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Nb 10.0 range trading system

  • #241
  • Oct 11, 2011 10:31am Oct 11, 2011 10:31am
Quoting nanningbob
Definition of a range trade is when the Low or high is touching any of the two lines on the daily chart. Price is trending when the low and high are not touching any of the lines on a daily chart.
got it. So you have trend up, trend down, range. It seem range is a very danger position to be in because with the Euro it is not ranging , but moving between an up trend or down.

I'll have to give it a bit more thought.

As for the lion's den...you are doing a good job of turning wild animals into teddy bears.
Kill the ego, or it will kill the mission.
  • #242
  • Oct 11, 2011 8:26pm Oct 11, 2011 8:26pm
Quoting nanningbob
One last thing about recovery trades. Recovery trades and negative DD are simple interest trades. In other words they happen once and they are done, no compounding. Winning trades are compound interest. In other words profits continue to increase the account and each winning trade is like banking compound interest over a long period of time. Losing trades and DD are simple interest in that once they are done they no long continue to add to the loses. So as my DD grew and diminished in size, my winners kept increasing my account like compound interest...
Bob,

I am going through your past posts, finding things I see as interesting, and commenting on them. I hope you don't mind. Let me know if this starts to clog things up.

I see your method as very similar to that of the business model of a clothing store. You buy your clothes, put them out for sale. You only sell when you have a profit and since you are not using a stoploss, you never sell for a loss.

At seasons end you have accumulated "Junk" inventory. You dump this at a loss and move onto the next season of clothing. This system works because the net profit during peak season counteracts losses from the season end sales.

With this metaphor, your DD is really the cost of maintaining a stock of goods in your store.

I find the metaphor of interest does not work that well for me because for me the central fact of interest is not that it increases your balance, but that it makes your account grow in geometrically.
Kill the ego, or it will kill the mission.
  • #243
  • Oct 11, 2011 8:33pm Oct 11, 2011 8:33pm
Quoting nanningbob
Thank you for your note. I dont know why but FOREX seems to be a different animal when it comes to trading rules. I finally believed them to be mostly garbage.
Well said.

the one central difference between the forex market and all other markets is the extreme leverage that is being used. This leverage really benefits two people.

1. the broker. a 2 pip commission at 100:1 leverage means 100X profit.
2. bankers. Bankers need liquidity to function. If retail traders go out there with 1:1 leverage the volume would be so small that it would make no difference to them. Also, with low leverage, forex is no where near as exciting. And that would also reduce the number of players. Double whammy.
Kill the ego, or it will kill the mission.
  • #244
  • Oct 11, 2011 8:46pm Oct 11, 2011 8:46pm
Quoting nanningbob
Also remember August is usually a very good range month but the news stories made it much more volatile than normal.
Is this just based on experience or have you done some detailed analysis like you have done with the behavior of currency pairs.
Kill the ego, or it will kill the mission.
  • #245
  • Oct 11, 2011 8:49pm Oct 11, 2011 8:49pm
Quoting AaronWard
Well said.

the one central difference between the forex market and all other markets is the extreme leverage that is being used. This leverage really benefits two people.

1. the broker. a 2 pip commission at 100:1 leverage means 100X profit.
2. bankers. Bankers need liquidity to function. If retail traders go out there with 1:1 leverage the volume would be so small that it would make no difference to them. Also, with low leverage, forex is no where near as exciting. And that would also reduce the number of players. Double whammy.
wow dude. you just don't stop with the misinformation do you?

firstly, leverage is not limited to the forex market. google CFD and get some education.

secondly, retail leverage doesn't make a lick of difference to the liquidity in the market when most retail muppets are trading with bucket shops. if your orders never see the light of day in the real market then HOW CAN YOUR ORDERS MAKE ANY DIFFERENCE TO LIQUIDITY?

seriously dude... just stop.
Congratulations ScalaFX for coming out of the closet!
  • #246
  • Oct 11, 2011 8:52pm Oct 11, 2011 8:52pm
Quoting nanningbob
When ever they break outside the norm. For example OCT. 2008 changed everything concerning volatility. The markets are far more volatile the last 3 years as compared to the 10 years before that. The eur/chf used to be one of the least volatile pairs, well now it is not since the Greek thing broke out last year. Eur/gbp has been a great non volatile pair but I think that will change if the Euro breaks up. aud/nzd used to be the best ranging pair until China started buying everything up it can find in Australia. Markets change, people keep...
Correct me if I am wrong, but this looks like a bit of fundamental analysis. I am not being argumentative, but the key thing I am working on at the moment is the relationship between technical analysis and fundamental analysis.

Do you ever use fundamental analysis with your trades?
Kill the ego, or it will kill the mission.
  • #247
  • Oct 11, 2011 9:01pm Oct 11, 2011 9:01pm
Quoting nanningbob
For example if we could do the RMB because it stays very stable and not move would probably be a big money maker if it was trade able.
%

I am now in the process of setting up an account to trade the RMB or USD/CNY as it is called. The key factor I am looking at is the swap. Since the currency pair is stable the 6.5 overnight rate of the CNY becomes very attractive. Also, long term, it is hard to imagine this pair breaking 7.0. So downside risk, while it exists, is very small. In a 10 year window, breaking 5.0 is much more likely.

At 6:1 leverage, the overnight rate works out to about 20% return per year. The 5 percent appreciation this year would have packed another 30% return.

The possibility that it will rise to 7.0 is small, but it does exist. However, the Chinese government is a big fan of stability. It does not like to surprise its people with the "unexpected". So you will have a lot of advanced warning.

Not relevant, but hopefully you will find it interesting.
Kill the ego, or it will kill the mission.
  • #248
  • Oct 11, 2011 9:04pm Oct 11, 2011 9:04pm
Quoting nanningbob
If you traded one penny on 1000
I am struggling with this logic... can you clarify?
Kill the ego, or it will kill the mission.
  • #249
  • Oct 11, 2011 9:04pm Oct 11, 2011 9:04pm
Quoting AaronWard
Is this just based on experience or have you done some detailed analysis like you have done with the behavior of currency pairs.
Traders usually trade less in August. I think retail sales maybe lower but dont know. My experience has been Sept., Oct. and November are the 3 wildest months of the year but that can change with the news. So any analysis can be thrown in the trash if news get violent.
  • #250
  • Oct 11, 2011 9:09pm Oct 11, 2011 9:09pm
Quoting AaronWard
Correct me if I am wrong, but this looks like a bit of fundamental analysis. I am not being argumentative, but the key thing I am working on at the moment is the relationship between technical analysis and fundamental analysis.

Do you ever use fundamental analysis with your trades?
The only news or fundamentals I am concerned with are ones that significantly move the market over a period of time. 1 week to months. Daily news means nothing to me per se. Interest Rate changes, economies slowing or speeding up, sovereign debt, earthquakes, major bank interventions, are ones that have interrupted range trading. Most of what you read in the news is not effective. USA down grade didnt affect the market for very long. Knowing Euro debt problems, I gave the warning to only sell the Euro and not get involved in buys. So the big front page ones are the most critical.
  • #251
  • Oct 11, 2011 9:11pm Oct 11, 2011 9:11pm
Quoting AaronWard
%

I am now in the process of setting up an account to trade the RMB or USD/CNY as it is called. The key factor I am looking at is the swap. Since the currency pair is stable the 6.5 overnight rate of the CNY becomes very attractive. Also, long term, it is hard to imagine this pair breaking 7.0. So downside risk, while it exists, is very small. In a 10 year window, breaking 5.0 is much more likely.

At 6:1 leverage, the overnight rate works out to about 20% return per year. The 5 percent appreciation this year would have packed another 30%...
I wish it was on the open market, it would a perfect range trade currency pair.
  • #252
  • Oct 11, 2011 9:12pm Oct 11, 2011 9:12pm
Quoting AaronWard
I am struggling with this logic... can you clarify?
one penny per thousand would be equivalent to trading 1:1 leverage even if your account is set up for higher leverage.
  • #253
  • Oct 11, 2011 9:13pm Oct 11, 2011 9:13pm
Just ignore nubcake that stuff is for the other thread. We range trade here whether he likes it or not.
  • #254
  • Oct 11, 2011 9:19pm Oct 11, 2011 9:19pm
Quoting nubcake
wow dude. you just don't stop with the misinformation do you?

firstly, leverage is not limited to the forex market. google CFD and get some education.

secondly, retail leverage doesn't make a lick of difference to the liquidity in the market when most retail muppets are trading with bucket shops. if your orders never see the light of day in the real market then HOW CAN YOUR ORDERS MAKE ANY DIFFERENCE TO LIQUIDITY?

seriously dude... just stop.
Hi Nub. Can't say I am happy to see you, but it is NB's thread so whatever he is comfortable with, I will respect.

I have two points:

1. Leverage exists in all markets, but the extreme leverage of 500:1 or 100:1 or even 50:1 does not exist in most markets.

2. That some retail trades never see the light of day does not mean that no retail trade sees the light of day. At least three types of retail trades make it to the interbank market: 1. the large ones, 2. the successful ones and 3. when the trades at a broke become unbalanced, brokers hedge their risk.
Kill the ego, or it will kill the mission.
  • #255
  • Oct 11, 2011 9:19pm Oct 11, 2011 9:19pm
Quoting nanningbob
Just ignore nubcake that stuff is for the other thread. We range trade here whether he likes it or not.
range trading is some peoples bread and butter, so no issue with range trading.

my issue was, is, and always will be, misinformation / lies / categorically wrong statements. it's like some stuff is being picked and chosen to suit a perspective because it seems relevant, except that the stuff isn't even true to begin with.

anyway, i have no interest in this thread. i only noticed it on the active threads list and happened to see the garden path getting followed as usual. adios.
Congratulations ScalaFX for coming out of the closet!
  • #256
  • Oct 11, 2011 9:27pm Oct 11, 2011 9:27pm
Quoting nanningbob
The only news or fundamentals I am concerned with are ones that significantly move the market over a period of time. 1 week to months. Daily news means nothing to me per se. Interest Rate changes, economies slowing or speeding up, sovereign debt, earthquakes, major bank interventions, are ones that have interrupted range trading. Most of what you read in the news is not effective. USA down grade didnt affect the market for very long. Knowing Euro debt problems, I gave the warning to only sell the Euro and not get involved in buys. So the big front...
Thanks. This is exactly what i do. It seems you can gain a very meaningful edge from looking at the big picture. The details though, are more noise than anything. The S&P downgrade was noise, though louder than most. It changed nothing that I would call fundamental. The US still borrowed to pay its bills, American consumption and production patterns did not change and the net supply of USD did not change one bit.
Kill the ego, or it will kill the mission.
  • #257
  • Oct 11, 2011 9:36pm Oct 11, 2011 9:36pm
Quoting AaronWard
Hi Nub. Can't say I am happy to see you, but it is NB's thread so whatever he is comfortable with, I will respect.

I have two points:

1. Leverage exists in all markets, but the extreme leverage of 500:1 or 100:1 or even 50:1 does not exist in most markets.

2. That some retail trades never see the light of day does not mean that no retail trade sees the light of day. At least three types of retail trades make it to the interbank market: 1. the large ones, 2. the successful ones and 3. when the trades at a broke become unbalanced, brokers...

ok i'll bite on this one because it's not completely bonkers...

1. perhaps. however, just because forex is leveraged so high doesn't mean a thing except that the price movements are so small that it requires the position to be leveraged for the miniscule movements to equate to anything.

it's like, if eur/usd was actually sitting at $120.39 and the spread was $0.01 and the pip size was $0.01 you probably wouldn't have much leverage used on this pair if any at all by anyone. you can probably open positions with what you make in a few weeks wage and actually have it return (or lose) a real amount of money because of the granularity of pip movements..... but the reality is something different. the reality is that the pip size is actually $0.0001 with a spread around that to 2x that. you aren't going to get anywhere waiting for price to tick up 1c without opening a huge position, and if you don't have the money to actually do this then you rely on leverage and margin instead.

what it's NOT like is if eur/usd was trading at $1.0001 and the spread was $0.01. then you'd be a crazy to bother leveraging a position based on this.

all that matters is tick size and spread size. all movement thereafter and leveraging of said movement is purely a function of the tick size and spread.

as for your point number 2.... so if one does not leverage their trades they are not going to be making much money unless they are starting with a mountain of capital in the first place. so, you think that no trader gets into trading with a grub stake, uses leverage, builds a nice bankroll and starts trading size that puts them into ECN and actually affecting liquidity? i'm sure there are some people who jump straight in with their daddy's oil fortunes propping them up, but i do not believe that the majority of retail traders who are actually a part of the market liquidity all come from rich backgrounds and instead actually had to build their capital from a grub stake.... and so i'd love to know how you do that without using leverage!

the conclusion to this is that from what you are suggesting you either start with enough capital to not be leveraged yet still be in the real market trading real volume with size, or you start with a small stake and not be leveraged and so will never see the real market and will always be small fry due to never accumulating a bankroll that supports large trading volume that would put you out of bucket shops and onto an ecn. you aren't ever going to get kicked out of a bucket shop trading nano lots, despite however big your account is.
Congratulations ScalaFX for coming out of the closet!
  • #258
  • Oct 11, 2011 9:54pm Oct 11, 2011 9:54pm
Nub,

Your points are reasonable, but NB has asked that we focus on either range trading or his systems here. SL & leverage will fit quite nicely into that mad house where we first met. If you wish to cut & past into that forum, I will respond there.
Kill the ego, or it will kill the mission.
  • #259
  • Oct 12, 2011 9:30pm Oct 12, 2011 9:30pm
Hi Bob, can you tell me why this would not work?

Some traders in the US are annoyed about not being able to hedge. I have an idea that effectively does the exact same thing.

Censura hedges at 100 and recovers later and this is considered a good strategy, effectively limiting DD.

Why not just set a 100 pip SL using a trade once 1hctr ea. When the stop gets hit, just wait and re-enter when the daily chart indicates a ranging market. This is what would be done with a hedge anyway (close the winner and re-enter in the original direction) The trick when using a SL would be to re-enter at a larger lot size just as you effectively would be with a hedge trade.

Hedge example:
Buy 1 lot. Trade goes -100 so 1 lot sell hedge trade is taken. Close winner and re-enter 1 lot in original direction using OI recovery ea. TP 50 pips to BE. Exit trade.

SL example:
Buy 1 lot. Trade goes -100 and hits SL. Set OI recovery ea at 2 lots with 50 pip TP. Once TP is hit, exit trade.

To me the outcome and risk of these examples are the same. The SL example would also save you swaps waiting for recovery ea to enter. Can you tell me how my reasoning is flawed?
  • #260
  • Oct 12, 2011 9:46pm Oct 12, 2011 9:46pm
Quoting Frodog
Hi Bob, can you tell me why this would not work?

Some traders in the US are annoyed about not being able to hedge. I have an idea that effectively does the exact same thing.

Censura hedges at 100 and recovers later and this is considered a good strategy, effectively limiting DD.

Why not just set a 100 pip SL using a trade once 1hctr ea. When the stop gets hit, just wait and re-enter when the daily chart indicates a ranging market. This is what would be done with a hedge anyway (close the winner and re-enter in the original direction) The trick...
In other words take 100 pip SL and then pretend you are recovering the SL. Interesting concept. I dont know the percentage of trades that may go 100+ pips down but then retrace and later make a profit. In other words I never have to make it up with a different trade. A different trade would mean I have a whole different set of parameters to meet to make a trade. I do know one thing the win percentage would go down and you would face having to have bigger wins to over come the 100 SL. So let us say your average win is 40 pips. You now need 2.5 wins for every loss just to break even. That is what I had to do before I started range trading or CT trading. You can try but I never could make it work. The two formulas that seem to work for traders is: lots of small stops and have some big winners OR lots of winners that overcome the occasional losers. Something in between I have never seen work. The only way to really tell is to test it out for a month and see how you do.
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