Building an equity millipede

Hi Cam,

amazing indeed i realized that the longer i have been using graeme's method the more i become confident. my confidence starts from small winnings and letting it run... and starts to become comfortable and confidence builds up.

it's been awhile now since the last post of graeme here... but how many of us here find that one thing

it's always, greed, fear and ego that blows our account and these are, for me the things we need to control if not tame them.

regards and be good all.

Hi Dongsky,

Since you're using the 4H time frame, I am curious as to what your exit strategy is on these positions? Are you waiting for a reversal signal on the 4H, or certain SR levels to be hit?

Thanks!

I was asked to make an updated pdf of pipeasy's posts. here is the link for pages 102 to 233.

pipeasy's posts

It is about 5 megs and hosted on mediafire.

Thanks Flyer. Your continued help to all our thread participants/readers is greatly appreciated.

thx again flyer without you we'd be lost in the maze of hundreds of posts

Good morning, all

It has been some time since my last post in this thread. I pray that everyone is safe and sound.

Apologies for my abrupt absence as it was an unscheduled event.

I have read most posts after my last correspondence and my sincerest gratitude to the contributors who continued on. A special thank you to VEEFX. It is a honour to be part of a community of individuals with intellect and aptitude.

SO where to from now?

I would like to continue on where we left off. Im sure many readers have forgotten some of the important points in trading hence please allow me to 'briefly' reiterate for the benefit of all.

There are only 3 core elements to successful trading;

1. Participation
2. Low-risk entries
3. Growth

It can be further enhanced to explain that

"since I dont know which direction market will go, I will enter at a low risk opportunity and let the market either take me out for a small loss/BE or reward me"

The above sentence is a broad/general common logic behind successful trading. I understand that the above sentence alone cannot make a trader profitable. However, it is the required mindset to be successful.

Successful trading starts from the re-conditioned trading approach and not new set of fandangled eas or indicators.

To know that your current approach does not work requires first to fail. Unfortunately, you will not know the sweet taste of success to its full extent until you first taste the sourness of failure first. Until then you will continue on looking at new eas, new indicators, new ideas.

Just before my absence, we were watching VEEFX trade and the side talk about statistics. Before we go there let us all slowly come back to our open minded learning mode before we press on.

Till then this is 3 trades that I took yesterday just to also start me off slowly as well. (eur/usd 4hr)

For now Im looking for at least 100 pip intraweek opportunities with intentions to holding onto half of the positions.

3 trades. 2 @ 100 TP

All positions moved to BE, current realized loss is -31 pips. Average 10 pip loss per position.

http://img502.imageshack.us/img502/1148/aaazf.png

However, Im ready to take buy positions very soon if the current stall develops into momentum

http://img177.imageshack.us/img177/443/aaawd.png

Im planning to spend this week catching up on personal matters as well as the work on this forum.

Please understand if I dont reply as quick as before but will gradually press on as before.

Sincerely,

Graeme

Welcome back, Master!

It is exciting to see you again.

[quote=pipEASY;4138705]Good morning, all

It has been some time since my last post in this thread. I pray that everyone is safe and sound.

-- Graeme,

I thank God you are well and healthy. Looking forward for your posts.

Edd

Good to see Graeme back,

Unfortunately I feel the need to be a bit of a downer. I take full responsibility for my results. No blame on anyone but myself and I have not given up as the math still makes sense to me.

I have been trading this system since Graeme started the thread. I have used very conservative money management the whole time. I never trade more than 0.5% of my capital on any one trade. I use very similar entry techniques to Graeme. Price action and candles. My entry success is pretty good. 70% survive long enough for me to move my SL to BE.

So I do not feel there are any problems with my abilities, psychology, money management etc. The problem is I have suffered a 30% drawdown in my account. It's frustrating but I never expected it to be easy. Graeme never said it was. I think a lot of it has to do with market behaviour the past few months. Lot's of ranging. Not a lot of medium/long term trending which is what this technique works well on.

So what I have started doing is more swing trading until I start to see more long term trends develop. Seems to me we are at a big turning point where a lot of trends are reversing. Time will tell.

Thoughts? Opinions?

Welcome back, Graeme. Good to see you posting again.

Good morning, Hubbahubba

Thank you for your question and others for their warm remark.

I feel obliged to answer your question with great depth as this is the question that rages in most of the readers.

How come Graeme finds long term approach successful but i dont?

I have thought about this question for a long time whilst I was i was away and glad to see that you have brought it up as my answer will also answer as to why I started the project with VEEFX and the last side talk on statistics.

I will answer earnestly and honestly for all but need everyone to think about what Im saying on their own terms. Im not forcing my thoughts onto anyone.

The 200ema project I have run with VEEFX had a final surprise. VEEFX chose the r:r of 1:4 which I explained that I have something important to explain later on. Unfortunately, due to my abrupt absence we didnt get to the part where I explain the surprise.

The surprise was that after 10 or 20 trades and some time after it will show that his trades that were closed for profit would have been far more if he has not closed them.

The reason?

This is eur/usd 4hr zoomed out to the max. It shows roughly 9 months of movement. There are almost 4 months of ranging period where the price does not exceed more than 200/300 pips (highlighted in red).

http://img827.imageshack.us/img827/5206/aaasu.png

But, there are areas just around the 200ema break where the price extends 1000+ pips. Really?

Aqua highlights area that went 1000+ pips.

http://img221.imageshack.us/img221/2846/aaand.png

You might think to yourself, 'ah geez, out of 9 months I only have 6 weeks of good trading opportunity?'

Yes.

Is it worthwhile?

Definitely. And it requires very little time. What more do we need to ask for?

If we are trading 200ema breaks then most of 9 months period we are not even staring at our computer screen. Setup alerts to your phone so when price nears the ema by 50-100 pips you know its time to watch again.

If we take low-risk entries towards the direction of 200ema breaks and control our risk/intention/greed. Yes, you will suffer a short term drawdown but at the end of it all you will reap greater.

WAIT.

I want to re-focus on my last sentence in purple.

This is where there are personal difference in between each trader.

"..you will suffer a short term drawdown.." What do you personally consider as a short term? For me, its 3-4 months.

"..but at the end of it all you will reap greater.." What do you personally consider as reaping greatly? For me, its at least 1000 pips no less.

This is the parameter which differs from each trader. But you are not born with certain limits and tolerance. Tolerance is built and changes over time.

Now, it is your responsibility to manage your loss during range sessions. If it is 30% drawdown with 0.5% per trade, can I assume that is 60 losses? (unless you change your lot size as you fluctuate up and down your capital balance)

Lets stop here and look back at first chart. The red area that denotes ranging period. Its almost 4 months. What do you think you will honestly lose in that period? 30-50 times? Hopefully at least a quarter of them breakevens

It has never cost me 1000 pips to make 1000 pips.

I know that there are some traders looking for instant fulfilments when it comes to profit taking. Making 1000 pips over 9 months with 4 months of range might not tickle most traders fancy. That amuses me as this is still an excellent return. Please humble yourself by saying aloud you cant drive that new Ferrari Italia by end of this year or write a nasty resignation letter with derogatory comments to your employer. Not yet and not in the next 2-3 years.

Lets say you missed most of the optimum 6 weeks of trading and only managed to place 2 positions that went to +1000 pips each.

Lets say you have lost 1000 pips to get these 2 positions (which is quiet extreme!)

So after 9 months, +1000 pip net profit. That is +27 net pips profit per week.

As we all know I currently have roughly +30 net pips growth per week.

And this is almost guaranteed result but the requirements is that you control your risk and tolerance. Not many will even try to do it.

I do not know which direction the next 100 or 200 pips might go but I do know for a fact that market will move up or down by thousands of pips in the months/years ahead. That is a fact.

The above 2 charts was from 2007. Trend wasnt that great.

In a real trending period (and I would say about 1 in every 3 or 4 years)

Look at eur/usd of Nov 2009 9 months.

http://img340.imageshack.us/img340/2835/aaaoqg.png

Another 6 weeks of optimum trading area. All would be +1000 at least.

How many positions do you think you can have in a gap of week? 2 per week at swing low or swing high?

What if you adhere to do the above and after 9 months, you have 6 positions that are +1000 pips each. You close 5 of them and keep 1. Just for luck because you are already up by few thousand pips profit anyway. Imagine 5 years later that 1 position is still alive. This hasnt happened to me yet but I still have bundles of positions that are 2 years old. (and yes Geoff, it was around 200ema)

Some might say, thats not enough excitement for the efforts required. Trust me when it is far more exciting to watch your positions grow then to place a trade aiming for the next 50 pips and fret with worry when it goes against you by 20 pips. And then you scoff at the idea of mere 27+ pips per week per position..

Hubbahubba, if you can have 50% of your positions moved to BE you are way ahead of most. What do you aim for? 1000+ pips? There will only be 2.4 months of 1 year that will happen. That is statistics for you. Unfortunately that 2 months is not together but spread out.

There are so many side related info I could provide to the above but I think this post is enough for now.

Good day all.

Sincerely,

Graeme

Just before I head out. I saw a setup on eurusd.

I took it but I dont have the time to see what is going to happen.

Moved SL so if the new 3 positions are taken out I lose -18 pips in total. What a bargain..

4hr chart

http://img294.imageshack.us/img294/874/aaayx.png

5min chart

http://img408.imageshack.us/img408/4259/aa1g.png

Current realized loss for 6 positions @ -31 pips. Average -5 pips per position. I wont care less to lose all 6 positions. My mentality is that Im happy to pay 31 pips for the potential reward of much more than what I paid for.

What can you tell about my price interpretation on 5 min chart?

Sincerely,

Graeme

Thank you for your very thoughtful response Graeme. I was like a pep talk for me and has helped a lot.

Early on I had been well into the black on paper a few times. Sometimes I have been up over 300 pips. However I never closed any positions and they all stopped out on me. If I had been swing trading I would be doing very well right now. But with this system 300pips is nothing so I held on and got stopped out.

Yes, I am aiming for at least 700-1000pips and major trend change before I consider closing. I watch over 20 pairs but so far I have only been trading a few of them regularly. Every time it's been the same story. The positions sometimes last for days or weeks. Sometimes gaining hundreds of pips only to come back and stop me out. I knew that would happen a lot. I knew it would be difficult to deal with psychologically and it has been.

Graeme:

Glad to see you back!! Wish you all the best. We missed your absence here.

-FX_California

Hubbahubba,

You will need to study your statistics.

Over a period of 100 trades, how much realized loss is suffered before you hit 300 pip profit? Perhaps with this calculation you can create your own threshold.

Personally my threshold is much higher than most. I do not worry about -400 pips over the course of 4 months as I have done my homework and know that my 1000+ pip opportuntiy is closer and approaching.

You must finish what you started in a constant parameter.

Now a little update on eur/usd

I have 7 positions. 3 sell and 4 buys. It cost me -51 pips in realized loss. Average -7 pips per position. Discount price.

http://img838.imageshack.us/img838/1274/aa1j.png

which means,

http://img229.imageshack.us/img229/9827/aaakv.png

I was waiting for volatile breakout up when... (roughly 4 minutes ago)

http://img227.imageshack.us/img227/5185/19897986.png

Placing myself in this scenario... In between my positions.

http://img7.imageshack.us/img7/3751/26819107.png

Whats my next intention?

I dont know. But if the current upward movement stops and reverses I will let it hit the stop losses (which is currently BE or below 6 pips) and then reconsider entering again on the open of the 4hr candle but most likely down.

http://img695.imageshack.us/img695/9418/21982328.png

You may wonder, Graeme your trading method has changed?

No, my trading approach has not changed. Only the scale has changed so I can show all what I do on higher timeframe but on lower timeframe to hasten things up.

I have said it many times. Everything is all relative. And if it works on higher timeframe it will also work on lower timeframe.

Let us watch.

Sincerely,

Graeme

Hi Graeme,

My stops are usually 100pips max (or less if possible) entering on 1H dips/peaks but following Daily/Weekly trend. I do not do the double trades with one at 100pip TP thing. Just the one trade and after it moves 20 or 30 pips in my favor I move my SL to BE. So 300 pips is 3:1 r/r but I am shooting for at least 10:1 r/r. I am reconsidering that and thinking of watching for exits around the 2-300pip mark. At least for the present market conditions.

I hope you can elaborate on your current E/U trades. Are you watching weekly trend when you make those trades? Quite impressive to have all those simultaneous buys and sells and only 51pips of loss.

Hi Graeme,

A big hearty welcome back. I've been reading over the posts you made today several times and still cannot for the life of me understand if you have a current position and if you do what it is - please could you clarify? Like the quote above, you say that you have 7 positions, but then you average the losses of those 7 positions across your realized losses which then makes it sound as if you instead HAD 7 positions. I'm confused.

With thanks,
MK

Hubbahubba - Please look into taking tighter trades. I take trades off 5min chart when Im looking at tight entries. Do you know how to interpret price action? Have you practiced entries before?

Most times when I enter price moves to my direction by at least few pips very soon. If it doesnt then I time my exit so I lose very few pips.

You do not need to take entries off 5min however, with your approach of 100 SL for 1000 TP it will not work out unless... you learn when to trade... and when not to. Timing. That will be your 1 Thing

Midknight - Thank you for your kind words. I mentioned briefly not long ago how I note myself mentally to judge whether im performing tight entries on 5min. And for myself I simply add how much I have lost whilst building current number of positions. From yesterday I have 7 positions. I took entries off 5min chart. I suffered few minor losses and breakevens and the total loss is -51 pips. I then divide the total realized loss to the number of current positions remaining (this is my potential profit) which gives me an average of -7.3 pips per position established. What does this mean?

It means it has costed me 7.3 pips on average to establish 1 position. I aim to have less than -15 pips of realized loss per position established. This simple calculation tells me whether im currently performing tight entries or not. Most often it will cost me just around -15 pips per position established on pairs except jpy cross which then I allow -20 to -25 pips of realized loss per position.

Update; 1 out of 3 sell positions have closed on BE. Remaining 2 is just about to close out on BE as well. However, I now have 6 buy positions (added 2 more) all growing. I have stopped adding buy positions and let it play out until the current up movement dies down and then I will start adding sell positions.

Current realized loss is -72 pips. 8 positions establised which gives me an average loss of -9 pips per position established. Still within my limits so im happy with that.

As you can see, I was selling yesterday but it is foolish to hold onto such beliefs/sentiments in trading. Today is up? Then buy. Today is down? Then sell. Yesterday is past. Very simple.

Currently, eur/usd 4hr

http://img202.imageshack.us/img202/892/50060609.png

Last set of buy positions. Can you see where I might be taking the trades on the 5min chart?

http://img824.imageshack.us/img824/8986/89940764.png

Sincerely,

Graeme

Hi again Graeme,

Once again welcome back. I didn't expect to get as much feedback from you on your first few hours back so sorry for all the questions. I certainly do appreciate your responses.

Perhaps I need to re-read the thread but I seem to recall you suggesting one possible entry method using 1H or 4H timeframes and 100 pip SL. Are you now suggesting that those sorts of trades will not work to establish long term millipede legs?

I tried 5min entries for a time but found it did not seem to suit me well. I found that the time of day was important and in my timezone it sucked to be trading London open and NY open. Also found that my eyes had to be glued to the charts while looking for an entry, and afterwards waiting to move SL to BE. As soon as I entered the trade my heart would just start racing. So 5min for me seems just too fast, too stressful, and too inconvenient for timezone. I feel much more comfortable entering on 1H and watching Daily/Weekly charts for trend. I can analyze the charts a before London open and often make my entries then. Go to bed, wake up for the London close and move my stops to BE if things went my way. Sometimes make entries before London close for the remainder of NY session. It just seems to work well in my timezone and 1H is slow enough that the stress level is greatly reduced.

Unfortunately, entering on 1H means I need larger stops and smaller position sizes.

Cheers for the reply Graeme.

While I really really like the sound of the "if it's up, buy it. If it's down, sell it" mentality - I would be lying if I didn't express great difficulty in doing it. Why is that you may ask?

- I live in New Zealand and my timezone is terrible for this as I miss the entire usa session. It turns out that quite often the entry points that work are during the times of day when volatility is higher and not during the more sedated Asian trade hours.

- If wanting to trade many markets - there just isn't enough of me to go around to be able to keep tabs and enter based on a 5m chart. I love the idea of using a 5m chart and am highly envious of your tight entries that so far I am unable to replicate in the Forex land. I find it far far harder to get a tight entry in Forex than I did when scalping futures.

- I'm not yet able to reconcile the internal conflict between going both long and short at the same time, especially when little time has passed between these trades.

The buy if it's up and sell if it's down mindset sounds very carefree and I would do well to aspire that sense of freedom but it is proving a lot more difficult than I had envisioned it would be. This trading business is a constant challenge.

All my best,
MK