Multi-Lot Multi-Timeframe Position trading

Since I see no questions or comments, I'll ramble on a bit while waiting for the market to work it's magic. In my own humble opinion, to be good at something, you have to be obsessed with it. Trend trading is no different than being a musician or scientist or doctor. You'll find very few that are successful in the field that are not obsessed with it. In fact, most get obsessed with a very narrow branch of their subject. You rarely see a successful musician playing all sorts of music on all sorts of instruments. Similarly, every successful trader I've ever known specializes in a very narrow area of the markets and has a very specialized method of trading those markets. I spoke earlier about why I trade trends. You either believe that there are trends in the market that can be traded for a profit, or you don't. If you don't, there is no use in trading since the spread cost will impose a negative expectation on any random walk through the markets.

If there are trends, then we can say that the spread cost of a trade is fixed, but the trend can affect price for a very long time and the longer a trend affects price, the better the chance that it will eventually overcome the negative expectancy imposed by the spread cost. That's the reason that all my trades are attempts to trade longer timeframes. So, from my perspective, to be profitable one should become an expert in trading trends on longer timeframes.


Seeing no comments or questions, I'll move on. Here is how I do a first pass 20,000 foot scan for possible entries using my multi-timeframe approach.

Short timeframes: 1M, 5M, 15M. Medium Timeframes: 30M, H1, H4. Long Timeframes: Daily, Weekly, Monthly.

If all timeframes are trending up, I want to watch for an entry up.

If all timeframes are trending down, I want to watch for an entry down.

If long and medium tfs are up, but short tf's are down, I consider that a shallow retracement.
I don't try to trade counter-trend on shallow retracements. I do sometimes use them as good entry points when the retracement weakens and price starts to return to the longer term up-trend. That may be obvious, but I'll try to post a screenshot of that later.

If long timeframes are up and medium and short timeframes are down, I consider that a deep retracement of an up-trend.
Some would do well trading that counter-trend retracement for quick pips short, but I'll just wait until the short timeframes indicate an end to the retracement and a good entry to the resumption of the main trend. Do what works for you there.

Edit: There is the situation we spoke of earlier where the higher and lower time frames are up but a middle timeframe is down. This is the situation of a deep retracement where the shorter timeframes are now turning to rejoin the longer term trend and the mid-term timeframes are likely to follow soon.

If trends are mixed up's and downs across various timeframes, I consider that a bad situation and will pass on trading that pair.

This is a simple observation that can be made across all the timeframes of 24 pairs in a very short time once we are used to looking at it from that point of view. It would take posting about 45 screenshots to display examples of all the above situations in all timeframes however, so I will only post screenshots on these situations to answer any questions or comments.

I'll let this sit for a bit for the reader to consider as the trading week winds to a close. I'm currently carrying +400 pips into the weekend and hoping to get some more good positions on next week. Have a great weekend all.

I think I've described the multi-lot part of my method fairly well here. It's a simple but efficient pyramiding system. The important part isn't the exact point where I put trades on and exit, but rather that there is a system that puts you into trades methodically, systematically increases winning trades, and most importantly takes you out of the trades in a predetermined way. I can't count the number of times I've gotten nervous carrying a very large profit and just decided to take it and run rather than hang in there only to see it double or triple right after I exited. A good well thought out method will keep us in a trade when we should stay in and take us out when we should exit, regardless of the emotions of the moment. It wont always be perfect. Nothing ever will be, but it beats trading emotionally by a mile. Often I think my system isn't serving me well, taking me out of trades I would have liked to stay in and leaving me in trades that I should have exited earlier, but when I do my weekend analysis, I see just how well it worked and I'm surprised at the results.

I think I've made a rock solid case for trading long term position trades vs. short timeframes, but if anyone wants to have an intelligent debate on the subject, bring your college statistics book and we'll go at it, in a completely professional way of course.

I've discussed the multi-timeframe aspect of this method a bit, but I thought I'd add a little something for those who like to use indicators. I know many prefer to trade naked, but some of us like the comfort of having an indicator confirm what we are seeing with our naked eyes. Consider that if you have a good indicator for a particular trading style, that indicator may be even more productive when it is observed across multiple timeframes. If you are getting too many bad entries, it can give you additional confirmation criteria that you can attach at any time to tighten up your trading. If you are completely anti-indicator, just skip over the following posts as they may not interest you. I'll get back to posting trades and discussing them later. That said, on to multi-timeframe indicators...(Naked traders, cover your eyes now)

I'll look at NJ since I have a good trade running there. First a ma crossover, a staple in the trend traders bag of tricks. I'll use a fast crossover. Since I'll be looking at multiple timeframes, there is no need to have a slow one. A 3ema X 10sma will actually be a very slow indicator on the monthly chart and a very fast one on the 5 min chart. Just a word about charts here. Don't put too much trust in anything they say. I hardly use them once I'm in a trade. They indicate what has happened in the past, but are of little use as to what will happen in the future. Once I'm in a trade, I manage the trade almost entirely off the profit column with the understanding that the market can do anything at anytime no mater what the charts show. I add new lots onto an existing trade, take off profits and exit all based on what the profit numbers for that trade tell me, with little regard to the lies charts will tell me. Some of the best traders in history, like Jesse Livermore, never looked at a single chart. OK, on with the multi-timeframe indicator analysis. Let's look at some charts, starting with the Monthly and working down a bit:

A hell of a trend on that monthly. The 3 ema crossed over the 10 sma and stayed there for 2 years for a profit of 3,000 pips. Hardly anyone would have rode out that big correction from May to July of 2013, but if they did, the pips were there to be had. Now look at a few more, rapid fire, weekly and daily.

Note that the 3 ema has crossed above the 10 sma on all three of the longer timeframes. That's 3 of 3. You can already see this trade is looking good for long term trading with just that simple count. Now, rapid fire, the three mid-term time frames, H4, H1, M30

We can see the H4 is crossed above, the H1 has crossed below, and the M30 has crossed above. I'll spare you the M15, M5 and M1 though you are welcome to go look at them yourself since they wont change for a couple days of no weekend trading. The short timeframe ma crosses have all crossed above as well. 8 of 9 timeframes have crossed above. This is a very bullish count, 8 out of 9. Should we even count the very short timeframes? Would we like to take trades that quickly go in our favor after entry? Yes, I think so. Does this situation sound familiar? It is the exact situation I spoke of earlier in this thread where the 4 longer timeframes are all trending up, the H1 is trending down, and the 4 shorter timeframes are trending up. My bet would be the H1 ema will cross above the 10 sma very soon. That's a very interesting conclusion, but it's not the only one to be had here. But wait! There's more!

What if we didn't like crossovers. Say the RSI was a personal favorite. We count the timeframes where the RSI is above the 50% line. Again we come out with a count of 8 of 9 timeframes with the rsi pointing up, this time with the 30M TF being the outlier, but only by a little. It's actually at 49 and heading up. So, 8 out of 9 rsi count. I suppose you can see where this is going.

Stack as many indicators as you have confidence in, take the counts across multiple timeframes, and take the trade with the best counts. The Stoch is only 6 out of 9. Not as strong, but still a majority, so I wouldn't disgard it yet. CCI which usually is very close to the 3 ema X 10 sma crossover is 7 of 9 up. Very strong with only the M30 and H1 not yet up, but moving up. We discussed that situation at least twice already. You can play this game with exotic indicators if you like. Plot the ADX main line indicator in the same window as the ATR and look for ADX crossovers above the ATR to indicate strong trends. It yields a count of 6 out of 9, still a majority, still looking good. Plot a Damiani Volatmeter, 6 of 8 trade indications. I don't get 9 because my platform doesn't have enough data to calculate the monthly.

The point is, a simple count across your favorite indicator(s), across multiple timeframes can give a boost to that old entry win/loss ratio. If you believe in such things. Personally, when I'm playing this game, I just don't take any trades where my favorite indicators don't point in the trade direction, or confirm that trend is strong enough to trade, in the majority of time frames. If way too may pairs have a majority, then I take those with the best counts on the most reliable indicators.

So, that's an introduction to multi-timeframe indicator analysis. Play with it as you like. Other than questions or comments, I'll spare the naked traders from more indicator talk, so naked traders can uncover their eyes now.

My girlfriend said I have to quit playing on the computer now.

Was hoping for some interactive discussion here of the three main precepts of this method, multi-lot, multi-timeframe and long term position trading. Seeing no interest in the subjects, I'll retire to the background and check back in later. Happy trading to all.

Hi Graviton
I have a couple of questions for you and would appreciate your reply
I am having a little difficulty in understanding your trade management
Not your entry/exit signals or adding to an existing position but your handling of lots resulting from an exit signal on a multi lot trade
How does a trade finally close?
My understanding is :
When you have an initial exit signal - you exit the last two lots (for a profit)
If you get another exit signal - you exit the last two lots (for a profit)
etc etc
Do you keep doing this until the trend on the next higher timeframe reverses?

Another query:
Once in a new trade and it proves successful, you move your stop loss to BE - do you leave it there for the duration of the trade
That was the impression I had, but on post 37 (which was a three lot position) - you moved all three position stops to protect profit.
(you were planning on leaving your computer for a while)
I thought you only took exit on two positions leaving the initial position open hoping it turns out to be a "massive" winner

Thank you for your reply to my last query (it did make sense)

Nice info here Graviton. Congrats on the start of a great thread.
My trading method is similar in theory but much less structured & process driven. No doubt the LT trend is a key to watch. Had some time this weekend to do some online reading and happy I found this thread as I can try to use some of this to beef up my own process. Surprised it hasn't had more activity yet because your content and clarity is bang on.
One question to confirm exits: In the case where you have a 4 position trade going, do I understand that you'd have a stop loss on the last two positions at about 100 pips, and another stop loss approx. 100 pips below that to protect the earlier positions? So in fact those first two positions would have approx. 200 pip stop loss in effect? You had mentioned in an earlier post about have stops going down the pyramid ladder to cover pullbacks but not sure if this is what you meant.
Appreciate you comments.
p.s. I've gradually been converting to a "naked trader" after having gone through many indicator based systems, however still use a basic TDI to confirm my thinking - much like you mentioned. I compare it to driving on the highway - I now by instinct how fast I'm going, but still glance at the speedometer occasionally to confirm - can save from costly mistake!

Hi Lizpet. Thanks for the good questions. As to exiting winners, you generally have it right. Once I have three or more lots on a trade, I should never allow that trade to take a loss, so I will need to exit as many lots as needed to make sure I am exiting the overall trade with a profit. If the last lot runs up to a very high number, say several hundred pips or more, and I get a reversal I'll exit because I'm getting a valid signal to trade in the opposite direction, or because the retracement has run too deep for my personal tolerance. I can tolerate a 30% retracement. I'm usually not going to tolerate a 50% retracement. Of course, this is a method rather than a system that would tell you to always enter right here and exit right there, but if I have reason to believe the long term trend has reversed, I will exit for profit. It's disappointing to see a trade lose 150 pips, and exit only to see it turn right around and make them up and keep going, but I can always re-enter for only the spread cost if I get valid signals to do so. I hope to post some screen shots of 3-lot and 4-lot exits for profit soon and maybe this will come into better focus then.

As to my moving of stops on the 3-lot NJ long trade, very observant of you! You are exactly correct. The stop for the most profitable lot should have not been placed that close to price. It should have been placed lower to prevent me from taking a loss on the trade, but to also allow the 1st lot to keep running even if the 2nd and 3rd lots stopped out. Once we get 3 lots running, the goal is no longer to make 10's of pips, but rather 100's or more if the main trend does not change. It was my mistake and I realized it too late, after the market closed. If it doesn't stop out on an opening gap, I'll move that 1st lot stop down to prevent taking a loss on the trade, but try to keep that lot running in case of a minor reversal. Good comments!

Hi Dmostpips. Glad to have your comments. I think this thread is passed on by many traders because it is a get rich slowly thread. Probably 95% of traders would participate in a thread titled "Get rich quick", but I don't know how to do that. I'm not sure as anyone does though, since probably 95% of traders lose money.

Yes, you have the idea right. I want to stagger stops to always exit with a profit should price reverse, but always maximize the best chance of leaving some lots running for the long trade of months or longer for hundreds or even thousands of pips. If we get one or more trades with too many pips on it to sleep well at night, I can always take half of it off in a big chunk of profit by say cashing out half a standard lot and leaving the other half running.

As far as indicators and charts go, I really mostly use them for the initial entries. After that I usually manage trades from the profit line in the platform. If profit is going up, I really want to add to successful trades, but I know adding to much too fast can cause it all to be lost on one quick retracement, so I'll wait till I'm up 50 to 100 pips to put another lot on. It's always ok to be a little cautious on putting additional lots on. Putting them on too fast is a disaster waiting to happen. I really don't need a chart for that, but sometimes it helps to try to put an additional lot on just after a retracement is finishing and a chart helps see that.

You are very correct that this is a process. What I like about it is you can always see your position and progress in the process at any time. If you have a couple good 1st lot entries, you are at stage 1. You can probably do that in a week, but you are likely to take some small losses getting there. Keep those losses VERY small.
Stage two is a good 2-lot trade. It might take a couple weeks to get there, and you will probably be carrying about as much profit as you've lost setting that up.
Stage 3 is a good 3-lot trade. That might take a month or so and you will probably be ahead a little overall.
Stage 4 is a good 4-lot trade (and you'd probably have many good 2-lot trades by then and a few good 3-lot). Your account balance should be growing by then and your carried profits should be growing very fast. That might take a couple or few months.
Stage 5 is you are fabulously wealthy. Just for fun, let's see how long that takes.

Thanks for the good discussion.

Well, I didn't stop out of my 3-lot NJ long trade, so I moved the stop down a little on the 1st lot as discussed with Lizpet above. That trade now looks like the below. Note that the ONLY time I will ever move a stop against the direction of my trade is when I'm correcting a mistake, as was pointed out above. Otherwise, the stop NEVER is moved against the direction of the trade regardless of what price is doing. That's a big no-no in my method.

I now have the 3-lot NJ long, a 2-lot ChfJpy long, and 3 1-lot long trades running on EJ, EU and ECad. All is running well and fine. I'll now scan for possible new entries.

Personally, I'm all for scaling into the market with a long trading times in mind. Actually I find it the most sensible trading approach there is, basically from the mathematical point of view you already explained. But to be honest, I don't have much to add on what you said, save some personal preferences (for one, I like the 'being on both sides of the game' approach explained in the Equity Millipede thread). I do keep an eye on the thread and I'll participate in the discussion whenever I feel I can contribute to it. However, I urge you to continue your effort at least for a while. Catching a good trend live will most likely show the true potential of the long-term trading to many.

I appreciate the feedback Barbossa. I understand the psychological advantages of being on "both sides of the market" and I can't debate those. From a financial standpoint though, I see no difference between simply exiting a trade when there is a reversal and putting a hedge trade on in the opposite direction, except that spread may be paid twice and capital remains tied up in the hedge that could be put to use elsewhere. So for example, if price goes up 200 pips on one lot, then drops 100 pips and Trader 1 exits, he pays one spread and has 100 pips profit and has regained his capital to use for another trade. Whether price goes up or down 100 pips after that, his outcome remains unchanged. If trader 2 instead has the same 200 pip rise and 100 pip fall, and then puts a short hedge trade on, he has locked in that same 100 pip gain and it will remain the same as Trader 1 whether price then goes up 100 or down 100 pips. The only difference is Trader 2 may be committed to pay 2 spread costs and locked up his capital in a non-productive hedge going forward. If you consider this carefully, I believe you will come to the same conclusion. There may be a psychological advantage for some traders who have difficulty exiting a trade, but if you exit at the same point that you would normally hedge, there may be advantages to simply exiting rather than hedging. My conclusion is that there is no mathematical advantage to hedging a trade. We can discus this more if you'd like.

Yes, it does take some time to make long term trades pay off. Generally it takes 1 to 2 months to start seeing the advantage. In 3 to 6 months, most long term traders should have an advantage over most intraday traders. Of course there is the exceptional intraday trader that can do better, but they are called exceptional for a reason. Once again, thanks for the feedback. Some good things to think about.

Just a pretty chart I'm watching.

Is this your plan about NJ?

I agree completely. The benefit of "hedging", as I see it, is that I don't know beforehand how much will it drop. It might drop enough to stop out some of the lots, but I don't know if it actually will. And if it proves to be only a minor retrace, then I would have decreased unnecessarily my pyramid. Sure, I can add more lots as it goes back up, but their placement would be worse. Not because of the small difference in the profits at the end, it is the increased chances of being stopped out I'm worried about. It's a matter of personal taste, but I prefer to pay a few extra spreads and keep my pyramid intact. Of course, there's always the chance of the price retracing deep enough to stop out some of the pyramided lots and then reversing, in which case simply closing would have been better. It's give and take. Probably if my broker locked margin for opposing positions (and certainly if I was trading from the US) I'd choose to close lots as well.

Jackub, now that's a pretty chart. That would be a great plan if the market would approve of it. Unfortunately, the market can do anything at any time and I'm not sure if it will go that way. If it does go up that +350, with adding a lot every 100 pips or so I'll make well over 1000 pips never risking more than 25 pips. Of course that would qualify as one of those "turtle trade" wins which justifies the trading of this system over the long haul. I'd be very fortunate to catch such a trade after only a couple weeks trading this method, but again, anything is possible. If price retraces deeply over time, as it is prone to do, I'll be pulling out some profit in chunks of 100 to 150 pips at a time by closing 2 or 3 lots at a time. Time will tell. At this point, my plan is very simple, put an additional lot on for every 100 pips or so the price goes up, or remove profit in 100 to 150 pip chunks if price reverses. It's a simple plan that doesn't require me to predict the unpredictable. I like simple. Thanks for the chart!