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Building an equity millipede

  • #6,321
  • Mar 31, 2014 5:19am Mar 31, 2014 5:19am
Quoting stewrigh
{quote} 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...
There is no absolute answer since it depends on the trader's style but if G was in your situation, he would close his positions as follows:

1. Losing positions
2. Positions that have a lower chance to survive the current trend (most likely added stack positions from his initial surviving positions)
3. Initial position that survived the trend and over 1000pips in size but a possible monthly reversal is happening based on his focal interpretation
  • #6,322
  • Mar 31, 2014 5:52am Mar 31, 2014 5:52am
Quoting stewrigh
{quote} 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...
If one has 10 trades long and 10 short, I think that is over trading. Yes that would be a problem to get out of if there is no direction. Yes it would be easier if one got the trend right. I guess one has to sit tight and do nothing until the trend develops. I know it's easier said than done.
I myself am trying not to add on until 1/3 or 1/2 ADR between trades.
Yes it would be much easier if one has already positions built up with the trend. Before hedging, one will close some of the latest positions to lock in some profit, leaving the largest profit positions behind. If the trend continues before adding position, close the hedge. It is always one hedge and one add on, and not a series of them, unless they are very small positions.
ITB - Seeing Orderliness amongst 'Randomness'
  • #6,323
  • Mar 31, 2014 6:15am Mar 31, 2014 6:15am
That sounds somewhat similar to what I do - I will only add to a position when the previous one is at be.

I don't currently hedge coz I just can't sell something if I actually think it's going up - I just wait to add more legs.

Never could get my head round hedging - it's a psycho thing with me.
  • #6,324
  • Mar 31, 2014 7:13am Mar 31, 2014 7:13am
Quoting stewrigh
That sounds somewhat similar to what I do - I will only add to a position when the previous one is at be. I don't currently hedge coz I just can't sell something if I actually think it's going up - I just wait to add more legs. Never could get my head round hedging - it's a psycho thing with me.
U are not hedging for the sake of it. You find yourself hedged when you take an opposite position in the event that the pullback turns out to be an actual trend reversal. You cannot know if this is the case, so have to take the opposite position to your millipede. At that point you find yourself hedged.

If you read carefully, neither Graeme or Peter uses stops. They hold a conversation with stops in mind because the newbie cannot process a world without stops, and both men were trying to convey a bigger message.

You will hold positions both long and short in the same currency, but not at the same time. When DD begins to cause pain in your mind, start cutting losers. This means that you will be trading position sizes that are small relative to your account balance.

For me, I will start cutting losers at -20% drawdown of an account. I used to do it at -5%. I realized I was being much too conservative. If you build small, you will find it very difficult to reach -20% of drawdown. Spread your money across a lot of pairs, and you will always be able to diversify a mature millipede well before you reach -20% DD.

A word about positions. A mature millipede for me will only have a certain number of legs. I might try to add a leg maybe twice a week. Now if you do that over 28 pairs, you will doing a lot of trading. So think about the number of legs in your millipede versus how long your millipede should be. All of this is in Graeme's writings.
If you are good at something, never do it for free--Joker
  • #6,325
  • Mar 31, 2014 7:49am Mar 31, 2014 7:49am
Quoting jmn5611
{quote} U are not hedging for the sake of it. You find yourself hedged when you take an opposite position in the event that the pullback turns out to be an actual trend reversal. You cannot know if this is the case, so have to take the opposite position to your millipede. At that point you find yourself hedged. If you read carefully, neither Graeme or Peter uses stops. They hold a conversation with stops in mind because the newbie cannot process a world without stops, and both men were trying to convey a bigger message. You will hold positions both...

Thanks for this but atm I'm happy building legs in the direction of the trend - when I think the trend has changed I'll change my position.

I just had a look at your explorer btw and you've currently got 40 open trades. Not sure I could or would want to trade that much
  • #6,326
  • Mar 31, 2014 10:26am Mar 31, 2014 10:26am
Quoting stewrigh
{quote} Thanks for this but atm I'm happy building legs in the direction of the trend - when I think the trend has changed I'll change my position. I just had a look at your explorer btw and you've currently got 40 open trades. Not sure I could or would want to trade that much
Yep, I am a little bit behind. I should have 56 open. If you try to enter twice a week and spread that over 28 pairs, that is what you would have. Just reduce the number of pairs traded if that is too much. I like to stay active.
If you are good at something, never do it for free--Joker
  • #6,327
  • Mar 31, 2014 10:34am Mar 31, 2014 10:34am
Quoting jmn5611
{quote} Yep, I am a little bit behind. I should have 56 open. If you try to enter twice a week and spread that over 28 pairs, that is what you would have. Just reduce the number of pairs traded if that is too much. I like to stay active.
Thats not active it's manic lol.
  • #6,328
  • Mar 31, 2014 10:54am Mar 31, 2014 10:54am
If...

- you have open positions floating in loss
and
- you are hedging positions in the same pair

then you are deliberately following a losing strategy. There is no mention by Graeme to hedge your loses. You should only FREEZE your floating profits. This is an absolute requirement and the most powerful force that enables building of an equity millipede for long term growth. Think, visualize, conceptualize. Just 'participating' across dozens of pairs and letting your losses accumulate creating an illusion that your positions are hedged is insanity. You are better off donating your money to charity of your choice. It's in their own best interest for jmn5611 and others to realize this 'fallacy'.

If you have upskilled your entries, it will minimize your drawdowns enabling you to forget about diversification or profit-taking. Just follow the direction of the market and freeze your profits along the way by moving SL to BE. Your balance will dwindle downwards and your equity will reach newer heights every week! Now THAT is the power of building an Equity Millipede ! Unfortunately not an easy endeavor for someone like me trading from USA

EDIT: My apologies in advance for picking on jmn5611 member's profile. I will delete this post.
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Staying in my lane...
  • #6,329
  • Mar 31, 2014 11:25am Mar 31, 2014 11:25am
Quoting VEEFX
If... - you have open positions floating in loss and - you are hedging positions in the same pair then you are deliberately following a losing strategy. There is no mention by Graeme to hedge your loses. You should only FREEZE your floating profits. This is an absolute requirement and the most powerful force that enables building of an equity millipede for long term growth. Think, visualize, conceptualize. Just 'participating' across dozens of pairs and letting your losses accumulate creating an illusion that your positions are hedged is insanity....
Don't delete the post. For whatever reason the TE is not displaying correctly. It hasn't been for awhile. I have been freezing my floating profits and that has been doing well. But millipede one is showing a 51% loss. I truly do not know why that is.

Edit: The reason I have not taken that TE down is because it does show some rather handy metrics, like how much leverage I have on related to positions. But the P/L part is totally unreliable.
If you are good at something, never do it for free--Joker
  • #6,330
  • Mar 31, 2014 11:44am Mar 31, 2014 11:44am
Hi Vee,

Your post prompted me to find out my TE. You have highlighted the all time on millipede one. I set it to start this year, when I started millipeding. Apparently Milli one is showing all time stats for the life of that account, which was my training account. I have had it since 2006, when I started trading.

At any rate, millipedes are good to build, and can be built even in the US, if you know how.
If you are good at something, never do it for free--Joker
  • #6,331
  • Mar 31, 2014 12:13pm Mar 31, 2014 12:13pm
Quoting VEEFX
If... - you have open positions floating in loss and - you are hedging positions in the same pair then you are deliberately following a losing strategy. There is no mention by Graeme to hedge your loses. You should only FREEZE your floating profits. This is an absolute requirement and the most powerful force that enables building of an equity millipede for long term growth. Think, visualize, conceptualize. Just 'participating' across dozens of pairs and letting your losses accumulate creating an illusion that your positions are hedged is insanity....
You make an important point about NOT hedging losses. Because if you do then all you end up doing is freezing your floating losses. If you have a buy position at X and you add a sell position at (X - 100pips) then by the time your buy position returns to breakeven your sell position is at a loss for -100 pips.
  • #6,332
  • Mar 31, 2014 12:28pm Mar 31, 2014 12:28pm
Quoting jmn5611
Hi Vee, Your post prompted me to find out my TE. You have highlighted the all time on millipede one. I set it to start this year, when I started millipeding. Apparently Milli one is showing all time stats for the life of that account, which was my training account. I have had it since 2006, when I started trading. At any rate, millipedes are good to build, and can be built even in the US, if you know how.
Hi jmn, be interested to here how you deal with hedging in the states? is it just a case of 2 accounts?
tradewith60
  • #6,333
  • Mar 31, 2014 12:28pm Mar 31, 2014 12:28pm
Quoting jmn5611
Hi Vee, Your post prompted me to find out my TE. You have highlighted the all time on millipede one. I set it to start this year, when I started millipeding. Apparently Milli one is showing all time stats for the life of that account, which was my training account. I have had it since 2006, when I started trading. At any rate, millipedes are good to build, and can be built even in the US, if you know how.
Thanks jmn. Please enlighten me how you overcome FIFO regulation and follow the rules on stacking and building legs and moving to BE and all the rest of the key ingredients necessary to build long term positions?? (and please don't give me the option of opening two subaccounts. It's retarded to consider trading multiple accounts!). Due to FIFO, you CANNOT set SL/TP on individual trades so move SL and BE does not apply to US traders the way Graeme advocates.

There are 3 major limitations for US trades (and I have mentioned this a dozen times in the past ):

  1. FIFO rules - you cannot pick and chose any position you want to close so the logic of mini-diversification, stacking, move SL to BE is just NOT possible. Most brokers would simply consolidate all open positions into one position making it VERY difficult to track your portfolio of positions. (please don't propose tracking in EXCEL... I have done it all and I am in trading to make money.. not to work my ass off managing and tracking my trades manually!)
  2. No Hedging - You cannot freeze/unfreeze floating profitable positions for infinite yield !
  3. Leverage capped at 50:1 - To me, this is a serious limitation and perhaps the only reason why I want to leave this country.

I have tried a netting broker who works around these restrictions and implements a solution in backoffice. If anyone has tried that, you will realize the flaws of this strategy and the illusions it creates into thinking we are building positions for growth.

Staying in my lane...
  • #6,334
  • Mar 31, 2014 12:29pm Mar 31, 2014 12:29pm
Quoting stewrigh
That sounds somewhat similar to what I do - I will only add to a position when the previous one is at be. I don't currently hedge coz I just can't sell something if I actually think it's going up - I just wait to add more legs. Never could get my head round hedging - it's a psycho thing with me.
Psychologically speaking, thats what differentiates amateurs with the professionals. Being able to ENTER TRADES that others are NOT WILLING TO TAKE is equally applicable in position trading.

Most traders are guilty of directional bias where they subconsciously look for reasons why the price should kept heading in the direction they have anticipated. This bias only gets stronger once you have more positions set to BE stacked in your favor. If your bias gets stronger than you become unwilling to take trades in the opposite direction.

Professionals on the other hand are able to keep their mind neutral (not 100% of the time) regardless of how many position they got surving in a particular direction. They are able to place trades in the opposite direction based on their focal interpretation per se and let the market decide their fate by choosing the ultimate direction. Hence as you lose big floating profits in one direction, you have the chance to gain even bigger floating profits in the other direction.

This method of milipede trading too is also one of the most difficult methods if it was to be done properly.
  • #6,335
  • Mar 31, 2014 12:30pm Mar 31, 2014 12:30pm
Quoting yonseo
{quote} You make an important point about NOT hedging losses. Because if you do then all you end up doing is freezing your floating losses. If you have a buy position at X and you add a sell position at (X - 100pips) then by the time your buy position returns to breakeven your sell position is at a loss for -100 pips.
Thanks Yon. You said it beautifully. (N)edging to freeze loses is a loser's game similar to averaging down and I am sure some loser will come here and convert this thread into a debate like most other threads on this subject :-
Staying in my lane...
  • #6,336
  • Mar 31, 2014 12:37pm Mar 31, 2014 12:37pm
Quoting yonseo
{quote} Psychologically speaking, thats what differentiates amateurs with the professionals. Being able to ENTER TRADES that others are NOT WILLING TO TAKE is equally applicable in position trading. Most traders are guilty of directional bias where they subconsciously look for reasons why the price should kept heading in the direction they have anticipated. This bias only gets stronger once you have more positions set to BE stacked in your favor. If your bias gets stronger than you become unwilling to take trades in the opposite direction. Professionals...
Just to add a bit further... even if it is done properly, there is a time element that needs to be taken into account. You just cannot go in the other direction and start freezing your profitable positions and expect your equity to grow. What happens if you have 3 long legs and 2 short legs and price is just stuck in a range for the remainder of the year. You are almost better off (depending on your upskill in razor sharp entries) to freeze all your long floating profits at a key turning point and then starting building short legs. Only then both your equity and account balance with show growth. As someone said earlier, your approach can be tweaked based on how good you are with your entries. Having said this, making good entries is not a requirement to be successful.
Staying in my lane...
  • #6,337
  • Mar 31, 2014 12:43pm Mar 31, 2014 12:43pm
Quoting VEEFX
{quote} Just to add a bit further... even if it is done properly, there is a time element that needs to be taken into account. You just cannot go in the other direction and start freezing your profitable positions and expect your equity to grow. What happens if you have 3 long legs and 2 short legs and price is just stuck in a range for the remainder of the year. You are almost better off (depending on your upskill in razor sharp entries) to freeze all your long floating profits at a key turning point and then starting building short legs. Only...
and one final comment on short term/intra-trading discussion we have earlier and which one is mathematically more profitable. To me, it is all a moot point as profit is always measured against a time horizon (and against effort for me). I don't see profits in dollars as simple as black and while as how to arrive at the those profit levels and the journey one takes ultimately has the final say in whether he or she considers him/herself profitable based on the criteria/goals that were set out to achieve. Everything else is meaningless and waste of time to the 3rd person commenting on someone's profitability. I consider myself 10 times profitable if I spend 5 mins to put a probe that turns into 100s of pips in return compared to someone who gets very excited by seeking 10 pips after doing hours of research prior to making a trade. It's all relative and yet we see these forums littered with comments on 5%, 1%, 95% winners/losers... who cares!
Staying in my lane...
  • #6,338
  • Mar 31, 2014 12:47pm Mar 31, 2014 12:47pm
Quoting yonseo
{quote} ... People like G on the other hand just leave their stops at BE and have rules like never exit that position unless it is AT LEAST 500, 1000 or 2000 pips in profits and decide to close out the positions based on his own personal focal intepretation that the monthly trend has reversed. Hence a "homerun" is nothing more but successfully closing those profitable trades based on your own trading plan. What is worth noting however is that. 1. Position closest to wicks of candles or closest to open price of wickless candles have the greatest...

Hi younseo

As english don't is my natural language... can you, please, elaborate more on your past text ???

Trade well

JL
Started a blog: terraceman blogspot com
  • #6,339
  • Mar 31, 2014 12:49pm Mar 31, 2014 12:49pm
Quoting yonseo
{quote} Psychologically speaking, thats what differentiates amateurs with the professionals. Being able to ENTER TRADES that others are NOT WILLING TO TAKE is equally applicable in position trading. Most traders are guilty of directional bias where they subconsciously look for reasons why the price should kept heading in the direction they have anticipated. This bias only gets stronger once you have more positions set to BE stacked in your favor. If your bias gets stronger than you become unwilling to take trades in the opposite direction....
The one highlighted in BOLD is so true. It's a undeniably stronger force to reckon with. I have dealt this by not allowing my trading platform to display my open trades. I don't even bother to have my terminal window open which displays my open/closed/account balance/equity$pnl etc. The idea behind my dashboard concept is to have everything i need to know across all timeframes and pairs just on one single chart.
Staying in my lane...
  • #6,340
  • Mar 31, 2014 12:49pm Mar 31, 2014 12:49pm
Quoting VEEFX
{quote} Thanks Yon. You said it beautifully. (N)edging to freeze loses is a loser's game similar to averaging down and I am sure some loser will come here and convert this thread into a debate like most other threads on this subject :-
LOL Vee. It is just amusing to see what people to do avoid losses. I feel regulations like FIFO implicitly encourages noobs to averaging down, so I assume we have more noobs averaging down during the US session. Of course thats an opportunity for those who stack positions in the opposite direction, because averaging losers only increases the likelihood of margin calls providing the rocket fuel for the price to go further.

What is equally hilarious is that G actually trades much less than he used to but his profitability hasn't really changed much. This really questions whether there was a need to share things like 5min chart based razor sharp entries on this thread.
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