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Set it and Forget it, Dollar Cost Averaging

  • #61
  • Aug 17, 2012 3:51pm Aug 17, 2012 3:51pm
Quoting jaws810
I think your math is just a bit off. 250 times 20 is 5000 so it would take 20 weeks not 2 years, and I don't think that your backtest was set to work like my system, similar but not the same as what I'm doing. You averaged every 100 pips, I average every 24 hrs no matter what happens to the price. NOT the same.
The 24 hour part is much better than every 50pips hadn't considered it this way.

You could go for a year or more without a loser.


I will do a excel spreadsheet tomorrow to explain the average price barely moving as your position increases, to simulate a trend move.

Ultimately you will end up on the wrong side of every trend move as with the trend you will quickly bank 50.


Interesting from a logic perspective.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #62
  • Aug 17, 2012 3:55pm Aug 17, 2012 3:55pm
Quoting dim13
From post 1 - trading rules:



Looking at the list of your trades, looks like you are trading twice a day.

Aug 16, 10:13 pm
Aug 16, 9:29 am
Aug 15, 11:52 pm
Aug 15, 7:06 am
Aug 14, 11:43 pm
Aug 14, 12:08 am
Aug 13, 9:32 am
Aug 13, 12:00 am
That's true only on days when I hit my TP and the price is near the weekly high/low, I've been opening a new position on the same day my position closes then adding positions around 11pm NY time each day until the next TP hits. I did add an extra lot after the big move on the 13th but other than that the only extra trades are after my TP is hit. I attached a chart that shows this week's trades. I actually had 9 trades for the week which would be over 9% if I didn't add money to my account in the middle of the week. I think I'll add that to the first post.
Attached Image (click to enlarge)
Click to Enlarge Name: Trading 12th-17th.JPG Size: 162 KB
  • #63
  • Aug 17, 2012 4:01pm Aug 17, 2012 4:01pm
Barbossa posted some actual trades from that debacle of 2008
As he showed as per the original strategy it would have busted the account
But if the escape was employed of just hitting be after 10 positions or even closing for 50 pips total, then I think we would have hit that after about the fourteenth entry

Not sure as I'm on my iPhone and will have to wait to get in front of my charts
  • #64
  • Aug 17, 2012 4:02pm Aug 17, 2012 4:02pm
Quoting jaws810
I think your math is just a bit off. 250 times 20 is 5000 so it would take 20 weeks not 2 years, and I don't think that your backtest was set to work like my system, similar but not the same as what I'm doing. You averaged every 100 pips, I average every 24 hrs no matter what happens to the price. NOT the same.
Well, I did give you an example with averaging every day, didn't I? And while it "almost did it" on one occasion, it ended up in a disaster. Point is, you can't know for sure that the market is not going to boom/collapse. And if it does, I wouldn't want to be on the wrong side. And I'm not even talking about the possible margin call... it's the missed golden opportunity that hurts even more.

Sincerely,
Barbossa
  • #65
  • Aug 17, 2012 4:49pm Aug 17, 2012 4:49pm
Quoting jaws810
That sounds about right, but you'd still be using the same 5% NAV per day, so what would be the advantage of doing that.
Thank you for responding. Was trying to figure out the lot/unit size per trade. I was a little confused after going through this thread the first time, initially thought it was 1% of account/NAV, but after doing the math (to get the weekly 5%) lot/unit size came out to 5%. Just wanted to verify before trying this out on demo acct. Thank you for sharing your strategy - very interesting.
  • #66
  • Aug 17, 2012 5:49pm Aug 17, 2012 5:49pm
Quoting dim13
Thank you for responding. Was trying to figure out the lot/unit size per trade. I was a little confused after going through this thread the first time, initially thought it was 1% of account/NAV, but after doing the math (to get the weekly 5%) lot/unit size came out to 5%. Just wanted to verify before trying this out on demo acct. Thank you for sharing your strategy - very interesting.
Dim - before you go testing the system as it was originally proposed - it will not work. Some sort of long term directional bias needs to be determined in order for a system like this to work. And even then, there is a good chance that one could have back to back losing months.
  • #67
  • Aug 17, 2012 9:58pm Aug 17, 2012 9:58pm
Quoting spyderman
Barbossa posted some actual trades from that debacle of 2008
As he showed as per the original strategy it would have busted the account
But if the escape was employed of just hitting be after 10 positions or even closing for 50 pips total, then I think we would have hit that after about the fourteenth entry

Not sure as I'm on my iPhone and will have to wait to get in front of my charts

Went back and checked the numbers (both Barbossa's and ran my own on those days).

If after 10 positions you switched over to just trying to close the string at BE+ a total of 50 pips for the profit, rather than 50 pips per position, then on October 14 that TP (180.99) would have been hit and you'd be out of the string with 50 pips profit.

I can't imagine or come up with a worse situation than what happened in '08, but if anyone sees one let's take a look at it.
  • #68
  • Edited 2:26am Aug 18, 2012 1:55am | Edited 2:26am
Quoting Barbossa
Unfortunately, the price seldom respects our beliefs. I did a manual backtest on GBP/JPY, starting with a buy on 29/09/2008. Let's not argue about the entry, I took it there on purpose, as a worst case. Suppose you enter a new position on daily open price for simplicity. Here's what would happen:

29/09/2008: buy @ 194.620
30/09/2008: buy @ 187.670 / average 191.145, tp = 191.665; daily high 190.960
01/10/2008: buy @ 188.990 / average 190.427, tp = 190.947; daily high 189.870
02/10/2008: buy @ 187.450 / average 189.683, tp = 190.203; daily...
Nice try but you pulled a trick worthy of a global warming scientist, where is the daily high for 9/29, it's not there because it would have allowed me to hit my TP . I attached a pic of what would have actually happened that month if I went long at the open the whole time it was falling and I even extended it to the day it hit that 138. My numbers are slightly different because I used OandA numbers since they are my broker. You can make the numbers do whatever you want them to do to prove a point, I want to see a real scenario where it wouldn't have worked, I don't think you can get more of an extreme trend than that, the problem is that the market never moves strait in one direction, it's more like a yo-yo dieter, it goes up then down some then up some more and so on.

P.S The reason this system will work under those conditions is because with big movement comes BIG retracement.
Attached Image (click to enlarge)
Click to Enlarge Name: Results extreme conditions.JPG Size: 311 KB
  • #69
  • Aug 18, 2012 3:32am Aug 18, 2012 3:32am
And here is the worst case scenario using the same numbers, every time I hit my TP, I buy the next entry at the daily high, then every day at open, either way the result is the same. 40+ successful trades each earning 1%+.
Attached Image (click to enlarge)
Click to Enlarge Name: Results extreme conditions.JPG Size: 412 KB
  • #70
  • Aug 18, 2012 3:53am Aug 18, 2012 3:53am
"P.S The reason this system will work under those conditions is because with big movement comes BIG retracement"

Because the market requires sellers and buyers pushing price in both directions to complete the transactions.

Therefore retracements will always occur.

Have you tried more evenly spacing your entries according to a set number of pips ?
  • #71
  • Aug 18, 2012 4:02am Aug 18, 2012 4:02am
Quoting jaws810
And here is the worst case scenario using the same numbers, every time I hit my TP, I buy the next entry at the daily high, then every day at open, either way the result is the same. 40+ successful trades each earning 1%+.
I do like the idea of this, anything which requires no subjectivity or thinking by me would be ideal!

That's a hell of a drawdown at the start though!
  • #72
  • Aug 18, 2012 4:13pm Aug 18, 2012 4:13pm
Quoting garynrox
By banking profit and getting right back in with equal amount to the opposite position I protect my loosing account.
If you have say 6 positions in one account and open straight away 6 positions in the other account and price reverses continuously from there, wouldn`t you risk running out of margin sooner?
  • #73
  • Aug 18, 2012 4:40pm Aug 18, 2012 4:40pm
the only risk I see with this strategy if there is a continuous slow trend for 20 days without a meaningful reversal and price is more than 150 pips from the average price. dont know if that ever happened.

I dont know much about margin. jaws uses 50:1 margin - say 0.1 lot. higher positions possible with higher margin. so with 500:1 1 lot positions possible?
but your floating losses (drawdown) are 10x higher as well, so you are not even able to put 20 positions on because you are running out of margin sooner? am I right?
or could somebody explain this, maybe with an example?

thanks
  • #74
  • Aug 18, 2012 4:56pm Aug 18, 2012 4:56pm
Quoting yonnie
the only risk I see with this strategy if there is a continuous slow trend for 20 days without a meaningful reversal and price is more than 150 pips from the average price. dont know if that ever happened.

I dont know much about margin. jaws uses 50:1 margin - say 0.1 lot. higher positions possible with higher margin. so with 500:1 1 lot positions possible?
but your floating losses (drawdown) are 10x higher as well, so you are not even able to put 20 positions on because you are running out of margin sooner? am I right?
or could somebody explain...
I think that's the point of his 50:1 margin. You would need to adjust your lot sizes to reflect your account size so that you could comfortably have twenty positions open. Obviously with a 500:1 leverage you can do that with larger sizes than a 50:1. Doesn't mean its a good idea though.
  • #75
  • Aug 18, 2012 5:20pm Aug 18, 2012 5:20pm
I looked back on the E/U chart and I think in the period 2 May - 1 June 2012 you would have had 23 positions and average price of around 1.2785.

lowest price on 2 June 1.2287 - 500 pips from the average price.

margin call???
  • #76
  • Aug 18, 2012 6:22pm Aug 18, 2012 6:22pm
First I'll say this seems really cool. Second I still don't really understand what your doing. Lastly best of luck to ya buddy! Looks like your doing something right.
  • #77
  • Aug 18, 2012 7:28pm Aug 18, 2012 7:28pm
Quoting yonnie
I looked back on the E/U chart and I think in the period 2 May - 1 June 2012 you would have had 23 positions and average price of around 1.2785.

lowest price on 2 June 1.2287 - 500 pips from the average price.

margin call???
At $1 per pip, that's -$11,500 you'll need a huge account to hold on long enough and keep averaging down to get back up 500pips and 50 for your profit.

The average price drops nicely at first, but even 5 in it really does slow down, which is why real martingaling increases the lot size so the average price keeps dropping giving you a easier out, but then you'd be likely 1mil down by then so don't even think about it.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #78
  • Aug 19, 2012 2:07am Aug 19, 2012 2:07am
Quoting yonnie
I looked back on the E/U chart and I think in the period 2 May - 1 June 2012 you would have had 23 positions and average price of around 1.2785.

lowest price on 2 June 1.2287 - 500 pips from the average price.

margin call???
Yep that would be a bad day to be on the wrong side of the trade, but there is no way of knowing where you would be in the trading cycle you could have been waiting for it to drop since the 16th or you might have just decided to go short. That is a MC scenario but there's no way of knowing what you would have done that day, I think I would have been short since there was a small bull run over the last week, but I wasn't there so I'll never know. This isn't a bot it's a manual system and human choices are hard to analyse, it's not a perfect system but I think it works good enough for me.

If anyone has any ideas on how to stop from being on the wrong side of a big trend or a way to minimize loses that's not overly complicated, please share.
  • #79
  • Aug 19, 2012 2:34am Aug 19, 2012 2:34am
Quoting jaws810
If anyone has any ideas on how to stop from being on the wrong side of a big trend or a way to minimize loses that's not overly complicated, please share.
I am anyone and I have an idea.
Having no SL is ok as long as the position is small and you don't continue to buy when the price goes down or continue to sell when the price goes up.
IMHO, the key is to manage the losers as well the winners in such a way that you segregate your trades between winners and losers. stop adding to the losers and use every reversal to reduce position until loser is gone and at the same time manage the winners to profitable conclusion.
  • #80
  • Aug 19, 2012 3:27am Aug 19, 2012 3:27am
Quoting jaws810
Yep that would be a bad day to be on the wrong side of the trade, but there is no way of knowing where you would be in the trading cycle you could have been waiting for it to drop since the 16th or you might have just decided to go short. That is a MC scenario but there's no way of knowing what you would have done that day, I think I would have been short since there was a small bull run over the last week, but I wasn't there so I'll never know. This isn't a bot it's a manual system and human choices are hard to analyse, it's not a perfect system...
jaws, I do realise that May/June was not one of the better periods for your system, but you did say somewhere that the right choice of the direction probably did not matter.

this here shows that the right direction sometimes does matter!

I`m into finding a range trading system myself and I`m looking more into low volatile pairs like AUD/NZD and USD/CAD with small daily ATR or combination of these pairs.
High/low for these pairs were under 1000 pips for the last year.

the profits are piling up at the moment, but you must be prepared for when the going is getting a bit rough to survive:

1. backtest for at least a year and err on the side of caution when the results are in.

2. you might start looking at lowering your position per trade (less potential profit)

3. more potential trades than 20.

4. to avoid your trades piling up: dont take a trade if you already have a trade around that price (again, lower potential profit).

5. when your number of positions is getting quite high: get away from closing all trades when price hits the average price + 50 pips; start closing individual trades which are in profit, even if the profit is below 50 pips. you can then again buy/sell the position you just sold if price stays within that price range.

just give me some feedback after evaluation.
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