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Building an equity millipede

  • #6,641
  • Oct 14, 2014 12:09am Oct 14, 2014 12:09am
Quoting Razor_trader
{quote} Its amazing how this chart and graph can illustrate long tails. Of course along the way there would be losers, BE and small winners as evident in your balance line, but the equity growth of maintaining trades open replicates again I think the premise of what people like Graeme, Peter Crowns and Joel Rensink have said with the advantages of multiple winning trades and long term growth. The only downside to the graph is that it is over 2 years and we all know that there will be great periods (particularly in the EUR/USD that went from this...
The Chart TRD (aka Sun Woo Lex Kim) shared actually gave out MUCH more information than most traders here realize.

It may seem that the Chart is cherry picked since we only see positions stacked in line with the trend.
What the chart doesnt show is the other positions that did not manage to survive during the build up of the positions. It is likely that TRD had initiated sell positions from August 2001 to early 2002, as well as the the range period from July 2002 to Ocotber 2002.

Even though all of these sell positions get taken out at BE or a small loss, that a good thing because we see the initial buy postions grow much bigger. This all comes from "Participation".

As for "Low Risk Entry" you will see exactly 12 examples of it on the chart. It is up to the reader to put the time and effort to disect the charts and figure out why this is low risk entry, as well is find similar SELL opportunities that didnt workout in hindsight but was a low risk opportunity worth taking at the time.

As for "Growth", grab a calculator and calculate the total amount of pips gained so far. If you can find a system that can return more pips than this approach, then kudos to you. You shouldn't be here in the first place.
  • #6,642
  • Oct 14, 2014 1:48am Oct 14, 2014 1:48am
@Pipotron: I entered 287 trades. Don't know why so few survived. Was market decision.

@Razor_trader: as you can see the range periods were longer that the trend periods, even if it doesn't look like this from the first time. Just look closely at both charts. Even after 1 year of complete ranging (Jan 2001 - Jan 2002) i was up 60% of my account without having any longterm positions. What this tells you? I am pretty much sure, if you put this method into a 10 years ranging market, it will achieve at least 600% for these 10 years. Because it was build in favor of ranging markets instead of trending. My small regular profits gave me confidence and time to hold the remaining legs long term.

@yonseo: thank you for your input. You are correct. Location is key.

TRD
  • #6,643
  • Oct 14, 2014 2:12am Oct 14, 2014 2:12am
Quoting TheRealDeal
@Pipotron: I entered 287 trades. Don't know why so few survived. Was market decision. @Razor_trader: as you can see the range periods were longer that the trend periods, even if it doesn't look like this from the first time. Just look closely at both charts. Even after 1 year of complete ranging (Jan 2001 - Jan 2002) i was up 60% of my account without having any longterm positions. What this tells you? I am pretty much sure, if you put this method into a 10 years ranging market, it will achieve at least 600% for these 10 years. Because it was build...
Yeah, noticed that also it is worthwhile pointing out that the chart is a Weekly chart therefore any period where there are a few bars running side by side indicates a range on the smaller timeframes. There were 2 massive periods - The first is the small pullback near the start which would have yielded some shorts that were essentially taken out when the market hit new highs, and the range period around the middle between .96 and .99.

One of the toughest pills to swallow is that that period is about 6 plus months with little to no growth and it is that period that has people going "this is rubbish". It is extremely difficult to get your head around and it doesn't tick all the emotional boxes, in fact it probably crosses them off which is why few people can trade this way. Richard Dennis's turtles are probably the most successful group that comes to mind with the long tails. I believe their strike rate was less than 20% but their average returns were phenomenal hence their success.

All that being said, timing is everything. If you started shorting the AUD/USD back when it was above parity you more or less have trades their that whilst they have a negative swap, will probably not return for a long time. Considering most are looking at sub .85-.80 in this pair, now is not a bad time to build shorts but global uncertainty can have an uncanny knack for kicking you in the balls.

Take Care

RT
  • #6,644
  • Oct 14, 2014 3:49am Oct 14, 2014 3:49am
Quoting Razor_trader
{quote} I believe their strike rate was less than 20% but their average returns were phenomenal hence their success.
If you can handle the equity swings (at 20% win rate) then it is for you. I can't and i don't want to put myself in a huge drawdown.
Worth to mention is that ForexTester is somehow not showing the drawdown correcly after Jun 2002. I experienced some drawdowns, but it was too much shown on the chart.
I had 7 consecutive loses and i never put more than 50 pips SL. Worst case will be 350 pips, about 3.5% from my initial balance.

And one more thing to be noticed: Why do you think i tested 2001 and 2002? Just for fun? Because FT doesnt have previous history. So i was trading without any history. Do i need history? No! The method i use doesn't care about history. Because it is universal. That is the reason it worked in the past, it works now and it will work until markets exst.

TRD
  • #6,645
  • Oct 14, 2014 3:55am Oct 14, 2014 3:55am
I don't think this has been said here , if it has apologies for repetition. In my view the guys that can scalp consistently don't realise that they are the one's most likely to succeed with this approach. Remember back about the 3 x 20 exercise, for me I interpreted that as when you have consistency in achieving that kind of result this gives you the power to participate with little risk. Without knowing where the market will go next those scalp type entries can be the acorn for the oak tree. Quickly moving to B.E. , taking half off maybe for expenses etc, then just leave it to roam. This approach around weekly levels is where the survival rate/life expectancy of the millipede has the greatest chance. Don't concern yourself with targets until you can consistently get legs to survive beyond the range you are normally used to, then gradually increase with further entries both ways because you never know which acorn will become the next oak tree.
I also think that this is unlike any other style of position trading in that to make it work effectively it really does take a lot of screen time, not just the "Oh I enter, then check in a few days", well at least that has been my experience with this approach. I did make this work in the format as described above but at a price of time. I still have a similar approach but without the manic stacking episodes. The beauty is every style of trading can find value in this thread I believe.

Edit: I should add, don't want an argument about anything I have said just sharing my experience and view.

Cheers

Stu
Once You See, You Can't Unsee But You Will Get The Odd Poke In The Eye
  • #6,646
  • Oct 14, 2014 4:27am Oct 14, 2014 4:27am
Quoting Stu Effex
I don't think this has been said here , if it has apologies for repetition. In my view the guys that can scalp consistently don't realise that they are the one's most likely to succeed with this approach. Remember back about the 3 x 20 exercise, for me I interpreted that as when you have consistency in achieving that kind of result this gives you the power to participate with little risk. Without knowing where the market will go next those scalp type entries can be the acorn for the oak tree. Quickly moving to B.E. , taking half off maybe for expenses...
Some of the best position traders are infact former scalpers. Generally profitable scalpers can no doubt gauage momentum of lower timeframe better than those who use wide stops and make trading decisions purely on higher timeframes (daily or higher). This is why there are instances where an intraday trader evolves into a position trader with account growth.

Peter Crowns would be a classic example of such. If you have seen Joel Rensink's video presentation on DIBS method he actually talks about how Peter Crowns was a scalper before he was given the DIBS approach by him. Hence there is a good reason why Peter Crowns claims to know which breakouts have 2~5 times the edge compared to the typical picture perfect breakouts that others take and lose money from. He also states that he trades less but makes more which most probably means that he is selective with his breakout entries such that those positions give the best R:R and probability of surviving the trend.

As for screen time, this should be reduced over time if you know what you are doing and know where to place "price alerts" that have the better potential R:R setups. You only need intraday entry skills to come into play once price reaches an area worth trading. More screen time only makes you want to close your positions earlier.
  • #6,647
  • Oct 14, 2014 4:49am Oct 14, 2014 4:49am
Quoting Stu Effex
I don't think this has been said here , if it has apologies for repetition. In my view the guys that can scalp consistently don't realise that they are the one's most likely to succeed with this approach. Remember back about the 3 x 20 exercise, for me I interpreted that as when you have consistency in achieving that kind of result this gives you the power to participate with little risk. Without knowing where the market will go next those scalp type entries can be the acorn for the oak tree. Quickly moving to B.E. , taking half off maybe for expenses...
partly true... at least it is instinctive to believe that we need to remove risk quickly, or risk small amounts for position trading as many entries will die.

But, it is in fact just as easy to build positions using much wider, or dare I say it, no stops to build large positions. Trader888 gave good examples of such as have many of the successful trend traders over time.

It's very rare for there to be a "best" with trading, there is always a pay off and always some pain to deal with. Most problems in fact will come from trying to achieve greatness as opposed to accepting consistency.

p.s nice to see this thread alive again
tradewith60
  • #6,648
  • Oct 14, 2014 4:53am Oct 14, 2014 4:53am
Quoting yonseo
{quote} Some of the best position traders are infact former scalpers. Generally profitable scalpers can no doubt gauage momentum of lower timeframe better than those who use wide stops and make trading decisions purely on higher timeframes (daily or higher). This is why there are instances where an intraday trader evolves into a position trader with account growth. Peter Crowns would be a classic example of such. If you have seen Joel Rensink's video presentation on DIBS method he actually talks about how Peter Crowns was a scalper before he was...
Haven't seen the vid, will check it out but get the gist of it anyway and agree. This is essentially what I meant but still found it absorbed so much time. Across many pairs each day you will find one which is approaching or at such a level. If you are lucky to find the momentum, those first hours are what I found to be crucial for stacking and I would tend to babysit those early positions to safety, this took a lot of screen time. Despite the increased screen time was never tempted to close as I always had the position worked in such a way that a portion would be for intraday profit and the balance for growth. Size & ratio of which I am not prepared to discuss, but anyone can tailor this to suit their size of pockets.
Once You See, You Can't Unsee But You Will Get The Odd Poke In The Eye
  • #6,649
  • Edited 5:27am Oct 14, 2014 5:11am | Edited 5:27am
Quoting 60minuteman
{quote} partly true... at least it is instinctive to believe that we need to remove risk quickly, or risk small amounts for position trading as many entries will die. But, it is in fact just as easy to build positions using much wider, or dare I say it, no stops to build large positions. Trader888 gave good examples of such as have many of the successful trend traders over time. It's very rare for there to be a "best" with trading, there is always a pay off and always some pain to deal with. Most problems in fact will come from trying to achieve...
Hi 60 With respect , it is not partly true at all, it is fully true as it was my personal experience nor did I mention amounts risked as being small as this is all relative to each individual. Yes the little EDIT:Wide or no stop option is another way to do it but for most account size can make this approach beyond reach for obvious reasons. Yes it is nice to see discussion again here but it can quickly degenerate, let's hope not.
Once You See, You Can't Unsee But You Will Get The Odd Poke In The Eye
  • #6,650
  • Oct 14, 2014 7:40am Oct 14, 2014 7:40am
Quoting yonseo
{quote} Some of the best position traders are infact former scalpers. Generally profitable scalpers can no doubt gauage momentum of lower timeframe better than those who use wide stops and make trading decisions purely on higher timeframes (daily or higher). This is why there are instances where an intraday trader evolves into a position trader with account growth. Peter Crowns would be a classic example of such. If you have seen Joel Rensink's video presentation on DIBS method he actually talks about how Peter Crowns was a scalper before he was...

Yon have you got a link for that vid ? Google has not immediately been forthcoming and would like to watch, Thanks.
Once You See, You Can't Unsee But You Will Get The Odd Poke In The Eye
  • #6,651
  • Oct 14, 2014 7:44am Oct 14, 2014 7:44am
Would somebody be kind enough please to clarify something for me with regards to Graeme .00 strategy. Rules and link to original post below:

(http://www.forexfactory.com/showthre...96#post3899196)

1. If the price is coming down from last .00, then enter 2 sell positions, 1 position at take profit 100 pips and other position has no take profit. Both positions to have stop loss -100 pips. If price reverses from your entry you lose -200pips but then enter another x2 lots of buy positions since price is coming up from .00
2. You let it run. After 100 pips, 1 position will close by taking +100 pips, and the other remaining position is completely free. Dont move the -100 stop loss of the remaining position, this is your free leg.
3. Hopefully this remaining leg will turn into a leg on your millipede.
4. Place a buy stop/sell stop on every .00

If price changes direction, and price comes from .00 to higher .00 then you would put in x2 buy positions with same rules at the coming up .00.


What is not clear to me is this (and which I have not found an answer/clarification to so far after reading upto page 288 on the compiled pdf, yes I am a slow reader). If the first trade hits the target (so 1 position bags the 100pips and in effect makes the second position a free trade to run), we are meant to place further pending orders at every .00 level. Now are these subsequent orders meant to be 2 positions as well with the same settings (both with 100pips SL and one with 100 TP) or should it be just one position, and if it is just one position should it have a SL of 100pips or no SL?
May be this question has already been addressed somewhere in the thread, I do not know, but from what I have read so far I can't find an answer/clarification to this. An answer to this will probably also address my ambuiguity with regards to the mechanics of stacking - should the stacking positions have SL and where the SL should be, especially when using 2 x positions entry (my preferred way) as opposed to one position and moving to brake even. Many thanks
  • #6,652
  • Edited 8:46am Oct 14, 2014 8:15am | Edited 8:46am
Quoting danjuma
Would somebody be kind enough please to clarify something for me with regards to Graeme .00 strategy. Rules and link to original post below: (http://www.of stacking - should the stacking positions have SL and where the SL should be, especially when using 2 x positions entry (my preferred way) as opposed to one position and moving to brake even. Many thanks
What Graeme is saying is yes open 2 positions both with 100 stop loss, if it goes against you, you are negative 200 (lost) . If the trade goes positive because you have trade in the direction of prevailing trend and you close one positon for +100 this will pay for the other position's stop loss and will effectively allow it to remain 200 pips away from the current market, risk free and further away from the market noise to hopefully survive. Anyway that is my understanding but will stand corrected if need be.

Edit: Dan he also said "For Those Who Can't Be bothered Perfecting Entries"
Further Edit: Sorry Dan just read your post again. Pretty sure Graeme only gave this as an entry example that is all. You do not enter both ways every 00 level. The post was not about stacking or diversification. What he meant was if that initial entry failed and you had -200 pips, trend had changed and you will now enter the opposite way from the 00 level you failed at just to get that initial millipede rolling. Think it will kill you myself. Again that is my understanding ?
Once You See, You Can't Unsee But You Will Get The Odd Poke In The Eye
  • #6,653
  • Oct 14, 2014 8:29am Oct 14, 2014 8:29am
Quoting Stu Effex
{quote} What Graeme is saying is yes open 2 positions both with 100 stop loss, if it goes against you, you are negative 200 (lost) . If the trade goes positive because you have trade in the direction of prevailing trend and you close one positon for +100 this will pay for the other position's stop loss and will effectively allow it to remain 200 pips away from the current market, risk free and further away from the market noise to hopefully survive. Anyway that is my understanding but will stand corrected if need be. Edit: Dan he also said "For...
Stu-Effex. Thanks for the reply. I understand the bit you just outlined again above. What I am not clear about is the subsequent positions to be added following the first entry hitting target.
  • #6,654
  • Oct 14, 2014 8:43am Oct 14, 2014 8:43am
Quoting yonseo
{quote} Some of the best position traders are infact former scalpers. Generally profitable scalpers can no doubt gauage momentum of lower timeframe better than those who use wide stops and make trading decisions purely on higher timeframes (daily or higher). This is why there are instances where an intraday trader evolves into a position trader with account growth. Peter Crowns would be a classic example of such. If you have seen Joel Rensink's video presentation on DIBS method he actually talks about how Peter Crowns was a scalper before he was...
One of the best setups I have been part of is the Pin Bar/IB combo or the Outside bar/Inside bar combo at highs/lows especially when those high lows break a previous high/low and close the other side. I picked this up trading DIBs exclusively for a while and it was one of the few things that I picked up but whenever I get a chance to trade one I almost certainly can count on a solid winner but being available to trade them when they occur is another thing.

If you can scalp successfully AND have the ability to take a longer TF management approach then you will no doubt be in a great position to find trades with low risk that can grow to many multiples of R as opposed to the same trade approach over the 4 hourly or greater.

RT
  • #6,655
  • Oct 14, 2014 9:27am Oct 14, 2014 9:27am
Quoting danjuma
{quote} Stu-Effex. Thanks for the reply. I understand the bit you just outlined again above. What I am not clear about is the subsequent positions to be added following the first entry hitting target.


Well in that very same post Graeme says add at every 00 level but in the direction of the initial positive entry. So for example if that was long stack every oo and do not think about diversifying (shorting) for
1/2 week or until their is sufficient growth. I would think he probably regrets mentioning this at all now.
This again is my view only, think it is very important to try and understand the dynamics of the pair you trade before blindly trading at every 00 level.
Once You See, You Can't Unsee But You Will Get The Odd Poke In The Eye
  • #6,656
  • Oct 14, 2014 9:45am Oct 14, 2014 9:45am
Quoting Stu Effex
{quote} Yon have you got a link for that vid ? Google has not immediately been forthcoming and would like to watch, Thanks.
Yeah not all things are available by google. I got it last year and there was a link before at:

http://www.forexfactory.com/showthre...86766&page=511

Both links seem dead now.

Filename is Joel_Rensink_DIBS.wmv and around 53mb in file size. I doubt I can upload it here.
  • #6,657
  • Oct 14, 2014 9:51am Oct 14, 2014 9:51am
Quoting yonseo
{quote} Yeah not all things are available by google. I got it last year and there was a link before at: http://www.forexfactory.com/showthre...86766&page=511 Both links seem dead now. Filename is Joel_Rensink_DIBS.wmv and around 53mb in file size. I doubt I can upload it here.
Oh Ok thanks Yon, didn't realise it was a download, thought it was you tube.

Cheers Stu
Once You See, You Can't Unsee But You Will Get The Odd Poke In The Eye
  • #6,658
  • Oct 14, 2014 9:58am Oct 14, 2014 9:58am
Quoting Stu Effex
{quote} Hi 60 With respect , it is not partly true at all, it is fully true as it was my personal experience nor did I mention amounts risked as being small as this is all relative to each individual. Yes the little EDIT:Wide or no stop option is another way to do it but for most account size can make this approach beyond reach for obvious reasons. Yes it is nice to see discussion again here but it can quickly degenerate, let's hope not.
I believe it may be true for you, right now, beyond that there's no evidence. Entry technique is a very small part of the puzzle

Agree there's no need to be offended because someone disagrees with your opinion
tradewith60
  • #6,659
  • Oct 14, 2014 9:59am Oct 14, 2014 9:59am
Quoting danjuma
{quote} Stu-Effex. Thanks for the reply. I understand the bit you just outlined again above. What I am not clear about is the subsequent positions to be added following the first entry hitting target.
Yes you do enter 2 positions at every 00 level which means you run the risk of -200 pip loss until you TP 1 position at the next 00 level. Basically your stacking positions if a trend happens while giving the holding position extra 100 pips room to breathe. The concept is similar to Peter Crowns free trade at 1:1 so that you get that extra cushion space for price to breathe when the free trade occurs.

The biggest weakness of this approach is when price ranges less than 200 pips. You will get whipsawed -200 pips both directions and potential drawdowns could be huge in those instances.

It is likely TRD regrets mentioning because people will start crying to him in PM when the whipsaws do happen. If you cut down your tradesize to minimize risk, this method is actually more profitable for a noob trader than the lower time frame scalping methods taught on the web.

The bigger message behind the 00 approach is clear. Following the TREND is more important than razor sharp entries and exits.
  • #6,660
  • Oct 14, 2014 10:22am Oct 14, 2014 10:22am
Quoting Razor_trader
{quote} One of the best setups I have been part of is the Pin Bar/IB combo or the Outside bar/Inside bar combo at highs/lows especially when those high lows break a previous high/low and close the other side. I picked this up trading DIBs exclusively for a while and it was one of the few things that I picked up but whenever I get a chance to trade one I almost certainly can count on a solid winner but being available to trade them when they occur is another thing. If you can scalp successfully AND have the ability to take a longer TF management...
I really appreciate your input Razor btw.

Looks like you and I share similar experience regarding trading IB's. 1H inside bars was something I traded exclusively when I first started trading the forex several years ago. From an educational perspective it is the one of best method for starting traders. It is VERY easy to execute and teaches new traders to accept what they tend to try to avoid the most: LOSSES

I completely agree with you about the setups you mention. Pin Bar/IB combo are very rare but those trades tend to give you enough move to make a free trade at 1:1 if you decide to drop 1/2 your positions. I believe part of the reason behind this is because pinbar traders notice the same setup and act accordingly when the move does happen. This means those who trade the inner bar ends up piggy backing off the pinbar traders.

Same with the previous high/low areas. Usually burst moves happen in those areas as the stoplosses get taken out and the move is enough to give you a free trade at 1:1 even if the overal move was a fakeout.

Like you said about closing on the other side, how the price closes when the breakout occurs is also very important. Peter Crown's actually says the best breakouts are those that don't retrace after the breakout. There are some DIBS traders that cut their losses before their SL is even hit if the price after the breakout closes within the inside bar and/or mother bar range.
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