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Building an equity millipede

  • #4,901
  • Edited 3:23pm Sep 25, 2011 2:31pm | Edited 3:23pm
Ill chime in about building an millipede""" equity""" account.
Money management + risk management + compounding and consistent trading = $$$$$ success.
  • #4,902
  • Sep 25, 2011 3:05pm Sep 25, 2011 3:05pm
Quoting VEEFX
Hi Guys,

Re-reading some of Graeme's posts and ran into this one. Just trying to understand the reasoning behind what I have highlighted in Magenta color.

- Why would Graeme close the largest legs of the largest group? I understand we got to be sensible and mix and match some legs across different groups and not set any hard and fast rules. wouldn't it make sense to close a few more medium term legs to raise capital balance?

- Another related question... How important it is to keep accounting of pips for each...
To me personally the system is flawed. I wholeheartedly agree that long term trend following is the way to go but if you just keep diversifying then eventually (over enough time) you will just keep eroding your profits as prices moves between trend directions.

The only way this doesn't happen is if a currency is moving in the same direction for a very long time like some of the CHF pairs.
  • #4,903
  • Sep 25, 2011 3:22pm Sep 25, 2011 3:22pm
Quoting willf
To me personally the system is flawed. I wholeheartedly agree that long term trend following is the way to go but if you just keep diversifying then eventually (over enough time) you will just keep eroding your profits as prices moves between trend directions.

The only way this doesn't happen is if a currency is moving in the same direction for a very long time like some of the CHF pairs.
system? flawed? hmm... this is not a system!

In my view, the sole purpose of diversification is to smoothen the account balance 'curve' and then add an element of growth to cover future losses that 'will' arise from probes/stacks. It is no secret that the power of this approach lies in trading both direction (as no pair will ever move in the same direction for years without a decent amount of retrace on weekly), let the BE trades shake out for a couple of weeks and those that survive become prime for analysis whether to keep them running or select some for diversification depending on how much drawdown one has faced. All these actions are sooooooo subjective and discretionary making it hard to realize the same profit level as Graeme's.
Staying in my lane...
  • #4,904
  • Sep 25, 2011 4:19pm Sep 25, 2011 4:19pm
Quoting VEEFX
system? flawed? hmm... this is not a system!

In my view, the sole purpose of diversification is to smoothen the account balance 'curve' and then add an element of growth to cover future losses that 'will' arise from probes/stacks. It is no secret that the power of this approach lies in trading both direction (as no pair will ever move in the same direction for years without a decent amount of retrace on weekly), let the BE trades shake out for a couple of weeks and those that survive become prime for analysis whether to keep them running or select...
I have been studying this system for sometime. The basics of this system are similar to a couple of other systems I am aware of. One thing is for sure that this class of systems definitely has a logic at their base. It's the matter of application we should be more concerned with.

This system becomes profitable when market makes a sustainable and big move in one direction. Currency markets do show such moves but to a lesser degree as compared to individual stocks. Therefore, this system should be more profitable when applied to individual stocks, but this doesn't mean this system cannot work in currency markets, logically it should.

The basic logic behind this system as I understand is limiting losses and maximizing profits following the direction in which market moves. If market moves significantly in one direction (either up or down) the trader realizes profits but not all profits at the same time. How you set that ratio of realized and unrealized profits is directly related to one's risk appetite, some have more than others.

Another thing is that this method requires a lot of patience. In the words of one of the people who I know is an expert in these kind of systems "You will need to sit on your hands most of the time."
The Thief of Wall Street
  • #4,905
  • Sep 27, 2011 8:47am Sep 27, 2011 8:47am
Quoting Chicky
I have been studying this system for sometime. The basics of this system are similar to a couple of other systems I am aware of. One thing is for sure that this class of systems definitely has a logic at their base. It's the matter of application we should be more concerned with.

This system becomes profitable when market makes a sustainable and big move in one direction. Currency markets do show such moves but to a lesser degree as compared to individual stocks. Therefore, this system should be more profitable when applied to individual...
Hi Chicky,

Are these systems in public domain? Can you please share there whereabouts?
  • #4,906
  • Sep 27, 2011 12:10pm Sep 27, 2011 12:10pm
Quoting Chicky
I have been studying this system for sometime. The basics of this system are similar to a couple of other systems I am aware of. One thing is for sure that this class of systems definitely has a logic at their base. It's the matter of application we should be more concerned with.

This system becomes profitable when market makes a sustainable and big move in one direction. Currency markets do show such moves but to a lesser degree as compared to individual stocks. Therefore, this system should be more profitable when applied to individual stocks,...
Thanks Chicky. Good to have you on this thread. I agree, it does require patience to find good low risk setups and one way to deal is to 'avoid' the market by using alerts (you probably know this already).

Past few weeks, I am solely logging on to my trading station only based on alerts/push notifications I set during the weekend and it is soooo much fun to not stare the darn charts. I get alert, if I am free, I log in, quickly scan the chart, if I like the momentum/setup, I do a trade, switch to 5M chart to check the heartbeat of the market and decide whether to close the trade or stare for 10-15 mins for opportunity to move to BE. That's all ! This is the best way that I I know of to avoid "sitting on your hands most of the time" and actually have a life outside forex. One could do this in the parking lot or in the toilet doing your thing. Try it out and you will be amazed.

Per Graeme's stats of 40 trades per week across 15-20 pairs is more than enough trading activity for someone seeking the thrill out of their trading activities to avoid boredom:-

I should stop as I feel at times, I am wearing the 'VP of Marketing' hat on this thread
Staying in my lane...
  • #4,907
  • Sep 27, 2011 4:19pm Sep 27, 2011 4:19pm
Quoting VEEFX
Past few weeks, I am solely logging on to my trading station only based on alerts/push notifications I set during the weekend and it is soooo much fun to not stare the darn charts.
What alert system are you using? I have started doing the same thing but I don't think MT4 platform is able to send alerts if it is offline, so I am now looking for an online alert service that could be in sync with my own broker's pricing.
  • #4,908
  • Sep 27, 2011 4:25pm Sep 27, 2011 4:25pm
Has anyone in this thread continuously stack positions if an opportunity arises like Graeme does? If so, given that it's the 5M chart, should I continuously stack positions for every bar until the opportunity is gone?

Thank you,

-LT
  • #4,909
  • Sep 27, 2011 5:40pm Sep 27, 2011 5:40pm
Quoting chick3n420
Has anyone in this thread continuously stack positions if an opportunity arises like Graeme does? If so, given that it's the 5M chart, should I continuously stack positions for every bar until the opportunity is gone?

Thank you,

-LT
Graeme does not stack on 5M charts. If you see in some of his posts, he was just trying to help us understand how to interpret price action in realtime. Anything under H4 or H1 timeframe to stack is considered over-exposure (in my personal view unless you either lack patience or seek a thrilling experience... I used to be like that!). My preference is to stack (and move SL to BE) only after I find another good PA setup for entry.

Hope this helps.
Staying in my lane...
  • #4,910
  • Sep 28, 2011 2:20pm Sep 28, 2011 2:20pm
Quoting tradista
What alert system are you using? I have started doing the same thing but I don't think MT4 platform is able to send alerts if it is offline, so I am now looking for an online alert service that could be in sync with my own broker's pricing.
Hi Tradista,

I use mobile trading platform from IBKR which requires a live account with them. This has been discussed in this thread before so do a quick search on "MT4 VPS solution". I believe, MBTrading offers free VPS hosting for their clients as well. There are also a bunch of free Apple and Android apps out there but not sure if they are reliable.

Personally, I would not want to use alerts from the same broker you are trading with.
Staying in my lane...
  • #4,911
  • Sep 28, 2011 3:59pm Sep 28, 2011 3:59pm
Quoting VEEFX
Graeme does not stack on 5M charts. If you see in some of his posts, he was just trying to help us understand how to interpret price action in realtime. Anything under H4 or H1 timeframe to stack is considered over-exposure (in my personal view unless you either lack patience or seek a thrilling experience... I used to be like that!). My preference is to stack (and move SL to BE) only after I find another good PA setup for entry.

Hope this helps.
Hello Vee,

Thank you for your fast response. I was just using the 5M chart as an example. I'm not looking for the thrill, [even though it's thrilling! ] but for the opportunity to milk all that the market has to offer. Graeme mentioned "Joe" aggressively stacking positions on every candle that goes toward his trend, until the opportunity is gone. Please refer to posts 832-837.

Please also refer to post #848. Just fyi, I'm rereading all of Graeme's posts.
  • #4,912
  • Edited 12:51am Sep 29, 2011 12:26am | Edited 12:51am
Quoting Eklavya
Hi Chicky,

Are these systems in public domain? Can you please share there whereabouts?
1. One is that of Jesse Livermore's. You may find it in "Reminiscences of a Stock Operator" and "How to Trade Stocks". Read these books in the same order. The second book shows practical application. (Note how many times he has repeated "If it was not wise to remain long, it was equally unwise not to go short. Just like Graeme's method)

2. All trend following methods.

3. Another (less preferred) is Hedging Strategy. Vast resouces on the net why and how do people hedge.

The basic concept is to go start to finish with a major trend until it exhausts. The primary requirement of this, however, is to wait until a major trend reverses. Sometimes it takes months or maybe years. Jesse says market provides 3 to 4 such opportunities in a year. My experience of forex market tells me even less than that, probably 1 or 2 per year.

If one wants to catch a major trend in the middle, will have to take greater risk because there would be no accumulated profits to put on stake. For example, if one is eyeing at a trend of 2,500 pips can invest 300 to 400 pips when such trend starts. But if one is trying to catch this trend in the middle, should be able to absorb a reaction of 500 to 1000 pips. Again, when a major trend develops it is supported by strong fundamentals. But after sometime profit taking, indecision and uncertainty makes market very volatile. We saw this in the past three years when best time to sell EURO was above 1.5000 and that of buying near below 1.2500. It was very difficult to judge market direction in between these two levels.

The third method is also good, somewhat like what Graeme does. But they close their position by hedging. They prefer hedging over closing for two reasons: a) they can keep track of their trades, and 2) partial close is possible (any % of original position) plus hedging with a less volatile / more volatile currency or pair, etc. Sometime traders may not want to close a position but make it low or high Beta. They therefore partially hedge it making a synthetic currency pair, etc. etc. etc. etc........... this is a whole world.
The Thief of Wall Street
  • #4,913
  • Sep 29, 2011 12:39am Sep 29, 2011 12:39am
Quoting VEEFX
Thanks Chicky. Good to have you on this thread. I agree, it does require patience to find good low risk setups and one way to deal is to 'avoid' the market by using alerts (you probably know this already).

Past few weeks, I am solely logging on to my trading station only based on alerts/push notifications I set during the weekend and it is soooo much fun to not stare the darn charts. I get alert, if I am free, I log in, quickly scan the chart, if I like the momentum/setup, I do a trade, switch to 5M chart to check the heartbeat of the market...
Thanks buddy.

Me too find it helpful to stare away from charts .................... NY summers offer much better opportunities than charts ever do ............ Eye Candies.
The Thief of Wall Street
  • #4,914
  • Oct 2, 2011 4:02am Oct 2, 2011 4:02am
Quoting Chicky
1. One is that of Jesse Livermore's. You may find it in "Reminiscences of a Stock Operator" and "How to Trade Stocks". Read these books in the same order. The second book shows practical application. (Note how many times he has repeated "If it was not wise to remain long, it was equally unwise not to go short. Just like Graeme's method)

2. All trend following methods.

3. Another (less preferred) is Hedging Strategy. Vast resouces on the net why and how do people hedge.

The basic concept is to go start to finish with a major trend until...

Thanks for dropping by Chicky.....IMO, you are one of well respected traders on FF. It is nice to have your thought in here as well.
-happyTrading, maaj-
  • #4,915
  • Edited 12:55pm Oct 2, 2011 12:32pm | Edited 12:55pm
Quoting Eklavya
Markets seems to be abnormal today. A straight drop like a stone with no retrace whatsoever. Anyway, a quick update. Was able to stick in three more shorts. Have not been able to get in anymore shorts.

Unrealized profits - 2250 pips.

Is this the start of something huge??

An update on my efforts to trade the NZDUSD the millipede way.

I closed out most legs from this series of trades for a profit of 1073 pips and left one short trade open. From then on for the last 7 weeks have been small losses trying to get a few legs going. Here is a weekly summary of how the trades have gone and current status.

Have lost a total of 1212 pips in the last 7 weeks. Total floating profit currently is roughly 1800 pips from the current set of legs. The one open leg from the earlier series is now 1200 pips giving a total of 3000 pips of floating profit.

Had a horrendous week last week, having lost a total of 416 pips trying to get in both long and short. I need to work on this aspect of my trading. Trying to minimize my losses during the times market gives an impression of turning.

Any thoughts on minimizing the losses during these times are welcome.

Attached Image(s) (click to enlarge)
Click to Enlarge Name: NZDUSD Progress Update.jpg Size: 157 KB
Click to Enlarge Name: 2011.09.25-NZDUSD-4HR.jpg Size: 117 KB
  • #4,916
  • Oct 2, 2011 4:04pm Oct 2, 2011 4:04pm
Quoting VEEFX
Personally, I would not want to use alerts from the same broker you are trading with.
I totally agree with you. I'll search the thread as you said. Thank you very much!
  • #4,917
  • Edited 7:43pm Oct 2, 2011 7:19pm | Edited 7:43pm
Quoting Eklavya

Had a horrendous week last week, having lost a total of 416 pips trying to get in both long and short. I need to work on this aspect of my trading. Trying to minimize my losses during the times market gives an impression of turning.

Any thoughts on minimizing the losses during these times are welcome.

Hi Eklavya.

I'm not aware of a simple solution, but here I have few ideas to suggest:
1. One needs to decide whether he'll be trading this pair this week or not.
If there is clear downtrend - no point trying to catch falling knife.
Market must prove by PA that it has intention to reverse.
Best prove is if it trades above the previous downwards weekly candle open.
Even better to wait until "reversal" W1 candle is closed as bullish engulfing bar, cause I reckon engulfing bar is far more reliable pattern showing that one force is completely dominating, whilst pin bar merely shows us there was a fight and there is only a temporary winner (based on close price), which gives us little or no guarantee this can advance any further.

2. If decided that this pair will be traded this week based on prev W1 closed bar, or (more risky) if current W1 is reaching early in the week the open of prev. W1 candle of different color, we enter assuming that current W1 will be closed as engulfing candle. If it's almost the end of the week and weekly ATR is almost reached - no point trying to catch the reversal - better wait until the close of this week and enter early next week - so price will have enough place and steam to advance in chosen direction next week.
Here I want to stress your attention to a simple fact.
Trading is mostly about different ATRs - contraction of ATRs followed by volatility breakouts.
If prev. week ATR was below normal, or even more contracted - this shows there was possibly a break in downwards move, or bears have no power to move price significantly lower. So weekly bar has little body, which can easily be breached in opposite direction early next week.

If, oppositevely, last week downwards bar was long bodied (>100% ATR10 or ATR30), this shows a very strong momentum and even if next week will show small bullish retracements or even will be closed as bullish bar, but fully covered by prev. W1 bearish bar - no point at all to enter long a week after. Until that long bearish bar open is breached basically we're still in downternd, and the only exception can be, if market will consolidate long enough to create a "bottom", then based on PA bullish entry is possible even if current price will still be much lower the open of that long breasih bar.


Naturally, except of Monday trading, I strive to never enter against current W1 candle direction. This saved me from many losses so far.
Never enter against current W1 direction. Sounds like a golden rule for me, but it's worth it.
And logically - the only valid reason I see to enter after the bearish bar expecting trend continuation is only if and when its Minimum is breached, not earlier, anticipating it'll be eventually breached. It may or may not be breached, I think our logic here should be entering when it's happening, not when we want it to happen.

Similarly - no point in entering any direction, until closest extremum in that direction is breached by PA. This prevents us from being catched in ranging market.

One exception from rule is so called eye-popping momentum.. or obvious and very good-looking setup.. with price moves steadily with little or no retraces. Such "ideal" trading situation worth trying even inside within the corridor made by local recent extremums.

If you spend some time checking charts you'll find that it's nothing new but trading simple breakouts. Hopefully this will help for your trades.

Regards,
Alexander
  • #4,918
  • Oct 2, 2011 11:04pm Oct 2, 2011 11:04pm
Quoting AlexanderSV
Hi Eklavya.

I'm not aware of a simple solution, but here I have few ideas to suggest:
1. One needs to decide whether he'll be trading this pair this week or not.
If there is clear downtrend - no point trying to catch falling knife.
Market must prove by PA that it has intention to reverse.
Best prove is if it trades above the previous downwards weekly candle open.
Even better to wait until "reversal" W1 candle is closed as bullish engulfing bar, cause I reckon engulfing bar is far more reliable pattern showing that one force is completely...
Very nice.

TS
Haste not to Enter AND Haste not to Exit !-TradeStar
  • #4,919
  • Oct 3, 2011 3:05am Oct 3, 2011 3:05am
Quoting Eklavya
[left][color=#000000][font=verdana]An update on my efforts to trade the NZDUSD the millipede way.

I closed out most legs from this series of trades for a profit of 1073 pips and left one short trade open. From then on for the last 7 weeks have been small losses trying to get a few legs going. Here is a weekly summary of how the trades have gone and current status.

Have lost a total of 1212 pips in the last 7 weeks. Total floating profit currently is roughly 1800 pips from the current set of legs. The one open leg from the earlier series is...
a bit hard to make out which ones hit BE versus SL... seems a bit of overtrading (or revenge trading perhaps) to me. May I add a reminder that Graeme has mentioned many times. One or two failed attempts in a day is a good indicator to let price move away from the current 'area' allowing us to focus on other pairs. It is easier said than done when you have a large floating position in your favor :-)

I am currently upskilling my ability to watch for a monthly or Weekly retrace to loose strength and wait for a pinbar to occur on H4/H1 and zoom into M5 and try to get a soldier on the tip of wick (in the direction of the overall trend). Probe on Tip of wick across multiple timeframes has the highest change of survival rate imo (way more than the daily open price). Very low success rate but huge reward if you just get one probe to survive for few months. You could also try this as a countertrend on a full body bar and anticipate a change in trend (or catch a early trip to 'retraceland' and freeze some profits along the way while stacking....again, easier said than done as we mortals are always fighting to protect our hard earned profits!

EDIT: Perhaps fine-tuning your mindset might help by using the exercise Graeme mentioned in one of his post....something like putting $100 in Oanda account, take a position and revisit the position only on weekends. I did this for my very first leg on E/U last year, watched only on weekends after moving to BE and saw it grew over 500 pips.... very hard to do on a live account especially when I was close to 20% drawdown before that trade!
Staying in my lane...
  • #4,920
  • Oct 3, 2011 11:08am Oct 3, 2011 11:08am
Quoting VEEFX
a bit hard to make out which ones hit BE versus SL... seems a bit of overtrading (or revenge trading perhaps) to me. May I add a reminder that Graeme has mentioned many times. One or two failed attempts in a day is a good indicator to let price move away from the current 'area' allowing us to focus on other pairs. It is easier said than done when you have a large floating position in your favor :-)

I am currently upskilling my ability to watch for a monthly or Weekly retrace to loose strength and wait for a pinbar to occur on H4/H1 and zoom...
Hi Vee,

Thanks. I think the only problem I have is participation during times market is turning. Right now I am at 50% returns in terms of floating equity. Trading only NU, AU and CADCHF. Total floating profit is 3500 pips. Money in bank is at BE level. So in terms of money management, exposure etc I think I am doing okay.

Let me talk about this last week. Taking hindsight from the previous week, my hindsight was down.
1. Had a limit order on Bar 2 and a stop order at 7700 level. This was overexposure. Lost 160 pips when price rocked back. Only one trade would have been good.
2. Entered a limit order at 50% of Bar 5. Lost 65 pips there. Good trade in my book.
3. Bar 7 was a pin bar back into the range. Took a short there and cut it quickly when price reversed. Again good trade.
4. Bar 8 closed the day as a bullish engulfing bar. Taking hindsight from daily now entered long on 50% of bar 9, stop entry at 7900 and 50% of bar 11. All good trades in my book.
5. Bar 14 closed the day as a bearish engulfing bar and in alignment with weekly hindsight. Took a short at 50% of bar 14 and got stopped out. Good trade.
6. Took a long entry at 50% of bar 15 an cut it quickly as I realized my mistake. No harm done.
7. took a stop sell at 7800 and at 50% of bar 19. One was BE and one was a loss. Good trades.
8. Stop sell at 7700 and one more at 50% of 25. Both the legs are alive.
9. Short sell at 50% of bar 26 and at 27. Both stopped out when the was a bullish outside bar. Good trades.

The one mistakes I did was not enter short on bar 16 because of bullish engulfing bar at bar 15.

So I think I could have saved 100 pip loss on Monday and could have entered one more short but got confused with the direction of the market on the 4 Hr and the daily and weekly.

Anyway the net for last week was total loss of 461 pips and 3 alive short positions at roughly 450 pips floating profit. Had I avoided the two mistakes the result would have been 360 pips loss and 780 pips floating profit. But I guess this would have been thought is really futile.

Any thoughts/discussions are welcome.
Attached Image (click to enlarge)
Click to Enlarge Name: 2011.09.25-NZDUSD-4HR.jpg Size: 117 KB
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