Building an equity millipede

Thanks again for your continued contributions Graeme.

I'd like to post this great candlestick tutorial from another thread. I found it extremely useful for implementing some of the things Graeme is teaching here. Hopefully others can find it useful.

btw....my favorite candlestick by far is the pinbar. Also known as shooting star (for upward) and hammer (for downward) candlesticks. The most high probability trade I know is a pinbar that is also a flying buddah and is also an inside bar (body inside the body of previous candle).

This is my train of thoughts.

1. Open eur/usd daily chart at start of new candle (for myself its the asian session)

And ask myself 1 question. Is it going up or down? And this simple question is governed by the ema crossover. We all know ema crossover has flaws but 'most' times the candles do move forward as per the direction of the crossover.

Let us consider the last few days on eur/usd daily chart

http://img716.imageshack.us/img716/2274/aa1wb.jpg

Now with the daily candle deleted appropriately

http://img543.imageshack.us/img543/9633/aa1a.jpg

So, the 1 question I ask myself is, "is it going up or down?"

Ema is crossed over to go up so for now I choose up.

Now I anticipate its going up

Whats next?

Participate in a low risk entry

How do I do that? It is by anticipation.

You need to anticipate that today will be a good day before it happens. You must assume that today's daily candle will be up with no retrace. Now this is where your personal threshold of stop loss comes into play.

For this type of method I choose 15 pips on 4hr chart, 25 pips on daily chart, 70 pips on weekly chart, 120 pips on monthly.

This setting needs to be tweaked by yourself through trial and error and find your own confortable level.

Lets go back. Since the above chart is daily, I have 25 pip stop loss. So as soon as the day opens, I will open 1 position towards the direction of the ema with my personal threshold. So on this day, I have a loss of -25 pips as the retrace is more than 25 pips.

Let us look at a day it did work out for me, eur/usd daily

http://img593.imageshack.us/img593/7794/aa1.jpg

In the month of september it looks like there were 4 days that my stop loss of 25 pips was not hit and would have survived.

This is where I ask myself another question.

"Ok. Position has survived the retrace and it now 30 or 40 pips in profit. How can I amplify the profit taking if this the day that price will never come back" Alot of ifs when im anticipating.

I will open another position and move the first position to breakeven. If today is a good volatile day then price should not make any more newer lows (or highs).

http://img18.imageshack.us/img18/7005/aa1qx.jpg

With 2 positions in play, you are covering few scenarios.

The first position is at BE at open price of the daily candle whilst second position is at -40 or -50 pips with SL at the lowest price of the retrace. That is an average loss of 25 pips per position however the second position has a bigger breathing space.

Price will charge on with both positions in profit or price might retrace near the open of the day closing the first position but price does not make a new low so the second position survived to end up as profit at end of day.

I would like to stop you here and advise you, you can alter few things above.

1. You dont need to add second position if it doesnt suit your trading style. However, you will need to find other means to amplify your profits.

2. Your personal threshold of stop loss for the first position could be larger than my 25 pips or lower than my 25 pips. Bigger stop loss will see you more positions surviving till end of day however bigger losses. Smaller stop loss will see you more number of losses which are smaller but less opportunities.

Now this method above will ensure that you capture those volatile bold movements.

Take profit is only again to your personal threshold. I aim for 1000 pips for each positions. Once again you can tweak this setting to your personal threshold.

You can aim to catch profit totalling 1000 pips with few positions - This means that you will have few more wins over the course of year than myself.

I aim to catch 1000 pips per position - This means I will have less wins than the above trader but bigger potential profit in the long run.

You could even adjust the take profit pip of 1000 to 500 with few positions totalling together or 500 pips each position. The adjustments you could do is endless.

This method works as 3 vital ingredients were added.

1. Participation - for a volatile breakout
2. Low risk entry - risking 25 pips on daily chart
3. Growth - letting the position grow to its greater extent

You will need to demo or live (on small account) for some extended period of time collecting data on your trading statistics and tweaking the above settings.

There is one more thing I wish to add..

Continuing on..

I believe what Im showing in depth today is from the very first post of this thread.

Opening positions at the open of the day.

There is something else I also add in to the above method.

If today is just another typical day where the daily candle does follow the ema but with usual retrace.

Sometimes the retrace is greater than my 25 pip stop loss, so that gets me out of the game. However.

Some days there are retraces of more than 25 pips that will come back and charge forward.

Let us look at last few days on eur/usd daily

http://img530.imageshack.us/img530/3191/aa1n.jpg

So the day had more than 25 pips .

When I watch a retrace happening, I set an alarm on my phone so I get alerted when price comes back to open of the day.

When I get alerted,

This is where I tell myself, 'if today is going to be a typical day up price should not make any more newer lows and move forward from here'

Then I would open a position at the open of the daily candle with stop loss at the lowerst price of the retrace. This is where personal threshold comes in.

1. I do not want to see any retrace larger than 50% of the previous candle. This is important. I prefer less than 33% retrace on previous candle.
2. Preferably not bigger than 50 pips retraces.

And if my anticipation is correct I will find that price will move on. If it doesnt then Im not interested in a day where price fluctuates between open price and low price of the day.

So the first method aims for volatile moves that does not have any retrace and charges forward. These are the best movements in forex market.

Second method aims for price to first retrace and then enter when price resumes its anticipated direction.

I use both methods simultaneously.

Having touched on the framework of my higher timeframe trading, I would like to add as I have been asked few times.

Why do I put in the effort to share?

Some traders believe that, giving away trade secrets hinders their own profit taking however it is not. If Im going up and more people join in then it is a benefit for myself. However even a large number of followers wont affect the market movement at all. It is still assuring to know that our interest lies together and not against each other.

Sincerely,

Graeme

Thank you Graeme, very good articles, read them with much interest and still thinking about the ideas presented.

Kindest Regards,

Cam

You are most welcome, Cam

I will answer your PM shortly. Apologies for delay.

For the last 4 months on this thread we have covered many many topics. I have given my thoughts and experience on many aspects of trading and replied to most of the requests received.

Now this might confuse many readers as I seem to be jumping from short timeframe trading to higher timeframe trading but it is all explained as per requests received.

Some traders prefer the excitement and pace of 5min charts or lower timeframe while some can only trade on 4hr or daily.

The method I have shown have proven profitability for myself on eur/usd for the last 2 years. Some had great drawdown but have never came back to starting capital once the ball started rolling. Nowadays I dont even consider capturing 1000 pips. But just let it run and diversify the positions when needs be.

I hope the smart readers can learn the successful trading approach and mould the best method out of their own mind.

You can try the method I have presented today on just the 3rd 4hr candle everyday with great results. Hope you use the above method with your upskilled price interpretation for a better result.

You will find at least 1 out of 5 3rd 4hr candle is the start of move that is at least 100 to 150 pips on any pairs.

Just with the above statistics, you could work out stop loss size and so on.

Sincerely,

Graeme

Thank you and certainly no need to apologise, patience should be any trader's quality, and I have plenty of it

here, here. My sentiments too.

Before the asian session opens (when the futures market is closed) is the time of lowest volume for the day and is when stop hunting is possible. So daily bars which open with the asian session are probably the best ones to use with your method. Unfortunately my broker rolls over the day halfway through the asian sesion.

Have you ever thought about entering after the open using a trailing stop of 25pips and a fixed stop loss of 26 pips?

steve

Last couple posts of Graeme covered almost every missing pieces..
again...brilliant ideas and pretty much a complete method in just couple posts..

As I always say that "simple" does not mean easy at all...One thing easy for sure is making things complicated...

I remember a saying not sure if its from Alex Ferguson "soccer is a simple game but playing it simple is the hardest"..

thanks a lot for the great help again..

SAB,

Guess what ? This has been discussed and replied to before, see:

http://www.forexfactory.com/showpost...&postcount=291

Kindest Regards,

Cam

hi everybody..since my most favorite thread getting kind of quiet i wanted to share my last trade on eurusd with you guys...
i took some trades on eurusd last friday...took 100 pips intraweek profits of 6 of them and left the first one on and just took another short now at break even currently..
here are my charts...

and

So you thought that if the thread was quiet, that was an invitation to post your trading journal

(but it's really great you found success with the methods presented here, congratulations)

Kindest Regards,

Cam

actually i've been trading forex with kind of success already but i'm trying to implement Graeme's position stacking and low risk entry ideas which i always wanted improve about my trading..they are essential though..

Hey Nomask,
Thats really good price interpretation and good patience too! Well done.
Ben

Nice trades nomask,
before others pile in with a wave of their trades, I'll post a thread that has slowed up.
It is for trades based on this equity millipede thread.

http://www.forexfactory.com/showthread.php?t=255481

Also showes up most times at the bottom of these pages, below the posts & people reading.

cheers scalpz

thanks a lot..
i'll use that thread for next trades..
good luck all..

Hi pipEasy..

when I see your chart, you had multi-horizental-price line on you chart.

I tried to fine any function to create those lines, but I couldn't.

please, let me know how to make those...

thanks..

Hi Graeme,

Good material. Your posts have had a profound impact on how I am thinking about my trading. I decided to do a simple test (using a back tester) with your ideas.

1. I opened a pair (I chose GBPJPY).
2. I randomly pick a year (I chose 2007).
3. I ramdomly chose a month (I choose Jan).

My research shows for this pair that 7am London is as good a daily open as any. So am looking to trade from 7am forward for a few hours. I plan to stack some trades with a small SL and 200 pip take profit, move the trades to break even very quickly and walk away from the market and see what happens.

Test Battle Plan: Open a trade on the open of each new 5 min candle, IF the prior candle was an up close, AND price is above any previous buys orders, AND PA does not indicate a reversal, AND momentum looks good. Keep stacking trades until my first loss OR first BE. At that point, walk away and let the market hit my SL or TP for all stacked trades.

I step forward on a 1 hr chart looking at the price leading up to the open each day. I find a day that I "anticipate" has a good chance of an explosive move if it breaks a resistance point on the opening hour. I think that the 11th looks good.

I start the back test (using Forex Tester) and run the test as planned to see what happens (and nearly fall off my chair!).

As you can see by the charts, I got "lucky" in this instance! I just happened to pick (anticipate) a day that had an explosive move off the open and did not look back.

I stacked 12 trades.

Results:

One at BE
One loss of -20
10 trades at +200

I would have previously considered it IMPOSSIBLE to make 2000 pips in a day using such a small SL (20 pips + spread).

Obviously lady luck was on my side in this test and the potential of a nasty draw down stacking so aggressively is a little scary to me, BUT, it does prove correct the points you have been drilling into to our noggins.

Your ideas are something I will continue it play around with. If may report back to this thread in a few weeks after additional back testing.

On the whole, this thread has had a profound and positive impact on me.

Thank you. I wish you good health.

Regards,
Darren Poyner
Brisbane/Australia.

What is your problem man?...If you don't want to share your trade, keep it under your pillow. let others to post, share, discuss and learn from each other. What you have contributed anyway?

Hello Nomask,

Nice trade..you are a fast learner, nice to see some of your guys are sharing your trade,..we all can learn from each other.