Building an equity millipede

Hi Prakash and Others,

You are (prakash) doing well man. I also have similar results on eur/usd and usd/jpy, but my trades are based on weekly and daily charts. I started usd/jpy on 14th November and till this moment its up by +607pips.

Entered into eur/usd on 15th November and it is still running with +452pips.

Anyway i am not boasting about my trades, just sharing what i am doing with this method. I don't know what will happen tomorrow for my trades, but i am certain that, i will not go negative because i already set breakeven points.

-maaj-

Hi fxpig

The main rule about this kind of trading is stick to one or two pairs.Can you hold to this method even though u stomach 20 consecutive losses .If u can then you can think of this method.It doesn't matter on which time frame you are working on.Do u have "The One Thing" which "pipeasy" was referring to.If so it is not a problem.
Please re-read the thread as many times you can.There is lot of information.I read this thread for last 8-months(10-15 times).Understand it on your own norms.

Regards
Prakash

Hi maaj..

Thanks for your comment.I had 10 legs on each pair and total of 6000+ pips for time being.Last week i diversified my legs so i had less number of legs.I am learning some lessons about diversification.If i hadn't diversified i could have earned more pips.
Anyway right now EUR/USD and GBP/JPY are forming pin bar with long wick.I am expecting some retrace here.Let's see next week.
All the best for your legs maaj. Keep posting your progress,so that others can learn from it(me too).I will also post my results.

Regards
prakash

The attached excel spreadsheet doesn't have everything you're looking for, but it does have avg pip per trade, gain, and loss. Feel free to use the formulas.

Hello everybody,
The power of this method resides in the way it views the market and the amount of control it provides the trader to react to its seemingly irrational behavior.
From a businessman's perspective, it is never a single sale/trade/service...that breaks even. It is the business itself, be it a brokerage firm or a lemonade stand.
When Pipeasy was in control of the flow of this thread, and given his extremely interesting professional background, his focus was on providing real life situations that invited the reader to get a better perspective and, more importantly, act on it. His gambling examples and analogies were pure gold not because they provided the steps to win a poker game but, more interestingly, because they didn't. And when he spoke of a trade breaking even, moving to BE, flying buddha...and all the rest, it was for illustration purposes more than anything else.
Hedging in a dynamic way and setting an expense limit that could not mathematically be broken while maintaining the ability to amplify a temporarily favorable run is key.

Those 3 points are really the whole key to this method. It's NOT about whether the market is in an uptrend or downtrend, whether short term or long term. It's NOT about milking a trend for all it's worth as how does anyone know the trend that's abut to happen is going to that milkable? The best milkable trends are those that we only realise are so milkable AFTER they've happened.

This method is about TRADING, and trading everyday, longs and shorts, regardless of what the main trend is. Do that and by default you'll be able to milk those long term trends by default...

So right now, look at USD-JPY. Stunning upmove over the last several weeks so common sense would say 'only look for longs as we're in a bull trend'. yes we are, but who says that today, or tomorrow is not going to be the high. Chances are it won't but today might offer a few low risk entries on the short side - TAKE THEM and forget about what the major trends are doing. And chances are any short trades will get knocked out for scratched trades BUT AT LEAST YOU'VE PARTICIPATED....

Most have read Reminiscences of a Stock Operator but did you know there's a new version out and it's excellent. The copy is all the same but the new author delves into the background o the markets and people during that time. Like I said it's excellent and I'd advise everyone to get it (who's interested in financial history). One of the characters (not Livermore) has a saying and it's very very applicable for this method -

IF YOU DON'T BET YOU DON'T KNOW....

That does a great job of describing what you need to do with this method which is to take every low risk entry you can find and to hell with the major trends in force at that time. And as Oathbreaker rightly points out, if you cannot handle 10-20 losses on the trot then forget about this method.

Question: How can one easily handle 10-20 losses on the trot?

Answer: Risk 10 basis points per trade.....risk more than say 20 basis points and I'd bet a big pile of cash that the physcology will get ya!

Graham will like this one.

There's an excellent book on Gambling called 'Dummy Up and Deal'. For those where English is not their first language 'Dummy Up' basically means 'shut up'.

For Graham's method we can modify this to 'Dummy Up and TRADE'. This means, shut up, don't bore yourself with any recent analysis of the markets, instead focus on the last 1-10 bars of any time period and TRADE WHAT YOU SEE RIGHT THERE AND NOW using those razor sharp entries.

Most of these entries will either lose or breakeven but every now and then you'll find yourself riding a good trend with multiple positions.

So for anyone that's struggling try to make this your new year's resoltion - DUMMY UP AND TRADE.

Anyone reckon Graham still reads this thread?

If he's still alive I reckon he pops back now and then to see how his baby is doing. Well, G, if you're reading this thanks for all the help you've given me and others and may you have a great 2013 in both your personal and trading/business life.

nice posts, Calculus, happy new year to you !

also, I think there is a possibility that you are "pipEASY".
dont bother answering this, it's just something that has came to my mind.

Happy trading to all !

MJ, funny but I'm not G. Mods can check my IP, I'm located in sunny England and always have been.

I'm not saying anything here that I haven't been taught from G's many posts on this thread. But here's the key, and Oath found this out as well - reading this thread is not what it's all about. It's about reading the thread 10+ times because everytime you read it I can guarantee you'll pick something else up, not another 'trick' per se, rather a deeper understanding of what's going on as well as a deeper undertanding of the price action trading discussed.

Want to know what I did, I went through the whole thread and copy pasted the important parts into a Word document under important headings such as -

Entries
Diversifaction
Hindsight
Physcology etc

The summary is abut 200 pages (Verdanna 8 so there's a lot of info per page). I try to read 25% a day and even after several months of this still pick up ideas into the foundations of this method.

Now, I'm normally a generous person but please note I will NOT be sending this to anyone that asks via PM because it will hurt you more than help. It's hard work I know but you need to do the work yourself, we all know that at the end of the day this is a solitary business, others can help but most of the work has to be done by yourself.

The Dummy up and Trade concept as well as - you don't know till you bet - is just part of the deep understanding of this method that I gained by studying G's posts over and over and over.

PS. If anyone wants a tip of how to edit this whole thread here it is - forget about everyone else's posts and just concentrate on Graham's, you'll get more than 90% o the relevant information that way and it will save time. Also, no point printing off the PDFs of just G's posts unless you want something like a 1000 page document. By copy/pasting to a Word document you can only paste the best info and also get rid of all the tables and other things relating to the ForexFactory site.

Remember -

If you don't bet you won't know

and

Dummy Up and TRADE

And think hard about the 10 basis points risk per trade as that has a hidden advantage - it can make trading psychologically effortless. Now, before someone pipes up and says 'huh, 10 basis points, you'll never be able to make a decent profit wth such small risks' I have one word for you - STACKING...

Hey Calc,

by 10 basis points you mean 0,1 % /one tenth percent/ of account equity?
youve been successful so far with millipedeing ?
Im still trying it, and my entries are better day by day, so its good

Happy trading !

Sure. Do the maths yourself. But first let's try a 1% risk per trade.

To be successful with this method it's all about putting on plenty of trades. G himself said he does an average of 7 a day. I budget for about 10 trades per day, looking at around 10 markets (not 1 trade per market per day, often I don't trade 1-5 of the markets that day).

Will there ever be days when you get 10 trades that you're able to move the stop to breakeven? There sure will.

Will there ever be days when you get 10 trades wrong, ie put a trade on and within the hour you're stopped out. There sure will.

So risk 1% and that's a 10% account equity loss IN ONE DAY!

Trade with that sort of risk and either the martkets will get you or your mind will get you. It doesn't matter which one gets you because you're pretty much dead either way because if you can suffer 1 day of 10 losses there will be 2 consecutive days of the same, maybe even 3 days. Now, those 2-3 days might not come for 3 or even 5 years but they're coming I can assure you of that.

Now, cut the risk to 50 basis points per trade. The potential to lose 5% over one day or perhaps 15% over 3 days is far too much for me.

So what is the right level for potential losses per day? For me it's 1% which is how I get to the 10 basis points risk per trade. Other people might be more but I wouldn't suggest to anyone with a view to making a career out of trading risks more than 2% a day.

10 basis points isn't a lot of risk but then it's still possible to have a pretty decent sized position on with that amount because it all depends on where your stop is. Many traders use a fixed trade size for every trade so it's say a $100k trade with a maximum stop of 20-25 ticks. I prefer to see how much risk I need to take in ticks on a trade then divide that by my 10 basis points. So if 10 basis points = $100 and my risk is 20 ticks the actual trade size will be smaller than if the stop risk is 8 ticks. I cannot always get trades on with 8 ticks but sometimes I can.

Now, as G points out many times on this thread, if you trade with just one position you're never going to get that far. The trick is to be far bigger when you're right and far smaller when wrong. Perhaps $100k when wrong and a position of $1million+ when right. THis is where the stacking comes in, put a probe out, risk 10 basis points and if it works stack with another 10 basis points and then another etc. So if USD-JPY trends nicely over the next several months you might find you have 34+ different 10 basis point trades all working for you which is a pretty good position to have.

Folks, sorry to be blunt but if you aren't agressive with your stacking you haven't got a hope of doing well with this strategy. But for me, I can only get agressive with both my initial probe and then stacking if my risk is small, hence 10 basis points. Some might prefer 20 or even 25 basis points but any more and for 95% of readers you're going to run into all sorts of mind problems and self doubt assuming you're an agressive trade (when I sau agressive I mean putting plenty of trades on, not monster sized ones)

Play with the numbers yourself, but never worry about the upside, focus on your potential downside and what might/can happen. Do that and you'll find the correct amount of risk to use per trade which I suggest is somewhere under 25 basis points. Good luck.

By the way when I say 34+ positions I don't mean to say that I trade like a madman, spraying trades like machine gun fire.

Personally I'm looking build a millepede over months and hold it for multi-months if not several years. So in turn it would probably take several months to build that position assuming the trend is kind to me, ie doesn't have any of those vicious 100% retracements which would knock out all my positions at breakeven. This by the way will happen to you with 100% certainity some of the time, please note this and mentally prepare for it.

As for one of these monster moves, what about USD-JPY going to 200+ over the next 5+ years. Anything is possible in this game...

I'm a big fan of ROASO...what's the name of the new version?
Thanks in advance!

Koko

Search for on Amazon -

Reminiscences of a Stock Operator: With New Commentary and Insights on the Life and Times of Jesse Livermore (Annotated Edition)

Don't buy the Kindle version as Kindle is crap at photos and it's got loads. Like I said, the book goes into all the interesting characters on Wall Street at the time and things like all the different corner attempts and scams of the time. It really brings the book to life.

Just placed the order. Thanks!

I apologise in advance if you're eating.

Question: What happens if you throw a load of shit at a wall?

Answer: Most of it slides down BUT some of it sticks.

Question: What happens when you get agressive and try to put on 5-10 trades a day when following 9 markets?

Answer: Most will lose/breakeven BUT some will stick.

That right there is the key, THE KEY. Of course your trades have to be well though out, but if you see something set up GIVE IT A GO, don't wonder about it, don't be scared because you know what will happen if you don't take it? Yes, THAT TRADE WILL WORK! And then what will that do to your mindset, it won't help will it?

Question: How can I easily get agressive with my trading?

Answer: Risk 10 basis points per trade (or no more than 20, even then I'd say that's too much unless you're really sound with your entries, I'm not).

Look at G, look how aggressive he gets? I'm no visionary, all I'm doing is practicing what he preaches, why try to re-invent the wheel.

PS. When I say follow 9 markets I don't mean try to put a trade on in each, perhaps today there's nothing much happening in 4 o them, but 2 are red hot - GET AGRESSIVE WITH THEM, drop to the 5/15/20, look for stalls, then ATTACK via a breakout trade. Will it work, maybe, but who cares if it doesn't because I've only risked 10 basis points and YOU DON'T KNOW TILL YOU BET. And if that trade works then I'm looking to take more on that market.

Here's an example of an agressive trade on the Euro.

Forget about your hindsight on the monthly and/or weekly it's just not relevant if you want to try and build a nice size position. Sure, smetimes it will help, but other times it won't and when it won't you won't have any positions on. But an agressive trader who takes good probability setups REGARDLESS of monthly/weekly hindsight might have 10+ positions on 400 ticks higher than when your monthly/weekly hindsight finally turns down and you;re ready to start looking for shorts.

 

1. Euro today doesn't look strong does it?
2. See the boys pop the stops on the 5 min?
3. That's got to be a good probability short hasn't it?
4. Short at say 1.3020, stop at 1.3027 WITH 10 BASIS POINT OF RISK
5. Will it work, so far it has and the stop should now be at breakeven
6. However, the reality states that this trade will probably get stopped out at sometime, perhaps even in the next few hours or maybe on when the price gets messy on the big figure later today
7. Whatever the case, this trade is finished for me and I'm LOOKING FOR OTHERS, I WANT TO RISK ANOTHER 10 BASIS POINTS - I WANT TO PARTICIPATE.....

Here's another trade I've just done.

 

1. USD-JPY
2. All sorts of hindight up on this one
3. But then I've just gone short because YOU NEVER KNOW and moves can start from ANYWHERE
4. Big move on the day, maybe there's a load of shorts covering, maybe it's genuine buying, I have not got a clue
5. But after a strong move when it puts in a pattern like this (20m) I'm going to give it a shot with my 10 basis points
6. Again, I'm not so confident about this trade and expect it to get stopped out BUT IF IT DOESN'T get stopped I'm going to try and get agressive again on the short side and look for MORE

Stop on the USD-JPY trade by the way is 88.31.

If my account was £100k then I'd risk £100 which would be a position size of 108k.

If you however wanted to buy a touch more insurance and have a bigger stop, perhaps 88.36 then the trade would be 78k.

Just got stopped at unchanged on the Euro, is this going to turn into a run of 10-20 trades that either breakeven of get stopped out. It's got a chance but then the potential loss is going to be no problem, 1%-2%. That loss is so manageable that if the next 20 trades DOES lose me 2% I'll have no mental problems taking the next 20 trades.

See how you can be both aggressive with your trading AND keep losses manageable which means your mind remains both positive and focussed as to what to do which is - PUT MORE TRADES ON.