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  • #5,201
  • Jul 1, 2012 9:22am Jul 1, 2012 9:22am
Quoting spyderman
Custos,

All respect to your analysis. Tis probably way above my pay grade Probably a topic for totally different thread because I think you're right in indicating that Graeme doesn't concentrate on those issues. He indicated he doesn't ignore them, just doesn't concentrate on them.

It's interesting that your profile indicates you are an automatic and price action trader. Would seem neither would be swayed much by fundamentals... Have you changed your tack?
No, am still a purely automated trader. However, I don't wanna stand still on my present/past successes and rather develop into a more complete trader by including fundies and sentiment (am still a newbie with regards to this, so don't trade according to my fundamental analysis)
  • #5,202
  • Jul 1, 2012 9:29am Jul 1, 2012 9:29am
So let's look at an example of a simple system that someone might trade while implementing Graeme's philosophy. You might not...but someone might.

You look for a trend on a weekly chart with a 5ma crossing a 10. Once you got that you move down to the H4 and begin taking trades in that direction using the same MA cross. So far so good.

After a couple weeks or so you have the positions open outlined previously. You have 1500 pips in floating profit and maybe you've spent a couple hundred pips getting them there.

Now price moves against you, you get a reverse cross on your weekly MA. You may feel at this point that it warrants a diversification. You close out the 3 near positions for 600 pips and move the other 2 positions aside to a "long term" leg.

Price has crossed short now on the weekly so you're looking for shorts, while having 400 pips in your pocket and a small equity leg (worth 900 pips at the time of diversification).

So far so good.
  • #5,203
  • Jul 1, 2012 9:31am Jul 1, 2012 9:31am
Quoting Custos
No, am still a purely automated trader. However, I don't wanna stand still on my present/past successes and rather develop into a more complete trader by including fundies and sentiment %g fundies and sentiment (am still a newbie with regards to this, so don't trade according to my fundamental analysis)

I hear you on that. I know I should look more at fundies (not just for Graeme's ideas but for all my trading). My mind just wants to find a mechanical way, with a measure of discretion, to trade successfully.

Here's to success for us.
  • #5,204
  • Jul 1, 2012 9:41am Jul 1, 2012 9:41am
Quoting spyderman

So far so good.
Price continues down and takes out your small equity leg (and the 900 pips you could have banked had you been able to see the future) while at the same time you build another scenario of 5 positions at 1500 pips...this time on the short side. But life is still good, you've banked 400 pips from your first foray...spent a couple hundred of those establishing this new string, but that's okay too.

Price again turns up and you repeat the process...ditto, ditto, ditto.

I think we'd all take this and run with it as many times as we could. Spending 200 pips to make 400 with that hope of one day breaking to one side or the other so that our 1500 pip string grows to epic proportion... (Obviously an overly basic and static example and I know the markets are going to throw skads of permutations into the mix, but let's keep it simple for discussion's sake)

So how can we get more pips from the process?
  • #5,205
  • Jul 1, 2012 10:21am Jul 1, 2012 10:21am
I don't think that Graeme ever wanted us to blindly follow his strategies and not develope our own skills as traders. Our success was his primary motivation, not getting people to use his system. Blending the bulk concept of long term trading with your own anaylsis will net you more pips every time. For me I am a purely tech trader and ignore fundies. I am concerned with news releases so as to be extra cautious around those times not really caring about the #s. For entries I always open multiple positions at a time each having a specific TP or Trail, and some left at BE for the long haul to follow weekly trends.
I may have legs that TP out at 300 and legs that close for +1 while having seen 300 and then fall back to +1. This concept gives me the feeling of eating and having my cake at the same time.
  • #5,206
  • Jul 1, 2012 10:27am Jul 1, 2012 10:27am
Let's suppose instead a second way of handling this scenario.

After our initial long string we see that the weekly ma cross is heading south, so we close out all our positions for the full 1500 pips. We then build our new short positions and after the following re-reversal we close out those 1500 pips and so on.

That would be ideal. We've now banked 3000 pips while only spending 400 or so building the legs. Sounds fantastic...if only things worked that well.

The problem, as we all know, is that after that first reversal and our subsequent closing of our 5 long positions, price may well re-reverse immediately and take off for the moon, leaving us holding our 1500 pips in the bank, but no positions to benefit from the climb (not counting new positions we make from that point forward.

So we've eaten our cake (our 1500 pips) but we can't have it too (still have the positions to benefit from the continued move up.)

Or can we???
  • #5,207
  • Jul 1, 2012 10:34am Jul 1, 2012 10:34am
We take investments based on probabilities, ratios ect. There is no way we can garuntee a reversal will happen. Or My skill level has not reached that point as of yet. All I can do is keep buying into a bull market and keep selling into a bear market. When Price reverses I start taking money off the table and shift it the other direction. Same as a surfing the waves. I get the feeling your wanting to see the future which is not my speciality. Just my opinions here.
  • #5,208
  • Jul 1, 2012 10:36am Jul 1, 2012 10:36am
Quoting samarrone
I don't think that Graeme ever wanted us to blindly follow his strategies and not develope our own skills as traders. Our success was his primary motivation, not getting people to use his system. Blending the bulk concept of long term trading with your own anaylsis will net you more pips every time. For me I am a purely tech trader and ignore fundies. I am concerned with news releases so as to be extra cautious around those times not really caring about the #s. For entries I always open multiple positions at a time each having a specific TP or Trail,...
Too true, and all well said. I'm glad you have a system that is successful for you, and you may not benefit from any further tweeking to it.

But...for the sake of discussion...wouldn't you enjoy maximizing the pips from every position.

Forget about trading strategies and systems. There's a million of them out there, some successful, some not. I certainly am not qualified, nor do I want to try, to dictate or change how anyone trades.

What I'm trying to address is an issue faced by those that are here for the threads original purpose, that of building positions for unlimited long term growth, with no set TP's and s/l's set at BE...

The issue of the pip value of our equity legs dying to the market rather then trying, again if possible, to bank some of those pips while still maintaining the leg.
  • #5,209
  • Jul 1, 2012 10:41am Jul 1, 2012 10:41am
Quoting samarrone
We take investments based on probabilities, ratios ect. There is no way we can garuntee a reversal will happen. Or My skill level has not reached that point as of yet. All I can do is keep buying into a bull market and keep selling into a bear market. When Price reverses I start taking money off the table and shift it the other direction. Same as a surfing the waves. I get the feeling your wanting to see the future which is not my speciality. Just my opinions here.

Nope...certainly can't see the market's future here. If I could I wouldn't have so many blown accounts.

But what I can do is look at what the market's done, to a series of trades, and based on that try and see if there would have been a way to have been more profitable. Could I, with the same trades, have banked a significantly higher amount of pips. And, even more importantly, can I now apply that information to my next "x" amount of trades.
  • #5,210
  • Jul 1, 2012 10:44am Jul 1, 2012 10:44am
First let us establish the the fact of type of market we are talking about. Are we discussing a trend or range-bound. If range then you will continually be getting trades that close for BE. If trending then most of your trades will be closed manually on a weekly or monthly chart at key resis/sup levels. So the legs your striving for will net the 1000++ pip gains. Graeme said that when reversals hit he opened up additional positions in the opposite direction preemptively seeking a reversal. If confirmed, he closed out the previous trend legs and managed the new legs built with low risk set ups. So he was always holding positions and opening positions in both directions.
Have you considered this?
  • #5,211
  • Jul 1, 2012 10:44am Jul 1, 2012 10:44am
Quoting samarrone
I don't think that Graeme ever wanted us to blindly follow his strategies and not develope our own skills as traders.

And that, grasshopper, is precisely what I am attempting.
  • #5,212
  • Jul 1, 2012 10:48am Jul 1, 2012 10:48am
Quoting samarrone
If confirmed, he closed out the previous trend legs and managed the new legs built with low risk set ups.

Unless I've misread the entire thread and all the relating docs, I believe that when a reversal was confirmed he diversified his positions. That did not mean he closed out all the previous legs. Price may well reverse again and then you'd be back at square one with no positions or legs...not his intent...imo
  • #5,213
  • Jul 1, 2012 10:50am Jul 1, 2012 10:50am
As I grow, learn and become a better trader and my trades become more profitable. I make far fewer stupid trades and trades that go against logic. Even losses now I can look back and say "that was a good trade" or "nothing wrong there, just a market reversal." As long as I am gaining pips I am successful.
I have found out that the more I contemplate my trades more of the "magic" is in the numbers, for example, how can I profit 200 pips from a 100pip movement. Opening more positions thru a movement will net me a higher return. Things like this is what now intrigues me the most. It's the math that gets me, not the systems anymore.
  • #5,214
  • Jul 1, 2012 10:50am Jul 1, 2012 10:50am
Quoting samarrone
First let us establish the the fact of type of market we are talking about.

First (for my purposes), let us establish if there is room for or need of a way to maximize our pip profits while still following the Equity Millipede philosophy. And if so, what that maximization may be.

Later we can see into what type of markets and/or trading systems it can be applied.
  • #5,215
  • Jul 1, 2012 10:53am Jul 1, 2012 10:53am
Quoting samarrone
Things like this is what now intrigues me the most. It's the math that gets me, not the systems anymore.

Now we're getting somewhere...
  • #5,216
  • Jul 1, 2012 11:38am Jul 1, 2012 11:38am
Quoting spyderman
Or can we???

Now where was I?

Oh yeah...

Scenario One = The way I understand to be Graeme's original idea.
Scenario Two = A possible refinement.

I'm going to refer to them as these scenario's for ease of writing sake.

Okay so going back to our original setup. We have 5 long positions open sitting at a combined profit of 1500 pips. We've spent 200 pips to get here.

Price on our weekly trend shows a reversal to the short side.

Scenario one:
At this point we don't necessarily close anything. It's not diversification time. This reversal may just be a blip that re-reverses right back. This is where the market can take out our BE entries and we're okay with that.

Scenario two:
We close our positions for 1500 pips.

Market continues south. We trade it.
Market flips back north...

Scenario one:
We look like geniuses. We still have our positions in place and continue to benefit from the price climbing.

Scenario two:
We re-enter the market in the original direction by recreating our closed positions.
Effectively we enter 5 new positions with the original "BE" settings as our s/l's
If price continues north (say 1000pips) each of those new positions gains 1000 pips, just like they would have had we not closed them. Of course we would also be adding new positions along the way.
If price reverses and eventually hits some of our s/l's, that would have happened anyway at that price if we hadn't closed them out (but without the 1500 pips we banked).

While we would continue to employ our BE strategy on the new positions moving forward, these "re-created" positions would never be moved to BE. We have recreated them as they were before closing them.

At some future point we will no doubt close some of them during diversification.

Thoughts so far???
  • #5,217
  • Jul 1, 2012 1:42pm Jul 1, 2012 1:42pm
Quoting spyderman

Thoughts so far???
Greame's position was that we don't know what the market will do next. If he were to try to close positions the way you suggest, he would be trying to predict which way the market is going, in effect just trading the 'normal way'.

If we use your example, he would get to 1500 pips potential profit and then the market would reverse. He would now start stacking in the opposite direction (let say after the market already moved 100 pips, and let's forget diversification for now). As long as the market ranges between the two extreme BE points, hist (potential) profit is 1400 pips - that's the worst case scenario.

Eventually the market will exit (no matter whether up or down), one side of the trade will exit at BE and his position will start growing again. If it goes for 700 pips and then reverses, he starts stacking in the opposite direct (again after 100 pips) and now his locked in profit is 2000 pips (1400+700-100).

The whole point is that he doesn't have to know what the market will do, through the above described mechanism his position is guaranteed to grow as long as a trend resumes.

Of course the trend resumption would start taking longer and longer as the extreme BEs grow further and further apart.

So that's where his diversification comes in. I think he uses 'small diversification' to close some positions so that he gets more of the 1500 pip bundle to replenish his equity and he must use some sort of 'big diversification' to get rid of huge positions that are unlikely to grow more. For example in living memory £1 was $2.4 at one time but also it was also $1.1 - that was more than 30 years ago so it would had been a waste to keep those position open that long (I know he didn't trade then :^) ).

Summary - he didn't know and care what the market would do, with this system he could sleep at night and wait for the growth to resume again. Once he got to a BE, the rest is stress free, effortlessly growing, profit.

I hope it makes sense (I'm not going to read it :^) ). If not, let me know.

Karel

P.S. I think the answer to your question is you can eat some of the cake and keep it if you are willing to concentrate on continous trade management. Graeme concentrated only on the entry-to-BE, then he would start the same with another pair, etc. Well, he had to manage the diversification timing, too. But taking profit is not all that stressful :^)
  • #5,218
  • Jul 1, 2012 6:03pm Jul 1, 2012 6:03pm
Karelk,

Thanks much for you comments. I'll try and give my thoughts regarding you points.

Quoting karelk
Greame's position was that we don't know what the market will do next. If he were to try to close positions the way you suggest, he would be trying to predict which way the market is going, in effect just trading the 'normal way'.
I couldn't agree more, we don't know what the market will do. I'm not suggesting closing any positions because we are trying to predict the market...just the opposite. We close are positions because we don't know what the market will do...or to be more precise...we don't know what the market is doing at the moment.

All we know is that it has moved against whatever strategy we have employed, thereby invalidating and possible reversing it.

We yet know where it will go from here. Will it reverse, allowing us to take trades in the opposite direction, or will it continue on, allowing us to continue our trading that way. What we do know, is that if we close our positions at this point, we have hopefully extracted all the pips we could have at this point in time.

Quoting karelk
If we use your example, he would get to 1500 pips potential profit and then the market would reverse. He would now start stacking in the opposite direction (let say after the market already moved 100 pips, and let's forget diversification for now). As long as the market ranges between the two extreme BE points, hist (potential) profit is 1400 pips - that's the worst case scenario.
And may I say the best case scenario as well.

Imagine as you say that price keeps bouncing within this range. It keeps taking out your positions while costing you more and more in pips to keep those positions established, waiting for the breakout in either direction.

But if you closed your positions and banked your 1500 pips and, just as Graeme would do, start trading the opposite way, then closed those for 1500 (I know, I know...best case scenario) when it reversed again, so on and so on and still be in a position to be ready for that breakout once it comes.

Quoting karelk
The whole point is that he doesn't have to know what the market will do, through the above described mechanism his position is guaranteed to grow as long as a trend resumes.
Or until your account dies by attrition.

Quoting karelk
if you are willing to concentrate on continous trade management. Graeme concentrated only on the entry-to-BE, then he would start the same with another pair, etc. Well, he had to manage the diversification timing, too. But taking profit is not all that stressful :^)
You've definitely got a point there. It would take additional effort at trade management to do what I'm proposing. Then again, how much effort is 1000's of pips worth?
  • #5,219
  • Jul 1, 2012 7:47pm Jul 1, 2012 7:47pm
Just a thought to put things in perspective for me, may be diff than you... I spend about 10% of my efforts entering trades and about 90% in management.
  • #5,220
  • Jul 2, 2012 2:02am Jul 2, 2012 2:02am
Quoting spyderman
I have enjoyed this thread for many months now and have implemented different trading strategies to try and embody the millipede philosophy.

I would, however, like to explore any ways to improve on the basic concept...I know, I know...sounds like heresy.

...
I am using a system that analyzes the commitment of traders report futures positions to give an indication when a trend may turn. Coupled with simple technical analysis such as moving average crossovers, this is a USEFUL and POWERFUL analysis tool that can be used (1) to initiate new positions for new legs, and (2) liquidate legs when a trend is about to end.

Read and enjoy ...

I appreciate any and all (constructive) feedback!

EZCurrency
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