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As Easy as "PI"

  • #421
  • Feb 13, 2013 8:54pm Feb 13, 2013 8:54pm
The more I look at this and study the charts, I come to feel that the problem isn't with coming up with a new exit strategy. I think the trailing MA 22 will work fine. There's a few cases on a steep parabolic rise/fall where a strong reversal has to travel quite a ways before hitting the MA, but we'll deal with that. I am going to adjust my lot sizes though. I'm switching to a 2 ADR initial stop with a 3% of equity of risk. I'll see if that gives me a nice balance between lot size and room to let the trades move.
  • #422
  • Feb 15, 2013 2:08am Feb 15, 2013 2:08am
Quoting spyderman
The more I look at this and study the charts, I come to feel that the problem isn't with coming up with a new exit strategy. I think the trailing MA 22 will work fine. There's a few cases on a steep parabolic rise/fall where a strong reversal has to travel quite a ways before hitting the MA, but we'll deal with that. I am going to adjust my lot sizes though. I'm switching to a 2 ADR initial stop with a 3% of equity of risk. I'll see if that gives me a nice balance between lot size and room to let the trades move.
With a method like this, keeping your risk as a percentage of your equity is fine when you're catching a trend, but when it starts to slow down, the latter positions are so large in relation to your former ones, that with a sizable retracement, your equity curve will hit the skids. Maybe you can consider standard swing trading money management involving keeping your risk fixed, or reduce it as you pyramid into positions to protect yourself from such volatility swings in equity. It may not result in the equity explosions that dazzle your eyes, but it goes a long way to reducing volatility and preserving capital.

Additionally, you're flitting from one exit method to another, partially due to all the input you are getting about how they can be 'improved'. With a method where you are trailing your profits - letting your winners run, whilst cutting your losses short - you should be coming out ahead with a decent strategy. Any exit method is going to have those sloppy exits that make you think twice about what you're doing, but such exits will be the furthest thing from your mind when you end up nabbing those memorable ones that allow you to capture the meat of a very large trend. I guess what I'm trying to say is that no exit method is perfect, and that is something you have to accept if you want to commit to a strategy and trade it unwaveringly.

Regards,
xXTrizzleXx
  • #423
  • Edited 6:15am Feb 15, 2013 5:44am | Edited 6:15am
What do you think about, not to increase now the lotsize regarding equity risk (3%) by a larger lotsize in reference to a single new position of a pair, instead of reinvest and share the risk to multiple positions?
I´d like to prefer to stable multiple orders with equal lotsize for more flexibility, to harvest profits in TP, especially in the long run.

Anyway I can try to scalp a daily move with higher lotsize (depends on the pair and already taken profit), using partial profit, very closed to actual movements.
But this additional intraday method depends on personal skills and experience, to enter a scalp order intraday during a strong momentum with a higher lotsize, to let an order alive after partial profit in the long run.
Might not be match with the longterm-strategy in generell.

However, the bigger problem seems to me, how to protect realized profits in the longterm run. It should be known, that we have to consider drawdowns (by market fluctuations/movements), which are indicated by experts by a common value of 25-30% in reference to the equity.
Trading with basket longterm, the leverage will influence the account heavy and strongly.
Weekly movements/retracements (appr. 350 pips movement) can move the equity very fast up and down > 25-30% equity, even more. On the other hand, no position will live infinitely. In addition with a position closed in profit (at an overheat homerun), I will get the chance to reinvest the profit be it completely or partially for any appropriate pair, if the profit has to be protected (partially) by SL.
If I e.g. will close or protect by SL an order in profit and I would this order immediately substitute, how did I loss or win pips in the further progress under equal conditions?
The risk would remain equal, despite of costs.

Independent from a.m. thoughts, as more pips any order performed, as closer the SL could be adapted. The SL protect the realized profit. If price retrace to SL , what do you think, I can place in advance pending orders?

Having in mind and assuming, if I will start e.g. with an account of $5,000.
That I´d call my risk-capital or invest. First of all, I have to protect the invest in the starting period using e.g. a RR of 1-2% in the starting period.
Assuming the account will take profit and grow constantly up to $10,000.
Does it makes sense for retail-traders to trade at this edge already with an increased lotsize?
What about the starting-invest e.g of $5,000?
For myself, I´d decide not to deal furtheron with the starting-invest.
I will protect or remove (also partially) the starting-account, which remains untouchable to come below, would make me happy and relaxed.
If not, especially for beginners, I would not challenge the risk to touch or deceed the starting account after take profit by higher risks. I´d like to protect my invest partially. Let´s start and repeat the game again and again, but always after take profit. I´d never risk my starting/basic-account.

Maybe this thoughts are not to complicated and oldfashioned…

Trade well
Over60
Enter Signature
  • #424
  • Feb 15, 2013 6:53am Feb 15, 2013 6:53am
Quoting xXTrizzleXx
With a method like this, keeping your risk as a percentage of your equity is fine when you're catching a trend, but when it starts to slow down, the latter positions are so large in relation to your former ones, that with a sizable retracement, your equity curve will hit the skids. Maybe you can consider standard swing trading money management involving keeping your risk fixed, or reduce it as you pyramid into positions to protect yourself from such volatility swings in equity. It may not result in the equity explosions that dazzle your eyes, but...
Trizzle,

Appreciate your input. I totally agree with your points. As I mentioned earlier I definitely think the equity swing problem is much more an issue with lot sizing rather then exit method.

I don't really consider what I'm trying to do as 'flitting' from one to another. This strategy is not yet 3 months old, which is nothing for a long term strategy. There are going to need to be refinements or adjustments for me, at least till I come up with what I consider a balanced approach.

I'm comfortable right now with the 22MA exit. Little bit quicker exit than entry, which I like.

But the lot sizing is still a question I'm thinking about. Will do that at greater length over the weekend.

Thanks again for your input and keep it coming.
  • #425
  • Feb 15, 2013 7:20am Feb 15, 2013 7:20am
Quoting Over60
What do you think about, not to increase now the lotsize regarding equity risk (3%) by a larger lotsize in reference to a single new position of a pair, instead of reinvest and share the risk to multiple positions?
I´d like to prefer to stable multiple orders with equal lotsize for more flexibility, to harvest profits in TP, especially in the long run.
Hey 60. If I understand you correctly, you're suggesting to enter just once at the beginning and ride that one position to the end, perhaps at a higher % lot size.

That's totally up to you if that's how you want to play it.

Personally, I like compounding/stacking of trades. When we hit that long trend, it obviously makes up for a lot of the losers. If I was entering only once at the beginning, I might hit many losing trades right off that would be harder to compensate for with just one position in the favorable trades.

Quoting Over60
However, the bigger problem seems to me, how to protect realized profits in the longterm run. It should be known, that we have to consider drawdowns (by market fluctuations/movements), which are indicated by experts by a common value of 25-30% in reference to the equity.
Trading with basket longterm, the leverage will influence the account heavy and strongly.
[color=black][font=Verdana]Weekly movements/retracements (appr. 350 pips movement) can move the equity...
Again, if I'm reading you right, I think you're referring to unrealized profit rather than realized. If it's realized it's already been closed and is on your balance side, so not effected by market movement.

If we tighten those s/l's too much or take profit early, we may transfer profit from unrealized to realized sooner but sacrifice the upside potential.

As far as the rest, everyone has to come up with a money management plan that fits their trading style and financial situation.
  • #426
  • Feb 15, 2013 7:24am Feb 15, 2013 7:24am
Quoting spyderman
Trizzle,

Appreciate your input. I totally agree with your points. As I mentioned earlier I definitely think the equity swing problem is much more an issue with lot sizing rather then exit method.

I don't really consider what I'm trying to do as 'flitting' from one to another. This strategy is not yet 3 months old, which is nothing for a long term strategy. There are going to need to be refinements or adjustments for me, at least till I come up with what I consider a balanced approach.

I'm comfortable right now with the 22MA exit....
You and many traders are truly prof and/or experienced.
If you may, in fact something mentioned I am not quite understood.

What you mean by "lot size" vs. "exit" vs. "equity problem" (how?) ?
Any illustration with numbers?

Thanks for your time, spyderman and seniors.

p. s. Good to see your pips growing - wow 23K pips. Keep it up.
  • #427
  • Feb 15, 2013 7:43am Feb 15, 2013 7:43am
I do not use your system but I see that you have problems to find solutions.
perhaps using murray could do.
while monitoring the trend in w1 and Mn

greetings.
Attached Image (click to enlarge)
Click to Enlarge Name: murrey.gif Size: 41 KB
  • #428
  • Feb 15, 2013 8:20am Feb 15, 2013 8:20am
Quoting msia.metal
You and many traders are truly prof and/or experienced.
If you may, in fact something mentioned I am not quite understood.

What you mean by "lot size" vs. "exit" vs. "equity problem" (how?) ?
Any illustration with numbers?

Thanks for your time, spyderman and seniors.

p. s. Good to see your pips growing - wow 23K pips. Keep it up.
Msia,

As you've been keeping up with the thread, I'm sure you've seen the huge swings in equity (unrealized profit) that have gone on with this system. That's the problem.

Most people couldn't or wouldn't want to handle an account that goes from 3,000 equity...up to 30,000 equity...then down to 6,000...up to 16,000...all in the space of a couple of months.

We've discussed closing our trades "exiting" before we they have a chance to retrace and loose equity. But no matter where you decide to exit, you're going to give pips back to the market in swing trading. You just can't perfectly hit the exact tops or bottoms.

But the exit is not what is creating the equity swing problem, in my and other's opinions. It's the lot size or position size of the trade.

Many if not most, increase their position size as their account grows. If you do that with this strategy, lets say you end up with 14 positions in UsdJpy, like I have now.

The first position you took has a relatively low lot size. As time goes by and you stack positions, you may well increase your lot size (assuming your account has been growing). The problem is now those recent positions are worth a lot more per pip of movement then the earlier positions. So when the trend reaches it's top/bottom and retraces the negative effect from those recent large positions is exaggerated in comparison to the earlier positions.

Hence the discussion on whether to increase lot size as you stack positions in a given trend, or do you establish a lot size for that cycle and use the same one throughout the trend until all are closed.
  • #429
  • Edited 9:05am Feb 15, 2013 8:58am | Edited 9:05am
Hi,

Just to add a bit to the problem about swings and equity drawdown, I was thinking on below lines:


Say we spot a change in long term trend, lets suppose upwards, and we take our 1st position with a stop loss of 300 pips( this could be whatever you are comfortable with)..

As the trend establishes in a week or two, we add 2nd position with a stop loss of say 300 again...

And we add a 3rd position in say week 3, again with a stop loss of 300 pips..


Now fast forward to week 6, we've not added any positions, so we have 3 positions and may be few pips and lot of equity under control.

Suppose we see a possible trend reversal( now I know it is not easy to spot or conform such a thing), but in my mind I worry that markets are about to reverse and would affect my equity.

At this point what if I move stop loss of my very 1st position to as close as 50pip(could be whatever you are comfortable with), 2nd position at 75pips and 3rd at 100 pips.

With this, if the long term trend reverses in real, my 1st position with longest run and most pips would close out first, bagging most profit. 2nd would close out after this one with some profit and 3rd would close out last with may be with little profit.

All in all I am thinking on the concept of protecting the positions in order they were opened. This way, if there is trend reversal we might save equity and pips. If trend doesn't reverse all the way, may be we'll still be in the trade with 2nd or 3rd or both positions and would still have bagged the pips and equity from 1st.

Once the trend resumes we can always add 4th and 5th position and increase our pips and equity.

I hope I am clear in my explanation and don't offend or upset anyone....

All the best all...
  • #430
  • Feb 15, 2013 9:08am Feb 15, 2013 9:08am
Quoting gj6n68
Hi,

Just to add a bit to the problem about swings and equity drawdown, I was thinking on below lines:


Say we spot a change in long term trend, lets suppose upwards, and we take our 1st position with a stop loss of 300 pips( this could be whatever you are comfortable with)..

As the trend establishing in a week or two, we add 2nd position with a stop loss of say 300 again...

And we add a 3rd position in say week 3, again with a stop loss of 300 pips..

Now fast forward to week 6, we've not added any positions, so we have 3 positions...

At first glance, not sure I'd want to close that first position first. That's where my muscle is, and if trend resumes I can't duplicate that equity with new positions. As far as bagging most pips if trend reverses. of your positions are all the same lot size, you'd bag the same total pips no matter what order you closed them in. Unless I'm doing the math wrong in my head.
  • #431
  • Feb 15, 2013 9:20am Feb 15, 2013 9:20am
Quoting spyderman
At first glance, not sure I'd want to close that first position first. That's where my muscle is, and if trend resumes I can't duplicate that equity with new positions. As far as bagging most pips if trend reverses. of your positions are all the same lot size, you'd bag the same total pips no matter what order you closed them in. Unless I'm doing the math wrong in my head.
We are taking same lot size on each position.

And yes you can't duplicate that equity with new positions, but you wont' loose that equity either if you've bagged it by closing your position.

It is better to have muscle which is safe, rather than muscle without any energy (joking, no offence..)

I know the first position is the muscle, but if the trend reverses and you have all your stops at around 300 pips (say where MA crosses), you might have positions multiplied by 300pips (distance to 200MA) from current high. That would be loosing 900pips.

If we did how I was proposing, you'd only loose 50+75+100=225, which seems a lot of pips, but if you have more positions, you'll be able to save lot many pips, especially if you change how tight the stop losses are. And this is lot less compared to 900 pips. And well the equity which would be washed away by 900 pips.

I hope I am making sense... unlesss I've completely lost it on a friday..
  • #432
  • Feb 15, 2013 9:49am Feb 15, 2013 9:49am
Quoting gj6n68
We are taking same lot size on each position.

And yes you can't duplicate that equity with new positions, but you wont' loose that equity either if you've bagged it by closing your position.

It is better to have muscle which is safe, rather than muscle without any energy (joking, no offence..)

I know the first position is the muscle, but if the trend reverses and you have all your stops at around 300 pips (say where MA crosses), you might have positions multiplied by 300pips (distance to 200MA) from current high. That would be loosing 900pips.

If...
No, I agree that you'd save pips by tightening the stops. I was referring to the order that you tighten the stops:

Let's do some math. Hey, its Friday

Assume market moves up 200 pips between positions.
Scenario 1 is what you mentioned...Oldest position has tightest s/l (50,75,100)
Sceanrio 2 is reversed...Newest position has tightest s/l

1st position - no change

2nd position opened - 1st position is +200 pips

3rd position opened - 1st position is +400 pips, 2nd position is +200

Market uncertainty or whatever and you tighten stops - 1st position is +600, 2nd is +400, 3rd is +200

Market drops 50 pips:
Scenario 1 = 1st position closed for 550 pip profit, 2nd position +350, 3rd position +150
Scenario 2 = 1st position +550 pips, 2nd position +350 pips, 3rd position closed for 150 pip profit

Market drops 25 pips more:
Scenario 1 = 1st position already closed for 550 pip profit, 2nd position closed for 325 pips profit, 3rd position +125
Scenario 2 = 1st position +525 pips, 2nd position closed for 325 pips profit, 3rd position already closed for 150 pip profit

Market drops 25 pips more:
Scenario 1 = 1st position already closed for 550 pip profit, 2nd position closed for 325 pips profit, 3rd position closed for 100 pips profit.
Total profit of scenario 1 = 975 pips
Scenario 2 = 1st position closed for 500 pips profit, 2nd position already closed for 325 pips profit, 3rd position already closed for 150 pip profit
Total profit of scenario 2 = 975 pips
  • #433
  • Feb 15, 2013 11:06am Feb 15, 2013 11:06am
Quoting spyderman
No, I agree that you'd save pips by tightening the stops. I was referring to the order that you tighten the stops:

Let's do some math. Hey, its Friday

Assume market moves up 200 pips between positions.
Scenario 1 is what you mentioned...Oldest position has tightest s/l (50,75,100)
Sceanrio 2 is reversed...Newest position has tightest s/l

1st position - no change

2nd position opened - 1st position is +200 pips

3rd position opened - 1st position is +400 pips, 2nd position is +200

Market uncertainty or whatever and you...

I get it now...
  • #434
  • Feb 16, 2013 5:07am Feb 16, 2013 5:07am
Only for clarification and to avoid missunderstandings.
Sorry, I did use mistaken the term “staple orders” instead of “stack orders”.
Please replace the terms.

The difference between “realized” and “unrealized” profit, I define as follow.
“realized profit” means positions closed or protected with SL > entry.
With other words: The equity concerning and with incorporated open orders is protected partially.
The MT4 terminal report is a little bit confusing, because it does indicate only closed orders in the equity-curve, but not considering and incorporating the floating P/L of still open orders.

The term “unrealized profit” means, that open positions are not already protected
by a stop > entry (positions are only protected by emergency stops < entry).

Trade well

Over60
Enter Signature
  • #435
  • Feb 17, 2013 7:09am Feb 17, 2013 7:09am
Looks like we may see some down gaps in the JPY pairs tonight. Will be interesting to see how the market responds to the G-20 comments this weekend..
  • #436
  • Feb 17, 2013 8:34am Feb 17, 2013 8:34am
So far very interesting trade explorer, just curious to see the trend changing phase & ranging phase results. But all said, that intelligent trader is inside u. Keep up the good work & happy pipping.

Congo & Best of Luck for future trades.

Cheers !
  • #437
  • Feb 19, 2013 9:18am Feb 19, 2013 9:18am
so this Feb, the system incurred 50% DD of the whole account? is the MM a bit aggressive here?
  • #438
  • Feb 19, 2013 9:27am Feb 19, 2013 9:27am
Quoting charvo
so this Feb, the system incurred 50% DD of the whole account? is the MM a bit aggressive here?
50% DD on the floating equity, yes. Not fun. Of course if there hadn't been such a huge run up in the equity, you wouldn't see the DD.
As far as aggressive MM, that's for each one to decide based on their risk tolerance. Personally I don't view risking 1-3% of account equity with a trailing stop overly aggressive. Nor is trailing the stop by a couple of ADR. Especially for a smaller account size. If I was dealing with tens of thousands of dollars then I would personally want to drop the risk down.
  • #439
  • Feb 19, 2013 9:31am Feb 19, 2013 9:31am
thanks for your reply.

of course, the risk comes with your astounding return. if DD vs Return = 1:2, that's well acceptable.

btw, in 2013, did you increase your lotsize with the growth of your capital?

Quoting spyderman
. Of course if there hadn't been such a huge run up in the equity, you wouldn't see the DD.
  • #440
  • Feb 19, 2013 9:51am Feb 19, 2013 9:51am
Quoting charvo
thanks for your reply.

of course, the risk comes with your astounding return. if DD vs Return = 1:2, that's well acceptable.

btw, in 2013, did you increase your lotsize with the growth of your capital?
That's one of the aspects I've really been struggling with if you've read through the recent posts. I have been increasing lot size as equity increases. We'll see how my current solution goes over the next weeks.
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