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Nb 1.0 trend trade system

  • #621
  • Jan 13, 2011 11:17am Jan 13, 2011 11:17am
Quoting krunofx
If you are risking 2% per trade only where does 23% DD comes from? Are you taking new trades while others are still open?
Two points on this: The 23% drawdown is the largest percentage difference from a peak to a valley on the equity curve. So, you might get 6 losers, then a winner, then three losers, then a winner, then another six losers, to form one equity drawdown. (That's just made up off the top of my head. I might post a shot of the numbers themselves later to show exactly what I mean.)

Also, remember that your equity, and thus the size of your losses, shrinks in a losing streak when using 2% of your equity as the basis for our risk. If you start with X, on your next trade you have .98x, after the next loss. .98*.98x, then .98*.98*.98. So, while you do lose 2% on every trade, you don't lose 2% of your starting equity.
  • #622
  • Jan 13, 2011 12:04pm Jan 13, 2011 12:04pm
Quoting duffypratt
Two points on this:...
duffypratt, I tried PMing you but I cant because I am a junior member. I love reading your posts because of how realistic you are with money management. I was just wondering, when you live trade, do you increase/decrease position size based on equity after every trade? Or do you have like benchmark points? (IE if a $1000 account gets you $1 a pip, do you wait till you're at $2000 to increase to $2 a pip)

I ask this because it seems if you adjust after every trade, a loss streak of 4-5 trades may not even be covered by 1 large winner, because after the losses, your position size will be considerably smaller.
  • #623
  • Jan 13, 2011 12:14pm Jan 13, 2011 12:14pm
Quoting greven
Can you post an image to clarify this? I'm really not grasping at all the logic behind this kind of method and i would like to understand exactly what are you meaning
It sound really interesting.
Here's a screenshot on AUDUSD that has two good trades. The entries are at the white arrows. The normal take profit (which people here already seem to think is aggressive) is at the blue arrows. The strategy for letting it ride is at the green arrows. Of course, not every screen is going to have two great examples on it. If, after price had hit the blue arrow area, it then turned around and came up to the white arrow area, it would then be a break even trade.

Edit: I just noticed: Where the green arrow is in the left hand box, it is also a set-up for another trade. This one would also have been a winner with regular take profit. But if you had let it run, it would have quickly come back to break even. So this chart shows either three winners in a row with normal strategy, for about 230 pips, or two winners and a break even trade with the holding strategy, for about 625 pips.
Attached Image (click to enlarge)
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  • #624
  • Jan 13, 2011 12:54pm Jan 13, 2011 12:54pm
Hi Duffy,

Thank you for your posting to clarify the discussion. Can you please clarify the "white color moving average" on the graph? I must have missed something.

Kind Regards,
Forexwonder
  • #625
  • Jan 13, 2011 1:23pm Jan 13, 2011 1:23pm
Quoting duffypratt
This time, I only tested one stop loss. That is 1/2 the distance to the prior high/low swing...
In earlier posts you showed the difference in SL. You tested SL half of swing H/L and full lenght of it. To be 100% sure what do you mean by it can you put a chart with SL (1/2 and full swing H/L) just like you draw two TP strategies lastly. When it is on the picture it is more clear .
Thx in advance .
misiek
  • #626
  • Jan 13, 2011 3:07pm Jan 13, 2011 3:07pm
Quoting forexwonder
Hi Duffy,

Thank you for your posting to clarify the discussion. Can you please clarify the "white color moving average" on the graph? I must have missed something.

Kind Regards,
Forexwonder
The white moving average is the 48MA smoothed. I have not used it in any tests so far, but have been prompted to look at it based on some of Bob's recent posts. The idea is that trades become riskier when price is between the 48 and the 240 (the white and dark blue on my chart).
  • #627
  • Jan 13, 2011 3:39pm Jan 13, 2011 3:39pm
Quoting misiek_doopa
In earlier posts you showed the difference in SL. You tested SL half of swing H/L and full lenght of it. To be 100% sure what do you mean by it can you put a chart with SL (1/2 and full swing H/L) just like you draw two TP strategies lastly. When it is on the picture it is more clear .
Thx in advance .
misiek
Here are two charts, that show the difference. In one, both the full swing and the 1/2 swing stop loss would be winners from the outset.

In the other, the full swing strategy wins outright. The 1/2 swing strategy takes two losses before winning. In placing the stops, I look back only to the last swing up and down. Where the 1/2 swing gets stopped out, but the full swing trade remains alive, that means that the next round on the 1/2 swing will almost always have a tighter stop than before.

The full swing has a reward/risk of 44/67 = .65. If you bet 2% on the trade, you would make a profit of 1.3%.

The 1/2 swing strategy can be looked at in different ways. It nets 11 pips, much less than the other. And that would be valid if you traded constant lot sizes, regardless of stop loss.

Or if you bet 2% per trade, you would lose 2% on your equity on the first loss. You would compound that on the second loss to .98*.98=.9604. And then you would get a 55 pip gain against your 11 pip stop for a 5 reward/risk ratio, and a 10% return on your third trade. That would leave you with a final position of .9604 * 1.1 = 1.056. So, instead of a 1.3% profit on the trades, you would get a 5.6% profit.
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  • #628
  • Edited 4:45pm Jan 13, 2011 3:48pm | Edited 4:45pm
Quoting ericjschroed
Bob, are you talking about the 240 and the 48? I meant the 240 and the TMA, as the TMA returns to the 240 indicating the possible trend reversal. If TMA is below 240 indicating DT, as the TMA gets closer to the 240 at what point do you wait or consider taking countertrend trades, expecting the trend to change to Up?
It is why I added the 48, I am studying that as the point of countertrend. Somewhere we have to make the change earlier than the 240 and TMA cross. It is still my definition of the trend but when price starts turning trading gets difficult. This has always been the problem of trend traders. When does the trend start when does it end and what do you do inbetween these two points. One of the hardest problems to tackle in trading. To me the key is having a defintion, knowing it will never be perfect and then properly managing your losses. The key is to try to be over 60% win and have your winners bigger than your losers. Then you have to realize there are periods you can not keep that win ratio over 60%. Sooooooo .......... I think I have an idea that will increase the odds in our favor. Sorry but I have one more day of exams and next week I only have two classes to teach. In China they have spring festival and I am off for 6 weeks. Nice.
  • #629
  • Jan 13, 2011 4:25pm Jan 13, 2011 4:25pm
Quoting duffypratt
Here are two charts, that show the difference. In one, both the full swing and the 1/2 swing stop loss would be winners from the outset...
Now it's clear to me what is and how do you measure last swing. I also notice that SL with range of 1/2 swing H/L could be better because if you hit SL earlier you have got smaller loses and there are multiple chances to reenter new position with even greater probability of win.
Thx again.
misiek
  • #630
  • Jan 13, 2011 4:36pm Jan 13, 2011 4:36pm
duffy:
none of your testing includes the use of the breakeven or jumping stop correct?
Thanks for all of your contribution and hard work.
  • #631
  • Jan 13, 2011 4:39pm Jan 13, 2011 4:39pm
Setup looming on Feb WTI...now waiting on 5x5 Cross to occur and then we are in!
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  • #632
  • Jan 13, 2011 4:47pm Jan 13, 2011 4:47pm
Also long setup on usd-chf..again just waiting for the price to cross 5x5. This one is slightly riskier than the WTI setup though
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  • #633
  • Jan 13, 2011 5:01pm Jan 13, 2011 5:01pm
I dont think I want to touch the euro or aud trades today. They meet the definition but they are clearly in the change of trend stage.
These are my trades today.
Sells
chf/jpy
Usd/Cad

Buys
Cad/jpy
gbp/nzd
usd/chf

others but in the risky areas
Sells
aud/cad
eur/cad
eur/gbp
eur/nzd
Buys
aud/chf
usd/jpy
  • #634
  • Jan 13, 2011 5:22pm Jan 13, 2011 5:22pm
Quoting Zuke
Setup looming on Feb WTI...now waiting on 5x5 Cross to occur and then we are in!
Are you sure its safe to use a technical analysis based system on instruments which are so sensitive to fundamentals? Would this system work on stocks? Indicies?
  • #635
  • Jan 13, 2011 5:49pm Jan 13, 2011 5:49pm
Quoting tazmaan
duffy:
none of your testing includes the use of the breakeven or jumping stop correct?
Thanks for all of your contribution and hard work.
Jumping stops would be a huge pain in the ass to test visually. Usually, I think the idea of jumping stops is to lock in some certain profits, and thus reduce risk, while limiting overall profitability. So, no, I haven't tested them at all.

I have used break even in one instance. One of Bob's rules has been "Never let a winning trade turn into a loser." But what's a winning trade? I had already defined a win as one where price moved to the opposite channel. So, in the test where I let trades run after that point, I moved to BE when price hit the opposite channel.

Hope this helps. I decided a long time ago that I wouldn't trade any system, or even any pair on any system, until I already had tested it myself and had a decent understanding of how it work. Bob has been extremely generous to share his ideas. Giving the results of tests I was going to do anyways, I think, is a very small thing to give in return.
  • #636
  • Jan 13, 2011 6:32pm Jan 13, 2011 6:32pm
Thanks, I figured you were not doing be or trailing/jumping but wanted to make sure. Worried a little about such a tight be and trail with this, throwing the RR totally out of wack. I'll play with some different settings going forward. Appreciate your reply on it
  • #637
  • Jan 13, 2011 7:25pm Jan 13, 2011 7:25pm
[QUOTE I use an MPTM to set my -40 and +60 on all my trades. [/quote]

Hi Bob,
Been trying to figure out how to use the MPTM to set SL/TP. Could you assist me with this please.
LEARNING HOW TO FISH SO I CAN FISH FOREVER
  • #638
  • Jan 13, 2011 7:48pm Jan 13, 2011 7:48pm
Quoting Mixer
[QUOTE I use an MPTM to set my -40 and +60 on all my trades.
Quote
Hi Bob,
Been trying to figure out how to use the MPTM to set SL/TP. Could you assist me with this please.

correct me if i'm wrong, but if i do this i enable and enter a number in "ad a missing SL" & "add a missing TP" or something to that effect.

that way you just press buy or sell and SL & TP are taken care of. THough i'm in the habit of not setting a TP in the hope of let the winners run.

Sorry to butt in Bob.
  • #639
  • Jan 13, 2011 8:01pm Jan 13, 2011 8:01pm
Quoting iamboston
correct me if i'm wrong, but if i do this i enable and enter a number in "ad a missing SL" & "add a missing TP" or something to that effect.

that way you just press buy or sell and SL & TP are taken care of. THough i'm in the habit of not setting a TP in the hope of let the winners run.

Sorry to butt in Bob.
Yes have these be the only functions working on the MPTM and it will set the TP and SL. If you have other functions running like BE and jump stops etc. the MTPM seems to jam up. I am testing this on trades within the lines. The ones outside the lines you want to see if they will run. So that is what I am testing.
  • #640
  • Jan 13, 2011 8:58pm Jan 13, 2011 8:58pm
After taking a hit on AU last night because I chose to enter a short trade while the TMA was rising, I am deciding to skip the inital entry for the same reason in the upcoming long opportunity setting up on UsdChf. From the rules standpoint it would be a correct entry but I dont like the angle of the TMA. So what I'm looking for is an initial test of the 9660 area and back down to test the current lows. If the low holds and we get a higher low and price then breaks the 5 MA, I will then enter long and look for price to go up to the 9712-24 area where I will take my profit. I may miss the trade, it could very well go up to the 9712 area on the initial entry, but for testing purposes, I will see how this goes. Best of luck.
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