Building an equity millipede

Hi Ben,

Quick question.

When you switch from Demo to your actual account in the future, will you also be starting with $50k?

That's the plan. That's why i'm so keen to sharpen my entries. Untill I know im getting good results through skill rather than luck then Im staying on demo.

Regards,
Ben

My lotsize (fixed lot) is calculated based on 0.5% risk per trade (60 pips SL) ...
But the actual SL is less than 40 pips all of the time.



I woke up late this morning ... missed another 4 new buy leg opportunity on JPY pairs .. sigh ...

Totally agree....

btw: I only asked as I've known traders in the past who demo with a large account but in real trading use one which is a lot smaller which can have an impact of money management if they have based their performance on the former.

Pipeasy,

Mighty good stuff and it has compelled me to offer my gratitude for your thread. My learning has come on leaps and bounds from the reading and the golden nuggets found within.

Your explanation of wicks was eye opening for me and has chaged my perception on price action. Previously i was concentrating on reversal from the previous candle and paying attention(too much) on the colour of the body.

From your explanation I can now see the key is the reversal of the reversal if you like. Let me try to explain:- when the first candle closes the next candle goes to 50% of that first candle. That's when I now become interested. If the price now reverses from that point I'm entering on that candle on the reversal within that candle most likely at the origonal open price. From my observations this appears to be a relatively low risk entry.

Well on with the entry practice. I've been engaged with your initial excerise this week with the 20/20 entry. Many thanks for the above as it has certainly helped and I'm not sure how long it would have taken me to have that associated discovery.

Glen

Ben,

I would like to share something that was a stumbling block for me with you. Feel free to disregard if it does not apply.

For me, zooming in and having a faster chart with a smaller stop does not necessarily mean a higher winning percentage or less risk. When I do this I get stopped out WAY more. I will take an extreme example, but if that was the case why not use a 5 second chart and risk 2 pips?

What works for me is to use a medium size stop and reduce the risk on the trade as it develops. You many be completely different and a faster chart might make all the difference in the world.

Also, 2% per trade seems a little high to me for this strategy. Some might disagree and this has probably already been discussed. Can you take 20 losses in a row @ 2% each?

Thanks for the reply.

I understand what you are trying to say but it still doesn't make any sense to me. For one, when I try to play every wave I get my butt kicked. So my strategy is downtrend - short, uptrend - buy. Period. Also doing counter trend trades seems to me like you/I would be more inclined to try and scalp these before they all die which defeats the purpose of the strategy.

Second, I don't understand having one open position that is long and one position that is short. I am in the US and I don't know if they even allow this. Doesn't really matter thought because to me that is being flat.

Jashanno, the counter trend technique has been discussed at length at the beginning of the thread. Post 47 (which is on page 4) has a detailed description.

Hello I live in the USA I switched over to FXCM UK Now I can hedge with no questions asked. Hope this helps

Look into opening an account with a non U.S. broker.
I finally settled on two different brokers and I will probably never trade with a U.S. broker again.
( Leave it to American Politicians to screw up a good thing every time)...

Understanding this trading concept is fairly important (imo)

I have found that reading and re reading flyer415's pdf to be a very good way to keep to the meat of the method.

here is the link to his pdf.

http://www.forexfactory.com/showpost.php?p=3911723


here's to good trading .....

Why do most of you guys insist on using a broker that allows simultaneous long and short positions on the same pair? Such a broker is not needed at all.

Any combination of buy and sell orders on the same pair can be replicated by a single net position. For example, placing a market sell of x lots while a long position is open = partially closing the long position by x lots, attach short stoploss to this market sell = open a buy stop for x lots, etc. etc.

The only difference it makes is that your order administration (like in Graeme's logbook) will look different.

Good morning, all

Apologies to answer all question in one post. Answering in order of posts

jashanno - thank you for your contribution. what works for you then works for you and im glad to hear of your success. there is different purpose to why i place both buy and sell. if you interpret this as just hedging unfortunately please read my posts again. i do not care if i have one position on buy and one position on sell; what im doing is positioning my positions as the market flows and sometimes a flow can last weeks to months. how does a trader know the next s/r is going to be a change in trend? they cant. just follow with flow.

luqmanz - you are definitely on right track. Please do not feel bad cause your results are fantastic if not little too fast. Your legs will happen. Most important thing in trading is not to rush but take your time and space out your exposure. From my earlier posts, by spacing out, you will miss few golden opportunities but you will avoid all/most of ranging periods.

tommbstone - im very glad that you have moved away from usd/chf current ranging period to a pair that is trending stronger. Can I ask for your learning benefits, how do you know a pair is trending stronger than other pairs? The answer will lead you to a very very important related discovery. Please try answer for me.

pip_daddy - good observation. Same reply to tommbstone as above, how do you personally judge whether the pair is trending or not? I have hinted few times in my earlier posts that I use scouts on higher timeframe to prod into market sentiments OR the fact that market moved strongly in last 2-3 weeks will not 'suddenly' change and stop. It could but it will give alot of warnings before it does stall and change. May I also add for your enlightment that for example, one of my wick entries could also turn into a long term scout and I can base my personal interpretation of market sentiments at its growth. Scout doesnt always start from higher time frame, it can also start on 5min timeframe. New trend can start from all of daily,4hr,1hr,5min timeframes.

Frenchcuff - thank you for your question. I have used heikenashi candles for some time. It is reliable source of 'indication' of trend and change with less short burst of whipsaws. Unfortunately with heikenashi users arrive little later than most traders on scene. I prefer to arrive first at buffet table with the mentality to spend few pips to know that I was right or wrong. If im wrong I will admit defeat and move on, but if im right I will stay awake to capture most out of it. May I suggest that there are many entry methods one can upskill so you can arrive at the scene much earlier with tighter stop loss than you can currently imagine.

knukk - thank you for your interesting charts. i looked at them closely for some time. You have contribtued alot of efforts into the charts. May I ask what the 2 question is that you would like answered? Im assuming its the 'x' on the charts? If so, and hopefully im answering to your question properly; price always moves .00 to .00. If price is coming down from .00 then look for sells, if price coming up from .00 then look for buys. If it does not work out, please try not to re-attempt but let the opporunity pass. It will be a hard mind game not to re-enter cause traders think there is an opportunity at every moment they glance at the charts. Once all traders understand the importance of 'ignoring' the markets they will find that 'somehow' they are avoiding ranging periods magically.

mcornbill - thank you Mark for a unique question that hasnt been asked before. I read your post twice and believe I can add some hindsight to your understanding. Personally it rarely takes me more than 30minutes to 1 hour to move my SL to BE when I enter manually. However, on days when I do need to walk out of office and see a good setup on higher timeframe, I would not use a SL but please do not use this approach as yet. All traders starting to build their millipede 'must' or 'prefer' to use entry methods on shorter timeframe or scout on higher timeframe and then zoom in to stack positions.

leggo - Good. Shorter timeframe for now Ben. Sooner or later you will phase into higher timeframe with no recommendation or assistance. There is a related discovery once this happens. Good result from skill than luck is a fantastic mentality. I urge you on.

luqmanz - Nice tight stop loss. Im sure you have your entry methods well planned and practiced.

glenj - thank you for your compliments. Yes, 50% is where most traders should watch other traders. But it also happens quiet often at the opening price of previous candle or the top/bottom of the wick. If I were to choose in order: 1. 50% 2. Opening of candle 3. Top/bottom wick. I personally prefer the wicks to touch a price or tight area and bounce off twice. That is a huge huge hint.

jashanno - you are mentioning scaling out? In forex, the more you lower your risk, then you ensure yourself a smaller guaranteed profits. I personally aim to minimize my risk when 'entering' and then letting the market reward me infinitely. 2 different perspective and I request that you please think abotu it. Your perspective is: lowering your risk as the position plays out, my perspective is: lowering my risk on entry and letting the market reward me indefinitely or close the position with no loss.

mechthildche - yes, you are referring to hedging. Im not hedging as such. Perhaps if you could please read the thread. Buy/sell should not be replicated in one net buy or sell position = cause that is just taking one sided opinion of the market. Alot of traders seemingly believe that nothing happens when you take one buy and one sell on same pair of cuurency. It is true when you look at capital balance/unrealized profits/loss however different result when you move both buy and sell positions to breakeven and let it play out for few weeks. I take both buy and sell at whatever opportunity market gives me cause I dont know where the market is heading towards for the next few months.

Sincerely,

Graeme

Thank you for your answer. I'm afraid I might have been too unclear in stating my questions. The X's are just the liquidation points at which all positions are closed and have nothing to do with my questions. My questions are asked with a colored text in the attachment, with a corresponding colored illustration on the chart. I'll rephrase them:

I'll add the attachment from my original post to this post.

1) Question one is marked with cyan. Look at the cyan circle. Do not consider the rest of the chart to the right. I think that regarding that .00 line @ 0.9100 as an S/R and enter on breakthrough is somewhat a weak decision. Why do I think so?

2) Look at the green circle. I consider that drawing that S/R is a mistake, as well as entering when the price breaks down through that S/R. Why do I think so?

Thank you for your quick reply.

I read your post twice before typing and im assuming your question is more for all to think. Can you then please explain why you would think the cyan are weak and green would be a mistake?

Look forward to your reply

Sincerely,

Graeme

Read the first page (carefully) of this thread. The buy/sell positions are not taken simultaneously. They are taken day/weeks or possibly even months apart when there are signs of 'possible' trend change. The market ultimately decides who survives and who get's stopped out. It is quite a unique approach I must say. I haven't seen another system quite like this. I am finding it does require a heck of a lot of will power to keep the positions open and to put up with day after day, week after week failed entry attempts. I personally find it quite difficult on the psyche but as time goes on I think I will get stronger and be a better trader.

Hi Jashano,
If you read my post again you will see that I dont risk 2% of my balance on one trade. 2% is the maximum I will risk at any one time. I could have 5 trades at 0.4% each.
As for the smaller time frames I truly believe that good entry on these is the key. For example you see a shooting star on a daily chart. To enter here you would need your stop at least 5 pips the other side of the wick. That could be over 100 pip risk. However if you had taken the time to practise on the smaller time frame you may get in with a 15 pip risk. If the shooting star decides to turn into tweezer top then you may have just lost 100 pips with the smaller time frame you loose 15pips or because you are watching the momentum you see the reversal early and close trade at minus 5 pips. Huge difference in my opinion.
Anyway as Graeme says we will all go through different doors and you only need one thing to succeed in this game.
Good luck and I will see you at the final door of profit.
Regards,
Ben

Good weekend to all

Hope everyone is safe and warm.

While explaining how to interpret wicks and the possible hindsight we can gain from its appearance on the charts I have noticed something very important and strange.

Im going to go ahead and break some common myths that are circulating amongst this forum.

What I say next might go against the beliefs of most but if you keep an open mind for me, readers mght be able to notice something important.

If I ask why a trader uses indicators/price pattern/price action, most will answer: cause it gives us an entry/exit with higher probability for a profitable trade.

Please read this carefully.

The main purpose of analysing/watching indicators/price pattern/price action is to gain an hindsight to which direction it may go. Not all the times but most times.

We then use this hard earned 'inside information' to our advantage and by using various personal entry methods, stack positions indefinitely until this inside formation is no longer valid.

Is this you??

You know pin bars are great 'indication' of change in trend.

1. You wait for pin bar
2. You see a pin bar on chart and notice the indicator also indicating that price is oversold.
3. You enter with r:r in mind. You decide 1:5.
4. You place stop loss at end of pin bar, e.g 40 pips. And then you place take profit at 200.
5. Your position goes your way and you exit with 200 pips. You move on to next opportunity.

That is most traders here.

Allow me to tell you one thing for certain.

Pros do not 'just' take 200 pips cause price moved 200 pips or cause its their defined r:r. They take minimum 200 pips if price moved 200 pips.

If price moved 500 pips, pros take minimum 500 pips, maximum: infinity
If price moved 1000 pips, pros take minimum 1000 pips, maximum: infinity

When I say minimum, this is worst case scenario.

I do not understand why alot of traders think stacking positions is too dangerous. This is a wrong myth and you are taking things too literally. It is only dangerous if you dont know what you are doing or more importantly dont know what you are expecting. And we should all be expecting/hoping infinity returns on our investments.

Please allow me to further explain what 95% of traders do and see how their trading perspective is actually hindering their potential growth/profit.

Trader awaits for the perfect evening star pattern to happen. He picks very carefully and expects everything to perfection and he admits the appearance of such perfect setups are often rare sighting. However he is confident that such perfect setups will be most likely a profit or a small loss. This trader has a good balance of r:r that he/she religiously apply to every trade to stay purely mechanical. The only discretionary decisions he does make is the entry and the rest he leaves to r:r for exit.

Now allow me to reliterate the above story in a different version but with the same ideology behind.

Group of highly trained blackjack players enter a casino. They have practiced thousands of hours (have you?) of playing advantage blackjack. When they refer to advantage playing it means they know 'when' to start playing to ensure a 'higher' probability of winning. They know when the remaining cards in the deck is full of high cards like 10, J, Q, K which changes their odds of winning against the dealer much higher. Even if the deck is almost full of high cards they know that their winning rate is only marginally over 50%. They dont care if the winning rate is just over 50% of the time, as long as it is over 50% they will consider that a premium opportunity to start playing.

One player will sit down alone on the table and start playing using +1 and -1 counting technique (personal entry method). He is playing very small bets and just watching the action, prodding here and there. Soon he notices a premium opportunity when the remaining cards in the deck is now mostly high cards. He then raises his betting size greatly as he knows the odds are in his favour. Soon after winning hand, he then leaves the table cause he just won more than he lost. He moves onto next table and starts counting again.

??????? No. Thats not how professional blackjack players win.

Lets rewind little bit. One player sits alone on the table and starts counting cards by playing with very small bets. Once this player 'knows' that the decks are full of high cards he will do a hand gesture or a signage for his other team members to now join this table. This table is now hot and ready for picking. Other team members will join this table and bet heavily into every hand as they know most cards are in their favour. As soon as they notice that the deck has lost its edge they will get up and leave with their winnings. This is a true story about a group of MIT blackjack players who made millions before being caught out.

They did not count all those cards to make one large bet and to walk away after winning one hand. Once they know the deck is in their favour they will milk it out as much as possible. The exact same perspective is required in trading. Do not focus on few minor losses you encountered over the last few days. Just make sure when a win does occur, you stack positions and exit with a much bigger profit that will cover all your losses before and adding a big chunk of realized profit into your trade balance which should be more than enough to cover any future small losses necessary for the next golden opportunity. This is the correct required mind frame.

Sincerely,

Graeme

Hi, Graeme,

I like your story on blackjack.

I have an entry idea based on your concept of moving stoplosses of winning positions to breakeven. I would like to know your opinion on this.

1. Place 2 long and 2 short positions at the same price
2. Stop loss is set at 100 pips for all long and short positions.
3. When price moves 100 pips, take profit for one of the winning position, and move the other winning position's stop loss to breakeven.
4. Repeat steps 1 to 3 every 100 pips.

The strength of this entry system is that we need not guess which direction the currency will be going. We will always have one winning position with stoploss at breakeven.

If the currency ranges, we lose, but not much, since we have taken profit on the other winning position.

On the other hand, we will be the first to catch a trend, and hopefully, the profit will be enough to cover all our initial losses.

I see it like doing business. In business we always lose money first (cost of infrastructure, rental, stocks, etc), and the profit will come later.

Perhaps similarly, we can see our initial losses as the cost of setting up our millipede (our business).

Comments by anyone will be appreciated. I have just started trading this entry idea so it's too early to tell if it works yet.

Hi Graeme,
When you stack positions do you have a particular scenario? For instance do you stack on every .00 break? Or do you wait for retrace on 5 min chart and then stack with momentum?
I am finding it hard to get great momentum until London opens do you find this also?
Regards,
Ben

People have tried this. It's like a perpetual motion machine. You can convince yourself it works but of course it is impossible. Only a trendy market would have a chance of this working and even then your draw down would be pretty significant IMHO.