Building an equity millipede

Hi Graeme,

As a faithful follower of this thread from day 1 I'm not only absolutely impressed by your overall long-term strategy that you kindly introduced on these pages but I have to tell you that your lesson on wicks is just amazing. Thank you very much.

By the way, I started my own little millipede about two weeks ago (on EUR/USD and GBP/USD only so far) . Unfortunately most of those legs died on BE today but this type of trading does fascinate me. But I have to admit that I almost had a weak moment and was nearly closing my positions when all my combined legs reached a total of 12% unrealized profit a few days ago. I hope those situations will become psychologically easier to overcome as some of those legs will turn into "long term fighters"...

Hi Graeme,

I must say you certainly look at the market differently than most traders and it's very refreshing.

I know that the mental part of this game is one of the hardest things to master and here is where I struggle with my decisions. I started placing trades on Thursday of last week and all of those positions were taken out with a loss on Friday with the NFP news. This week, I started all over again. So far I've placed 4 trades/2 lots each and have hit my TP or manually close 4 positions/1 lot for 370 pips. Now I have 1 position open on 4 different pairs that are up about 1000 pips in total. I am very tempted to close the positions and I'm fighting the internal mental battle to hold on and not close them out. I know you talked alot about the mechanics of placing trades do you have any insight on how one over comes the urge to close out profitable positions rather than let them run?

i am sure you will get past 12% next time much easier.
right at the moment i am also having my own little internal struggle with this

I guarantee you it is much harder with a few 0's added
Don't think of it as 'profit I could have had'. There is only losses, small losses, breakevens, small wins, medium wins, huge wins. In order to get the huge wins, you have to succumb to the others. Best to just accept the fact you'll get one, and keep disciplined and all will be fine.

a few zero's on 115% profit
i would love to see that........ 11500% unrealised profit, that would be earth shakingly good or maybe knee tremblingly

Good morning, all

Apologies to address all enquiries in a single post. I wish to keep this thread as condensed as possible for the sake of new readers.

Leggo - Good question. 50% is loved by alot of traders. Alot of retail traders look for retrace also. They are interested in 50% and the 33% and then 66%. I consider 50% as a psychological level. We should never tell ourselves, 'ok graeme, price is at 50% lets enter.' We should be really saying 'ok graeme price is at 50% which is loved/followed/believed/cherished by the larger group of traders lets see if they all join force and enter/place buy/sell stop orders there at 50%. I always witness the 'bounce' first and then enter when its coming back down. This ensures a much higher probability as you are piggyback riding.

Geoff - Thank you. You are correct, they are temperamental.

Sixx58 - Good question. Emotional control does/will improve over time. Position trading has the best rewards compared to the small risk taken. Part of the small risk is perserverance and unbending faith.

There is a very good reason why I urge all traders to sharpen their entry method non-stop. Cause this will help their emotional control immensely. If a trader has lost 8 positions before the 1 winning position he/she will most likely be greatly attempted to close the 1 winning position earlier to re-coup his losses. We are all guilty of this.

However, if you know your entry method very well and have kept your losses very minimal, you will look at your losses from a different angle. You will look at 8 losses/breakevens as just part of something you had 'no control' over cause you know there is nothing wrong with your entry skill but it was the inevitable fluctuations of the market that took you out. It is a very different psychological mind game.

Dave - Good question. For me, 250 pip leg is not worth the trouble to negotiate a close or not. We prefer legs that are few thousand pips big. However, you can cushion your emotional hurdle by capturing this good short term profit by diversifying and keeping 1/2 larger legs intact and watch what happens. Sooner or later you will undoubtedtly prefer to hold them without my recommendation anymore. Then you are over that emotional hurdle. I pray for your enlightment to happen soon.

Please allow me to show all readers some realistic expectations. This is answering to sixx58

http://img806.imageshack.us/img806/5306/aa1d.png

The good side of this story, please look below

http://img641.imageshack.us/img641/4135/aa2k.png

There is another reason why trading multiple pair of currency is to its advantage. While gbp/jpy had a lukewarm trend for the last one year and while we wait for the next golden opportunity, all traders must expand their exposure in the market by adding positions into other pairs.

This will balance the risk and reward proportionally.

Infact this will ensure that your equity curve keeps growing while you position yourself for an opportunity of infinite growth. Since your participation is stretched out, you will have continuous flow of diversification throughtout the different pairs. This is important and please think about it.

Yesterday, I have showed all readers, wicks. Please try using the interpretation method that I have showed into your own interpretation. You will be surprised that you are grasping the market sentiments better. It might lead to related discovery.

Sincerely,

Graeme

Apologize, I missed the % aspect lol. Quick glance.

Graeme,

I had to sign up for Forexfactory to comment on what a great thread you have here. I must say this is one of the best trading threads I have ever read. You taking riding your winners to a whole new level and it is very appealing to me because this is something I really value in my trading.

I read the entire thread in one sitting tonight (quickly) and I have some comments/questions. Bare with me if I ask something that has already been answered previously because I have not studied everything in detail yet. If that is the case and you don't want to duplicate your response just say so and I will go hunt down the answer.

First, I have my "1 thing" I am good at. I can trade S/R. It took me 5 years to develop and not 6 month as you suggest. Maybe I am just an idiot and it took me a little longer. It My general strategy is in an uptrend I buy support and sell resistance and in a down trend I short resistance and cover at support. Having a 10x trade is a common target for me and I have a terrible winning percentage.

One thing that I have experimented with and have had no luck with is adding to a position (I call it averaging up). I can see the value in it but I can't make it work for me. Psychologically I can handle 10% winners but 1% becomes a bit difficult (I consider BE losers so that is why my % is so low).

What I am having trouble grasping with your concept is how you are determining when you take your intermediate profits and when (if at all) you take your infinite yield profits.

So lets come up w/ a hypothetical example. I will use my style of trading and incorporate averaging up and see were my strategy would differ from yours.

Lets say resistance on a monthly chart is 100 and support is at 50 and price is currently at 50.

Next we trade off a weekly or daily chart and we...

buy 2 @ 50
buy 2 @ 60
buy 2 @ 70

Now lets say price moves to 100 and we are now at resistance. What is your move here? Mine would be to sell all 3 positions at 100. Would you scale out 1/2 of each here or sell 50 & 60 and hold 70 for infinite yield? If you do hold I would think there has to be some strategy to get out eventually. Are you then looking at a yearly resistance area to hold to (say 300 is the number)?

For this example lets say we sell 50 & 60 and we are holding 70 indefinitely. Now the market bounces off of 100 and starts to trend down. Do you then try to add short positions? This is where I am confused.

If you...

short 2@100 .... you are flat and are basically selling the long
short 2@90 .... you are short 2.

I guess if you try one of these trades and they don't work out then you become net long again.

To me this is why I am getting out of everything @ 100. If 100 breaks and resistance becomes support I would go back into buy mode and add add add add all the way to 300.

So I guess where my strategy would differ is that I would eventually have a target but I would add add add until its eventually hit and then the trade would be over.

On a side note where I would get tripped up on this before when I tried it I would enter at...

long 2 @ 50 ... move stop to be
long 2 @ 60 ... move stop to be and move 50 to here
long 2 @ 70 ... stopped out and retraces back to 60 to stop me out.

= very small gain on what was huge profits (relative to initial risk) at one point

Essentially I was trailing the trade based on new entries and would lose because if the market is not going up up up up w/ no retracement it would eventually stop out the whole trade.

Thanks,

-jashanno

Thanks you for your great reply.

1) I could have been lucky because many pairs are trending this week.

However, to establish my 11 current open (SL at BE) position:

- 22 losing trade (SL got hit) - total loss 5% of account
- 8 trades stopped out at BE
- 4 Trades closed (divestment ...) - EU (360 pips) GU (300 pips) AUD (150 pips) CADJPY (160 pips)

2. Most of my 11 positions are Sell ... if only 1 survive after next week, I guess its because the market is still bullish. "But worry not, by that time I should have a number of Buy Legs established." (This is my way of controlling my psychology).

3. I'd feel bad ... but by that time .. I should have a number of fresh new legs working for me. Hopefully I wont feel too bad that way.

Even Soros would be impressed LOL ...

I know the question is directed to Graeme. However let me explain what I've learned from Graeme in this thread. The answer lies in the first 10 pages of the thread IIRC.

Basically we trade both buy and sell by taking low-risk entries. Take any low-risk set up .. and set SL to BE. Make sure you broker allows holding buy/sell at the same time (called "Hedging") .. Do this as frequent as the opportunity is presented to you. This is the routine.

After a few days .. some of the position will be stopped out. Assume a bull trend. All sell would die and buy will be in profit. If the profit on remaining positions are large enough (or gut feeling is telling u weekly trend is reversing) .. just take profit .. but never Take profit all of them. Leave at least one position to ride the winners till infinity.

What I'd like about this strategy is ... by holding some winners till infinity (assume holding buy and sell at the same time) .. we can profit no matter where the market goes.

Control the risk (low-risk entry) and let the market take care of the profits.

my usd/jpy is my only tade holding on to be a leg.. more like a small toe nail at the moment. Buts its a start

Hi Graeme,

If you have time I hope you can answer a question. What is your take on the market right now? It seems to me a lot of pairs have been going sideways lately and/or may be reversing trend. Just about all 12 of the majors actually. Do you feel cautious right now or are you still stacking positions at your usual rate on your usual pairs?

One difficulty I am having at the moment is that there is no clear long term trend for several pairs. Only ones that look good to me currently are E/U, G/U which appear to be ending their mulitweek retrace and resuming the long term trend.

I have studied this thread from the beginning and am truly impressed. Thank you for sharing. I do have one question - what is your opinion of using the Heikin Ashi candlesticks to keep you in the longer trades?

Here's another take on the H4 TF with .00 entries:

The rules are the same as before: We enter 2 positions per new breakthrough, both with 100 pips SL and one with 100 pips TP and let the other position flow. When the other position reaches 100+ pips we adjust its SL to BE.

Also, recall from my previous post that I do not accept every .00 as an entry, but I identify which .00 are entries from S/R price action.

Trades:

1. 2 long positions @ 0.8200. TP @ 0.8300 & TP @ 0.9200
2. 2 long positions @ 0.8300. TP @ 0.8400 & TP @ 0.9200
3. 2 long positions @ 0.8400. SL @ 0.8300
4. 2 long positions @ 0.8800. SL @ 0.8700
5. 2 long positions @ 0.9100. TP @ 0.9200
6. 2 long positions @ 0.9300. SL/liquidation @ 0.9200

This totals in in 1300 normalized pips. Adjusted down 25 % for spreads, slippage, entering slightly above/below .00 lines etc, this is 975 normalized pips.

Also, a warning: in reading historical charts for practice, be aware of the obvious biases in doing so. One of them is future bias which is that when you are reading historical charts you always knows what happens next to the bar(s) you are considering, unless you are at the end of the chart. You'll typically encounter price action that you are unsure of. However, if you have what happens next in front of you, you might be choosing to do something you wouldn't necessarily do if you were in the same situation on a live account. This may result in back-testing looking far more lucrative than what it actually is when you go about it live.

Here's another H4 take with different market condition than that above:

Normalized pips roughly adjusted for slippage, spreads, etc: 840.

I also added two questions with illustrations in the chart for you to answer.

Good to see you back Graeme.

Well I had a great start to my millipede three weeks ago, was stacking up long cable, euro and aud positions nicely. Unrealised profit was at 75% of my account balance on Sunday night! Note I have only been adding one position at a time, with a view for it to run, not two with one with a take profit and the other to run.

Then what has happened since is a harsh lesson. I had been so confident in my trades that none had stops, only one long cable trade which was the very first one I opened had a stop. I figured why do I need stops on these if I'm going to diversify anyway some point down the road. So the dollar bear run has finished and all the majors have now started to lose their ground against the greenback. All of my stacked buy positions with no stops are now very much in the red. I have opened several short positions across the different pairs in an attempt to hedge/diversify while the market decides what it wants to do. But as I left it late in diversifying, and I didn't diversify as aggressively as I bought into the long trend, I am now at a hefty unrealised net loss.

I think the most difficult aspect of this is knowing when to close some of your youngest winning positions, and then diversifying. For example I now have several short positions in profit, I don't know whether to let them run or to close them now to inject some account balance. This inevitably then puts the unrealised losses higher though as the longs are still losing money. I suppose the question is do I believe that the long trend will resume, if so then I should maybe close some shorts now and then wait for my longs to get back into profit. If the downtrend contines then I could keep adding short positions until all short position profits can cancel out the long losses.

All this is over a period of 3 weeks. So moving forward I am going to implement these two things:

1. Once a position has survived past a few days then SL will be put in at BE.

2. Opening two positions when adding to what I believe is the current trend and also two positions when diversifying. With the much talked about 100 pip TP and 100 pip stop on one position, the other to follow point 1 above.

The only reason I didn't want to do the two position technique is because of fear of overexposure. It certainly would have helped no end during this week though to be fair. So this is just a post to say that I've hit my first hurdle, and to see 75% unrealised profit turn into 30% unrealised loss in a few days can be disheartening but these things are sent to test us and between us all we can nail this! My spirits are still high :-)

Looking forward to continuing contribution to this thread, let's keep the momentum.

Mark

To all those who have built their millipede, what is your MM like per position ?

Fixed lots size or % ? Can elaborate ??

Thanks...

Hi Songbo,
I am only doing this on a demo account but my plan is to only have a maximum of 2 % of my account at risk at any one time. I am trading 2 lots at a dollar a pip each lot. My account is 50,000 so if my stop is 100 pips then I can have 5 positions open at any time or $1000 if this makes sense. Once a stop is taken to breakeven then I discount it because there is no risk.

To be honest though I think 100 pips is way too much so thats why Im practising my entries on 5 min time frame. That way I can enter with a 10 - 15 pip stop so this way I can get more exposure to the market with the same % risk if that makes sense.

Im still learning though so will let you know how it goes.

Regards,
Ben