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Building an equity millipede

  • #6,301
  • Mar 30, 2014 9:32am Mar 30, 2014 9:32am
Quoting stewrigh
{quote} I might be missing something here but I thought we move sl to b/e as soon as possible. If that is right nearly all of the trades in your example would be stopped out now apart from the diversify(hedges??) trades or am I mis-reading this method?
No I don't move stops. Graeme did.

well, let me rephrase... not quickly like Graeme did
tradewith60
  • #6,302
  • Mar 30, 2014 9:40am Mar 30, 2014 9:40am
Quoting bodypip
{quote} Can you show us an example. Thank you in advance.
Sure. Since you ask for AN example, I will give you AN example by refering to post #6173 by Calculus http://www.forexfactory.com/showthre...45149&page=309

You will see a chart that Calculus kindly provided with some numbering. The stall green candle where Calculus marked as 3 is the price area where hardly any retail traders would buy.

Why? Because it is below the previous swing low causing retails to SELL if they choose to chase breakouts, and there is no pinbar (another newbies favorite) or some significant wick showing rejection for the retails to feel that it is a fakeout happening to convince them to enter BUY. Based on their textbook based knowledge, hardly any retails would buy on that candle.

An interview question to Bruce Kovner was as follows:

Jack Schwager: You are one of the most successful traders in the world. There are only a small number of
traders of your caliber. What makes you different from the average guy?
Bruce Kovner: I'm not sure one can really define why some traders make it, while others do not. For myself, I can
think of two important elements. First, I have the ability to imagine configurations of the world
different from today and really believe it can happen. I can imagine that soybean prices can double
or that the dollar can fall to 100 yen. Second, I stay rational and disciplined under pressure.

If you can imagine what the majority is expecting based on what they see, then all you need to determine is what kind of price movement will screw them over. That is the direction worth trading.
  • #6,303
  • Mar 30, 2014 10:04am Mar 30, 2014 10:04am
Quoting stewrigh
{quote} I think he might be referring to consolidation zones - area's where price does nothing - just ranges - you wait for it to break out and trade in that direction.
Not at all. What you mentioned is an example of inside bar trading or some other forms of range breakout trading. Those ENTRIES can be executed mechanically.
I am more interested in discretionary methods that cannot be explained in some form of flowchart "IF A THEN B" explanation.

These days when range forms, price tends to fakeout in both directions. GBPJPY as of late is a good example. This makes trading very difficult for most retails.

The green lines show the range that other retails most likely would have taken notice at the time.

The problem however is that even if the trader mananged to get a perfect BUY near or at bottom of the range or perfect SELL near or at top of the range, a SL at BE would have taken out either positions. Even if you have razor shar entry skills to probe both directions almost flawlessly where you let the market decide the ultimate direction, your stops get taken out before the real meaningful move takes place.
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  • #6,304
  • Mar 30, 2014 10:17am Mar 30, 2014 10:17am
SO basically you wait for the pullback after it breaks out. I thought thats's what most ppl did anyway.
  • #6,305
  • Mar 30, 2014 10:50am Mar 30, 2014 10:50am
Quoting stewrigh
SO basically you wait for the pullback after it breaks out. I thought thats's what most ppl did anyway.
No that post was just to simply show why it is difficult to trade breakout these days.

I actually placed a trade on 27th March at 169.058 because I anticipated that retails who traded the pinbar earlier in the morning would start closing out their positions for small profits. News was upcoming that day and you will notice the price moved down far enough to take out breakeven stoplosses of those who traded BUY on that pinbar. Huge news spike occured afterwards. I got out at S2 pivot the next day and got lucky. So I sent a small SELL probe to see how price played out, then decided to toss the towel and close for the weekend since the price stalled near that area.

If I didnt have a position the day before, then I probably would have traded near the current pivot point (169.560) the next day which is also the approximate area of the pullback you mention.
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  • #6,306
  • Mar 30, 2014 10:53am Mar 30, 2014 10:53am
Quoting 60minuteman
{quote} here's an example: here's current EA daily chart, showing a simple MA to define trend and a period we would of been looking to buy the lows of each week {image} here's the h4 chart with lows that survived... see how many opportunities we often will get to diversify, all offered good rewards compared to the costs {image}
60MIN

1) In your examples you show clearly where to diversify, that is in hindsight, in real time how would you actually know when the market will reverse on the top and bottom?

2) Let say in a 4 hour chart you notice a hammer,fb,pin or what ever traders call it at resistance. That is a sign for a reversal but its a false reversal and you end up taking a sell. How would you manage your entry in negative, in other words stoploss.
  • #6,307
  • Mar 30, 2014 11:17am Mar 30, 2014 11:17am
Quoting yonseo
{quote} No that post was just to simply show why it is difficult to trade breakout these days. I actually placed a trade on 27th March at 169.058 because I anticipated that retails who traded the pinbar earlier in the morning would start closing out their positions for small profits. News was upcoming that day and you will notice the price moved down far enough to take out breakeven stoplosses of those who traded BUY on that pinbar. Huge news spike occured afterwards. I got out at S2 pivot the next day and got lucky. So I sent a small SELL probe...
Wish I was clever as you Brian. I think you are trying to read too much into what you think other traders think. - you 'anticipated' retails would bla de bla - what total utter BS.

It was a classic example of a breakout trade.

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  • #6,308
  • Mar 30, 2014 11:26am Mar 30, 2014 11:26am
Quoting stewrigh
{quote} Wish I was clever as you Brian. I think you are trying to read too much into what you think other traders think. - you 'anticipated' retails would bla de bla - what total utter BS. It was a classic example of a breakout trade. {image}
Everyone has their own focal intepretation. Whether it works out or not is only after the fact. Thats why we cut our losses when our participation based on our anticipation does not work out.

All I am pointing out in my previous post is that I had different reasons for entry but it just happened that a pullback after the breakout played out the next day. If someone traded the pullback of that breakout (monthly open) and it worked then kudos to them.
  • #6,309
  • Mar 30, 2014 11:28am Mar 30, 2014 11:28am
Quoting pullice
{quote} 60MIN 1) In your examples you show clearly where to diversify, that is in hindsight, in real time how would you actually know when the market will reverse on the top and bottom? 2) Let say in a 4 hour chart you notice a hammer,fb,pin or what ever traders call it at resistance. That is a sign for a reversal but its a false reversal and you end up taking a sell. How would you manage your entry in negative, in other words stoploss.
Hi Pullice, i'm presuming you mean for my entry? how do I know where the extreme is? If that is what you mean I will explain.

Everytime price makes a new low you buy the breakout, you will get stopped out until the extreme is made. That is your costs to find the extreme. Then you just need to make more profits than your cost.

Now I know that sounds like a total gamble, but I assure you if you're doing it in line with higher TF trends then it is no different to using SR, pivot points, fibs or any other price average. The advantage being you will very rarely miss a move, so your job becomes a position/money manager and not a predictor of future price movements.

here's an example where we had to take 3 attempts to find the eventual real low of the week, entry 1 and 2 are our costs to find that location
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tradewith60
  • #6,310
  • Mar 30, 2014 4:42pm Mar 30, 2014 4:42pm
60minuteman, I am slowly reading this thread because I think pipEasy's methodology resonates with me and seems to suit me. I also seem to like your take on the method and would like to explore yours as well. I see you started a thread 'H4 Power', though you have not visited for a while. Does that thread cover your method you are explaining here? Thanks
  • #6,311
  • Mar 30, 2014 5:16pm Mar 30, 2014 5:16pm
Quoting danjuma
60minuteman, I am slowly reading this thread because I think pipEasy's methodology resonates with me and seems to suit me. I also seem to like your take on the method and would like to explore yours as well. I see you started a thread 'H4 Power', though you have not visited for a while. Does that thread cover your method you are explaining here? Thanks
Hi Dan, im the same as you, Graeme's money management strategies resonate with me, I'm not keen on his entry techniques but thats not the important part anyway.imo
The ideas I mentioned here are not H4power - that's more of a technical approach and the ideas here are more odds/probabilities approach.
I have a journal for a small test account that I am trying some ideas on, I post my trades there if you're interested.
tradewith60
  • #6,312
  • Mar 30, 2014 5:38pm Mar 30, 2014 5:38pm
Quoting 60minuteman
{quote} Hi Dan, im the same as you, Graeme's money management strategies resonate with me, I'm not keen on his entry techniques but thats not the important part anyway.imo
Graeme stated that entries do not matter. Anyone can bring any system here a try to build millipedes. The trick is indeed money management.
If you are good at something, never do it for free--Joker
  • #6,313
  • Mar 30, 2014 6:04pm Mar 30, 2014 6:04pm
Quoting 60minuteman
{quote} here's an example: here's current EA daily chart, showing a simple MA to define trend and a period we would of been looking to buy the lows of each week {image} here's the h4 chart with lows that survived... see how many opportunities we often will get to diversify, all offered good rewards compared to the costs {image}
I might be reading this wrong but this chart seems to indicate that if you had taken all the trades indicated including the hedges you would currently have 10 trades long and 10 hedges short - of those 7 long would be in dawdown and 3 in profiit but the hedges would be in profit by more than the drawdown.

Think I'm beginning to see the light - I always had a problem with hedging but I think I am beginning to understand how it can work.

Am I on the right track??
  • #6,314
  • Mar 31, 2014 2:11am Mar 31, 2014 2:11am
Quoting stewrigh
{quote} I might be reading this wrong but this chart seems to indicate that if you had taken all the trades indicated including the hedges you would currently have 10 trades long and 10 hedges short - of those 7 long would be in dawdown and 3 in profiit but the hedges would be in profit by more than the drawdown. Think I'm beginning to see the light - I always had a problem with hedging but I think I am beginning to understand how it can work. Am I on the right track??
This is my interpretation. Buy 1 to 4 survive. Upon 1st sell diversification, close buy 5. 2nd sell diversification, close second buy 5 and so on. The last 2 sell diversification would knock off the two buy 7, leaving buy 5 and 6. Subsequent sells would knock of buy 6 and then 5,4,3. By this time, one would have built up a series of sells when the trend changes.
Please correct me if I am wrong.
ITB - Seeing Orderliness amongst 'Randomness'
  • #6,315
  • Mar 31, 2014 2:38am Mar 31, 2014 2:38am
Quoting 60minuteman
{quote} Hi Dan, im the same as you, Graeme's money management strategies resonate with me, I'm not keen on his entry techniques but thats not the important part anyway.imo The ideas I mentioned here are not H4power - that's more of a technical approach and the ideas here are more odds/probabilities approach. I have a journal for a small test account that I am trying some ideas on, I post my trades there if you're interested.
Thanks for the reply 60M, much appreciated. "Weekly/h4 trend trading - flow", is that the journal you refer to?
  • #6,316
  • Mar 31, 2014 3:03am Mar 31, 2014 3:03am
Hi everybody. Nice thoughts you have over here. Read it all, good read and interesting info. I have a question, did anybody try Graeme's strategy with shares or CFDs?
  • #6,317
  • Mar 31, 2014 3:27am Mar 31, 2014 3:27am
Quoting cold chisel
Hi everybody. Nice thoughts you have over here. Read it all, good read and interesting info. I have a question, did anybody try Graeme's strategy with shares or CFDs?
If you read all, you would have seen this bit http://www.forexfactory.com/showthre...74#post7003274
  • #6,318
  • Mar 31, 2014 3:32am Mar 31, 2014 3:32am
Quoting Inthebox
{quote} This is my interpretation. Buy 1 to 4 survive. Upon 1st sell diversification, close buy 5. 2nd sell diversification, close second buy 5 and so on. The last 2 sell diversification would knock off the two buy 7, leaving buy 5 and 6. Subsequent sells would knock of buy 6 and then 5,4,3. By this time, one would have built up a series of sells when the trend changes. Please correct me if I am wrong.
Yeah but the problem I have with hedging is the same as it always was - when/which trades do you close.

Do you trim the losers or the winners.

for instance if I had 10 trades long and 10 short in about equal profit vs drawdown - which ones do I close first.

If I book the profit I risk the others going into worse dd.

If I close the losers I risk losing the profit.

My gut tells me to close the winners but the risk there is that the dd just gets bigger.

If the market was predictable and with hindsight it's easy - you just close all the winners just before they reverse - trade the other way then re-enter when the market turns again.

God I'm confused just thinking about it - I can imagine what I'd feel like if I had 10 plus trades running lol.
  • #6,319
  • Mar 31, 2014 4:21am Mar 31, 2014 4:21am
Quoting danjuma
{quote} If you read all, you would have seen this bit http://www.forexfactory.com/showthre...74#post7003274
Yeah, thanks I saw that. But there no info on real day to day trading and results.
But thanks any way, I should PM this person.
  • #6,320
  • Mar 31, 2014 5:11am Mar 31, 2014 5:11am
Quoting cold chisel
Hi everybody. Nice thoughts you have over here. Read it all, good read and interesting info. I have a question, did anybody try Graeme's strategy with shares or CFDs?
What I can tell you is that G's kind of position trading works most ideally in forex because alot of CFD's have an expiry date and have to deal with daily chart gaps. Also with stocks you usually don't create separate breakeven stop losses for the same company shares you are currently pyramiding.

I trade Korean stocks so in my discussion with him personally. his approach to stocks is more like a value investor. He buys bluechip stocks during dips and is willing to hold them forever. He has a dislike for IT stocks and prefers stocks that are people's habits like coca cola, KFC, viagra etc. There is a reason why he calls himself a "trader investor".
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