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Building an equity millipede

  • #5,221
  • Jul 2, 2012 2:19am Jul 2, 2012 2:19am
Quoting spyderman
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.
That would be pursuing short-term profits, I believe, while Graeme always emphasized on the power of the long-term growth. Yes, you capture all the possible profit at this point in time, but you lose all the possible growth from this moment on, should the market continue in the same direction after the stall. Graeme's diversification is a trade-off. He closes some positions in order to cover his loses and lock in some profit, while willingly letting the rest of the floating profit at the mercy of the markets. This way he has a plan for either case. Remember, a good strategy is not one where you win if the events move according to the plan. A good strategy is one where you win no matter how the events go.
  • #5,222
  • Jul 2, 2012 6:18am Jul 2, 2012 6:18am
Quoting Barbossa
Yes, you capture all the possible profit at this point in time, but you lose all the possible growth from this moment on, should the market continue in the same direction after the stall.
I think you miss my point. I'm trying to do both, capture the short term profits and still get the possible long term growth.

Quoting Barbossa
Remember, a good strategy is not one where you win if the events move according to the plan. A good strategy is one where you win no matter how the events go.
And a great strategy would be one where you win the most no matter how the events go.
  • #5,223
  • Jul 2, 2012 6:24am Jul 2, 2012 6:24am
Quoting spyderman
I think you miss my point. I'm trying to do both, capture the short term profits and still get the possible long term growth.



And a great strategy would be one where you win the most no matter how the events go.
Basically what u want is a crystal ball. No one could be this naive. Stop trolling pls
  • #5,224
  • Jul 2, 2012 6:44am Jul 2, 2012 6:44am
Believe me, I'm not trolling. Just read the posts. Address the strategy I'm presenting. I'm not even saying at this point if its good or not, but it's certainly worth considering.

5 positions...+1500 pips. Price moves against so you close and start trading the other direction.

Price moves back in your original direction. You start trading that direction PLUS you re-create those 5 positions with their original s/l's in place.

That is not asking for a crystal ball. That is reacting to the market change by taking profit and then reacting again to the market change by recreating your market positions as they were before the whip-saw.
  • #5,225
  • Jul 2, 2012 7:08am Jul 2, 2012 7:08am
Quoting spyderman
Believe me, I'm not trolling. Just read the posts. Address the strategy I'm presenting. I'm not even saying at this point if its good or not, but it's certainly worth considering.
Ok, let's consider...

Quoting spyderman
5 positions...+1500 pips. Price moves against so you close and start trading the other direction.
Price moves back in your original direction. You start trading that direction PLUS you re-create those 5 positions with their original s/l's in place.
You can't recreate the original positions if the price only retraced for e.g. 500 pips. You can place new orders, 1000 pips from the original ones with the same stops, of course, but that only means you would be prone to very deep drawdowns should the price reverse again. The beauty of not closing the whole bunch of positions is that you never see positions deep in red. To the contrary, most of your positions would be well in profit, which I find utterly pleasing. And, in fact, I don't think you'd lose substantial profits anyways. If the market reverses, you'd make profits on the one side, if it resumes - on the other.
  • #5,226
  • Jul 2, 2012 8:08am Jul 2, 2012 8:08am
Quoting Barbossa
Ok, let's consider...


You can't recreate the original positions if the price only retraced for e.g. 500 pips. You can place new orders, 1000 pips from the original ones with the same stops, of course, but that only means you would be prone to very deep drawdowns should the price reverse again.
I agree, let's consider. First off in my example the total position was 500 pips so if you got that retracement then all positions would have closed. But I follow your point. Let's say price retraced only 200 pips.

Following traditional scenario 1, two positions would have closed at BE with 3 left at +300, +200 & +100 respectively.

Scenario two you recreate would recreate those 3 positions (if your strategy indicates market move in that direction) with s/l's of 300,200 & 100 pips. If price continues to go against your positions, then yes you'd be in deep drawdown, but you have 1500 pips to offset that drawdown.

Worst case all three are taken out for a 600 pip loss. Your net profit on the string is still 900 pips, which you would not have had you followed scenario 1.

Quoting Barbossa
The beauty of not closing the whole bunch of positions is that you never see positions deep in red. To the contrary, most of your positions would be well in profit, which I find utterly pleasing.
If our purpose in trading is to see a pleasing display on our floating equity, then I would agree with you. If however our purpose is to see a pleasing display in our actual balance then...not so much. But remember, you can't spend floating equity.

Quoting Barbossa
And, in fact, I don't think you'd lose substantial profits anyways. If the market reverses, you'd make profits on the one side, if it resumes - on the other.
That's a moot point. We're still going to trade the market in either scenario. What I'm talking about doesn't effect how we trade our particular strategy. I'm just discussing managing the trades once taken.

Thanks for sharing your ideas. That's how we learn.
  • #5,227
  • Jul 2, 2012 8:22am Jul 2, 2012 8:22am
At this point I'd like to mention something.

My purpose here is not to stir up controversy or troll or say anything negative about Graeme's philosophy. Quite the contrary.

Discovering the Equity Millipede thread has changed the way I view trading. Since then I have continued to try and adapt different trading strategies to this trade management philosophy.

It's not my purpose to try and discuss different trading systems. I don't think that was ever Graeme's intent. In fact he was quite reluctant to put forth any specific trading strategies.

My intent is to discuss whether or not there is any way to improve the profitability of the Millipede method, irrespective of your chosen strategy. It may not work out. You traders may help me realize it's a fruitless endeavor. But, if we don't have the discussion, we'll never know.

At the very least, we are having a discussion on a fantastic thread, that has unfortunately all but died. And I think that discussion has to some extent remained faithful to Graeme's original intent.

If I were someone that found this thread for the first time, the size of it would intimidate me. I would probably try and start reading the first 50 pages, maybe all of Graeme's post, but then jump to the end and see how things had evolved. I hope the ideas we're discussing would stimulate that interest rather then the contrary.

Just my musings...
  • #5,228
  • Jul 2, 2012 9:05am Jul 2, 2012 9:05am
Spyderman,

This is from post 198 of this thread.
"We are all here because we all want to be professional traders. What seperates winners from losers is the determination they exert onto their
learnings. Winners do everything to learn and purposefully choose the harder road. They want to be top of their game and they focus on perfecting
every move they do in the market. Subconsciously they can bend the will of the market into their focal interpretation. Just like Michael Jackson
doing his 1000th perfect moonwalk we should be able to perform our 1000th perfect entry to the same awe-inspiring effect. Then you dont worry
about the profit cause you will know that your actions are top of its calibre and money will follow you."

I read this over and over again and what I believe it means is that if we are taking perfect entries and simply leaving our stops at B/E, then we will be paid by the market eventually because we are trading with the banks and hedge funds. They are the ones who make money in this market consistently. Price WILL NOT come back to our entry because if it did those same banks and hedge funds wouldn't be making money either. I'm not sure if this is what Graeme meant when he wrote this, but it is how I justify leaving my stops at B/E and not worrying about losing a 100 pip leg.
Twitter: @zusch_ -- Preselecting trending pairs, stocks on a weekly basis.
  • #5,229
  • Jul 2, 2012 9:23am Jul 2, 2012 9:23am
Quoting zusch
What seperates winners from losers is the determination they exert onto their learnings. Winners do everything to learn and purposefully choose the harder road. They want to be top of their game and they focus on perfecting every move they do in the market.

You may be right zusch. One could also interpret that as an incentive to do everything we can to improve every aspect of the trading strategy, method, etc.
  • #5,230
  • Jul 2, 2012 9:39am Jul 2, 2012 9:39am
just 3 days back i started reading this thread, vary enlighting for me , I WOULD LIKE TO KNOW IS MASTER GRAEME STILL ARUND TO CLEAR ANY DOUBTS ,pls let me know THANKS
  • #5,231
  • Jul 2, 2012 12:44pm Jul 2, 2012 12:44pm
Quoting rajini
just 3 days back i started reading this thread, vary enlighting for me , I WOULD LIKE TO KNOW IS MASTER GRAEME STILL ARUND TO CLEAR ANY DOUBTS ,pls let me know THANKS

Unfortunately no. Graeme hasn't been around for some time. His last post was back in July of last year.
  • #5,232
  • Jul 2, 2012 1:51pm Jul 2, 2012 1:51pm
[quote=spyderman;5806778]I think you miss my point. I'm trying to do both, capture the short term profits and still get the possible long term growth.

Easy, do what I do, open multiple positions, some for long term and others for short term.
  • #5,233
  • Jul 2, 2012 2:44pm Jul 2, 2012 2:44pm
[quote=samarrone;5807979]
Quoting spyderman
I think you miss my point. I'm trying to do both, capture the short term profits and still get the possible long term growth.

Easy, do what I do, open multiple positions, some for long term and others for short term.
In my mind, that's not really accomplishing what I'm talking about. What you are doing is placing twice the amount of orders at twice the risk of DD. If you keep your risk the same overall then you're still splitting your profits between the two positions. Not what I'm talking about.
  • #5,234
  • Jul 2, 2012 3:11pm Jul 2, 2012 3:11pm
Guys I know there's a lot of opinions out there. But my intention was/is not to discuss different ways that you trade or manage your trade.

I'm just asking, for those who are employing the millipede method, is there a reason why closing the positions and banking the profits and then recreating them if the market direction indicates the need, is not a more profitable method then letting your legs die at BE.
  • #5,235
  • Jul 2, 2012 3:44pm Jul 2, 2012 3:44pm
Quoting samarrone
Easy, do what I do, open multiple positions, some for long term and others for short term.

Actually samarrone that's about what I have been doing to this point.
If my position is 2 lots I close one and let the other ride.

I had a nice short leg going on G/U a while back. Price started to reverse so I closed out 1/2 of all my positions. Tried to follow the market and keep trading but price ranged a bit. I "diversified" by closing out the balance of the nearer trades, all trying to follow how I understood Graeme's method to be.

Just got me thinking...is there an alternative/better way, so wanted to throw the idea out and see what would stick.

But so far, all I've got is "The world is flat!!!"

I was hoping for ..."What? You think the world is round...well...let's talk about it and see"
  • #5,236
  • Jul 2, 2012 8:05pm Jul 2, 2012 8:05pm
Spyderman,

I have got lot of sympathy for your view but I'm partly trying to argue the other side in order to clarify for myself Graeme's idea of 'participation'.

If you cash in your pips after a good run, you may maximize your local profit but you will cease to participate - which means you are likely to miss big runs. If you participate with both short and long positions, you will be in when a big run appears. When you have enough positions in both directions, you may well do what you want on some fat positions, just call it 'diversification' and everyone will be happy http://www.forexfactory.com/images/icons/icon12.gif.
  • #5,237
  • Jul 2, 2012 8:17pm Jul 2, 2012 8:17pm
Quoting spyderman
Just got me thinking...is there an alternative/better way, so wanted to throw the idea out and see what would stick.
Check out my post #5225 and let me know what you think ...

EZ
  • #5,238
  • Jul 2, 2012 8:24pm Jul 2, 2012 8:24pm
You trading only 1 currency Spyder? Trading multiple currencies will have an exponential effect on your profits...
  • #5,239
  • Edited 9:29pm Jul 2, 2012 8:54pm | Edited 9:29pm
Quoting karelk
Spyderman,

I have got lot of sympathy for your view but I'm partly trying to argue the other side in order to clarify for myself Graeme's idea of 'participation'.

If you cash in your pips after a good run, you may maximize your local profit but you will cease to participate - which means you are likely to miss big runs. If you participate with both short and long positions, you will be in when a big run appears. When you have enough positions in both directions, you may well do what you want on some fat positions, just call it 'diversification'...
I must not have made myself clear Karelk, because I totally agree about the participation. I in no way want to limit that.

For example, let's say whatever method you use to trade gets you to where we were in our example...5 positions, 1500 pips. Now your strategy indicates to trade in the opposite direction. Maybe you take 1 short position. Now you have 5 long and 1 short position.

Now the dag gum market turns back the original direction. No problem...you start trading long again and add a position. Now 6 long, 1 short. If price continues north you keep adding long and of course your short gets taken out.

Now here's what I would wonder about doing. Whatever method you use to trade gets you to where we were in our example...5 positions, 1500 pips. Now your strategy indicates to trade in the opposite direction. You close your longs and bank 1500 pips. Now you take 1 short position. Now you have 1500 pips banked and 1 short position.

Now the dag gum market turns back the original direction. No problem...you start trading long again and add a position plus you recreate your 5 closed positions. Now you have 6 long, 1 short plus 1500 banked pips. If price continues north you keep adding long and of course your short gets taken out.

Same two market scenarios...same ending positions and market participation. Only difference is the banked 1500 pips.
  • #5,240
  • Jul 2, 2012 8:57pm Jul 2, 2012 8:57pm
Quoting samarrone
You trading only 1 currency Spyder? Trading multiple currencies will have an exponential effect on your profits...
Samarrone,

No I trade any and all currencies that fit my trading methodology. Again, I'm not talking about trading systems but trade management.
What do you do with the trades once you have them in place, whatever the pair, whatever the strategy, whatever the whatever.

Look at my above post to Karelk for a running example.
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