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Building an equity millipede

  • #5,581
  • Jan 21, 2013 10:48am Jan 21, 2013 10:48am
As or the answer to whether one should include mark-to-market profits or only include realised profits. There is of course no right answer, it's up to you, what works best for you and your mind. Don't discount the role your mind plays. For me, I don't like to see large MTM profits build up and then get destroyed (doesn't always happen) so I don't include them, only taking note of realised profits and losses.

Vee however does include MTM and his arguements are very valid, but they're valid for HIM, not me whereas my method is NOT valid for him. We're both therefore right.
Road To Wisdom? To err and err and err again, but less and less and less...
  • #5,582
  • Jan 21, 2013 12:23pm Jan 21, 2013 12:23pm
Hi Vee,

It is extremely important to be able to separate the ACCOUNTING department from the R&D one and, unless you do that, you will never be able to develop the necessary confidence to reach that goal of yours as it was stated a couple of years ago.
If making a living out of trading is still your goal then note this:
Trading is no different than any other business undertaking and one needs to understand the basic rules of accounting such as working capital, cash flow, gross income, net income, expenses, taxes and so on...
There's a reason businesses, no matter their nature, pay the big bucks to accountants and financial advisers: It takes a lot more than keeping an eye on the cash register.
Imagine that, instead of a career in trading, you choose to open a flower-shop in a very busy train station and make it your one and only source of income for the rest of your life ( a bit scary if you depended on a paycheck your whole life.)
Your high school days delivering bouquets in the neighborhood will not be of any help if you do not switch your perspective from “ I'm finally going to buy that used red car that surely will impress Susie” to “ it is going to cost me this much in fixed costs, variable costs and it is going to take selling this many flowers to reach my breakeven point.
Being the best botanist in the world will, with some exceptions, be more of a handicap than an asset.
Now that you have set up shop, imagine finding yourself standing in front of the cash register at all time worrying whether the next passerby still loves his wife/girlfriend enough to spend a few bucks on those beautifully arranged roses of yours.
Trading is exactly the same: We can spend hours upon hours debating tulips and roses but the bottom line remains whether at the end of the week/month one can draw a paycheck to cover his/her living expenses outside the flower-shop itself.
Interestingly enough, the very strategy that got me margin-called five years ago is the same that started generating a very decent income once I started applying the very basic but rigid rules of accounting and investment.
When Pipeasy spoke of diversification, I initially got it completely wrong. It took a while before I realized that all he meant, in my opinion of course, was reaching his breakeven point where all of his budgeted expenses are covered and, from then on, can trade with confidence knowing that his future is not in the hands of a moody market.
Only then does the R&D department kick in.
After all, some lose money selling water in the desert while some others make a decent living selling umbrellas.
Cheers.
"For Sale: Baby Shoes. Never worn." Ernest Hemingway
  • #5,583
  • Jan 21, 2013 9:35pm Jan 21, 2013 9:35pm
Quoting VEEFX
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...


I am not sure what quality responses you were hoping for. I suppose you can make arguments about what different people find useful to focus on. But I don't know how you would argue that anything other than equity really matters. That is the only number that is real (ie you can get it and buy a car with it).

I do not currently trade long term millipede but do deal with similar issues due to FIFO and hedging limitations. After trying and even implementing many complex solutions I have finally resolved this well enough for myself. Basically I just consider all the layering of rules and discretionary decisions results in a single net position that is handled within a very simple EA. This keeps things simple and minimizes exposure and transactions costs.

The only drawback to this is the need to have the trading app constantly up but with VPS that is really not a major issue.

If you think about it a bit you will realize that a millipede is nothing more than a net position with a commitment to enter at the break of certain prices. You could theoretically just forgo the initial trading profits and set up a large set of commitments to capture the long term trend.
  • #5,584
  • Edited 1:59pm Jan 22, 2013 1:27am | Edited 1:59pm
Quoting Paradox
I am not sure what quality responses you were hoping for. I suppose you can make arguments about what different people find useful to focus on. But I don't know how you would argue that anything other than equity really matters. That is the only number that is real (ie you can get it and buy a car with it).

I do not currently trade long term millipede but do deal with similar issues due to FIFO and hedging limitations. After trying and even implementing many complex solutions I have finally resolved this well enough for myself. Basically I just...
you just gave me an idea to tweak the Average Buy/Sell consolidated positions indicator to create average buy/sell order line based on Stack ID. I think considering each stacking episode as individual "block of trades" using the comment field in MT4 with it's own BE buy/sell average level will come the closest FIFO implementation to Graeme's approach. I already have this indicator tweaked which works in conjunction with alerter.mql to alert me when price reaches the average buy/sell price. Writing an EA to check if any of the average price has reached and then close all the trades that belong to the specific stack ID would be one way to deal with FIFO. Still not a perfect solution but close as we are moving each stack id into BE and older legs are still intact.

edit: no special EA is required... just a minor tweak to the alerter indicator to insert a "close all orders with same comment text" script/logic is doable.

edit1: thinking further, this would also free up my mind with pip accounting and increase my already 'aggressive' strategy even further with stacking on multiple pairs at the same time without increasing risk/exposure but safer as we now have hidden BE levels from our broker. I am liking this much better as I think more. Feeling kinda stupid why I didn't think about this creative possibility which has been in front of me all along. Thanks Paradox !!!

edit2: I also learnt a bit of MQL on how to keep the mt4 editor open at all times, modify the parameters in the code itself hit F5 to compile and change parameters on the fly based on the price interpretation. This helps me with the negative aspects of predefined entries/exits that Graeme advocates against. Randomizing our trading approach in a random and unpredictable market has some benefits.
Staying in my lane...
  • #5,585
  • Edited 1:45pm Jan 22, 2013 1:33am | Edited 1:45pm
Quoting BizFx
Hi Vee,

It is extremely important to be able to separate the ACCOUNTING department from the R&D one and, unless you do that, you will never be able to develop the necessary confidence to reach that goal of yours as it was stated a couple of years ago.
If making a living out of trading is still your goal then note this:
Trading is no different than any other business undertaking and one needs to understand the basic rules of accounting such as working capital, cash flow, gross income, net income, expenses, taxes and so on...
There's a reason...
This is precisely the kind of response I was looking for BizFX! Quite an gem of a post you got here. It does not apply to me though... will update this post later when I have some spare time.
Staying in my lane...
  • #5,586
  • Jan 22, 2013 3:23am Jan 22, 2013 3:23am
Quoting BizFx
When Pipeasy spoke of diversification, I initially got it completely wrong. It took a while before I realized that all he meant, in my opinion of course, was reaching his breakeven point where all of his budgeted expenses are covered and, from then on, can trade with confidence knowing that his future is not in the hands of a moody market.
Hello, Biz.
You make a very valid point in that post. I have thought about that myself, after a few times watching floating profits skyrocket initially and then fall even faster below the break-even point. However, I couldn't figure out "rigid" rules about that. Obviously, you don't want to cover your investment costs as soon as the break-even point is reached, since there would be no profits and no assets left to generate those. Also you don't want to sit there and wait for the mercy of the market. I guess I need to wait until some kind of threshold value is reached, then cover the costs and let the remainder grow for free.
  • #5,587
  • Jan 22, 2013 3:45am Jan 22, 2013 3:45am
Quoting BizFx
When Pipeasy spoke of diversification, I initially got it completely wrong. It took a while before I realized that all he meant, in my opinion of course, was reaching his breakeven point where all of his budgeted expenses are covered and, from then on, can trade with confidence knowing that his future is not in the hands of a moody market.
Yes, good way of looking at it. G once said that when you diversify you're now playing for free!
Road To Wisdom? To err and err and err again, but less and less and less...
  • #5,588
  • Jan 22, 2013 3:55am Jan 22, 2013 3:55am
Only take the 2nd trade!

Here's a concept for people struggling with putting on good positions that 'last'.

One of the problems with trading this method, in fact any method that relies on direction continuing is the curse of getting stopped out at unchanged. So we follow a break in the market, price goes 100 ticks onside before a strong rally (assume short position) pushes price back up to take our position(s) out at unchanged THEN the real move begins and we're not on it.

Therefore, DON'T take the first trade, note where it triggered and then wait for the re-test, then not only go short but stack AGRESSIVELY. This is the 2nd trade.

Yes, you will miss some good trades but that negative but I think overall one might have a far more robust trading strategy. Something to think about anyway.
Road To Wisdom? To err and err and err again, but less and less and less...
  • #5,589
  • Edited 1:12am Jan 23, 2013 1:00am | Edited 1:12am
Quoting Calculus
Only take the 2nd trade!

Here's a concept for people struggling with putting on good positions that 'last'.

One of the problems with trading this method, in fact any method that relies on direction continuing is the curse of getting stopped out at unchanged. So we follow a break in the market, price goes 100 ticks onside before a strong rally (assume short position) pushes price back up to take our position(s) out at unchanged THEN the real move begins and we're not on it.

Therefore, DON'T take the first trade, note where it triggered...
I prefer to be the first in line when I start stacking based on compelling momentum as most likely price will retrace back to yesterday's low and take out positions i.e. elasticity effect, newton's law etc that Graeme talks about. A probe is just a penny to throw in the penny jar in my mindset. A stack is also considered just that with the mindset that I can eventually take my penny jar to a coinstar machine at the grocery store and convert into dollar bills to pay for my 'expenses'.

At times you lose (in range market) and at times you gain ( in breakouts from major line) being at mercy of this beast. Once I stop stacking, I want to see min S/R created between current price and average price levels on gauge the possibility of survival of the entire stack. ( as shown in the second M1 chart for folks with FIFO restrictions)
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Staying in my lane...
  • #5,590
  • Jan 23, 2013 1:41am Jan 23, 2013 1:41am
Hello everyone,
In post #37 Pipeasy wrote the following:
“
Good day all

Something I appreciate more as I get older is the beautiful weather and how it plays on my garden. Today is one of those days. Just before I head out for a lunch appointment I thought I tell you a story about myself.

Everyone has vice. I dont smoke, drink heavily or chase tail however I do collect comic books. My favourite is superman and Im an avid collector. There has been an occassion where I actually attended an auction house overseas to bid for a prized number in the series. In this trip I befriended a collector who had a wide interest and has been very successful in his field. I welcomed his friendship and attended few of the auctions with him.

What I noticed at the time of the auction was that he was buying quiet a few pieces of antiques. I dont personally see the point of buying a marble head of a roman imperial for $600K even if it was 1800 years old. We were obviously not on the same level in antiques. He looked somewhat disappointed when I bid $5000 for an egyptian jar apparently few thousand years old but I must admit I only bid cause I got carried away. Luckily it went under the hammer for much more. And it wasnt a jar but some important washing bowl..

Anyways, we had few quiet drinks and got to know each other alot more. Our common grounds was that we were both traders. Trading different instruments but traders nonetheless. He continued telling me that his trip was not only about buying but also selling. From what he was showing me, he had sold few millions of antiques the last few months and his trip is just about to conclude. I asked what he considers to be the important aspect of his success and he said it was nothing but just buying at reasonable price and holding cause he knows that antiques of this calibre will only rise in value.Not all of them but most of them and he knows which ones do.

He noticed that I wasnt talking much and he returned the same question to me. I replied, 'wilson, i do the same as you do..'

Are you a trader? Then be a trader.We buy items to hold indefinitely increasing its value. The whole purpose of a trader is to buy something cheap or reasonable and selling it later on for alot more. Thats what I perceive as a trader.

Moving on. “ (end of quotes)

Talking about candlesticks, time frames and all other technological marvels makes absolutely no sense to me unless the big picture is drawn and fully understood. There is a reason the best Chefs make the worst restaurant owners and end up filing for bankruptcy (in other words, getting margin-called) within a few weeks of setting up shop. While they were busy showing off their recipes and their culinary abilities, they failed to realize that being an owner/manager was a whole different ball game and that the focus should have been more on paying salaries, purchasing equipment, paying hefty bills, dealing with dry seasons (and not so dry ones) , lawsuits, insurance, managing cash flow, allocating capital and so on...
McDonald's is a huge success because it is well managed as a corporation, not because it makes the best dishes. It does not really matter, from this perspective, whether it is a burger joint or a five-star restaurant with the most sought after French Chef. The scale might be different, but the same economical criteria applies equally to both.
Cheers.
"For Sale: Baby Shoes. Never worn." Ernest Hemingway
  • #5,591
  • Jan 23, 2013 8:40am Jan 23, 2013 8:40am
Hello everyone,
One feature in MT4 I can't go without is the comment column and I never enter any trade without attaching a comment to it.
I was wondering if any of the posters make use of it and how.
Cheers.
"For Sale: Baby Shoes. Never worn." Ernest Hemingway
  • #5,592
  • Edited 2:29pm Jan 23, 2013 9:40am | Edited 2:29pm
USDCAD reached 1.0 parity... what a good looking spike :- placed a short probe to see what happens. USE ALERTS AT STRATEGIC LOCATIONS INSTEAD OF STARRING AT SCREENS !!!

So here's a perfect example of why I was saying about strategic placement of positions where price may not come back (for weeks/months). 1.0 parity... pice will hug this level for a few days. It has to decide whether to shoot up to 1.10 or back down to .90. Place both buy and sell and let the market decide when to get out. I got my short in tiny positive pips. It I go long and freeze it for a week or two, no harm done as spread/swap is covered... but let's not sit idle... go long and short and freeze/unfreeze along the way until market is stalled trying to find direction one way or the other. When it breaks out, you should already have a block of trades working hard for you to aid in future growth. if price comes back to parity mid year, no harm done as I will/should have several short-term diversifications to cover of short-term losses :-
Staying in my lane...
  • #5,593
  • Jan 23, 2013 9:40am Jan 23, 2013 9:40am
Hi Vee,
The solution to you “logistical” problems might be here in Ontario.
What part of the US are you from? You don't need to be specific. Just the region.
Thanks.
"For Sale: Baby Shoes. Never worn." Ernest Hemingway
  • #5,594
  • Jan 23, 2013 11:27am Jan 23, 2013 11:27am
Quoting BizFx
Hello everyone,
One feature in MT4 I can't go without is the comment column and I never enter any trade without attaching a comment to it.
I was wondering if any of the posters make use of it and how.
Cheers.
You type a comment into it when enter a order, eg, breakout entry 1, my favour entry, etc.

add a trade comment when EA create a order, then, your EA can search fast for that trade or order by search string in comment.

Comment is very good feature in MT4. I can eye view all my trades by comment, due to EA hold hundred of trades, sometimes.
  • #5,595
  • Jan 23, 2013 11:39am Jan 23, 2013 11:39am
EA enter 3 trades at a fixed price 1.3300, as "buy 1", "buy 2", "buy3". Then, you can search, get one of "buy i", then, you can modify stoploss, target in terms of price move, eg, exit "buy 2".
  • #5,596
  • Jan 23, 2013 12:28pm Jan 23, 2013 12:28pm
You should not rely too much on the comment field. The MT4 server can change the comment under some circumstances like partial close. AFIK, Oanda does not allow entering any comments.

I think that a more reliable way would be storing information in a local file is CSV format.

Cheers,
Aimak

Quoting Jack168
You type a comment into it when enter a order, eg, breakout entry 1, my favour entry, etc.

add a trade comment when EA create a order, then, your EA can search fast for that trade or order by search string in comment.

Comment is very good feature in MT4. I can eye view all my trades by comment, due to EA hold hundred of trades, sometimes.
  • #5,597
  • Jan 23, 2013 12:37pm Jan 23, 2013 12:37pm
ok, thanks.

Too many different versions of mt4. Some dealers can add or remove functions to mt4. A problem ?

I use fxcm and ibfx mt4. I go to check.
  • #5,598
  • Jan 23, 2013 2:11pm Jan 23, 2013 2:11pm
Quoting Aimak
You should not rely too much on the comment field. The MT4 server can change the comment under some circumstances like partial close. AFIK, Oanda does not allow entering any comments.

I think that a more reliable way would be storing information in a local file is CSV format.

Cheers,
Aimak
Good point. my broker also messes with comment field. CSV would increase your disk i/o. One creative broker-independent option is to create order lines on the chart with the same characteristics as the default open order line we see on the chart but with same foreground as background to avoid clutter if too many trades are open at the same time. The EA could then use these hidden lines just like the comment field for trade management. Unfortunately, it would help in trading statistics analysis.
Staying in my lane...
  • #5,599
  • Jan 23, 2013 3:35pm Jan 23, 2013 3:35pm
Quoting VEEFX
USDCAD reached 1.0 parity... what a good looking spike :- placed a short probe to see what happens. USE ALERTS AT STRATEGIC LOCATIONS INSTEAD OF STARRING AT SCREENS !!!

So here's a perfect example of why I was saying about strategic placement of positions where price may not come back (for weeks/months). 1.0 parity... pice will hug this level for a few days. It has to decide whether to shoot up to 1.10 or back down to .90. Place both buy and sell and let the market decide when to get out. I got my short in tiny positive pips. It I go long and freeze it for a week or two, no harm done as spread/swap is covered... but let's not sit idle... go long and short and freeze/unfreeze along the way until market is stalled trying to find direction one way or the other. When it breaks out, you should already have a block of trades working hard for you to aid in future growth. if price comes back to parity mid year, no harm done as I will/should have several short-term diversifications to cover of short-term losses :-
Another quality post
Thanks for the little bulb relighting up Vee

cheers scalpz
Target 2 : Stoploss in the green
  • #5,600
  • Edited 6:44pm Jan 23, 2013 6:23pm | Edited 6:44pm
Hello everyone,
Unlike in the US, the FIFO rule does not apply in Canada. One can still hedge within the same account just like in any other country in the world and apply the principles learned from Pipeasy without the added hassle of re-engineering the wheel.
A lot of serious and focused traders in the US find FIFO to be a great source of frustration because of the added workload necessary to go around it.
The US government, through its regulatory arm, has also made it a priority to go after every foreign broker that tries to cater to US residents. A lot of these brokers, otherwise very legitimate, were threatened with lawsuits, forced to pay six-figure fines …effectively banning what used to be an important customer base.
That was the reason I mentioned Ontario. It was in no way to encourage immigration, Vee.
Building an equity millipede, if it is still the focus of this thread, requires tracking every single trade with mathematical precision over a very long period of time. Daily entries are not always “designed” to make a killing and are always treated as part of a group with a very specific do-or-die mission. Though one can't predict the market's movements, he/she can certainly and easily force it to make a call on the existing setup with minimal risk in the shortest amount of time.
That's where the comment column comes in handy.
When used as a labeling tool ( as opposed to a descriptive one) it can be made into a very straightforward, efficient and non-lagging indicator. One does have to show some creativity in the way it is used though since the comments will have to follow a certain alphabetical scheme just like serial numbers or license plates do. The comment will carry all the necessary information that will identify the intended nature, purpose and status of the trade it is attached to. It will be useless otherwise.
I personally find that MT4 provides all the necessary tools and reports I will ever need and hope that, just like Microsoft's Project, no major changes will ever be brought to it.
Cheers.
"For Sale: Baby Shoes. Never worn." Ernest Hemingway
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