The Pip Vault

I thought I'd share this approach I've recently added to my arsenal. It's not a system or method, but more of a way to manage trades. I trade a few mechanical systems that do well for me, but also like to place discretionary trades during certain times of the day.

I've started grouping these trades into "Vaults". A Vault is essentially a cumulation of pips from short term intra-day trades. All pips gained under this approach are assigned to the current Vault. For instance, I am currently building what I label as a "40K Vault". Each pip gained or lost under this approach will be assigned to this Vault, trades place via my mechanical systems are not associated. The number 40K is associated with the lot size for each pip in this Vault.

The goal for any new Vault is 1000 pips, and when this target is reached the Vault is considered "matured". So once the Vault has matured each pip in my current vault will be recognized as having a 40K lot size, ending up with a balance of $4,000, or $4 per pip. This doesn't mean that I have to enter each trade at 40K lot size, although I normally do. What I cannot do is enter a trade with more than 40K lot size. I can enter anything under though, I often open half size positions if I am having a good day and don't want to risk losing my winnings.

A matured Vault is open to a few options. Below are the list of options I give myself:

1. Cut it in half and start creating a larger Vault. For instance, if I finish the 40K vault, an option would be to turn it into 500 pips to allow me to be at the half way mark on at 80K Vault. So each pip will now be worth 80K.

2. Use all or a portion of it to buffer the start of larger entries from any of my strategies. For instance, if I have a system based on EMA crossovers, and I want to start increasing the size of my entries without incurring larger losses, I will use this vault as a buffer.

3. Similar to number 2 above, but with a twists. Split it up into a certain number of stop losses. Say my strategy averages about a 1:3 risk/reward ratio and I want to significantly raise my lot size, let's say I want to double or triple my normal risk. What I can do with my Vault is split it into 3 so that each part is equal to what a potential loss would be for the specific strategy. What this does is accelerates the snowball effect that can happen when lot sizes reach higher levels.

I do have a few rules that I must adhere to, and they are listed below:

1. All trades must be closed by end of day.

2. In regards to trading for the Vault, all trades are to be treated as their own entity and not be associated with any other system I am trading.

3. Once 150 pips is reached must not go back under Zero.

4. A Vault cannot be split or adjusted until it has reach maturity of 1000 pips.

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I will likely have additions to this, but this covers most of the approach. Not sure how well I've described this approach, so let me know if you have any questions.

My current status on the 40K Vault is around 250. The key for me is to trade at the same time every day and get in and out quick. The average profit per trade is about 10 pips. It is reasonable for me to have a goal of completing a vault anywhere between 1 and 3 months. You can imagine the scale this can get to if the first option above is selected, and you continue to split the matured vaults. Slow and steady can get you places quicker than you think.

Now, I'm on demo
and I admit to being a bad trader (hope to change this),

so if you've pushed your technical/news edge as far as it can reasonably go,
then
WHY?

I mean, why do all the mm somersaults when they have no connection with the chart? If you're wrong, you lose, and you, to a certain % of the time, know where you'll probably lose. If you're right, you win. And you break up the chart along the way to either or both with various other chart/news reasons.

What's the purpose of basing a trade on something other than what you're trading?

-- Please tell me, I've read much but experienced too little.

Not sure if I understand you correctly, but hopefully this clarifies. My approach to trading is very much based on breaking my trading up into separate parts or strategies, however you want to call it. This is based on my perspective and tolerance for certain aspects of how I view the market. I consider the "Vault" as just another "part" to my trading, and well, my business.

As I mentioned, I trade several mechanical strategies, and this is very much intentional, as it provides a balance to the approach as a whole. It's based on my own personality and the way I view the market. Each strategy/part is completely independent of one another, sometimes they agree with each other, other times they oppose, but at the end of the day they are consistently profitable as a whole.

This is where I have arrived and I will not change any of the existing parts because they are working. This being said I truly enjoy trading and learning/developing new approaches, so I will continue to add as long as it manageable and profitable.

Sounds interesting, and haven't tried it -- Too tunnel-visioned, perhaps.
Yours sounds a little like a method I once read of a pgm'er who interweaved ecn's -- maybe similar to 'mechanical strategies' -- so that they worked for different seasons of the year, times of the day, etc. You know -- Ranging, trend, volatile, big news, balancing news, etc.

Am eager to learn about your thread's approach.

A few more thoughts that come to mind:

This business can be very "un-tangible", which can lead to confusion and frustration. I find that using this sort of mindset helps bring a certain level of security that allows me to grasp what it is that I am doing

I found along the way that some of my most profitable days were when I was "free" to trade with discretion. I also found that some of my worst days were when I traded with discretion. What I needed to harness this was some sort of structure. Applying structure to the style of entry didn't work, as that took away from the discretion. Having some sort of structure and purpose to where the trades are going seems to help me emotionally. Keeping a visual in my head of the closed trades being tucked away in the vault makes it much easier for me to close a trade for a small lose rather than a big one. Eventually the new Vault size will be large enough that a couple of trades a week will do just fine, this is my ultimate goal for this approach.

Below is a quick chart from today. As you can see trades are discretionary, but also have guidance from other elements.

I also find that allowing my self this"luxury" of discretionary trading takes the focus off of my mechanical trades, leaving them to be truly mechanical without my own thoughts to disrupt.

To give an idea of the amount of trades and size, here's a list of the trades in the 40K Vault so far:

My trades are intraday trading, from a minute to maybe half a day, average 1-4 hours. The number of pips are 10 to 100 on the gbpusd, average 30. I've traded a simulator discretionary for maybe a year now, awaiting progress in losses. I can appreciate being a scalper, as I started that way several times on simulator and then, in real, for many years before forex.
How I want to escape (on real) having too many trades is through the number of pips to obtain, is the way I prefer, to keep loyal to how the chart aligns its trends.

Much appreciate the emotion and related stuff, will take a while to digest.

I'd love to know what keeps you going?

I had about 18 months of frustration before I began to make some consistent gains and I was close to giving up on the whole idea by then. I have no idea how you can be so many years down the line with trying to become profitable and still be hammering away at.

Maybe one day you will crack it but isn't there a part of you that just thinks "you know what, if i haven't nailed this by now, maybe trading just isn't for me"?

I'm not having a pop here by the way, i'm genuinely interested in knowing what motivates someone like you to stick at it.

Bills.

That, and it's a nice hobby. I get to express myself (somewhat) usefully to others in a regulated area -- something I have much less of in the rest of my life. I've also got a really good handle on price action, patterns and drawing devices, as well as good experience in news and regular indicators.

And, some hobbies turn into jobs.

To let go of all these self-delusions and hopes would not crush my ego, as I've plenty of other things to do. But I don't feel I'd be doing something more meaningful in this portion of my life, at least at the moment.



-- I don't mean to distract from the thread. Best wishes and trading to you.

Good answer and yeah, I do apologise that i'm taking the thread off course here. I'll leave it at that but there was more I wanted to say in reply and maybe more I was interested to ask you (I have a fascination with psychology and the psychology of trading/traders so it is purely to indulge my interest in this) but perhaps i'll save that for another thread and another time. Not fair on the OP for me to take it any further here.

Thanks for taking the time to answer though and I wish you well.

Hi Trotty and Hi-Pattern,

Psychology is the primary reason for this approach and thread, so please, feel free to expand.

I too have been at this relentlessly for almost 9 years now, only the last 3-4 in Forex, prior was stocks and options. I gave up a hand full of times before I finally arrived, and I've been consistently profitable for the last 11 months.

Thanks for your contributions.

Here is some more food for thought:

Some days I just freeze up and miss all kinds of opportunities, the key is to keep focusing on the bigger picture. If I just keep making more profits than losses I will eventually complete the Vault, then if I choose to split it, I will now be trading at $8 a pip versus $4. Eventually, years from now, this one little approach that I decided to add on will be at a 500K Vault, each 100 pips gained will be $5,000, and this one part of the approach as a whole, I still have my other strategies.

Let's say I average just 20 pips a week, I like to estimate weeks versus days, as it's always less pressure. This comes out to 50 weeks per vault. 40K to 80K to 160K to 320K to 640K is 5 steps. 5 x 50 = 250 weeks, this comes to about 5 years. Let's say I'm at 500K in five years and still averaging 20 pips per week. This adds to $1,000 per week. In my experience, 20 pips per week allows for extreme patience as well as losses, so this is very achievable. In 5 years I will be 43 years old with a daughter in college, and another in High School, and likely a Kindergartener, wife's got one in the oven

And again, this is just one part of the entire approach, who knows where the other strategies will be five years from now.

EDIT: I didn't take into account that each new vault after the first 40K is complete would start at the 500 pip mark, so this would likely speed things up tremendously. Plus I initially had an extra "0" after the weekly number.

So my math was way off on the above, after the first 40K, each Vault would take 25 weeks to complete based on 20 pips per week. Below is this taken a step further after the 40K is acheived:

80, 160, 320, 640, 1280, 2560, 5120, 10,240 = 8 steps/vaults

Each Vault takes 25 weeks to complete, which is a total of 200 weeks, which is 4 years. 10,240K Vault is $1,024,000, in which my lot size would now be 10,240K or $1,024 per pip. At an average of 20 pips per week it comes to $20,480 per week. I hope I did my math right this time?

Nothing new, just the power of compounding, but this angle helps me visualize.

As the week is ready to begin my current status for the 40K pip vault is: +264.

My target each week is a total of 20 pips, with a grand total of 1000 to complete the Vault.

I will patiently wait for the best chances to produce a profit of approx 10 pips, and will cut losses quickly.

A quick update, going well so far, patience and trading calmly without urgency is proving to be the key to trading with discretion. I am confident that my 8 step plan will be achieved as long as I do not attempt to rush. +62 for the week so far, well past the 20 pip target. I will continue to keep the target at just 20 pips per week, until the 4 year plan is complete.