Building an equity millipede

I believe the sudden action today is because China unexpectedly announced it's raising interest rates by 0.25% tomorrow.

sjiff

Right ! Looks like euro and gold topped.

Good Afternoon everyone,

Another quick update on my positions from earlier today during NY open. 5 of my initial 9 positions hit SL. Added some more later in the session to recover some of my losses. So far, things are looking better.

Hope to see Graeme back soon to shed some direction on this 200ema project.

Kevin, I think you have a fine approach to the market that looks to suit your lifestyle. Since you're looking at long term you don't mind sloppy entries and don't need to rush into the market at the drop of a hat. This means that you'll probably find that your entries get quite spaced out. While there certainly might be conditions that warrant closing out all positions simultaneously I think it would be more prudent to look to space out your exits as well. The funk the market is going through today might be the start of a new trend or maybe it's just a part of retrace. Right now no-one knows.

I've traded this sort of long term approach quite a bit over the years and one bit of advice that I've learned is that it's probably not worth going all in or all out. Better to add your entries over time when you see decent setups and to also space your exits. If things look grim, by all means close out some positions so that if things continue to move against you the pain will be reduced. But if the market was just looking to shake out weak hands you'll still have a couple of positions to reap at least some rewards for your efforts.

Your current trading approach mirrors pretty closely that of BWILC (Bird Watching in Lion Country by Dirk du Toit) - trade the long term, pick a direction, low gearing and very wide stop losses. I traded that way for many years until I started getting greedy and market punished me.

Dirk likes to use hedging, but in a way that never resonated with me. He likes to hedge losing trades, ones that are in the red so that you limit your drawdown and wait for the market to one day get your position back into the black. I never could put it into practice, I always found it much easier mentally to just close out the position, take the loss and move on. If the market turned back I could always put on a new trade.

What really resonates with me about Graeme's method is how he had a totally different approach to using hedging. Graeme looks to only ever hedge when you have legs that are in positive territory. You're not using hedges to limit losses, but to get in early on what could be the starting point of a complete change of long term direction. At the time when you put on such a hedge trade you have no idea if there will be a long term change. Maybe price is just bumping up against strong resistance, maybe what currently looks like just a short term retrace is in progress. Graeme advocates hedging in case things really do change, allowing you to be part of that long term change close to the beginning.

I guess what I might be asking here is: do you have a plan for how you'll deal with the change of direction of the long term trend? Not just of spotting when it is going against you and thus to get out of underwater positions, but how you will know it is changing and when you'll decide to trade in the opposite direction. I always thought I'd known it when it happened, but it didn't work out that well for me. I got blinded to only trading the long term direction that was in place at the time and had so many trades on and was so committed to it that I got caught when things went against me, which ended up just being a medium term retrace and not even a full blown trend reversal.

By combining this experience and the method that Graeme has detailed I can finally see a way to return to that long term approach that almost worked so well for me, and to fill the gaps in my own psychological profile so that I won't sabotage myself again (hopefully!). A vital component of this reboot is always looking and not being afraid to take trades in both directions at any given time, even while cognisant of the current long term trend direction. I'll probably take more trades in the direction of that trend but will still dabble in a few counter trend trades to try and see if I can get a foothold in any retrace or start of a new major trend. If they don't work out then I'll see them all hit their breakeven points and I'll know the long term trend still has dominance.

I don't have the time to look at 5 minute charts all day long (and have to sleep during the European session), so I have to content myself with primarily basing my trades off the 1 and 4 hour charts. I can be a bit sloppy but won't give myself too much rope to hang myself. When I traded the BWILC way, I would generally give myself about 200 pips of wiggle room while trading the euro. Now I don't like to see things go much more than 50 pips before taking the loss.

I think this is why Greame pushes the participation so much. You never know which way the market is going to go next. You have to be willing to test the waters in both directions so that you can be along for the ride when the markets do move. I think it is fine to have a bias and try to make the most of that bias, but always be open minded and mindful that you are only trading your beliefs, the market is not going to bend to your will and you have to be humble enough to accept whichever way it decides to go. If you're lucky enough to have a leg or two still standing then all the better.

Hi Starvin
I PM you (due my questions were not relevant to this thread) and hope you will comment.
Thanks n Cheers



Hi Veefx
Any chance if you know Greame will be returning. The reason being asked is I hope to see his advises on your trades being made... a way to learn his thought process on trading... maybe there is one or two of his thoughts would improve our trading... IMO.
Thanks for your continuous efforts shown in this thread / special project for a month now.
Cheers

Hi HornedGod,

Thanks for your insightful post. I do appreciate the feedback. You brought up several aspects of this trading approach that I've also been thinking about lately. For instance, it's not the entries that give me trouble, it's the exits, which definitely require some thought.

I agree. One of the main tenets of this trading method is to always have trades open. Yesterday I did some pruning of losers, and in doing so, also took some winners off the table to offset the losers. I also added a couple new trades. Those that remained were either in the red or barely in the money when the market reacted to major news today, then most of my trades started going against me. I didn't like what I saw and felt it best to just get out and let things settle with a plan to enter later at a better price. As I see it, this would not be typical behavior.

I appreciate the advice. I've been thinking along those same lines, so I completely agree with the idea of spaced entries, as well as spaced exits.

I've heard of this method before, but have not investigated it all. Had no idea that it is similar to my approach. I'll definitely check it out.

I'd like to think so. I pay close attention to swing structure. If I'm long and price fails to make a higher swing high/higher swing low or vise-versa on a short, I get concerned. I've also found that failure to close above/below the weekly pivot can be an indicator of possible trend change, so I'm always mindful of that. I'll not hesitate to trade countertrend if swing structure suggests a new trend is forming/has formed, even if it may turn out to be short-lived.

I really appreciate you sharing your thoughts on my adaptation of Graeme's approach. I'm always interested in learning from others' experiences. Thank you.

Kevin

there's been some very strong trends recently and the china rate thing was the catalysts for a lot of selling. One of the hardest questions to answer is when is a retrace a trend change? First of all you have to know what a trend is.

This thread is all about catching long term trends where prices can move over 10% so imho a retrace of 3.8% is not a trend change but just a bit of profit taking from overbought levels. A quite normal retrace that happens occasionally. If you arrived late to this party then you wouldn't of built legs at the start of the trend and this retrace will see many of your legs stopped out. I had all mine stopped out except one long eurgbp. if i had been trading at the start of the latest trend and spacing my entries out more then i would of built my legs at better prices. With more fat on them, this retrace wouldn't of made me so nervous.
Only one wk ago i was keen to buy the AUD at 97 and nothing of note has really changed since then. there is still the same amount of uncertainty about the future. all we are trying to do is let our winners run with the long term trend so get familiar with the weekly charts. you will kick yourself if you sell at the bottom of a retrace so define your exit strategy before the market makes it move. be prepared.

I still have short legs in usd/jpy from last month. so far so good. Slow boring trading but what the hey right

The most fascinating part of this whole thread is Graeme's introduction of two words that are seldom used in the world of trading, or in anything that's perceived to be purely “technical” for that matter:

1-Participation: Your trade is your exposure and your exposure is your trade . Never have a sudden big change in your exposure, no matter what. I always look forward to seeing my “stop losses” getting hit. It's my bread and butter. That's my way of participating and , as far as I am concerned, the market does not trend or range; it only moves, a lot of times in a seemingly very frantic and scary way if you're not prepared for that eventuality. I don't need any back testing or forward testing to see if my strategy “works”. All I have to do is ask a 3-year old to go crazy on a printed monthly chart with his crayon. One should be able to measure his “survivability” 20 years down the road and insure a certain level of average daily income for that duration.
2-Enlightenment: It's one of those moments when everything within a certain context suddenly makes perfect sense. As Graeme puts it, it's discovering that “1 thing” that you deem true under any circumstances and building your whole strategy around it in a very straight forward way. In this kind of business, laziness works like a charm. It's an extremely boring line of work and ,if one spends an awful lot of time “trading”, it might be a good idea to invest in some musical instrument for when that hand starts reaching for that mouse.
God bless you, Graeme.

10% so imho a retrace of 3.8% is not a trend change [/quote]

If I remember well, Graeme talked of looking for retracement between 38.2 and 50 % as common. I tend to agree.

Do you think this pair is changing direction, with its weekly bullish pin bar?
I hope the swissy follows gold in its retracement next week.

As I said last time, all I need is to be able to let my trades run when in profit. Look at this chart. The first time I was long this UK sugar contract cannot even be seen here, as it was around 400+. But I trailed my stop and got ... stopped out. As you can see, the beast went as high as 730+. That is a considerable advance, even without stacking.

I last took it at 701 and decided to go by Graeme's laws, at least as regards stop management: trail at BE and forget. Then the price went as far as 730+, but retraced all the way to 706 now. That was great experience for me, watching all these gains wane and keeping my stop BE + some meager pips.
Now, I no longer care if I am ousted on monday: I've learned to "seat tight" with a trade that I called right, and one day I will hold THE trade that will not look back.
I promise to let you people know.
Muntu

I wonder if, by that time, all the trades that you have let go to BE will add up to twice or more what that one big trade will be.

It gapped back up this morning. Hope it continues.

I doubt it, provided the concepts of stacking and diversification are properly executed.

This thread has been awfully quiet lately. How is everyone's trading progressing?

Hi qwerty00,

I think I found my one-thing: to anticipate the opposite direction of where the price will go ;-)

Kindest Regards,

Cam

LOL - I hear ya', dude!

Within this same vein of thought, as I near completion of this multi-week reading assignment, I'm curious as to how folks are progressing with their 3 X 20 exercises. I personally am finding it very difficult to achieve. I also feel these entries will need to be defined by the weekly/monthly inflection points should they have any hope of surviving long enough to create a leg. Twenty pips on a M5 chart is merely a blip on the screen when considering the long term trends. And to be honest, if I could consistently manage to take 60pip/day, I'd probably be quite content at that point.

The above should not be construed as negativism. More so, just a comment of where I am at currently. I think anyone with any trading experience can marvel at Graeme's depth of market insight, and to be ever thankful as he was no doubt dealing with physical issues while so graciously sharing his body of work. I know I am, and only hope that he is on the mend and heading back to good health.

Regards ... meph

Was wondering if tjfxtrader, or anyone else, could provide more info on where to acquire this indicator. I've spent some time searching, but so far have come up empty handed. I did come across some interesting stuff about 'Master Candles'

Thanks for any help!

I haven't read much past the first few pages of this thread so far, but I found PipEasy's remarks very refreshing, a breath of fresh air compared to everything else that is out there. This humble, simplistic approach is spot on in my opinion, I look forward to reading more! Thanks for sharing.