Building an equity millipede | Page 264 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Thegman's Journal (Equity Millipede Concept) 102 replies

Trading an Equity Millipede 23 replies

Equity millipede & Flying Buddha trading journal 9 replies

Build an Equity Millipede with the filtered Flying Buddha 171 replies

Application Development - Journal of Building an equity millipede 14 replies

Attachments: Building an equity millipede
Exit Attachments

Building an equity millipede

  • #5,261
  • Aug 1, 2012 4:57pm Aug 1, 2012 4:57pm
there are some practicalities of both the development and the deployment of a machine (EA), with the added change in habit required.

development/ manual system to machine
development/ learn to work with a programmer
deployment vps/ learn to operate a vps
deployment machine/ demo account to bug check machine
deployment machine/ cent account learning operation
deployment machine/ next pair. then to pair 9

your expertise & abilities grow organically until the habits are formed. you notice routines establishing themselves. you need to get from point a to point b… FIX API

the reason to start with one pair using a machine is to roll over before crawling before walking before running. manual trading and machine trading is trading, same same but different.

you have no way of knowing when you look at the lastbarclose whether that is the beginning or end of trend, or the beginning or end of range. none. nada. zip. so drawdown by manual or machine operation is the same.

I deal with this by taking every sigA + sigB + sigC + sigD + sigE. there will be clusters of open profit at the beginning and mid trend. the frequency of BE (enter with 2 positions, one with TP of 1R:1R) increases towards the end. the frequency of LOSS increases during range. BUT… as I take every trade then I HAVE those clusters at the start of trend. that is where profit lies.
  • #5,262
  • Aug 2, 2012 2:09am Aug 2, 2012 2:09am
Quoting hermit
so drawdown by manual or machine operation is the same
No, it is not. There are several differences between manual and automated trading. And the most important one in regards to the drawdown is that an EA is on the market constantly, while with manual trading you only monitor and trade during a specific time window. Since every static algorithm of trading is prone to having drawdowns (especially during ranges), it's only natural that an EA would have much bigger drawdowns, as its "exposure" to the markets is much bigger. As Graeme said, it is important "to avoid the markets, in a sence". Meaning not to enter on every possible signal. Yes, you never know which one will work out and you're going to miss some good opportunities. But in the same time you're also going to "miss" much of the failed entries, thus reducing the drawdown dramatically.
On a side note, this is also why I dislike restricting the trades to a single pair. If you have multiple pairs to monitor, it's natural to simply switch the pair after a failed entry. This way you avoid the temptation to enter again "because look at that signal, it has to work out, I just know it".

Sincerely,
Barbossa
  • #5,263
  • Aug 3, 2012 3:38am Aug 3, 2012 3:38am
I think risking 1% per trade is far too high. Probabilities suggest that however good you are a losing streak of between 10-20 trades is coming your way. Perhaps it's today, perhaps not for 3 years - but it's coming.

So 10-20 losses over a week would of course equate to 10%-20% drawdown and that's far too much for most people, whether they realise it or not (before it happens).

So what's the right amount to risk (if you want to allocate money this way)? I reckon it's about 0.25% and maybe even half that.
Road To Wisdom? To err and err and err again, but less and less and less...
  • #5,264
  • Aug 3, 2012 9:24am Aug 3, 2012 9:24am
Dear Graeme n all his followers/fans,

I have bn following this thread which has a few years span. And have not finished reading the entire thread. But am thoroughly enjoying every bit of it. I decided to register and participate and share my experiences from a newbie to hopefully mastering the skills required to consistently do well in Forex Trading. I loved how Graeme a.k.a pipEASY described Forex Trading based on his style. Makes CLEAR and common sense and the approach is doable; low-risk and riding a high gain capture of what the market dishes out. TQ Graeme.... Your unselfish gesture and foresight is second to none that i have seen and followed thus far in the industry.

A lil' bit abt myself. Initially i was introduced to Forex Trading thru a close friend who shared the passion of another business venture which we enjoyed. Besides that biz venture ....Forex Trading was his baby. He loved every bit of it. Eventually, i got curious and loved the idea of being anywhere in the world and be able to trade. And so happen Forex seemed an ideal match. And so, i was introduced to Forex rather weirdly. But i enjoyed learning the Trade as my friend became my Mentor. But unfortunately, he passed away 5 mths into my baptism into Fortex Trading. And i was at a loss.... Further googling, reading books took a toll on me as there were lots of garbage out there and to filter thru all that for a newbie was way too much. And somehow along the way ... i was steered towards Options Trading. Paid a hefty amt to learn from so-called the Best in the Industry. I did my due diligence, many countless hours of Paper Trading and understanding various Strategies and yet the acct. lost more than i anticipated. Though Paper Trading... still it can be demoralising. But nevertheless... i kept going, persevered until one day i happen to talk to a friend who was also interested in Forex Trading and he showed me this interesting strategy, "Building An Equity Milipede".

How cool.... i started reading the start of the thread and got hooked on to it. I remember i started reading at 12 midnight and went on til 5am before i doze off excitedly. Anyway, long story cut short .... i am glad that somehow someone up there aligned the stars and showed me the way. I am eagerly waiting for Graeme's book as a Guide towards my Forex Trading style.

Keep up the good work Graeme, you are indeed an inspiration and your actions have definitely impacted the lives of many. Thank you again. Hope to one day keep in touch on a personal basis.

Your thread... your style of trading, your perspectives are greatly observed. There's many underlying behind the scene meanings that needs to be deciphered but only can be achieved when one puts in the work.

Have a good day ahead Graeme, smile always and keep smelling the roses. You have done wonders and so has Superman

p/s. to all the Graeme's unofficial Moderators... u guys hv bn super. Thanks for doing a great job when Graeme has bn swamped with 100's of messages and unable to follow up. Cheerio

GL
  • #5,265
  • Aug 7, 2012 2:09pm Aug 7, 2012 2:09pm
Quoting Hayden
This sounds very interesting I'm curious as to how many open trades you guys consider safe to have open at any one time. If 1% risked on each open position what would you suggest is a safe number without risking margin call?

Hope this is not too off topic.

Kind regards
I have struggled to get this aspect in my trading plan for the longest time!!! If I recall correctly, there are no CONCRETE MM rules shared on this thread by Graeme although some recommendations do suggest taking 4-5 mini positions for an account size of $5K. That is just not enough as we have to be VERY careful when building our millipede not to get a margin call or else our entire long term effort of building positions goes down the toilet. Since then, I am been on a search to tweak this to my liking and comfort.

Here's what I have to share....

It is conventional wisdom as our physiology is tuned to 'keeping a close eye' on account balance. It is littered all over this forum to ensure smooth account balance curve and minimize drawdowns. I beg to differ as it is NOT the account balance that matters but the equity curve that we all should focus on. Why? Because available margin is based on Account Equity and not Account Balance on most platforms especially crappy MT4 platform "designed by brokers for brokers". One could never really understand their in-depth trading stats just by looking at the MT4 generated account statement. Trade Explorer does a much better job. Even this guy... http://www.earnforex.com/report-analysis/ has done some good work based on the generated statement (Make sure to select the "Force close open positions" checkbox and remove any account personal information before you upload the htm file)

As an extension to my post which I had posted earlier and later on deleted (see here > http://www.forexfactory.com/showthread.php?t=369594 ) in which I tried to emphasize on my entry/exit practice skills in demo. After doubling my account, I moved to see how I perform with never taking a single TP or Diversification and running 2 EAs, one to move SL to BE and another to act as forced/hidden SL to help me with discipline.

Attached are my results. Where I am going with all this is....

- Short term realized losses are not important if it depletes the account balance (I know.. this is against conventional wisdom!!!) as long as you are consistently following a strategy of continues market participation with similar actions. If market is made up of continuos repetition of up/down cycles, our actions in a similar manner should balance out and create a smooth equity curve (and not balance curve)

- Concentrating on available margin becomes moot if your broker only closes portion of open positions in LOSS towards margin call. PERSONALLY, I WOUD NEVER STAY WITH A BROKER OR IMPLEMENT THIS MILLIPEDE STRATEGY IF YOUR CURRENT BROKER CLOSES ALL OPEN POSITIONS DURING MC. I consider this as almost a scam in Retail Forex but it is there for a reason which I understand. This coupled with hedging and spread widening is free money for most brokers. (not trying to bash any broker in particular nor am I going to share which broker I use!)

- What forum member Hayden is raising in his post is a valid question. What is more important to me is where do I go from here? My account and open positions are MAXed out. I have no account balance available as seen in the screenshot and I have no free margin available! Am I forced to closed my profitable positions to make room for more growth or should I 'freeze' my profitable positions to make more room for growth?????????

To me, freezing of profits ONLY makes sense if I am moving my SL to BE on most sides otherwise you are better off just diversifying your profitable positions and rinse/repeat towards infinite yield.

p.s. Regarding position size, just 1x of 'starting' balance is good enough for me. As Graeme advocates, increasing exposure in multiple pairs makes more sense than increasing lot size after a certain amount of profit.

Just my two pips worth of food for thought :-

disclaimer: All results here are from demo account. I am currently trading live with this approach as well on a small relatively amount.
Attached Image (click to enlarge)
Click to Enlarge Name: Snap149.jpg Size: 103 KB
Staying in my lane...
  • #5,266
  • Aug 7, 2012 2:57pm Aug 7, 2012 2:57pm
wow, god-like performance. at this point, it doesn't matter if demo or live. i believe that you've got your "thing" now, a super one.

Congradulations! It's a long path -- 3 years?

Quoting VEEFX
disclaimer: All results here are from demo account. I am currently trading live with this approach as well on a small relatively amount.
  • #5,267
  • Aug 7, 2012 3:02pm Aug 7, 2012 3:02pm
Quoting charvo
wow, god-like performance. at this point, it doesn't matter if demo or live. i believe that you've got your "thing" now, a super one.

Congradulations! It's a long path -- 3 years?
Not according to this chart.... LMAO !
Attached Image (click to enlarge)
Click to Enlarge Name: Snap150.jpg Size: 83 KB
Staying in my lane...
  • #5,268
  • Aug 7, 2012 3:42pm Aug 7, 2012 3:42pm
Hello, VEEFX.

Would you mind to share what was the starting balance of the demo account from the posted results? 50k?
Anyways, it seems to me that you either need to "diversify" some of your groups or just stop adding and let them grow on their own.
I would also disagree slightly on your remark about account balance being unimportant. The main importance of the balance is that unlike the floating profit, it's not affected by random fluctuations of the market. It acts as a "base" that offsets the equity curve up. As far as I remember, Graeme said we should aim for steady growth of balance and exponential growth of the equity. Doing both at the same time would prevent you from being overexposed to the market and lacking the margin to take new positions.

Sincerely,
Barbossa
  • #5,269
  • Aug 7, 2012 4:03pm Aug 7, 2012 4:03pm
How long does it take to evolve this account into this giant size? Just try to have a sense of how well a trader can be :-)

Quoting VEEFX
Not according to this chart.... LMAO !
  • #5,270
  • Aug 7, 2012 7:51pm Aug 7, 2012 7:51pm
Quoting Barbossa
Hello, VEEFX.

Would you mind to share what was the starting balance of the demo account from the posted results? 50k?
Anyways, it seems to me that you either need to "diversify" some of your groups or just stop adding and let them grow on their own.
I would also disagree slightly on your remark about account balance being unimportant. The main importance of the balance is that unlike the floating profit, it's not affected by random fluctuations of the market. It acts as a "base" that offsets the equity curve up. As far as I remember, Graeme...
Hi Barbossa,

I started with $50K as in the screenshot. I am sure you are not the first one to disagree. Many out here might think I have gone nuts :-))

I agree about account balance acting as a 'base' but only when the strategy is income-producing (i.e. intraday/swing trading serving a daily/weekly target with predefined risk/reward etc). It adds limited value in long term position trading. For me, it just creates a negative physiological barrier when you are trying to build positions.

One could inverse the strategy with relative ease and have a LARGE floating loss and double the account balance by taking frequent profits. That would make the trader feel great looking at the account balance.

- When you calculate your net worth, it is the account equity that counts
- When you liquidate your funds for withdrawal, you will receive the amount shown in your account equity and not what's in your balance.

I will get off my soap box now :-
Staying in my lane...
  • #5,271
  • Aug 7, 2012 8:25pm Aug 7, 2012 8:25pm
Quoting charvo
How long does it take to evolve this account into this giant size? Just try to have a sense of how well a trader can be :-)
That's a loaded question charvo. I consider myself just half way in my 4+ years of FX journey. I lost about $15K of floating profit just last week. If this was live, I would have a hard time dealing with it for sure so I am definitely not there yet.

I have yet to figure out a way to both smoothen and grow equity curve even after having positions across 20+ pairs in this account. I have tried diversification of strategies to smooth the floating equity. I have tried time/session based strategies. I have tried randomly choosing PA setups for entries thinking if market is unpredictable then my entries should also be somewhat unpredictable. But I am absolutely convinced that one has to continuously participate in the market in a constant/frequent manner.
Staying in my lane...
  • #5,272
  • Aug 8, 2012 2:39am Aug 8, 2012 2:39am
Quoting VEEFX
That's a loaded question charvo. I consider myself just half way in my 4+ years of FX journey. I lost about $15K of floating profit just last week. If this was live, I would have a hard time dealing with it for sure so I am definitely not there yet.

I have yet to figure out a way to both smoothen and grow equity curve even after having positions across 20+ pairs in this account. I have tried diversification of strategies to smooth the floating equity. I have tried time/session based strategies. I have tried randomly choosing PA setups for entries...
Well said V. Well said.
If you think you can or cannot do it you are correct
  • #5,273
  • Aug 8, 2012 3:01am Aug 8, 2012 3:01am
Quoting VEEFX
Hi Barbossa,

I started with $50K as in the screenshot. I am sure you are not the first one to disagree. Many out here might think I have gone nuts :-))

I agree about account balance acting as a 'base' but only when the strategy is income-producing (i.e. intraday/swing trading serving a daily/weekly target with predefined risk/reward etc). It adds limited value in long term position trading. For me, it just creates a negative physiological barrier when you are trying to build positions.

One could inverse the strategy with relative ease...
Hey, VEEFX.

Don't get me wrong. I'm a huge fan of the "equity millipede" idea and I wholeheartedly agree that it's pointless to take small profits and leave huge losses behind. The aim should be to get the equity growing. I was only pointing out that while exposure is necessary for growth, overexposure probably should be avoided. As I understand it, master Graeme's diversifications served for several purposes, among them avoiding overexposure and securing profits at the same time. By closing a position, you transfer a value from your equity to your balance, effectively freezing its value forever. It can no longer grow or shrink. By keeping a limited exposure, you would avoid such large whipsaws on the equity curve. 15% loss in floating P/L is far too much for me to handle.

The above is simply a personal opinion. I do not claim it to be true and I certainly have less experience in forex than you. It is just the way I understand what Graeme tried to teach us.

Sincerely,
Barbossa
  • #5,274
  • Aug 8, 2012 5:17am Aug 8, 2012 5:17am
Hi VEEFX, congrats on your great progress using Graeme's principles. I was wondering, without going to specifics of course, did you settle with just "one thing" / one type of entering as Graeme suggested? Did you simplify your whole methodology to make it as stress-free / non-time intensive as possible? Thanks and good luck in your further study.
  • #5,275
  • Aug 8, 2012 12:37pm Aug 8, 2012 12:37pm
Big thread.Very interesting.
One important question that puzzles me.In this system only viable way to make money is to buy and hold because most brokers pay interest on gain however opposite true if selling hence negative interest or swap will eat the profits in long run.So I don't see how selling and holding a position for a year for example would be profitable unless your broker doesn't charge you negative interest but that's rare.

Am I missing something?
In trading, you have to be defensive and aggressive at the same time
  • #5,276
  • Aug 8, 2012 12:52pm Aug 8, 2012 12:52pm
Quoting Davit
Big thread.Very interesting.
One important question that puzzles me.In this system only viable way to make money is to buy and hold because most brokers pay interest on gain however opposite true if selling hence negative interest or swap will eat the profits in long run.So I don't see how selling and holding a position for a year for example would be profitable unless your broker doesn't charge you negative interest but that's rare.

Am I missing something?
Yeah...
Suppose you sold one standard lot on EURUSD an year before, when the exchange rate was 1.45+. Let's say today the rate is 1.25. At $10 per pip, that single position would be worth exactly $20k. My broker reports negative swap of -0.81 for EURUSD. Correct me if I'm wrong but that would mean paying $8.1 per day for this position, right? Well, 8.1x365 = $2965.5 paid for swaps. Could be less actually, I'm not sure if swaps are paid on holidays and weekends, but let's take it as a worst-case. That still leaves $17k profit from a single position. The idea of the method is to have a pyramid of positions in line with the main trend. You could check the numbers for yourself in a "conservative" pyramid, having another sell position every 200 pips or so.

Best regards,
Barbossa
  • #5,277
  • Aug 8, 2012 12:58pm Aug 8, 2012 12:58pm
Quoting Barbossa
Yeah...
Suppose you sold one standard lot on EURUSD an year before, when the exchange rate was 1.45+. Let's say today the rate is 1.25. At $10 per pip, that single position would be worth exactly $20k. My broker reports negative swap of -0.81 for EURUSD. Correct me if I'm wrong but that would mean paying $8.1 per day for this position, right? Well, 8.1x365 = $2965.5 paid for swaps. Could be less actually, I'm not sure if swaps are paid on holidays and weekends, but let's take it as a worst-case. That still leaves $17k profit from a single...
Agreed,

Swap (interest) is a cost of trading that has to be considered, just like spread, commissions, internet access, computers, etc. As with any business that cost has to be weighed against the benefit. Some businesses can operate and make a profit without incurring a large (in relative terms) interest expense.

Others (especially those conducting larger enterprises) are going to incur more interest expense which is hopefully offset by larger returns.

The same scenarios are in play for forex trading systems. Each trader has to analyze for themselves whether the additional expense is worth the returns.
  • #5,278
  • Aug 8, 2012 1:15pm Aug 8, 2012 1:15pm
Quoting Barbossa
Hey, VEEFX.
Don't get me wrong. I'm a huge fan of the "equity millipede" idea and I wholeheartedly agree that it's pointless to take small profits and leave huge losses behind. The aim should be to get the equity growing. I was only pointing out that while exposure is necessary for growth, overexposure probably should be avoided. As I understand it, master Graeme's diversifications served for several purposes, among them avoiding overexposure and securing profits at the same time. By closing a position, you transfer a value from your equity...
One should never follow what you see or hear on forums (including my post) and come to your own conclusions. What you are saying is just conventional wisdom. "It can no longer grow or shrink." is only true if you close ALL open position and not just 'a' position in your portfolio. Regarding exposure, unless you are using 1:1 leverage, you are already exposed REGARDLESS of what 'number' you see in your account balance. Account balance of 2K with open 1 minilot to 5:1 effective leverage has the potential to wipe out a decent chunk from your account balance if left unattended.
Regarding 15% floating loss, I am working towards finding a way to prevent daily swings but it is not that easy. I bet even Graeme experienced a decent swing when he was hospitalized or during CHF intervention. I got some unconventional ideas but trying to keep those to myself for now. I will mention this though... floating PnL is also just a number that has a dramatic effect on our mindset. Similar to Account Balance, it also creates a "feel good/feel lousy" illusionary effect in our decision-making thought process. Here's another screenshot LOL !

$105K of floating profit, negative account balance and a decent drop in equity (I forced this condition to happen by not participating in the last 24 hours just to make my point)

Attached Image (click to enlarge)
Click to Enlarge Name: Snap153.jpg Size: 8 KB


njoy!
Staying in my lane...
  • #5,279
  • Aug 8, 2012 1:32pm Aug 8, 2012 1:32pm
Quoting VEEFX
"It can no longer grow or shrink." is only true if you close ALL open position and not just 'a' position in your portfolio.
Just a remark I'd like to make...
You did not understand me here. Say, you have a single position at +100 pips which you decide to close in a diversification. By closing it, you transfer it's value from equity to balance, right? Then, in a sense, you freeze the growth of that very position. You may think of it like it's still there, but frozen forever at +100 pips. That was what I was referring to by "can no longer grow or shrink", the value of a position, not the value of the equity.

Hope that clears the misunderstanding.

Best regards,
Barbossa
  • #5,280
  • Aug 8, 2012 2:50pm Aug 8, 2012 2:50pm
Quoting spyderman
Agreed,

Swap (interest) is a cost of trading that has to be considered, just like spread, commissions, internet access, computers, etc. As with any business that cost has to be weighed against the benefit. Some businesses can operate and make a profit without incurring a large (in relative terms) interest expense.

Others (especially those conducting larger enterprises) are going to incur more interest expense which is hopefully offset by larger returns.

The same scenarios are in play for forex trading systems. Each trader has to analyze for...
So true! Daily swaps also negatively effects your mindset if your focus is too narrow (i.e "penny wise and pound foolish" as an old saying goes) or during the initial position building phase of your endeavor. Very challenging to say the least!

If you have a balanced spread across many pairs, the effect of swaps could be netted out with a bit of manipulation and proper planning. Ultimately, this becomes a trade book management issue instead of a PnL issue in my opinion. It is common knowledge that every FX pairs is ranging when you zoom out. It is just an inevitable fact due to the FX nature of trading a pair when compared to any other instrument. Going top down from decade > Year > Quarter > Month > Week can reveal some great artwork and related discoveries

Even with profitable positions on both sides set at BE (BE is very important as you should not freeze profitable positions forever !) on pairs that have atleast 50+pips of daily ATR should minimize the net long term impact on your portfolio. This is just statistics when I looked into this issue last year.
Staying in my lane...
11 traders viewing now