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Multi-Lot Multi-Timeframe Position trading

  • #741
  • Jan 22, 2015 5:56am Jan 22, 2015 5:56am
Quoting lemming78
{quote} Your scenario shows up when you appy a sort of grid, opening more position but when you are on the loosing side of the trade. Hope i understood well and answered correctly. Hi man
Lemming,

I don't think you understood my post correctly ... I'm not adding longs as the position is falling down against me ... I'm adding longs as its running up, and I'm in profit. I move my SL up to manage risk to lock in profits on an adverse move.

My question was as you add more and more positions, the same % swing makes a bigger % swing in your equity. This is especially true if building positions on correlated pairs. Ex: lets say you have UJ, GJ, AJ longs with 1:1 ratio and one position each. 1% move in all (since highly correlated) makes 3% move in your equity. Now you do your analysis and see JPY is falling, and should fall much more and trend for months (so these pairs all up). You add as it runs your in your favor over days/weeks, but now have 5 longs in each, so 5:1 for each position x 3 = 15:1 leverage. So a 1% move in the currency pair makes a 15% move in equity.

Much harder to watch than a 3% move! How does one handle this psychologically?

EZ
  • #742
  • Edited 6:32am Jan 22, 2015 6:04am | Edited 6:32am
Continuing our discussion on improving our r/r ratio. A third risk to greater profits can be described statistically. The longer we stay in a trade, the more likely we are to experience a spike in price that will drive us out. I'm not talking about a major reversal due to fundamentals changing, like a central bank changing from lowering interest rates to raising them. I'm just speaking of the run of the mill news spikes that cause price to dip before it recovers and returns to following the main trend. In a week perhaps you would have only two daily moves that would be greater than the average daily range. But in a month you might have 8 days greater than the average daily range and perhaps one twice the ADR. In 4 months, you might get 4 moves twice the ADR and 1 as much as four times the ADR. This continues generally following a Bell Curve distribution with ever larger spikes occurring less often over time, so that over a long enough period, a move of even 10 or 20 times the ADR is probable. There is no way to accurately predict when one of these spikes will come along. We can only say that the longer we are in a trade, the more likely that one will occur. So while the 80 pip sl might suffice to get us into a good trade, we can't expect a 80 pip trailing stop to keep us in the trade for very long. As the trade progresses we will have to let the sl increase in size to stay in the trade through ever larger spikes. The less we increase the width of the stop loss over time, the faster we will be spiked out of the trade, but with a greater % of the profit up to that time because of trailing a tighter stop. The more we increase the width of the stoploss with time, the longer we will stay in the trade before getting spiked out, but when we are spiked out it will be with a lessor % of profit made up to that time because of the wider stop. The problem is obvious if you think about it. The solution is not as simple as just trading without a stoploss, since a major reversal will ultimately come through wiping out all the profits of the trade along with trading capital if the trade isn't exited promptly.

Just when it looks like we are lost with no hope of salvation, a friend comes to our aid. The trend is our friend. It turns out, the spikes are not evenly distributed on both sides of the bell curve. The price spikes are larger and occur more frequently on the side of the bell curve that is trading against the trend, and they are smaller and occur less frequently on the side of the curve that is trading with the trend, and this effect becomes more pronounced as we go further out the curve, or stay in our trades longer. Yes Virginia, there is a Santa Claus.

Questions? Comments? Discussion?
  • #743
  • Jan 22, 2015 7:22am Jan 22, 2015 7:22am
Quoting ezcurrency
Graviton, Great stuff! I love reading your comments and discussion! Can you talk about the psychology of holding for the big swing / long term? Personally I can take small losses no problem ... but holding for weeks/months is very difficult for me. It is hard to watch the big swings in equity as you add positions. I want to punch out after a decent move up ... but have a hard time holding for a truly huge swing over weeks/months. Example, as you add more lots to build a position in a trend ... lets say first position is 1:1 leverage (so 0.1 lots...
I wish I had a golden ticket that would get you past all the psychological hurdles to making a profit in the markets. Reading "Trading in the Zone" by Mark Douglas might be as close as I can come. Once you have some trades running that are making huge pips, you can at least be confident that even your worst case scenario allows you to walk away with some good pips. Yes, it's hard to sit tight while watching 500 pips vaporize from a great trade that has climbed 1500. In the end, you just have to accept that risking unrealized gains to make even larger gains is a necessary act of sacrifice to succeed in trading. I look at unrealized gains as different from trading capital. I protect my trading capital like a mother lion protects her cubs, never taking one pip more risk with it than necessary to enter a good trade. Unrealized gains are thrown into the fight like mercenaries. I don't care how much is lost, as long as I win in the longer haul. It's rather like riding a roller coaster at a theme park. The first time it goes by in a blur and it's scary as hell. The second time it's still pretty darned scary, but you start to recognize some of the twists and turns. But after riding the same roller coaster 10, 20, 50 times, you learn every twist and turn and it's just a nice view. You are amused by all the sheer terror in the "first timers" eyes and remember when that was you. All the fear leaves you and what once frightened you to the point of panic becomes just another nice day in the park. Be patient with yourself. This takes time. In the end, the only way to lose is to quit. As long as you don't quit, you haven't lost. Best success.

G
  • #744
  • Edited 8:48am Jan 22, 2015 7:34am | Edited 8:48am
Quoting IBreakOut
Hi Grav, great writing on risk and money management! It is an interesting point what ezcurrency raised. Maybe you could tell us with an example how you handled the UJ situation. I would be very interested to see if you closed your positions when the large retracement occured and if yes where; or if you did not close them then where were your SL-s? One more question: NZD is a roller coaster, IMO it's own fundamentals are strong but commodity fundamentals in general are weak and this influences the currency in a way that it is hard to trade. What...
My last UJ trade was taken off for 500 pips profit on Dec 5, 2014. I'm thinking you meant the UCad trade. I'm still in that trade. I have 7 lots long and it's up +3000 pips total. SL is at 1.1874, so it is widened to +450 pips at the moment. I'll probably move the stop up at some point, but I'm nearing the point where I probably wont ever hit the stop on this trade. I'll just exit when the fundamentals shift. That is to say, oil price starts to rise.

I've looked at NZD many times over the past few months, but it has never met my entry criteria of strong fundamentals that I understand and trending in ALL timeframes. What is the fundamental basis of this trade? Do you think the price of sheep will go up? I'm kidding a bit here, (kidding, get it?), but if ALL the timeframes are trending and you understand the fundamentals that are driving the trade (I don't), then by all means, take the trade.

UCad Long - Daily TF
Attached Image (click to enlarge)
Click to Enlarge Name: UCad +3000.PNG Size: 51 KB
  • #745
  • Edited 8:03am Jan 22, 2015 7:44am | Edited 8:03am
Quoting lemna
Graviton, it had always seemed to me that part of the success of the methods that you share here, is that you did move up stop losses quite quickly including to BE and beyond. This meant sacrificing a few winners but limited losses. So I am a bit confused as to how you prefer yourself to manage entries and build multi-lot positions. As you say, the best trades tend to move into profit very quickly. I am very aware of course that you often get at least one retest of the good entry points after some initial success. For example, I think you like to...
Yes, I am moving the stop up slower for these longer duration trades. The longer the duration of the trade, the slower we need to move the stop. I hinted earlier why this is required. Good question. I intend to discuss this further going forward.
  • #746
  • Jan 22, 2015 8:33am Jan 22, 2015 8:33am
Quoting Graviton
{quote} My last UJ trade was taken off for 500 pips profit on Dec 5, 2014. I'm thinking you meant the UCad trade. I'm still in that trade. I have 7 lots long and it's up +3000 pips total. SL is at 1.1874, so it is widened to +450 pips at the moment. I'll probably move the stop up at some point, but I'm nearing the point where I probably wont ever hit the stop on this trade. I'll just exit when the fundamentals shift. That is to say, oil price starts to rise. I've looked at NZD many times over the past few months, but it has never met my entry criteria...
Hi Grav,

no, actually I really meant UJ. It retraced from 121 to 115 so I was interested where you closed your trades or if you closed them at all.

Thanks,
IBO
  • #747
  • Jan 22, 2015 9:01am Jan 22, 2015 9:01am
Someone asked earlier what to do if price is moving so well that you don't get a pullback to enter. If it's moving that well, and all your other entry criteria are met, go ahead and enter. If it pulls back just after you enter, cut your loss short and try again when the retracement is completing and all other entry criteria are satisfied. Three tries is the limit. If you can't get in in the trade in three tries, it's just not working today. Go do something else.
  • #748
  • Jan 22, 2015 9:13am Jan 22, 2015 9:13am
Quoting IBreakOut
{quote} Hi Grav, no, actually I really meant UJ. It retraced from 121 to 115 so I was interested where you closed your trades or if you closed them at all. Thanks, IBO
Yep, exited at 121.371 on Dec 5. That was a preset TP near the top of the old 2003 and 2007 highs. It went up just a little more after my exit, then crashed. I don't usually try to pick tops and bottoms. I had set that wide TP when I took the trade though and it hit. Probably just luck, eh?
  • #749
  • Jan 22, 2015 9:37am Jan 22, 2015 9:37am
I haven't heard of anyone in this thread that got burned in the SNB madness with the Swiss Franc. Hopefully everyone who read this thread knew that I don't approve of trading a currency that is being manipulated as the SNB was doing with the Franc. We had discussed that here just a few days before the SNB firebombed the currency markets. That was such a mess, it messed up all my Chf charts and indicators and I might not be able to get a reasonable forecast of the Franc for months or years. The funny thing is, my system was giving sell signals on EChf for weeks ahead of the SNB move. Had I taken the sell signal, I could have made thousands of pips on that move. In the end though, when I see so many traders and brokers get wiped out by central bank stupidity, I'm glad I stuck by my principles. Would a computer algorithm know to stay out of a manipulated currency? That's the problem with computers, they do what you tell them to do, even if it's stupid.
  • #750
  • Jan 22, 2015 9:45am Jan 22, 2015 9:45am
Just tipped over +2,000 pips on EU. Yay!
Attached Image (click to enlarge)
Click to Enlarge Name: EU +2000.PNG Size: 79 KB
  • #751
  • Jan 22, 2015 10:10am Jan 22, 2015 10:10am
Nice!
  • #752
  • Jan 22, 2015 10:24am Jan 22, 2015 10:24am
Quoting Graviton
{quote} Yep, exited at 121.371 on Dec 5. That was a preset TP near the top of the old 2003 and 2007 highs. It went up just a little more after my exit, then crashed. I don't usually try to pick tops and bottoms. I had set that wide TP when I took the trade though and it hit. Probably just luck, eh?
Great charts and congrats for picking the top on the JPY!
  • #753
  • Jan 22, 2015 11:01am Jan 22, 2015 11:01am
Thanks! I've scanned my pairs and see no good new entries today. I do have an EG short trade I entered a week ago, and I've added a third lot to it today. It's up about +400 pips total, but I don't have great confidence in it. It met all my entry criteria though, so I was compelled to enter it. The fundamental driver behind the trade is that the BOE is independent of the ECB and they don't have to follow the same inflationary path that the ECB has embarked on, though they have been doing so of late. While this isn't exactly a gamble, I don't consider it's fundamentals as strong as the UCad long or the EU short. I never take gambles. Lady luck said she's helped me enough and I need to learn how to do this stuff on my own. While we wait for the Euro to go to parity with the USD, lets discuss trailing a stop in a long duration multi-lot trade some more. I know I've beat this subject up a lot here, but if you are going to trade for thousands of pips, it's an important skill. Before I take off on this rant, does anyone have any questions? Is anyone having any trading problems they want to discuss?
  • #754
  • Jan 22, 2015 12:31pm Jan 22, 2015 12:31pm
Hi Grav,

I do have a question. There are some topics about technicals and fundamentals which are in my mind since the beginning of the thread. Interesting that no one has asked them. You said many times that you check the charts and when you find a setup you think about how the fundamentals line up for it. My logic is completely the opposite. I find it hard to look at the charts first and then think about technicals. Charts are something clear cut most of the times but I can always line up both positive and negative fundamentals for every single currency. So if I looked first the charts then my emotions start to play with me and convince me about the trade setup. If I however decide for example that I am bearish on AUDNZD and the charts say the opposite then nothing can influence me to take a bad trade because I decided my fundamental bias already before looking at the charts.

What do you think about that and how do you handle this situation?

IBO
  • #755
  • Jan 22, 2015 1:26pm Jan 22, 2015 1:26pm
Quoting IBreakOut
Hi Grav, I do have a question. There are some topics about technicals and fundamentals which are in my mind since the beginning of the thread. Interesting that no one has asked them. You said many times that you check the charts and when you find a setup you think about how the fundamentals line up for it. My logic is completely the opposite. I find it hard to look at the charts first and then think about technicals. Charts are something clear cut most of the times but I can always line up both positive and negative fundamentals for every single...
I rarely have the problem of technical influencing my view of fundamentals, or visa versa. I try to keep a very open and flexible mind. There are 2 possibilities. Either technicals and fundamentals disagree, in which case I don't take the trade, or they agree, and I do take the trade. My belief is that when they agree I have a slightly better edge of winning than when they disagree.

I don't think it matters which you look at first. It only matters that they agree. Of course you can find some reason right now that the CAD should be gong up, the USD should be going down or the Euro should be gong up, but all of those positions disagree with the positions of the central banks, and central banks, not brokers or traders, control currencies. If the central banks want the currency to go down, and it's going up, I wouldn't trade against a central bank, certainly when they can print all the paper money they want to force the currency down. The other way is different. Sure they can soak up cash and force the currency to go up, but they can only do that so much and they will cause a recession. Even still, I think I do better trading with the central banks than against them. All the other factors are of lesser importance to me, like unemployment, trade balance, wars, etc. I'll consider them, and if I'm not sure of their impact, or lack thereof, I may decide to not take the trade. I miss lots of trades that way, but that's ok.

This isn't a guessing game. It's not craps or roulette. I miss many good trades every day in stock markets, options, futures and bonds all over the world every day. None of those have ever cost me a dime. I only trade when I understand the fundamentals. If I'm not sure I understand them, then I go study them some more. As long as it takes. You are right, once you understand the fundamentals, it's easy to see if the technicals agree with them or not. I just don't want to spend a lot of time studying lots of fundamentals in currencies that I have no intention of trading because of technical reasons. That's the reason I do it as I do. I made a joke earlier about trading the NZD long because the price of sheep might go up. But it's no joke. If the technicals said I should trade NZD up, I'd want to know what the price of dairy and wool are doing. Otherwise, I couldn't care less and I wouldn't waste my time to go research that information. I'm not sure if my answer has helped?
  • #756
  • Jan 22, 2015 1:54pm Jan 22, 2015 1:54pm
Quoting Graviton
{quote} I rarely have the problem of technical influencing my view of fundamentals, or visa versa. I try to keep a very open and flexible mind. There are 2 possibilities. Either technicals and fundamentals disagree, in which case I don't take the trade, or they agree, and I do take the trade. My belief is that when they agree I have a slightly better edge of winning than when they disagree. I don't think it matters which you look at first. It only matters that they agree. Of course you can find some reason right now that the CAD should be gong up,...
You started it out like a normal answer and it turned out to be one of my favorite posts. Thanks for that. It is also interesting to see that you do not care about the reports coming out but you do care for central banks. So it would be interesting then how you exactly decide what you have to listen and pay attention and what is unimportant? By EUR and JPY it is clear. CAD is also ok. However you trade USD long. I know I know the good reports, nice trends etc. But what is your fundamental driving force in trading it? They postpone the whole time rate hiking and even the reports are weak lately. So basically what I see out there to go long USD is only that others are weaker.

It would be great if you wrote 1 sentence on all 8 currencies about what you on their fundamentals think. Maybe I see your seleciton criteria better.

Thanks for all the input,

IBO
  • #757
  • Jan 22, 2015 2:59pm Jan 22, 2015 2:59pm
Quoting IBreakOut
{quote} You started it out like a normal answer and it turned out to be one of my favorite posts. Thanks for that. It is also interesting to see that you do not care about the reports coming out but you do care for central banks. So it would be interesting then how you exactly decide what you have to listen and pay attention and what is unimportant? By EUR and JPY it is clear. CAD is also ok. However you trade USD long. I know I know the good reports, nice trends etc. But what is your fundamental driving force in trading it? They postpone the whole...
The dollar has been strengthened by the US Fed announcing a reduction in QE. As the FED quits printing trainloads of USD's, it's value will go up because of it's status as the world's reserve currency. Many international debts (like oil) are settled in dollars and foreign banks must keep a large supply of them in reserve, so they are in high demand. And as you say, if other nations are inflating their currencies, and the US Fed is tightening, it makes the USD relatively stronger. Basically only the Swiss Franc and USD are strong at this time. All other countries are trying to weaken their currencies. This situation has been called a currency war by some.
  • #758
  • Jan 23, 2015 3:48am Jan 23, 2015 3:48am
Graviton, would be really great to hear more from you about trailing stops in long duration trades. If you are taking requests I would love for you to touch on where/how to add lots, moving to BE, and bailing out within that.
  • #759
  • Jan 23, 2015 3:17pm Jan 23, 2015 3:17pm
Here I am.....having read through the thread completely.
Very interesting. Thanks a lot G., have learned so much.
Came to building-millipedes-trading by another thread (Graeme).
This approach has changed my poor trading totally.
What suits me best is your trying to ride out the trends as long as possible
without tolerating an i.e. 1000 pips move in your favour coming back to B.E.
I also like your combining technical plus fundamental research of the pairs.
And your lessons, comments and discussions are head and shouders above the rest.
Beeing lucky to have found this thread. Keep on your excellent work.
Will try - if accepted - to play a humble part of this community.
Best wishes to all.
Have a nice weekend.
Have a nice day
  • #760
  • Jan 24, 2015 8:56am Jan 24, 2015 8:56am
Concerning the NZD, could its relatively high interest rate - the highest by far of all the major global currencies - be said to be a fundamental reason to look to buy it if it had started really trending up on the weekly against the USD?
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