm Aug 1, 2010 2:10pm
Hi Graeme, I'm new to posting in forums. At the moment, I'm
not sure how to attach the qoute from my previous post.
This is in reply to post #145.

I guess I'm lossing money in forex is because I didn't try hard enough,
I tried too hard, maybe the forex is just a crap shoot. It's up, it's down
knowbody knows which way it's going. I know I'm quick on the trigger
to get a trade on. Don't have the patience to wait for the ideal conditions.
in regard to the X3 20/20 exercise. I know impatience is
one of the hurdles I must overcome. I would like to open trades and have it be effortless and have a sense or intuition that it's time to trade.
I'm hoping to get some valuable insight from the exercise.

As you mentioned before, you could risk 25-30 pips to gain 60(something like that). I now have a renewed interest and changing my trading style
too take that 25-30 pip risk to gain profits I never would have realized
before.
Thanks Graeme for all your time and effort your put into
this thread. George
  • #458
  • Aug 1, 2010 5:29pm Aug 1, 2010 5:29pm
Hi Graeme,

In general I understand support and resistance but I'm not sure I'm following how you apply it to your charts.

For example, on the 4hr GBP chart. On your chart you mark the highs at #1 as new resistance. Now if you look to the left you have area 2 that is previous resistance. Why do you designate area #1 as "new" resistance?

The same holds true for area #3. This makes a new low and breaks previous support at area #4. Why wouldn't this be "new" support?

I hope you don't remove the last set of charts because they really give some detailed insight into how you look at price movement/price action. I hope you will continue to update the thread with the analysis of the remaining 6 pairs. I realize it's alot of work on your part but you are helping thousands of traders understand the market.
Attached Image (click to enlarge)
Click to Enlarge Name: gbpusd s & r 02.08.10.gif Size: 33 KB
  • #459
  • Aug 1, 2010 6:31pm Aug 1, 2010 6:31pm
Hi Graeme,

Just a follow up question about entries, in particular, in the area of the double top on the 4hr GBPUSD chart. In real time you wouldn't know this is going to turn into a ranging market so I marked all of the entries in the range. Green for long and magenta for short. What I will do is present my reasons for taking or passing on the trade and I would like to hear your feedback on my entries if you have the time to comment.

1. This would be a long entry because we've broken the old resistance and we're making new highs.
2. No short entry because we haven't broken the previous support line (dashed yellow line).
3. No long trade since we haven't broken to a new high above the previous resistance line (dashed red line).
4. No entry short since we haven't broken the support line (dashed yellow line).
5. Short entry as we've broken below the support line (dashed yelow line). Enter 2 lots. First lot +100 pips and 2nd lot BE at entry point.
6. No long entry. Hasn't broken the previous resistance line (dashed red line).
7. No long entry. Hasn't broken the previous resistance line (dashed red line).
8. No short entry. Hasn't broken the previous support line (dashed purple line).
9. No short entry. Hasn't broken the previous support line (dashed purple line).
10. No long entry. Hasn't broken above previous resistance line (dashed red line).
11. No short entry. Hasn't broken below previous support line (dashed purple line).
12. Entry short. Price has broken below the support line (dashed purple line). Enter 2 lots -200 pips.
13. No entry long. Hasn't broken previous resistance line (dashed red line).
14. No short entry. Hasn't broken below support line (dashed tan line).
15. Entry short. Price breaks below the support line (dashed tan line). Enter 2 lots, first lot +100 pips second lot minimum of +500 pips.
16. This may be s short entry or if you entered at #15 you may deem it too close to your last entry and may pass on this entry point. If you did enter you would have the first lot with +100 and second lot with a minimum of +400 pips.
Attached Image (click to enlarge)
Click to Enlarge Name: gbpusd entries 02.08.10.gif Size: 19 KB
  • #460
  • Aug 1, 2010 7:37pm Aug 1, 2010 7:37pm
Good morning, ozzietrader

In forex, what you see as s/r is nothing to other traders focal interpretation. I prefer not to use long term s/r like the ones you marked in orange. No special reason however I only look for few things in higher timeframe.

1. I look for range. Why?? Cause it needs to breakout
2. How does it breakout?
- scenario 1, where price expands in both direction and then one of the counter trades turn into a trend
- scenario 2, where price moves out of range into a dedicated trend with higher highs and higher lows following together.
- or it could be a mix of both.

Please refer to my gbpusd charts, it has all 3 scenarios

Preference? I dont care as long as I enter with flow from moving HH LL s/r and .00 to .00.

http://img339.imageshack.us/img339/5300/oz1.png

This is how I look at your chart in my focal interpretation

See how I treat each range and breakout individually? This keeps my interpretation like liquid, I have no shape or size. I flow with the market.

http://img4.imageshack.us/img4/6527/oz2v.png
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