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Set it and Forget it, Dollar Cost Averaging

  • #1
  • First Post: Edited Sep 7, 2012 9:23am Aug 15, 2012 2:09pm | Edited Sep 7, 2012 9:23am
This system is very simple but requires the ability to open 20 equal positions. I've been using it on the Euro getting over 5% a week.

1) Choose a direction using whatever method you want or guess it really don't matter.

2) Sometime before or after all the news for the day is released, open your trade. 1 position, no sl, and 50 pip tp, I use 50:1 leverage which gets me about 1% per position opened you will do better with higher leverage just make sure you have enough margin for 20 positions.

3) Come back the next day before or after news releases(same as step 2) and if the trade is still there open another position and move the TP for all open positions to 50 pips from your average position, if it's gone it's gone go back to step 1.

4) Repeat step 3

Even if you choose the wrong direction a small correction will get you your pips when averaged out, I haven't waited more than a week and at one time it was 150 pips away from mt TP. I place my trades around 11:00pm NY time, I use OandA so splitting an account into 20 positions is easy since their minimum contract is $1.

Update 8/17/12: I have been opening new trades immediately after my TP is hit, then I add additional positions the same time every day until the TP is hit. It increases profitability.

Update 8/19/12 Updated rules in post #91 in this thread. Also all new trades after 8-20 will be split into 2 accounts. Long in one account and shorts in the other.
  • #2
  • Aug 15, 2012 2:36pm Aug 15, 2012 2:36pm
Hi
jaws810
I think you are saying some thing intrsting but can't understand properly. Please can you explain with some images of your chart how you work. One can understand better through images.
Thanks to share
  • #3
  • Aug 15, 2012 3:36pm Aug 15, 2012 3:36pm
I opened my first position on Sunday the 12, then I opened a second position just after midnight on the 13th then I saw a big jump and got a bit impatient and opened a third position position(I don't always follow the rules exactly), then a forth around midnight on the 14th and a fifth on the 15th around midnight and then it hit my TP around 8am.

When you place the trades is less important than making sure that you reset all tp to 50 pips from your AVERAGE position, OandA has a setting that either shows average position or each individual position. The green dotted line is my current average position. All trading platforms should have a similar function.
Attached Image (click to enlarge)
Click to Enlarge Name: System pic.JPG Size: 174 KB
  • #4
  • Aug 15, 2012 3:46pm Aug 15, 2012 3:46pm
it`s seem very interesting
but i have question on which pairs you trying this method
and after the news release if positive for that particular currency then did you take revrse my means sell position or follow the trend
and one more thing , will you like to share with us account history and some daily practical experiment with us
because 5% per week and 20% per month not a bad deal i think so
  • #5
  • Aug 15, 2012 4:09pm Aug 15, 2012 4:09pm
I'm only using it on EU atm but I think it would work on any pair with any pair with enough volatility. I've only been using it for a few weeks but I've looked back several weeks and it looks like it would have worked.

I really don't worry about the news results, I use the volatility that news releases create, if I'm heading in the wrong direction I just add a position the next day and wait for a correction, you can see that in the pic I posted. That's why I split my account into 20 equal positions so I could wait as long as needed, I haven't seen an entire month without a correction.
As far as which way to go after a trade closes, I look at what the pair has been doing for the past week if the price is near the weekly high I short it if it's near the weekly low I go long. Not too complicated. I try to keep it as simple as possible so I can't mess it up.
  • #6
  • Aug 16, 2012 3:12am Aug 16, 2012 3:12am
Sooner or later you might end up with positions you cant make up..?
  • #7
  • Aug 16, 2012 4:14am Aug 16, 2012 4:14am
Quoting uberteh
Sooner or later you might end up with positions you cant make up..?
I guess it's possible but it's working for now.
  • #8
  • Aug 16, 2012 4:49am Aug 16, 2012 4:49am
Quoting jaws810
I guess it's possible but it's working for now.
I would open the charts and see how would perform this system under worst conditions before trying it out on forward test. I'd pick two specific scenarios - a sharp directional movement (SNB intervention on EURCHF from last year) and a strong trend (GBPJPY from 2008). For both scenarios I'd assume I'm on the wrong side of the market and figure out how much of a drawdown the system would reach.

Just a suggestion.
If you do that research, please share the results.

Best regards,
Barbossa
  • #9
  • Aug 16, 2012 5:37am Aug 16, 2012 5:37am
Quoting jaws810
This system is very simple but requires the ability to open 20 equal positions. I've been using it on the Euro getting over 5% a week.

1) Choose a direction using whatever method you want or guess it really don't matter.

2) Sometime before or after all the news for the day is released, open your trade. 1 position, no sl, and 50 pip tp
For some reason i do not fully understand your system. Or at least i think i don't understand all of it because the way i read it you make it sound like you can have 20 open positions with no stop loss!?
That may not be as bad as it sounds if the positions are small enough (and the acc big enough) but if you make 5% pr week it sounds like the positions are not very small.
So i guess there have to be something very important i am missing here right?
But if i am not missing anything and you are really opening 20 positions with no SL then my question is this:
How do you handle it when the market turns against you? When do you take the loss?

Arctic4x
  • #10
  • Aug 16, 2012 5:39am Aug 16, 2012 5:39am
Quoting jaws810
This system is very simple but requires the ability to open 20 equal positions. I've been using it on the Euro getting over 5% a week.

1) Choose a direction using whatever method you want or guess it really don't matter.

2) Sometime before or after all the news for the day is released, open your trade. 1 position, no sl, and 50 pip tp, I use 50:1 leverage which gets me about 1% per position opened you will do better with higher leverage just make sure you have enough margin for 20 positions.

3) Come back the next day before or after news releases(same...

Hello jaws:
I can guarantee that you will BK your account.
Do not misunderstand, I am the biggest advocate of averaging down systems and make my money from them, but way much safer, using multi-currencies to hedge and some math that I do not intent to discuss here.

Your strategy has too many weak point. The worse is the 50:1 leverage you use. Average down strategies in general bring no more then a 5-6% per month with reasonable low risk, but you must have a solid math aproach to them and consider a lot more then your short test, specially if you want to automated them like I did.

J.
  • #11
  • Aug 16, 2012 3:11pm Aug 16, 2012 3:11pm
Quoting Arctic4x
For some reason i do not fully understand your system. Or at least i think i don't understand all of it because the way i read it you make it sound like you can have 20 open positions with no stop loss!?
That may not be as bad as it sounds if the positions are small enough (and the acc big enough) but if you make 5% pr week it sounds like the positions are not very small.
So i guess there have to be something very important i am missing here right?
But if i am not missing anything and you are really opening 20 positions with no SL then my question...
My account allows me to lose 50% of my margin before a MC, so it is possible for me to lose half of my account but it would require me to open all 20 positions than have the trade go over 150 pips against my average position without a retrace after 20 trading days, which I haven't seen but anything is possible. I remember back in 2008 when news would cause 200-500 pip moves, I was trying something similar with 1000:1 leverage, I would open a new position every 50 pips and wait for the retrace and hope I don't run out of account before the retrace and after I blew my account it was only a few hours before it retraced to the point where I would have made a profit and I've seen similar moves many times since then . At that time I was looking for huge profits in one day, now I'm a little more patient and happy with smaller gains.

Ok here is how I make 5% a week, each of the positions I open earn an average of 1% of my total margin. Lets say I use micro lots, for 20 micro lots using 50:1 leverage my margin on the euro would be about $500 and the margin for 1 micro lot would be about $25 and the value of each pip would be $0.10, so you take $0.10 times 52 pips(I add an extra 2 pips for the spread and any slippage) and I get a profit of about $5.20 or about 1% of my $500 margin requirement for all 20 lots and every lot that is opened will make 1% when averaged out, so if I open my trade on Sunday night and it closes on Friday I'll actually make over 6% because I will have at least 6 positions opened by Friday when the TP is hit. Using this as my calculation I already made over 7% this week.
  • #12
  • Aug 16, 2012 3:31pm Aug 16, 2012 3:31pm
If I understand well you do not use stops, but simply expect for the price to come back to the place where you opened after some time. If it doesn't you still open another trade in the same direction. In this way you manage to average?
It's better to use the pairs that help you to make interest then. aud/jpy let's say.
I tested this system long time ago. In the long run it gets you into trouble as at some point a trend starts against you and prices fall thousands of pips.
If that is the type of system you are talking about? If not, then I am sorry. Thanks for sharing.
  • #13
  • Aug 16, 2012 4:15pm Aug 16, 2012 4:15pm
Quoting fxghost
If I understand well you do not use stops, but simply expect for the price to come back to the place where you opened after some time. If it doesn't you still open another trade in the same direction. In this way you manage to average?
It's better to use the pairs that help you to make interest then. aud/jpy let's say.
I tested this system long time ago. In the long run it gets you into trouble as at some point a trend starts against you and prices fall thousands of pips.
If that is the type of system you are talking about? If not, then I am...
That is about right except I don't need it to come all the way back to where it started just back to the average position and a few pips for profit. It could move a couple thousand pips in the wrong direction as long as it's not in one day it will average out nicely until there is a retrace 50% retrace is fairly consistent.
  • #14
  • Aug 16, 2012 7:04pm Aug 16, 2012 7:04pm
I see. The problem can start if (let's say) one is at the top with (again let's say usd/cad) and he opens long, at the price goes down. He again opens a long and the price continues going down. Yes, throughout the day there will be retracements, but one will have not closed position on the top and maybe a few positions lower. This can cause severe losses if the risk level is high.
Anyway, in a range it is not a bad system at all. And with those pairs that help you to earn interest it might even be quite good provided one is patient to wait through ups and downs.
  • #15
  • Aug 16, 2012 7:15pm Aug 16, 2012 7:15pm
Jaws,

So are you moving your TP to 50 pips above average or 50 pips profit for the whole basket. If its 50 pips above average then you're looking to get 50 pips profit per position you have open at the time.

And what if you get all 20 of your positions open and you still haven't hit TP?
  • #16
  • Aug 16, 2012 8:24pm Aug 16, 2012 8:24pm
assume this:

day 1: buy 1 lot of eur

end of day 1: eur drop 100 pips

day 2: buy 1 lot of eur

end of day 2: eur drop 100 pips

day 3: buy 1 lot of eur

end of day 3: eur drop 100 pips

day 4: buy 1 lot of eur

end of day 4: eur drop 100 pips

by now, you have 4 lots open, losses of <400 + 300 + 200 + 100 = total 1000> pips.

you will need on average a rise of 250 pips (250 x 4 lots = 1000 pips) from the current level in order to break even.

the condition gets much worse the more lots you opened and it moved against you. exponential losses accumulate.

say by day 5, it made a retracement of 200 pips, .. which is quite good already, but you are still making a loss of <total 200 pips>.
  • #17
  • Aug 16, 2012 9:52pm Aug 16, 2012 9:52pm
I use Oanda and have been trading for many years in a similar fashion. You are basically trading a grid system (look up grid system (yours is a time grid)). The difference I do is I have divided my account into two accounts. One account I do the system (Buy) only and the other I (Sell) only. When one of the TP is hit I reopen with the same amount that is still pending on the other account. By banking profit and getting right back in with equal amount to the opposite position I protect my loosing account. I lost big with one side trading but both side trading seems to be doing good.
I use other tools to this trade to make it work that are not discussed here.
  • #18
  • Aug 16, 2012 9:53pm Aug 16, 2012 9:53pm
Quoting kelvinyun
assume this:

day 1: buy 1 lot of eur

end of day 1: eur drop 100 pips

day 2: buy 1 lot of eur

end of day 2: eur drop 100 pips

day 3: buy 1 lot of eur

end of day 3: eur drop 100 pips

day 4: buy 1 lot of eur

end of day 4: eur drop 100 pips

by now, you have 4 lots open, losses of <400 + 300 + 200 + 100 = total 1000> pips.

you will need on average a rise of 250 pips (250 x 4 lots = 1000 pips) from the current level in order...
First thing your calculation is off a bit, on day five I would have 5 open positions times the 200 pip reversal would bring me to BE and I would open a sixth position and wait for a few more pips to hit my 50 pip average profit. Even if it did happen, you had me down 1000 pips and a 200 pip retrace brought me to BE, I'm relying on the consistency of the 50% retracement and even in your scenario it would only take a 25% retrace to hit my TP.

I understand the math I just don't think it will ever continue in the same direction for 20 trading days without a big enough retrace for me to make my 50 pips. The bigger the moves the bigger the retrace. I just haven't seen that drastic a move continue for a month without a temporary reversal, even weekend profit taking could cause enough of a retrace to get my positions back into profit within the 20 trading days.
  • #19
  • Aug 16, 2012 10:03pm Aug 16, 2012 10:03pm
Quoting fxghost
I see. The problem can start if (let's say) one is at the top with (again let's say usd/cad) and he opens long, at the price goes down. He again opens a long and the price continues going down. Yes, throughout the day there will be retracements, but one will have not closed position on the top and maybe a few positions lower. This can cause severe losses if the risk level is high.
Anyway, in a range it is not a bad system at all. And with those pairs that help you to earn interest it might even be quite good provided one is patient to wait through...
First off I would never open a long position at the top because I choose direction using the weekly high and low, I go in the opposite direction, if I'm near the high I short it, if I'm near the low I go long. I could get caught in the middle of a long trend but I still have plenty of time for it to retrace.

All of my positions close at the same time 50 pips TP from the average of ALL my positions, in a long run some of my positions will close with a loss but the profit will average 50 pips per lot or about 1% per lot.
  • #20
  • Aug 17, 2012 12:42am Aug 17, 2012 12:42am
Hi Jaws,
Not trying to rubbish your system but like others here I do not believe that it would wok in the long term.

Just for an example would you mind going through what your trades would be on GBPUSD starting 01.08.08 and running for 1 month. Please show your starting balance and the lots size and end balance.

It is tempting to try but just not convinced it would withstand such periods.
If I understand you correctly you never change your direction until in profit on current position.

M.
If you think I'm mad, I must be mad
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