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Multi-Lot Multi-Timeframe Position trading

  • #601
  • Jan 2, 2015 7:46am Jan 2, 2015 7:46am
Quoting Just-Jimmy
Thanks Graviton for the thread, been looking for sometime to find a philosophy of trading which is close to my personality. Once I get my head around most of the overall picture I might come back and ask a few questions. But thanks again for persisting with the thread, loads of sound advice.
You are welcome Jimmy. There was a lot of discussion last year about many subjects. I'd like to start out the new year with a summary of things discussed so far, so off we go!
  • #602
  • Jan 2, 2015 8:40am Jan 2, 2015 8:40am
The core of this type of trading is that to profit we must trade some sort of trend. We can trade very short intraday trends, medium term swing trades of a few days or very long ones, but without a trend we are just trading random chaos and that can only produce a negative expectancy due to the cost of spread.

Our goals are simple. We want to identify a trend, get in it while it still has some room to run, stay with it as long as it's reasonable to do so, and exit with as much of the profit as possible.

It turns out that identifying a trend really isn't that hard. For longer term trades, just look at the longer term charts like the monthly, weekly and daily. For a medium term swing trade, the monthly becomes less important and the H4 and H1 charts are more important. Use what ever indicator(s) you like most, or just look at bare price action. I like the RSI above (or below) 50% and the 5 EMA above (or below) the 10 SMA to indicate a long (or short) trend in a particular time frame, and I want to see the trend in all timeframes of interest. To make things simple, I just look for a trend in all timeframes. Those are fewer in number, but I can usually catch one or more in any week. We want to keep our trading simple. Adding more widgets and rules that don't improve long term results is not productive.

In any case, a good trend should jump off the page at you. Most of the time, there is a good trend running somewhere in the markets, but I have seen long periods, like a couple or few weeks where there are no good trends. In those difficult times, we just have to sit on the sidelines and wait for a trend to come by. No matter how enticing it might be, we never want to trade the random chaos of the markets since that does not produce a positive expectancy for our trading longer term. We always want to trade trends, or at least what we think are trends. We also discussed confirming the technical trends with fundamental information. We like to trade in the direction that agrees with central bank policy, and we are reluctant to trade against a central bank. Going forward, I'll point out from time to time what looks like a good trend to me, but it's important that each trader develop the skill to see those for themselves. At this moment, UCad long and EU and AU short all seem to be trending nicely by my definitions.
  • #603
  • Jan 2, 2015 12:09pm Jan 2, 2015 12:09pm
Happy new year Graviton,

Thanks for your answers! I will let you know how it goes. Just wanted to follow up with a few questions:

1. I was trading JPY (NZD JPY, AUD JPY and GBP JPY up for the past week - because it was trending up)
But yesterday, it suddenly turned down and killed quite a few of my positions.
It seems that it will continue to go down for a major retracement (on the weekly chart). If you were me, would you sit out in this market until the major retracement is over? Or, would you trade the major retracement and profit from that?

2. Earlier you mention that you would enter 3 lots - and then exit the oldest lot at a local maximum and re-enter at a local minimum.
And you keep recycling the trades at approximately 100 pips increment to realize your profits.
(And if you want to increase the 3 lots trade to 10 lots, you would then skip a few profit-taking opportunities)
You mention that you would exit two positions at once when an entry goes bad.
If you exit at a local maximum and re-enter, which is then proven to be a bad entry, would you exit two positions together?
(That would mean that you will only have one lot left, assuming the 3 lots are set up properly)
Wouldn't that be a huge set back for building up to a 10 lot trade?

3. I tried placing a 2nd position after 50 pips of the price moving in my favour. However, my second position often retrace enough to make my overall net position negative, which then I have to exit both of them. That brings me back to square one with zero positions. Would you have any advice on that? (Similar to what I describe in #2)

4. I noticed you demonstrated that we can break even if the market is a few pips in our favour.
But often, I notice that you leave 50 pip stop losses to ensure the market doesn't take out your position easily.
I am not sure about the timing in which the stop loss is moved to break even. My current strategy is to place my stop loss under the H4 wick
and wait till the H4 lower wick is above my entry price to break even.
Would you have any advice on a general rule of thumb for breaking even?

Hope you are having a blast !

Cheers,
Eric
  • #604
  • Jan 2, 2015 1:49pm Jan 2, 2015 1:49pm
Quoting setoeric12
Happy new year Graviton, Thanks for your answers! I will let you know how it goes. Just wanted to follow up with a few questions: 1. I was trading JPY (NZD JPY, AUD JPY and GBP JPY up for the past week - because it was trending up) But yesterday, it suddenly turned down and killed quite a few of my positions. It seems that it will continue to go down for a major retracement (on the weekly chart). If you were me, would you sit out in this market until the major retracement is over? Or, would you trade the major retracement and profit from that?
Happy New Year! I got caught in the GJ downswing and bailed out with a little profit from the trade. I'm sitting out the retracement and going to try to re-enter as near the bottom as I can. It looks like it's almost ready for a re-entry now, but it's too late in the week for me to re-enter now. I'll see how it's doing in the London session after the market re-opens next week. Some of these moves are just the result of very thin holiday trading. Some people trade these counter trends and do very well with them, but I never trade them, so I can't advise on that. I'll comment on your other questions later.

G
  • #605
  • Jan 4, 2015 8:52pm Jan 4, 2015 8:52pm
Continuing answering Eric's questions:

Quoting setoeric12
2. Earlier you mention that you would enter 3 lots - and then exit the oldest lot at a local maximum and re-enter at a local minimum. And you keep recycling the trades at approximately 100 pips increment to realize your profits. (And if you want to increase the 3 lots trade to 10 lots, you would then skip a few profit-taking opportunities) You mention that you would exit two positions at once when an entry goes bad. If you exit at a local maximum and re-enter, which is then proven to be a bad entry, would you exit two positions together? (That would...
Another good question. Yes, exiting 2 lots for a small profit if price moves against a new 3rd lot entry would be a setback to setting up a multi lot trade. There will be a lot of these exits and a lot of probing and back and forth entries and exits in the process of setting up a good multi-lot trade. Sometimes I take a small loss on them as well because I believe it will turnaround. Usually that is a bad idea. In any case, there will be many small wins and perhaps a few small losses for each trade that runs well without ever retracing into a loss. But those few that do not retrace back to break even or a loss are the ones we want to stay in anyway. Typically out of 6 trades I'll get a few break evens, small wins or small losses and only one or two trades that run multi-lot to large profits. All my profit is made on that one or two that run to large profit in multi-lot. If I had some way of knowing which of the 6 try's would end up in large profit, I could avoid a lot of work, but there is no way for me to know that in advance. The best I can do is never take a large loss, ever, for any reason. I can do that, so that's what I do.
  • #606
  • Jan 4, 2015 9:07pm Jan 4, 2015 9:07pm
Here's a 5 lot trade currently running 3 weeks on UCad long. It's up about +600 pips total. That pays for a lot of small losses to get in it. Even if I only exit 3/4ths of the profit, I'm still well ahead:

Attached Image (click to enlarge)
Click to Enlarge Name: 5 lot trade running 3 weeks.PNG Size: 56 KB
  • #607
  • Jan 5, 2015 4:08am Jan 5, 2015 4:08am
Quoting Graviton
Here's a 5 lot trade currently running 3 weeks on UCad long. It's up about +600 pips total. That pays for a lot of small losses to get in it. Even if I only exit 3/4ths of the profit, I'm still well ahead: {image}
Nice G.

Could we follow this example to completion? I am very interested to see how you exit from this combo.

Best, AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
  • #608
  • Jan 5, 2015 5:27am Jan 5, 2015 5:27am
Quoting AlbinaGrande
{quote} Nice G. Could we follow this example to completion? I am very interested to see how you exit from this combo. Best, AG
Sure AG, we'll do that.
  • #609
  • Jan 5, 2015 6:05am Jan 5, 2015 6:05am
Quoting setoeric12
3. I tried placing a 2nd position after 50 pips of the price moving in my favour. However, my second position often retrace enough to make my overall net position negative, which then I have to exit both of them. That brings me back to square one with zero positions. Would you have any advice on that? (Similar to what I describe in #2)
Yes, this is similar to your previous question #2. I'm more likely to exit a 2 lot trade at break even or for a small loss. A 3 lot set-up should always exit with a profit. There will be many of these early exits for the few that run a long way with the trend. I know of no method that can avoid both small and large losses. You have to choose between a rare large loss and more frequent small losses. The small losses wont wipe out an account but eventually the large losses will, so the choice is clear, never take a large loss. The market never forces you to take a large loss, that is simply a choice that you can make while trading, so choose wisely.

If you are only getting small losses with no good trades running a long way with the trend, you'll have to adjust your trading rules to current market conditions. Did your entries prove out to be good over a longer time period? If not you need to tighten up on your entry criteria, but if so you are being taken out by the markets volatility. Perhaps you are trading too tight a stop loss with too large of a position size and being taken out by normal price volatility. Are your trades going on to move in your favor after you exit? How much further did it move against you after you exited before it turned back in your favor? Did it turn back in your favor on an s/r line soon after you exited? If that's the case, half your position size and double your stop loss to keep your account risk the same and put your sl on the other side of an obvious s/r line and see if the trades hang in there longer. You can always exit before the sl if it's obvious a trade isn't working out for you. I don't know of a single solution that works for every trade, but I know that taking ever larger losses is not a solution. With better trade selection, better entries and better stops, you should eventually be able to get some trades to run further with the trend. If those make more pips than the small losses you had to take to find them, you are trading successfully, if not, then further work is needed. This is a very good question and it's one we need to discuss and work on more going forward. It goes right to the heart of trading a trend for profit.
  • #610
  • Edited 6:37am Jan 5, 2015 6:25am | Edited 6:37am
Quoting setoeric12
4. I noticed you demonstrated that we can break even if the market is a few pips in our favour. But often, I notice that you leave 50 pip stop losses to ensure the market doesn't take out your position easily. I am not sure about the timing in which the stop loss is moved to break even. My current strategy is to place my stop loss under the H4 wick and wait till the H4 lower wick is above my entry price to break even. Would you have any advice on a general rule of thumb for breaking even? Hope you are having a blast ! Cheers, Eric
Generally, I'll move my stop loss while the price is moving in my favor and after I am well into profit. The stop loss is never moved against the direction of the trade. If you see you entered a trade with too tight a stoploss, it's best to exit quickly and look for a better entry with a better stop loss setting. One way to get past fighting with stop losses is to manually exit all trades. That takes the stop loss setting problem out of the trading, of course in exchange for the problem of when to manually exit. So if you were trading 0.2 lots with 50 pips stop, try trading 0.1 lots at 100 pips stop and try to always exit manually around the 50 pips you wanted, but never let the trade run the full 100 pips against you. This is challenging, but you might find it easier (or at least more possible) to manually exit trades wisely with the latest information as the trade develops than to set a perfect stop loss in advance with less information, and you have an opportunity to reduce the size of your average loss when you see early on that a trade isn't working. Either way is difficult, but give it a try and see if it works out better for you or not.
  • #611
  • Edited 10:15am Jan 6, 2015 8:49am | Edited 10:15am
I said I'd update the UCad long trade. The first lot on this trade was taken on 12/11 and is up about +250 pips. An additional 4 lots have been added to the trade over the past few weeks. We took a little swing down yesterday for a 38.2% retracement on the fib, but it's recovering today. The H4 looks like this:
Attached Image (click to enlarge)
Click to Enlarge Name: UCad 1-6.PNG Size: 55 KB


Since the pair is trending up in ALL timeframes, it is a buy and I intend to stay with it. Looking at the monthly chart we can see that it has about another 450 pips to run before hitting the next major resistance. You will note that I entered this trend way late, after it had already moved up 1000 pips or so, but that doesn't matter. If I can milk the middle of the trend for 600 pips with a multi-lot trade, I'm fine with that.
  • #612
  • Edited 9:46am Jan 6, 2015 9:14am | Edited 9:46am
The Yen is recovering some of it's value this week. The Bank of Japan can't be happy about that. The BOJ announced increased QE for 2015 back in Nov of 2014, so we can expect them to move soon. Be patient, but be prepared to catch the next wave of Yen devaluation. GJ has given back exactly 50% of it's 2150 pip rise since October. Will it turn back up right on the 50% Fib line? We'll know in the next day or so. I have no problem riding it back up 1,000 pips to it's previous Dec high if it turns back up. Time will tell.
  • #613
  • Jan 6, 2015 9:46am Jan 6, 2015 9:46am
Quoting Graviton
I said I'd update the UCad long trade. The first lot on this trade was taken on 12/11 and is up about +250 pips. An additional 4 lots have been added to the trade over the past few weeks. We took a little swing down yesterday for a 38.2% retracement on the fib, but are recovering today. .............
Nice G. Takes lots of patience and confidence. Need to work on that.

How do you trail your Stops for this example?

AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
  • #614
  • Edited 10:23pm Jan 6, 2015 11:58am | Edited 10:23pm
Quoting AlbinaGrande
{quote} Nice G. Takes lots of patience and confidence. Need to work on that. How do you trail your Stops for this example? AG
Stops can be frustrating. They are a careful balance between protecting capital and unrealized gains and not wanting to be kicked out of a good trade too early. My goals and settings in trailing stops changes depending on where I am in the trade.

Initially, I'll have one lot on and my only risk is a small one to my trading capital. I want to give the trade room to move, but I don't want to risk too much of my precious trading capital. I'm looking to set that initial stop around -50 to -100 pips, depending on the volatility of the pair. Daily atr on UCad is 62 pips so that would be a good area for an entry stop, but on GJ daily atr is 138 pips, so a reasonable stop would be around 140 pips. I'll usually scroll down from the daily to the H4, H1, M30, or M15 to look for a very recent support to place my stop under. I like to get well under it as those are often tested by 10 to 15 pips. I prefer to exit a bad trade manually as soon as I can see it's not moving as I planned rather than wait for the price to go all the way down to the stop. A good way to build trading skill is to try to never hit a stop. If the stop was at 75 pips and you have rode it all the way down to -70, just manually exit. The 5 pips wasn't worth anything, but the control over your trading by taking a manual exit rather than letting the market control your exit at a stop is priceless. Most good trades move into profit fairly quickly after entry and if it doesn't it's suspect. If it moves very far against you, you obviously didn't intend that to happen and it's a bad entry by definition, so just exit and look for a better entry.

That said, in the next step, I have put a second lot on. At this point, the 50 pips or so profit from the first lot isn't that significant, but if price turns against me I will be losing pips at twice the rate that I made them thus far, so my goal is to never let that happen. Up to this point my trading was very mechanical but now I have to make a judgment decision. If I'm near the computer and able to watch the trade closely, I won't trail the stop at all at this point. If the trade goes bad so that it turns negative overall or looks like it will turn negative overall for the two lots combined, I'll exit manually before things go too badly. But if I have to be away from the computer I'll want a stop set under a support to catch it before it goes too far against me. If another support has been generated at this point I can trail the stop to be below it and reduce my risk a bit, but that little reduction in risk of 25 to 50 pips isn't very significant and I risk getting kicked out of a good trade set-up to save 25 pips. If price continues in my favor as it should in a good trade, I wont trail the stop until I have the third lot on.

The third lot might go on at +75 pips or so from the second, so now I have around 200 pips in unrealized profit at risk, and if price turns against me I'd be losing pips at 3 times the rate I would have originally. That IS significant (to me at least) and I want to reduce my risk. I can do that either by taking off the original first lot of the trade, or trailing my stop up. I like taking the first lot off because that 125 pips in profit can fund this whole trade, meaning no matter what happens, I walk away with a profit. Risk to my precious trading capital is reduced to zero for the remainder of this trade. That route reduces my risk to unrealized gains to 75 pips and means if price turns against me I'm only losing pips at twice the original rate rather than 3 times the original rate. On the UCad trade I posted, I took the original lot off at +100 pips profit, so the rest of the trade which is now up to 5 lots and +600 pips or so was funded by taking profit off that original lot. If I'm not ready to take that first lot off for profit for some reason, like if price is moving up very strongly and I'm waiting for a peak to take it off, then I'll trail the stops up some to be underneath a recent support to at least reduce my risk some in case of a quick reversal.

From this point on I am going to try to never have a stop take me out of the trade. I will trail my stops in a tight group or almost right on top of each other just beneath supports as they develop but place the stops just below where I would manually exit if the trade turns against me. My goal will be to manually exit this trade with as much profit as possible and the stop is only there for emergency protection in case of a sudden reversal or loss of power or internet.

In perfect trading I would never hit a stop. All exits are taken manually unless there is a huge quick reversal or some other sort of emergency. In reality I have to sleep sometime, and when I do I want a stop that will protect me from having a winning trade turn into a big loss while I sleep.

Please ask more questions about this as the more discussion of it the better.
  • #615
  • Jan 6, 2015 12:55pm Jan 6, 2015 12:55pm
Quoting Graviton
{quote} Stops can be frustrating. They are a careful balance between protecting capital and unrealized gains and not wanting to be kicked out of a good trade too early. My goals and settings in trailing stops changes depending on where I am in the trade. Initially, I'll have one lot on and my only risk is a small one to my trading capital. I want to give the trade room to move, but I don't want to risk too much of my precious trading capital. I'm looking to set that initial stop around -50 to -100 pips, depending on the volatility of the pair. Daily...
Thanks G,

I am starting to get the idea re your approach to stops. Your writing is very clear. Digesting it all is another matter.

New question re. Exits: Have you considered a systematic approach to Harvesting profit? Eg. a long time runner with multiple positions, closing out selected positions at say every 500 pips in order to keep your position numbers manageable, perhaps no more than 5 or 6, while continuing to build your Floating Profit. A couple of years ago I had looked at this concept and found it interesting, at least on paper.

AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
  • #616
  • Jan 6, 2015 8:05pm Jan 6, 2015 8:05pm
Quoting AlbinaGrande
{quote} Thanks G, I am starting to get the idea re your approach to stops. Your writing is very clear. Digesting it all is another matter. New question re. Exits: Have you considered a systematic approach to Harvesting profit? Eg. a long time runner with multiple positions, closing out selected positions at say every 500 pips in order to keep your position numbers manageable, perhaps no more than 5 or 6, while continuing to build your Floating Profit. A couple of years ago I had looked at this concept and found it interesting, at least on paper....
Yes, for stops, I try to just use them for emergencies. It builds character to try to take all your exits manually, and it's not that hard to exit manually better than a stop that will always take you out at a local minimum of profit. There is no reason to turn control of my exits over to the market. I want to keep control of exits and try to master them.

I do have a systematic method of taking profits, though I might not have demonstrated it much here. The first profit off the UCad was already taken at +100 pips to cover the risk of the rest of the trade as was described above. The next lots were put on spaced at 50, 75, 75 and 100 pips apart. That leaves me with 5 lots running now. Soon I'll take the 2nd (bottom most) lot off for about +325 pips as near a peak in price as I can and put the new 7th lot on top with as close to 100 pip spacing and as near the bottom of a retracement as I can (buy low, sell high).

The 5 lots will eventually be spaced about 100 pips apart each so the most profitable on the bottom will soon be at +400 at the time of harvesting for the remainder of the trade. I'll continue taking off 400 pip chunks of profit off the bottom lot and adding new lots on top as long as the trend runs. I only intend to run 5 lots on this long UCad trade. I'd run fewer lots if I expect the trend to run shorter, like only 3 lots or so. I rarely run more than 5 lots. There is really no reason for me to, but if I skip taking one off, that would put 6 lots running at 500 pips profit on the bottom lot for harvesting. If the trend ran forever there would be no limit to how many lots that could be stacked up, but all trends come to an end, so it's best to not get too greedy. Well, I'm also running EU and AU short trades with this same method now, so maybe that is a little greedy, but I also took the first lot off in profit on each of those, so these are all essentially risk-free trades as well. So maybe the lesson is that greed is ok as long as you first manage your risk
  • #617
  • Jan 7, 2015 6:50am Jan 7, 2015 6:50am
Quoting Graviton
{quote} Yes, for stops, I try to just use them for emergencies. It builds character to try to take all your exits manually, and it's not that hard to exit manually better than a stop that will always take you out at a local minimum of profit. There is no reason to turn control of my exits over to the market. I want to keep control of exits and try to master them. I do have a systematic method of taking profits, though I might not have demonstrated it much here. The first profit off the UCad was already taken at +100 pips to cover the risk of the...
Hi G.

My note evaporated. An occasional problem here with WiFi USB connections. But some more of my mumblings from out of the ether.

I was happy to see your reply which confirms my thinking that the regular Harvesting of profit from a growing Floating Profit is the way to go. Looking at several of my back testing models I have come to believe that for longer running Trends taking profit, perhaps via Limit Orders somewhere between 500 to 750 pips for each position, results in the smoothest relation between FP and Balance. Above that only delays building our Bank thus risking a relatively excessive draw down in the early stages.

I think of this as the difference between Coffee and Corn Harvesting. Coffee is harvested several times over weeks or months while corn is harvested once, at hopefully an optimal time all things considered. With spacing at 100 pips and Harvesting at rungs 5 or 6 and forward, the Equity Harvest Ladder would appear to produce a reasonably smooth relationship between FP and Bank and should hold up pretty well in the face of an unchecked 300 pip retrace once the process is underway.

I also really like your notion of pulling profit out of rung one early to pay yourself in advance as it were.

Best, AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
  • #618
  • Jan 7, 2015 9:03am Jan 7, 2015 9:03am
Nice Thread Graviton! I have come out of hibernation to actively follow it! ;-)

Congrats on your USDCAD long ... nice trade! If you look at the weekly and monthly pivot points, you see there is a confluence (pivots near each other) of the W2 and M2. USDCAD is slightly below this level, which is strong resistance. Do you think its prudent to lighten up and lock in a couple of positions here, then reenter on the retrace?

Regards,
EZcurrency
  • #619
  • Jan 7, 2015 9:20am Jan 7, 2015 9:20am
Oh ... also event risk today for USD (FOMC). One more reason to lighten up imo.

What's your take on this?

EZ
  • #620
  • Jan 7, 2015 12:55pm Jan 7, 2015 12:55pm
Quoting ezcurrency
Oh ... also event risk today for USD (FOMC). One more reason to lighten up imo. What's your take on this? EZ
Thanks for your positive comments. Yes, it was very volatile today during FOMC minutes. The minutes can be read either way, but they are generally being interpreted as at least allowing room for a more dovish stance by the Fed. That would send the USD down and beat my trade up. My overall opinion though is that the low oil prices will help the USD and Hurt the CAD, supporting my trade over the long haul. At this time, I'm assured of making a nice profit on the trade, the only question is how much. I'll stay the course for today and let some of the volatility settle out before making any major decision. Most news flashes don't affect these longer term trades after the talking heads move on to the next topic, which will probably be oil prices. The exception would be a major shift in central bank policy, and I just don't read that into the FMOC minutes. Perhaps I missed something important in them, but I don't see what it could be.
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