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  • #5,561
  • Jan 18, 2013 6:21am Jan 18, 2013 6:21am
Great beginning of January moves for USD/JPY and NZD/JPY.. see chart!
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  • #5,562
  • Jan 18, 2013 6:28am Jan 18, 2013 6:28am
Quoting Fxbay
Great beginning of January moves for USD/JPY and NZD/JPY.. see chart!

Beautiful.
  • #5,563
  • Jan 18, 2013 7:01am Jan 18, 2013 7:01am
Quoting Fxbay
Great beginning of January moves for USD/JPY and NZD/JPY.. see chart!
Nice trade man. I did catch that move on usd/jpy. I started when it was 79.375...its been a good ride so far.
-happyTrading, maaj-
  • #5,564
  • Edited 2:41pm Jan 18, 2013 2:18pm | Edited 2:41pm
Quoting Fxbay
Great beginning of January moves for USD/JPY and NZD/JPY.. see chart!
Fantastic FXbay. How does this look with starting capital of $50K

My infamous 'negative' account balance demo account equity keeps growing. No one here has commented negatively on my negative account balance approach yet I am scared to implement this on a live account as I am not sure how the brokers will react when it comes to real dollars !!!

EDIT:
What is Graeme trying to accomplish with his probes and his theory on placing trades at around the daily open price ??? He sends probes with the anticipation for price to never come back to the point of entry. Isn't that our ulterior motive with probes/stacks as long term position traders?

Well, it could be as simple an approach as letting the account balance dilute into negative territory, take simultaneous buy AND sell orders at key price extremity levels, wait for several weeks for trend to form on weekly/monthly TF (like JPY pairs) and then take a realized loss on the losing trade with the expectation that price will not retrace back to the entry point for months/years. If it retraces back to your entry point within a few weeks, it is range bound and you only pay spread x 2 if you close both sides of the trade. Rinse and repeat across 20 pairs and you can't go wrong. You could be a trend follower, swing trader or whatever and still come thru the revolving door with buckets of floating profit. Out of the box thinking is all it takes to keep at it and draw your own path to achieve success.
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Staying in my lane...
  • #5,565
  • Jan 19, 2013 6:54am Jan 19, 2013 6:54am
Quoting VEEFX
Fantastic FXbay. How does this look with starting capital of $50K

My infamous 'negative' account balance demo account equity keeps growing. No one here has commented negatively on my negative account balance approach yet I am scared to implement this on a live account as I am not sure how the brokers will react
Hi VEEFX

Here are my thoughts on negative balance.Why don't you close some of trades and leave only 3-4 legs on a pair.Remember PIPEASY saying about smoothing equity curve.In any business, we need to have smooth cash flow.If our cash-flow is in negative quadrant then it puts pressure psychologically.It doesn't matter how big your assets are..You need to have smooth transaction in your business.I think same rule applies in this business too.If you close some legs,it will take some more time to reach your goal but we need to have proper cash-flow.

Regards
Prakash
I am a hunter...i kill both bulls and bears...
  • #5,566
  • Edited 9:30am Jan 19, 2013 9:20am | Edited 9:30am
Quoting oathbreaker
Hi VEEFX

Here are my thoughts on negative balance.Why don't you close some of trades and leave only 3-4 legs on a pair.Remember PIPEASY saying about smoothing equity curve.In any business, we need to have smooth cash flow.If our cash-flow is in negative quadrant then it puts pressure psychologically.It doesn't matter how big your assets are..You need to have smooth transaction in your business.I think same rule applies in this business too.If you close some legs,it will take some more time to reach your goal but we need to have proper cash-flow....
Thanks Prakash. "Remember PIPEASY saying about smoothing equity curve"... perhaps we should make a effort to understand what true definition of Equity is.

How would you calculate your net worth? Would you consider the current MTM value of your assets like home, precious stones, boat etc or would you consider the amount you paid for years ago?

Would Hedge funds and money managers report their quarterly or annual performance based on MTM or based on their realized pnl ? MTM obviously otherwise they will be forced to close all investment vehicles in order to report their profits for every period they report their performance to their investors.

Would they charge performance fees based on the loss of value in investments made in citibank, fannie/freddie mae, AIG etc or would they charge their performance based on their floating MTM profit made in Apple, Google, Bidu and other strong performing stocks in their portfolio?

Equity to me means NET LIQUIDATION VALUE. If I close all my accounts/investments and wish to hide all my money in a mattress, that is what I consider equity(my net worth)

Now let's look at cash flow: There is no correlation with having a positive cash flow and negative account balance unless you are a day trader and rely on daily/weekly profits to bring food on the table. If my financial ability allows me to withdraw only one or twice a year, there is no psychological impact. When time comes to withdrawal, it is the equty that matters and not the balance. If you have enough equity and free margin, i see no issues with withdrawal/cash flow either. I consider this as true financial freedom and a psychological edge. I can never imagine living month to month on trading income. That would be extremely stressful !

Broker Margin Call: it is also based on floating equity and not balance. Considering money shown in account balance as 'safe' is also a absolute myth. As along as my equity remains at 80% after withdrawal, I should be able to withdraw funds without closing any positions.

Let's address your comment on "You need to have smooth transaction in your business". Graeme has NEVER shared his actual equity curve of realized pnl or floating pnl so it is impossible visualize how his equity curve looks during volatile markets. With his big portfolio, I would assume it fluctuates atleast by +/- 50K to 100K on any given day which is considered quite normal in my opinion.

Here's how my balance and equity curve looks for past 37 weeks when I opened this demo account which I see no issues. It's as smooth as any floating equity curve could get as we are at the mercy of market volatility every day. The only risk here is an utter Armageddon and market chaos. In that scenario, it would be a rude awakening for those who feel their large account 'balance' is protected. Most brokers will file for bankruptcy and we all can kiss our money good bye. It is better to take annual profits off your brokers account and invest it in other assets!

Please note that going Negative account balance is a bit extreme measure. I get that and I would never let it go into negative territory but just trying to make a point here that focussing on short term account balance growth just to keep it 'smooth' is detrimental to long term growth potential!
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  • #5,567
  • Jan 19, 2013 9:31am Jan 19, 2013 9:31am
i just edited my post with more info..... i really am hoping some more folks to agree or disagree with this approach before I go live with this philosophy.
Staying in my lane...
  • #5,568
  • Jan 19, 2013 12:56pm Jan 19, 2013 12:56pm
Quoting VEEFX
Well, it could be as simple an approach as letting the account balance dilute into negative territory, take simultaneous buy AND sell orders at key price extremity levels, wait for several weeks for trend to form on weekly/monthly TF (like JPY pairs) and then take a realized loss on the losing trade with the expectation that price will not retrace back to the entry point for months/years. If it retraces back to your entry point within a few weeks, it is range bound and you only pay spread x 2 if you close both sides of the trade.
you must be closing out the losing trades after the market moved quite a bit. the losses will be in the 100s of pips per trade in stead of a 30 pip SL on say E/U.
plus there is never a guarantee that price will not come back to your entry price.

I do realise you would have taken all this into consideration. personally I would backtest for years before committing myself to such an enormous change in my trading.

good luck
  • #5,569
  • Jan 19, 2013 1:43pm Jan 19, 2013 1:43pm
VEEFX,

you mentioned the jpy pairs: look what happened to GBP/JPY after basing in 2001 until December.
yep it shot up from 180 to 192 and......it came all the way back again to 180 in March 2002.

so if I understand you, you get in at extremes with a buy/sell order, so say at 192.
at 187 you might think that this downtrend will continue and close out the losing trade for a 500 pip loss.
then at 180 your remaining trade has a floating profit of 1200 pips.

from 180 the price is screaming back up to 192 in April 2002 and the trade is stopped out at BE.

how would you manage these trades?
  • #5,570
  • Jan 19, 2013 9:26pm Jan 19, 2013 9:26pm
Quoting yonnie
you must be closing out the losing trades after the market moved quite a bit. the losses will be in the 100s of pips per trade in stead of a 30 pip SL on say E/U.
plus there is never a guarantee that price will not come back to your entry price.

I do realise you would have taken all this into consideration. personally I would backtest for years before committing myself to such an enormous change in my trading.

good luck
Ofcourse I have to close out the losing trade otherwise I would be sitting on 2 times the spread forever

Here's my reasoning but fear this might be deviating from the core principles of Graeme's teachings as it is unrelated to the negative balance and smooth equity curve discussion which has greater consequence (to me). Buy/Sell also addresses some of the diversification/profit freezing hassles but every option requires careful price interpretation for sure.

Regarding "loss worth 100s of pips per trade", I suggest we dig deeper into our trading stats to reveal how much realized loss we incur for every 1000 pip price movement. If it is under 100 pips trying to build a few legs for every 1000 pip movement, it is either based on upskilled entries or luck played a huge part in it! And let's not ignore to factor some sweat equity for the stress/greed/fear emotion, screen time for finding low risk entries, monitor floating positions, sleepless nights/weekends worrying about some politician randomly moving the market 100s of pips, frustration of moving SL to BE and letting it taken away for 200+ pips of movement etc. etc. Pip value of all these will vary by individual and based on their life cycle, age and other factors. I feel sad when folks here on forum talk about financial freedom and flexibility and yet they choose a trading system that require 10-14 hours of screen time! I did that in the first few weeks of this year taking every low risk entry just to prove to myself (and hopefully others) that finding low risk entries and conducting aggressive stacking episode is possible and important ingredients to future equity growth. Looking back at that experience I feel anything good in life comes at a price. Joe/Marion putting his life on hold for days when a good FB opportunity knocks on his door as a example.

Note: Anyone here dealing with FIFO restrictions would know how hard it is to successfully stack trades without any loss or BE trades. There is no way for those based in USA to build long 1000+ pip legs as every realized loss or BE trade will first close the trade that is in most profit ! I have a solution for this dilemma but it is pretty intense for me to implement year after year. Strangely, there are just not many US traders following this thread as FIFO restriction is not questioned by many when it comes to stacking, moving Sl to BE. Heck! FXCM does not even allow you to set SL for individual trades as we are forced to set SL only on net position (on average position price). I will stop here as I am going on a rant :-(
Staying in my lane...
  • #5,571
  • Edited 10:31pm Jan 19, 2013 10:20pm | Edited 10:31pm
Quoting yonnie
VEEFX,

you mentioned the jpy pairs: look what happened to GBP/JPY after basing in 2001 until December.
yep it shot up from 180 to 192 and......it came all the way back again to 180 in March 2002.

so if I understand you, you get in at extremes with a buy/sell order, so say at 192.
at 187 you might think that this downtrend will continue and close out the losing trade for a 500 pip loss.
then at 180 your remaining trade has a floating profit of 1200 pips.

from 180 the price is screaming back up to 192 in April 2002 and the trade is...
I would not consider price to be at extreme levels in 2001... a breakout on monthly for sure but not at extreme when considering monthly TF. I prefer to use the high/lows of last bull/bear run on weekly or monthly timeframe as price extremes. This way, it would be easy for me to know which direction to keep and which direction to exit. (Looking at any lower TF won't work as probability of extreme levels to be taken out on D1 and lower increases)

Just to address your question, I would manage my trade the exact same way I would manage any leg/probe/stack... based purely on price interpretation techniques taught by Graeme (but reversed as we apply these techniques to exits instead of entries). Yes, there will be several losses when price does a complete reversal and come back to a entry level (hopefully within the next few candles) but doing this across 28 pairs should see some growth at minimal effort.

Bottom Line: Price will always come back to entry point within a decade or two on most pairs. It should work out ok by closing several large legs in profit at year end and withdraw those profits in your bank's checking account as FX income for the following year.

EDIT: One could be creative by trading this approach inside of a breakout range (instead of waiting for price to breakout and have no ides which direction it will breakout!). Please don't listen to me and find your own way to make it work! This is not what Graeme teaches and I am just causing distraction by bringing this up.
Staying in my lane...
  • #5,572
  • Jan 20, 2013 6:58am Jan 20, 2013 6:58am
Quoting VEEFX
..... i really am hoping some more folks to agree or disagree with this approach before I go live with this philosophy.
Hi Vee,

You have quite a different vision regarding risk management compared to the majority and that might turn out to be revolutionary and pay off, it might be your edge.

For myself, floating profit is something that I do not think about, in the sense that today it can show 1 million, and tomorrow it can be void because anything can happen in the future, in the next second or the next hour, and if my floating profit would vanish, I would rather still be solvent.

Cheers,

Cam
  • #5,573
  • Edited 8:03am Jan 20, 2013 7:41am | Edited 8:03am
Quoting cameron1st
Hi Vee,

You have quite a different vision regarding risk management compared to the majority and that might turn out to be revolutionary and pay off, it might be your edge.

For myself, floating profit is something that I do not think about, in the sense that today it can show 1 million, and tomorrow it can be void because anything can happen in the future, in the next second or the next hour, and if my floating profit would vanish, I would rather still be solvent.

Cheers,

Cam
Glad to see your response Cam as I respect your opinion. Perhaps my thinking is a bit different looking at how broker's back office treats all hedged/nedged positios and adding FIFO on top of it becomes a game changer. I completely understand the attitude required towards large floating profits and what you (and Graeme) mentioned is the only way to maintain your sanity. I recall you having huge long legs on E/U. If you have not once tried to freeze your floating profits, then your 'maturity' and faith in this philosophy is just amazing. If you have taken any short positions (which you must have based on Graeme teachings) then it is an illusion as every time an opposite trade is taken, it kills your largest leg (atleast for me as I am a US citizen with hedging/fifo rules).

I have been thinking about this alternative for a long time (more than a year now) and there is no way to build large positions for US based traders if (1) BE traders die or (2) Freeze floating positions by going in the opposite direction By doing buy/Sell at important levels, I am inadvertently turning my floating profits into realized profits by doing mini-diversifications and not expose myself too much to sudden 500+ pip market volatility.

Key is to do it (1) only on MN/WK timeframe (2) across atleast 20 or as many pairs as possible to smooth out the curve (3) with a broker who does not close ALL positions upon margin call and charges zero spreads and margin for nedged positions.

hint: this approach also uses "TP to BE" instead of "SL to BE".... same cause and effect but logic reversed :-
Staying in my lane...
  • #5,574
  • Jan 20, 2013 8:02am Jan 20, 2013 8:02am
Vee, the way I get around the FIFO bs is by having two sub-accounts via Oanda. They use units rather than lots (100000 units being $1 per pip. 100001 units being $1.001 per pip etc). I use one sub-account primarily for longs and one for shorts. Moving equity between accounts ususually takes seconds as well. Hope this helps!
  • #5,575
  • Edited 6:38pm Jan 20, 2013 8:25am | Edited 6:38pm
Quoting Benevolent
Vee, the way I get around the FIFO bs is by having two sub-accounts via Oanda. They use units rather than lots (100000 units being $1 per pip. 100001 units being $1.001 per pip etc). I use one sub-account primarily for longs and one for shorts. Moving equity between accounts ususually takes seconds as well. Hope this helps!
Thanks Ben. i am aware of Oanda's implementation of FIFO and trade with them as well. As I have said earlier, I would not trade this long term position building approach with a broker that would close out all positions upon margin call. As floating equity grows you are making use of that large equity to build new positions and as Cam described, you simply cannot not worry about million dollar profit and build more positions without actually considering those floating profits as your own hard earned dollars. You are simply fooling yourself by tricking your mind at ease on minor equity retracements. The hard reality will kick in as I have experienced it once in late 2011... I lost all my months of position building with one silly fat finger mistake in position sizing and realized it only after I got a margin call closing all my legs. Luckily all my legs were in profit so no harm done but it did impact my future growth potential.

Oanda is also horrible when trading momentum based low risk entries as they always widen their spread to their advantage. The best thing with Oanda is that they allow weekend trading which is beneficial to long term position traders if they fear any negative news over the weekend.

EDIT: Even FXCM allows trading with their subaccounts and allow sub-account transfers within seconds. Unless you trade with a pure broker independent ECN, they are all crooks in my opinion.
Staying in my lane...
  • #5,576
  • Edited 1:54pm Jan 20, 2013 1:41pm | Edited 1:54pm
The fear about FIFO/nedging is misplaced. If you do not want to go through the business of subaccounts or adding an extra unit to your trade, just carefully document your entries and stops in Excel. Sit down for a minute and you will realize that any combination of positions can be replicated by a net position. What are stop losses and take profits but market orders?

I use subaccounts, but as a matter of convenience for my EAs. Don't think that accounting regulations will render obsolete your ability to hold for the future.

Regards,
xXTrizzleXx
  • #5,577
  • Jan 20, 2013 5:00pm Jan 20, 2013 5:00pm
Quoting VEEFX
I recall you having huge long legs on E/U. If you have not once tried to freeze your floating profits, then your 'maturity' and faith in this philosophy is just amazing. If you have taken any short positions (which you must have based on Graeme teachings) then it is an illusion as every time an opposite trade is taken, it kills your largest leg (atleast for me as I am a US citizen with hedging/fifo rules).
Hi Vee,

I can trade longs and shorts in the same account, but if I were to live in US, I would keep different accounts for longs/shorts.

About mentality, and keeping large legs and floating profits, you have to be happy with your current life and state of things without considering the floating profits, so that if those profits become void overnight, you will still be sane and happy. I do not actively look to freeze profits, sometimes that happens naturally because I added some shorts that get combined with the already existing longs.

Vee, I am under the impression that you are quite consumed with the whole business of trading, but it is really simple, you make a decision "up" or "down", place your bet and see if it paid off. Eventually it will pay off, but you have the be able to do this for many years, who can endure some 40 years in the future of continuous stress and still stay sane ? You have to make this be sustainable not only financially, but from a health point of view as well.

Cheers,

Cam
  • #5,578
  • Edited Jan 21, 2013 7:55am Jan 20, 2013 9:07pm | Edited Jan 21, 2013 7:55am
Quoting xXTrizzleXx
The fear about FIFO/nedging is misplaced. If you do not want to go through the business of subaccounts or adding an extra unit to your trade, just carefully document your entries and stops in Excel. Sit down for a minute and you will realize that any combination of positions can be replicated by a net position. What are stop losses and take profits but market orders?

I use subaccounts, but as a matter of convenience for my EAs. Don't think that accounting regulations will render obsolete your ability to hold for the future.

Regards,
xXTrizzleXx...
Trizzle - This is what I proposed within the first few months of this thread as I recall some folks raised similar concerns. I have been trading markets since 1998 doing the trade log in excel. It gets really old and labor intensive as years go by. I think I had posted a screenshot also of my excel blotter in this thread a while back and this discussion keeping popping up. Try doing this for a several years and you will understand how boring it is to manually log every trade. It is just not worth it in the long run. I have tried sub-accounts too for long/short positions which is also prone to manual errors (open long position in a short account and vice versa) and I find that also not worth the hassle. Since I now execute 90% of my trades via mobile platforms, it helps to simplify my life further and minimize button clicks, navigations, multi-account login/logoffs etc. I trade a portfolio of 26 pairs which in itself is a lot to handle on my mobile devise.

Cam - It is absolutely my desire to make trading as simple as 1-2-3 with health issues into consideration. I wish I was getting younger every day lol. What I have is something that almost requires only an hour per week and 20 minutes to monitor daily. I just have to let go and not look at markets for as many hours as I usually do out of personal passion and interest and not out of necessity! I have been busy putting a framework in place that requires me to make only key decisions on entry and exits in advance (but not predefined as that would be against Graeme's policy). Rest everything could be 'outsourced' offshore to one of my IT guys just to monitor infrastructure, position/margin mgmt and other important elements (and this individual will be clueless about trading in general).

I think this discussion (and this thread) is getting decayed further with my responses and participation. Let's leave it at that for now as I am not getting quality responses I am hoping for. Clearly there are not many US based traders implementing this trading philosophy. It takes someone to trade in a live FIFO enabled account to realize what I am trying to convey and no one here has expressed a strong opinion on account balance vs equity. Clearly, folks feel secured with seeing profit in their account balance forcing them to think short term and closing their trades early just to see some growth in their realized balance curve. Let's leave it at that :-

Thanks to all for your responses.
Staying in my lane...
  • #5,579
  • Jan 21, 2013 7:55am Jan 21, 2013 7:55am
i just updated my previous post
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  • #5,580
  • Jan 21, 2013 8:44am Jan 21, 2013 8:44am
Quoting xXTrizzleXx
The fear about FIFO/nedging is misplaced. If you do not want to go through the business of subaccounts or adding an extra unit to your trade, just carefully document your entries and stops in Excel. Sit down for a minute and you will realize that any combination of positions can be replicated by a net position. What are stop losses and take profits but market orders?
I agree. Create your own position sheet using Excel it will be very similar to a FIFO broker's statement plus you may save some money on interest charges.

1 tip I've found useful for Excel is to use Verdana 6 or 7 point. It makes it small on the screen but if printed out a lot of information can be held on one sheet. I also like my printed sheets to be landscape so they fit nicely between the edge of my desk and my keyboard, portrait makes them too large, for me anyway.
Road To Wisdom? To err and err and err again, but less and less and less...
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