Building an equity millipede

Hi gents, Vee.

Vee, you're definetely not alone in doing this ))

If I can comment, Graeme always advised not to try too much in one single day, so 2-3 is a max number of entries until this day is shut down for any new probing or adding to existing positions.
I believe this is the GOLDEN rule everyone must stick with. It greatly reduces DD and expenses to create positions.
So basically, approach already is to have on risk only few probes a day.

Having said that, I also agree that as Graeme said, it's better to watch the PA not from raw price, but from smallest probe, which is for micro accounts is 0.01.
So basically when I have no positions at all on this pair, I like just to watch the market with that 0.01 probe, even with no SL or wide enough. This is paid service for me )) in case that 0.01 goes horribly wrong I close it (50-100 pp is just 5-10 $ - what a bargain).

But, when I'm more confident in my assumptions, I use normal size probe, which is indeed is an essential part of the method and adds enourmously to the profits when it works.

As to splitting the "normal" size probe into chunks, I found it to be very time-consuming and not worth doing it in the long run. Basically, I would just make a little re-adjustment of this "normal" lotsize to trade more comfortable size without thinking of how I can save even on that small SL probe. So basically I stopped splitting the probe, I just re-adjusted the lotsize to be more comfortable for me.
But if what you do works well for you - why change that? ))

Hope that was helping for further thinking.

Vee, everybody, please post more from your exp and thoughts for discussion. Cause many of us have mostly the same issues and would love to have other people thoughts on them. I do really love to discuss the things with you, guys, here in the thread.

Regards,
Alexander

Vee, everybody, please post more from your exp and thoughts for discussion. Cause many of us have mostly the same issues and would love to have other people thoughts on them. I do really love to discuss the things with you, guys, here in the thread.

Regards,
Alexander[/quote]


Yes thanks, guys for sharing your ideas.
My losing days are days with to many try out probes that's for sure.
My winning days I'm busy with something else, gardening building or having a coffee in La Rochelle.
I try to be or get in the market 2 hours before London opens and then leave it for the day, and try to build some legs Graeme's way.

Being new to this method I still use half my position to score some short term pips , say 50 to 100 to give myself the idea to cover my losses.
Because its not easy to get stopped out and re enter on a better level ( if your lucky ) and get stopped out again and again, without scoring a pip.

And yes I use a mini 0.01 position to follow the market that works for me.

Regards to all of you,

hans..

Appreciate all your comments and responses. Glad to stir up some discussion but afraid to mislead or confuse anyone so let's move to a more interesting discussion topic....

How to introduce more pairs in your equity portfolio. Personally, I have no issues adding major pairs but the are all USD centric causing a bit of volatility in my portfolio.

I tried adding some crosses but I find crosses more unpredictable in regards to price action setups. Is it just me or others facing similar challenges? The only good ones I feel are E/CHF and G/CHF pairs due to strong monthly strength of CHF.

I have positions going in A/U, E/U, U/J, U/cad and E/J in live account but fail to produce any millipedes on crosses. why is that? Which is the best pair to introduce in your experience and why? How to avoid being over-exposed in a particular currency in terms are traditional diversification (I know Graeme does not care and one shouldn't rightfully so). I think it makes the first 50-mile journey a bit smoother if you factor the currency exposures and not be too heavy on any one currency. Perhaps, it is just in my head unable to ignore correlations.

To go with Graeme's theory "To increase profit, the only way safe, logical, sensible way is to increase your exposure by participating in more pairs with the same/main lot size. Period.", I recently tried this with some success (in demo). I introduced a basket of 10 crosses following Graeme's golden rule of "buy when candle closes above the closing price of previous down candle and vice versa" based on weekly hindsight with entries on H4 TF. Things are looking pretty good so far.... much smoother equity curve and volatility. May be I got lucky this time so further practice will reveal further truth.

Hiya, Vee, gents.

Well, so far I stick with what works well for me, which is EURUSD.
If you look at its charts, it's best to none pair for trend trending so far.
I used to trade AUD and GBP as well, but they became too unpredictable, unstable in movements and I believe one would need to go to even higher timeframe to get juice out of them. Basically, at the time only EU produces more or less solid movements with little or no retrace. Perhaps later in the year they can become even more trendy than EU, cause GBP used to be a very trending, volatile and directional pair some time last year, that was just doing effortless entries, many of them.

I made simple math on how much I was spending on creating positions, and what was the outcome. Conclusion was - not worth spending valuable time on other pairs which doen't give stable increase similar to trading the EU.

You touched another point - why crosses moves harder to follow. Normally, cross is moved only if major pair(or both pairs) in it are moving, cross doesn't live a separate life.
So I believe that trading at the same time crosses and majors which make it is pure overleveraging and creates unnessessary expenses on higher crosses spread.

If to discuss the topic of diversification. Some time ago last year I read quite a few researches on diversification (mainly stocks) and the conclusion I came after thoughts on this topic was that diversification can barely be existing within the same market. So if you trade orange juice and pork bellies which are barely correlate between each other - this is a diversification of portfolio to some degree, but if you take currency market - all currencies are highly related and there are only short directional bursts of uncorrelated movements caused by events or news, specific for that currencies. In the long run market is like one company with many divisions (currency pairs), yes, you split the value by investing into different divisions, but it's all the same one company, if it goes down, it goes down, if up - then up.

And to make a parallel to crosses here - basically when you buy crosses from this one big company - you pay a mark-up for marketing to you this ready product, which is still made from raw materials or sub assemblies (major pairs) - so you pay more whilst you get basically the same stuff, just assembled for you and remarketed as a cross.

So what a point to pay more? If you know assembly A (EU) is going to heaven and assembly B (UJ) is going to hell - why not just buy A (EU) and/or sell B (UJ) - what's the point in trading EJ?
Yes, sometimes setups are more obvious on crosses charts, but.. these setups are made from moves of majors.. so setups on majors also exist, just not that obvious so far. One could make a trick here and based on crosses chart setup - go to corresponding majors and select best looking chart major and trade it, I think somewhere in the thread Graeme was explaining this trick..

Appreciate your feedback on that, guys. Btw, on other that EU pairs, I have few positions on UJ and UCHF opened some time in April, still growing, just opened when saw an eye-catching movement and obvious downtrend. Currently they're ranging a lot( so no additions for more than a month.

Regards,
Alexander

Hi Vee,

Whilst I don't want to detail too much how I am trading because it might be somewhat incompatible with the overall thread, I will say that besides FX, I increased my exposure to other non-correlated markets, such as futures and stocks (but mainly futures). Like yourself I have an IB account.

Kindest Regards,

Cam

One of the most important subjects in trading is managing your money and trade. I believe that trading systems' weight in being a successful trader is just 20-30%. The major part of the way to success is how a trader acts once he/she opened a position.

This is how I see it:

When you set rules for managing a position, you need to separate between two different situations: A. the trade is winning. B. the trade is losing. In this post I will discuss about situation A- the trade is winning.

I usually take partial profits, meaning that I don’t close the whole position in the first target. Note: I set the trade's targets before I enter the market. Well, lets say that I opened a long position in the EUR/USD of 4 lot at 1.45. The first target I had set was at 1.4580-1.46 ( I never wait for a specific point, you have to be dynamic). If the currency gets there, I will sell half of the position, 2 lots in this case, and let the other 2 lots play. By doing that, I am increasing the chances for realizing larger profits. However, the second half which is still in the money might turn all the way back to the entry point or even cross to the red zone. To avoid that, I always move the stop-loss order to the entry point (after hitting the first target), so in the worst case scenario the second half of the position will be closed on break-even (though it contradicts some of the technical analysis principles).

If the left half position continues rising, I manage it like it was a new position. Meaning, I will look for more targets for realizing half of the position (which is 1/4 of the original size) and so on. I usually continue with that system till I am left with an eighth of the original size. Likewise, I set new top-loss orders each time the currency makes a new low.
Note: I use the same trading management for both long & short positions.

That is my point of you. How do you manage your trades?

Good Luck!

Bastian Rubben
Chief Analyst at SunBirdfx

Good morning all

Thank you for the continued interest.

Apologies for my absence from forum activities however it is proving to be a very busy year for myself.

The book is almost complete. Just on that note, I have noticed that the content of the book does not differ much from the content I have contributed in this very thread apart from a planned flow of explanation.

I did not have a chance to read all the posts after my last post in the thread however I can clearly notice that traders are 'finally' looking at market/trading through a different but 'sensible' perspective.

No one or any one entity can ever influence/forecast the movement of price. It is somewhat possible in markets with limited/smaller volume (pork belly, orange juice, platinum) of transaction however 'definitely' not in foreign exchange.

So give up using indicators to forecast the next 50 pip movement. The last 50 pip movement you have correctly forecasted was just a random ripple in the ocean in which you 'chose' (unknowingly) to believe that it happened as per your calculations. That is the biggest fallacy in trading.

Once the above finally sinks in, you will look at things completely different because your paradigm has now shifted. And this is a very important phase in your trading career. Some traders agree to the above but they are unknowingly clingling onto the 'notion' of 'trying to forecast' once again. Paradigm shift is vital as it 'finally' opens your 'eyes' in which with the new sense of understanding, you are finally able to ask the right question and seek the right answer.

What is a paradigm shift? It is nothing new and there are books on the subject. An example; you notice a man crying in public with his hands covering his face. Straight away your focal interpretation would indicate that he is unhappy/sad. And then you would ask the man, "why do you cry sir?" "can i help you?" "you look troubled"

But.. what if the gentleman is crying because he had all these financial problems only to have just realized that he has won the lottery of the night before and the emotion of joy was too overwhelming for him to continue walking down the street. Now here is the problem. If the man does not respond to your offer of assistance and does not share with you his new found stroke of luck. Then there are no changes in your thoughts/understanding. You would probably walk past him, go home and tell your partner that you met a man on the street crying into his hands and most likely exaggerate that he was a junkie in his appearance.

That is happening right now to most traders but of course in the context of trading. But what if the man did decide to share his joy with you and told you that he has just won the lottery. Then your paradigm shifts completely. You look at him completely different the very instant you hear this. Your actions change instantly from standing back to shaking his hand, patting his back, taking pics with him and so on.

The crying man is the market. And everyone still throws a lot of assumption based on their own interpretation (of course with the help of these so called indicators). At the end of the day, the only person you are fooling is yourself but there is no one to tell you that you are wrong apart from the crying man himself.

I appreciate all the linear efforts to improve your trading but a new angle is required. And this is the part that will do so many traders head in. Its just too much thinking and hassle and research to do any of that. There are few traders here who do the unthinkable of most and gather statistics. Testing methods on a long-term basis and gathering statistical data; average loss per week, maximum drawdown, and so on. Analyzing weakness and strength of their theorem and using such data to further tweak and improve their method. They are guaranteed to succeed in this business and without a slightest notion of exaggeration they will be able to bask in absolute luxury with such means at their disposal.

So, here is one for your thoughts. It may sound like a riddle and shrouded from clarity but believe me when i say it is not and completely direct for your understanding.

You enter 1 sell position (as per your reasons, engulf, pin, s/r,..)
It travels 200+ pips down
Then you notice that there is a shift in the market (fundamental, technical,..)
You enter 1 buy position (because you are one trader who do truly believe that forecasting the market is impossible)

Notice what happens to your floating equity.....

Im sure everyone knows what happens...

It wont move anymore.

Floating 200+ pip profit will be frozen. It wont move. Some trader might just hit the ceiling or not but if you have noticed this before and walked right past it you have just ignored a blatant advantage to trading... Sometimes I wonder if this is one of the reason why you cannot trade both directions in US.

Your floating profit is locked while the buyers push it up and sellers try to keep the price down.. Do you care? Ofcourse not cause it does not effect your profit. Let them fight cause your intentions are different.

Do i need to continue explaining what the possible outcome is or can everyone think for themselves what they can and should do afterwards.

Only 2 possible scenarios will happen and either way you will win at the end.

Scenario 1. Price returns back to your sell position closing it at BE.

Then look at the floating profit when your sell position gets closed at BE. It will still have 200+ pip profit.

Now here is a very important sentence/question that you must digest.

Are you going to sit there and tell me that the fate of the market is just measely 200 pips? Draw the box. Draw a line at the sell position and another line at buy position and will you sit there and look at those lines and completely ignore the fact that 'sooner or later' price will move past these barriers? And when it does what happen; Your floating profit grows as the time passes. Please re-read.

Scenario 2. Price stalls, buyers fight but lose and the price continues down. You might experience a small loss here and there but the important fact is that the price is now moving towards your original anticipation and your sell position is now growing bigger.

But then you are not going to sit there with just 1 position are you? You will of course (as per good/sound money/risk management) extrapolate/amplify this opportunity by adding more position into it. And this paragraph applies to scenario 1 as well.

Whatever happens your aim is for the price to move and grow your positions enough (at least 500 pip growth on one of the position) for the whole endeavor to be worthwhile at the end. "endeavor to be worthwhile..." Not all this trouble for 70 pips but megapips... And to achieve all this all you need to do is trap the price in an imaginary box that needs to broken out of 'inevitably.'

On eurusd (open your weekly chart), I have multitudes of buy positions from earlier this year and a new bunch of sell positions surviving from few weeks back. I did not attempt to fully hedge myself but I just found this morning that the total 24 positions (both buy and sell) are somehow completely hedged. Floating profit is not moving but it makes me smile to know that it does not matter. Why should it matter when it is not my money ..yet..

My box? Low price of the year and high price of the year. Cause I have all the patience in the world and know sooner or later (might take months, years) but it will move out of the box and whilst it crawls along as per my anticipation I will be taking chuncks out of the move here and there just to keep me happy.

The reason for this post is that a lot of traders do not fully understand and appreciate the strength and the need to participate in both direction. I just do not understand why traders keep stating that fully hedging makes no money when infact you are cleverly trapping the price into a tight box that needs to be broken out in which you are already participating in.

I just more or less covered hedge, trading both directions, core principals to profitable trading. And I sincerely hope it does give some benefit to the seekers of the right answers.

Also, please stop using stop losses unless it is part of a sound money management plan that 'has' proven its worth in statistical data. A 50-70 pip stop loss 'cushion' is a fart in the wind. Guarantee yourself a win then placing measures to guarantee a loss.

My wishes and thoughts are with everyone.

Sincerely,

Graeme

Welcome back Graeme!

So happy you are back! Thanks to you, my trading perspective and paradigm has changed totally and irrevocably since reading your tread. I have read and reread, study and restudy the thread countless time trying to soak in everying that you have so kindly and generously taught and continue to teach.

THANK YOU so much for "crying in public" and sharing your joy in winning the lottery. I hear you and there is no doubt that I, and whoever follow your approach will also win their own lottery!

Very glad to hear that your book is almost complete. Looking forward to learning new wisdom and moving onward and upward

Warmest regards,
ooops

Graeme, your posts never cease to amaze me. Thanks so much for taking time to write that encouraging piece.

One quick question. Throughout most of the thread, you always stressed the importance of keeping a tight stop on entries. Now it appears you are saying not to use stops anymore. Is this correct? I know the age-old philosophy is cut your losers short and let your winners run, which is exactly what you taught. Are we now taking away that first half of the equation? Thanks again for everything you've done!!!

Hi Graeme,

Glad to see you are doing well. I can't wait to get a copy of your book :-
Thanks for your continued interest in our journey to become better and prosperous traders. Your top notch wisdom is something I personally would cherish forever. You have been an incredible mentor and I am positive, long term success is just around the corner for me. Being in US has its challenges but nothing has some a dedicated trader to navigate though the maze.

Hope to meet and thank you in person some day.

Regards,

Vee

For those curious to know how I am doing with my basket of crosses, things are looking really good. I began replicating my real trades in a demo account to check out the 'Trade Explorer' features here at FF. I am opening my account to public until sunday night for those who want to look or asked for my trading performance. I took those trades with no SL and some are moved to BE after 100+ pips in profit. Please PM to avoid clutter on this thread. Here's the link... http://www.forexfactory.com/veefx

Good afternoon, scottymoll

Thank you for the question.

Apologies I should have been far more thorough in my post but was already shocked to see the length of it.

Good observation and here is my answer for everyone.

I use the stop loss in a different context to most traders. I do not use stop loss as a method of 'cushioning' the volatility. However, I use the stop loss as a part of money management plan that aides me when the action comes too frantic and im in the midst of stacking positions. Ofcourse the main use of the stop loss for myself is to move it to BE as a sign to myself to indicate that, that part of the job has now been complete.

Most traders use stop losses as a cushion whilst I use it as a means of symbol and indication.

I hope this answers your query.

Sorry to address everyone in same post but thank you for the warm compliments, Oooops and VEEFX. It is greatly appreciated.

Sincerely,

Graeme

Hello Graeme,

Nice to hear from you again. You have already created a paradigm shift in many of us with this thread. Thank you and please keep posting whenever you can.

Your point on SL clearly points to the minimum requirement that

Any trader who wants to take up this approach, should have the basic skill of picking up right entry points, where price almost always moves in his favour immediately.

So that one would have the maturity to leave a trade open and let it play with out a SL

Perhaps the reason for 20x3 preparation exercise.

Warm Regards,
TradeStar

Good afternoon, VEEFX

Thank you for the summary of your trading status.

Impressive.

Just a quick analysis of the pic of your summary indicate that (no disrespect but just a analysis for the rest of the readers);

My analysis could be wrong as I can only interpret from the pic posted above.

But this the type of analysis every trader should be performing on a weekly basis of their progress.

I assume this account is approximately few weeks old. I assume 4 weeks just for the calculation purposes.

100+ trades in the last few weeks. Good
Avg. number of trades taken per week. 25+
Gross profit in pip. +1506
Realized loss so far in pip. -924
Current net profit in pip. +582
Current floating profit in pip. +908

Maximum drawdown 4%
(assuming this account is 4 weeks old)
Realized loss based per week in pip. -231
Realized profit based per week in pip. +426
Profit to loss factor, almost 2:1. Excellent but you can do much better (soon)

*Using above statistics, I can project your future results (under the assumption that current progress is somewhat median)

Estimated for the next 52 weeks.
Expected median-maxi realized loss for 52 weeks in pips. -3003
Expected median-maxi realized profit for 52 weeks in pips. +5538
Profit to loss factor, 1:1.5 (this is absolute median as we are not even considering the potential floating profit for the whole year)

In regards to your current floating profit of 908 pips based on the assumption that this is a 4 week old account.

You do not work out expected floating pips for the year by multiplying it by 13. Instead floating profit is considered as a mode of acceleration here. If the potential is there to add 200 pip per week as a floating profit on the average throughout the whole year (from the looks of the last 4 weeks and assuming this is the median progress once again). I would take this into consideration by considering a worst case scenario of only 10% of this amount as an realized profit, hence adding 20 pips of realized profit into the overall calculation. Creating the absolute worst case scenario.

All in all everything points in the right direction. Now this will be the most important paragraph of this whole post. Time will tell if the past 4 weeks of your endeavor was the median progress (average progress) or not.. However, time will also tell if the above result was one of the better results that happen/s/ed from now for the next year in which the above figures/expectancy will dramatically decrease. Ofcourse I only hope that the last 4 weeks was rather a poor progress compared to the upcoming one year of events in which the above figures will be much smaller than your true realized profit in the one year time. At the moment (just from 4 weeks), one can forecast 200-220 pips per week but I think the true median could be anywhere between 50-200 pips ONLY if the current method you are adhering to is 'consistent' for the length of experiment.

VEEFX, you will find the final answer when you question yourself how to ensure 'consistency.'

Sincerely,

Graeme

EDIT: Analyzing your progress on a regular basis will show you the ins and outs of your method. The trade summary that shows profit or loss is nothing compared to the amount of insight you gain from taking your trade performance apart and looking through every nook and cranny. How will you build a car if you don't know the inner mechanics... Anyone can drive. But driving alone does not build a car.

Good afternoon, TradeStar

Thank you very much. Perfectly said.

3x20 exercise is one the main reason I became the trader I am.

It will teach anyone so much more than just reading.

Sincerely,

Graeme

Thank you for your participation and the questions today.

I will spend this weekend answering all the messages.

If you have any new ones please send them through before Monday and it will be promptly answered.

Currently there are 100+ messages to be replied so please understand if my answer is bit short.

Sincerely,

Graeme

Good morning, Graeme!

I've read all your posts, for the few times, some of them even for dozens of time.

But this is the first time I can directly express my gratitude and respect to you for what you taught me in this thread. I give thanks to God he made you starting this millipede thread. Thank you for being so genuinely interested to help people improve! And your efforts really work.

I clearly see your book will be a best-seller and most expected reading for many traders over here. Can't wait to read it, but that shouldn't hurry the process as I believe the more author works on a research, more time is passed since its very first draft, many new ideas start coming into the head and end result becomes even much more impressive.

A Question to you, Graeme.
As to 3x20 exercise - many people, especially who found your thread not so long ago, curious for exact rules of this exercise.

As I see it, you advised to practice for at least 6 months, until there is a stable 3TP hit (with reasonable number of loss trades until these 3 TPs are hit within the same day), on a reasonable timeframe (personally for 20pp SL and TP the reasonable TF is M5, starting from M15 20pp SL is not enough) when under any entry system you think it's time to enter the market, but with only one rule: enter long if entry price is above today D1 open price, enter short if price is below today D1 open price.

Can you please confirm or correct if my understanding of 3x20 exercise is right? I think many people here would appreciate your feedback on that.

Warmest regards,
Alexander

Thanks Graeme. I appreciate your time in analyzing my trades. Perhaps a bit of background is required more than just a snapshot. I starting replicating these trades since June 27th so it is a bit over 2 weeks now and it does have a few trades from a different strategy which has varying lot sizes and some other funky stuff to further skew the pip count. I did this post to reflect the discussion we were having on how to introduce more pairs and crosses to the portfolio. To that effect, I tried using the 'basket' approach to see if it reaps any benefits.

I get what you are trying to convey but I must admit, I am quite lost reading this para... "You do not work out expected floating pips for the year by multiplying it by 13. Instead floating profit is considered as a mode of acceleration here. If the potential is there to add 200 pip per week as a floating profit on the average throughout the whole year (from the looks of the last 4 weeks and assuming this is the median progress once again). I would take this into consideration by considering a worst case scenario of only 10% of this amount as an realized profit, hence adding 20 pips of realized profit into the overall calculation. Creating the absolute worst case scenario. "

In all my trading statistical analysis, I have been ignoring floating pips as there is no way (that I know of) to come up with an average # of total floating pips per week. It is almost impossible to come up with a median for unrealized gains over a year to come up with a worst case scenario. May be I am too tired to think straight

EDIT: I found the answer to my question... one could export the statement in excel and have a running average floating pip per week

Dear Graeme,

Can you please tell me if the entry is only off the daily(up or down), or can it be taken also from the initial candle from the Asian, London and NY markets? Different brokers begin the daily candle at different times.
Thank you in advance for your kindness, patience and willingness to teach us.....many blessings to you and your family!!

Tony Costa

Hi Graeme,

Looking at my current open positions, I think EURNZD is in best mode to try freezing my 649 pips of unrealized profits. Looking at where price is at this week's close, it would be a good time to try sending some long probes. Price action warrants continued downtrend but I anticipate a bounce near last year's low levels which might touch next week.

Plan of action is to enter two 0.05 lot long probes with no SL and wait to close these probes if weekly bar closes below last year's low price of 1.6929.

If price continues down south, I will continue building my short positions.

Sincerely,

Vee