Seventh Wave Trading (maybe it IS rocket science after all?)

I started a thread in the trading systems area a while ago and a few people pointed out that I really wasn't explaining a system. They're right. My system, such as it is, doesn't involve much more than looking at a chart and picking a direction. The vastly more important aspect to my trading is how I manage the trades when they are open rather than fretting about when/how/why to open them.

Take a look at the screenshot below. The left hand figure at the top is my equity, the second figure is my open trades profit. This took half a day and did involve sitting through some drawdown but it shows what is possible and what I intend to carry on doing for the forseeable future until I can start taking regular money out of my account.

For anyone interested the thread is here...

http://www.forexfactory.com/showthread.php?t=330762

I decided that rather than try to explain how and why I do what I do I would just open this thread and document what I am doing and hopefully someone will find it useful and informative. If you're reading this and want to join in then please do, any information about basket or trend trading, or basket trend trading, is welcomed.

***** UPDATE 11th Jan 2012 *****

The basic method is more or less set in stone now. Open the trades, give them time to develop, close the bad ones, trail the good ones. There are two very important rules that I need to stick to. The first one is to use the same postion size on all trades and never to increase it unless the account balance and MM rules allow. The second is to only open one trade per pair at any one time unless there is a very good reason to add on.

The position sizing is fairly straightforward to start with, I will be using 0.01 for every 100 gbp in my account in closed trades or locked in equity. I will make this safer as I go along and my eventual target will probably be 0.01 for every 1000 gbp.

***** Update 12th Jan 2012 *****

As you have probably noticed I have added a trade explorer to the thread. The account it is linked to is a test account that I have used to test various strategies (for the most part losing as you can tell!). The data I am interested in is the year to date figure. I started with 50 gbp to see how far I could get trading this method.

***** Targets *****

My first minor target is to acheive a balance of 200 gbp by the end of Jan 2012.

My first major target is to achieve a balance of 1000 gbp by the end of May 2012.

Once I have reached the target of 1000 gbp in the account I will be withdrawing 50% of my gains on a weekly basis.

I will update this area as and when targets are hit.

If you take a look at the chart above you will see a nice move down on eurusd. The annoying thing is that I had an entry just below 1.30. If I'd have held the trade open I would be nearly 300 pips up now. Looking back through the charts and my last month or so of trading I can see that I have taken some awesome trades but have closed them because I have been using a target equity. Gbp pairs, eur pairs, whatever, if it's trending and you manage to get a decent entry on it, hold it until it gives you a good reason to close it!

I'm going to be opening baskets of trades in a similar way to before but the intention now is to hold the good trades until the main trend reverses and just closing out the bad trades when they really show no sign of working out. I will be taking into account relative strength but only roughly to gauge the strong and weak pairs.

I will be using 0.01 (1 micro lot) for every 100 gbp in my account. The basic principle is that rather than open one trade with a large position size I will be opening multiple trades with small position size and ditching bad trades quickly and just holding on to the good ones for as long as I can. I'm targetting 1000's of pips per trade here. I will be adding on if the trend pauses and then shows signs of resuming.

For trading decisions I will be using large round number s/r and a 3 sma of the typical price (the pivot point ma).

Here are my current trades. I was expecting the chf to weaken more than it did but I think I will hold these trades open a while longer and see what happens.

Had an EA problem and all trades closed by accident. Oh well, have to start again. No big deal, banked a profit.

Here are some new trades for the next week, I'll add more on Monday.

OK this is good what you doing.
As you already noticed I am trading very close to what you doing. I started having a fix tp about 100 pips,but it take a lot of time to get to the point,and many times it reverse when get close, therefore I change tp at 50 pips.

I am wining a lot more and face it, when we use a micro account we need to see the profit faster to be worth our time.

Agreed, answered in your thread.

Here's something for you. If you haven't seen this already then I am shocked and surprised in equal measure.

http://www.forexfactory.com/showthread.php?t=70742

This is an awesome tool. I recommend you use it to go through daily charts and see just how many times you can "guess" the direction with some s/r lines and 1 or 2 of your favourite indicators. It doesn't matter what system you use just keep trying and I promise you you will see what I mean when I say that trading with the trend can be really simple.

Read the instructions carefully and I suggest you use "control points" and pause the simulator, then use the f12 button to go through "tick by tick". This isn't really tick by tick but it gives you a close enough approximation of the movement of daily charts that you should be able to take trading decisions from it.

Try using a 200 pip stop loss and a 200 pip take profit and see how many times you get it right. Buy on breaks of s/r in the direction of the trend and bounces from s/r in the direction of the trend. As I say, use any method or indicators you like but just be sure to trade with the trend. When you get to the end of the time period it will stop automatically and you can view the results in the "graph" and "report" tabs along the bottom.

Hopefully this will put into perspective my method of trading. Take multiple trades in the direction of the trend and if they don't work out shut them down and if they do let them run. You could target 200 pips with a 200 pip stop or you could target a certain s/r level or whatever you like. The important thing is that you take lots of trades and let the good ones work for you.

I hope this is all helping someone?

Monday morning, added gbpnzd, I'm short gbpusd already and this looks ok too. I'll check back in around 11 for my 4 hour candle close.

Just spotted this on eurcad so put in a pending order. It's only 10 pips away.

Hello Richard. Yes, you are right that the method you take the trades by is less important than the trade management so feel free to add whatever you like to your analysis.

To answer your questions...

I have no min or max for a basket, I monitor all pairs with spreads under about 15 (eurnzd the biggest) and just take any and all trades that strike me as likely to make a profit.

I do take correlations into account but more to gauge relative strength. I am not too concerned with being overleveraged on any one particular currency and if I am short all eur pairs and the eur turns sharply for any reason then I will just take a loss on all those trades. If you are trading with the trend then this will happen rarely.

I have tried different approaches in terms of length of time to hold the basket and recently I have arrived at the conclusion that if you have taken a good trade with potential to run then it is senseless to close it early because your basket is at a certain equity gain. From now on I will be opening and closing trades in accordance with my view of the potential of the trade to run. I will take profit at s/r if it feels as though that's as far as it will go but generally I will just be trailing a stop loss somewhere behind the price.

You can open trades at any time of day really as long as you realise that most impulse moves happen at the market opens so if you open a trade at 22.00 gmt then generally not much will happen overnight. If you open a basket at 08.00 New York time then you can expect some fireworks straight away.

I hope this answers everything and if you need any more just ask.

Ted

Here is my trade situation at 10:40 gmt today. A little bit of drawdown but nothing serious. I'm watching eur pairs to go short but may not happen today. Usdjpy looks like it may go down today too but I'll hold off on that one as I am already short 1 yen pair and I don't want to overload this just yet. I'll check back at 3 pm.

I took a short on eurcad anyway, it didn't reach my pending order. The first pic is when I took the trade, the second is now 14.00 ish.

Everything else just ticking along.

This is the state of play at 3.00 gmt. Still ticking.

Just added euraud and eurnzd short.

Added gbpjpy short, audusd short and cadjpy short. Here are the current trades.

Here we go, 7 pm, a bit of drawdown now but no individual trade too far out. If usdchf actually closes for the day below 0.95 then I'll be tempted to close it but other than that it's a wait and see, probably til morning.

Sold eurusd and eurjpy. Current trades below.

Here is the situation this morning. First pic is as I found it. The second is with the bad trades closed. As you can see the balance has dropped £30 or so but the equity is still only about £6 from peak. I've kept the good trades open and also left gbpusd and gbpjpy open as I believe they still have the potential to go right. The usd has weakened more than I expected but it's no big deal, in equity terms I am still ballpark where I started and now I have closed the bad trades I can just watch those pairs and jump on when they do start moving with the trend again. I probably won't be adding too many trades today and I'll be keeping a close eye on those gbp trades. If they don't start coming back my way I will close them. I'll update at 11am.