Multi-Lot Multi-Timeframe Position trading

Of those trying to trade some variation of the methods we described, I'm wondering who is making money and who is losing?

If you ask me half an hour earlier, i would be losing. A big red bear candle just popped out for AUDJPY and AUDUSD.

All my previous positions got some significant growth in one day.

Previous loss, now profit.

I have increased my account by 50% since using a variation of your methods. The only variation is when I get it wrong. I got out of my trades after the Greek election except for one short at 1.1100 on EURUSD, which I should have bailed on early but held on, because my analysis says it will retry that price. If the SNB would stop buying it would make it seem like less of a losing battle though. Just got hm from a 13hr day hope that answers your question.

Your descriptions were great, rules too, if someone exercises and has some experience then can make nice gains. Maybe we can find some topics still to discuss but you have already explained very many topics in detail. Thanks once more for that.

At this very moment though I stay at out currencies and rather look into commodities. I think currencies are only choppy and there are hard to see trends.

IBO

I have made money in recent months position trading with this kind of method. Not as much as I should have, which is what attracted me to the writings in this thread.
UJ long late 2014.
EU short for a while now.
UC long lately.
But these might be coming off the boil. Especially UC as Oil now rallying.

Considering starting up with AUDUSD short now we have had a rate cut and the CB hints they want it lower.
Gold also on my radar above $1300.

I started trading this method of buying low sell high at the end of Dec.14--nearly doubled my little account within 4 weeks without realizing the gains. Last weekend there were 18 floating positions with 4500 pips win. Balance dropped by nearly 20% by cutting losses short.
Yesterday and today equity dropped immense (about 29%) so I drew the release cord. Now there is still usdsgd running long with 155 pips win so far.
Don`t know actually how many pips I bagged so far but balance "only" rised by 35% instead of nearly 100% at the top of all running pairs.
That`s very hard to stomach.
It`s a psychological dilemma having stacked from few positions up to 18....all positions between 50 and 1300 pips plus....account grows week by week.....stopps are switched more tight as momentum of all traded pairs is going down and new positions are stopped out by little loss ( but many little losses sum up too).
My positions were:
eurjpy-short
audjpy-s
audusd-s
nzdusd-s
nzdjpy-s
sgdjpy-s
eurusd-s
gbpnzd-long
usdcad-l
usdsgd-l

Don`t know the right way to handle this - perhaps its really a good idea to close here and there the oldest position with the biggest win so far.....
On the other side it makes more pips letting it run......
Hope my statements are clear enough. Sorry for my english.

Thanks to everyone for the feedback. This multi-lot trading can be a bit of a roller coaster. Of course 35% in two months is a very good return by the standard we often discuss here. Professional hedge fund traders consider that a 35% return in a year is very good trading, as long as they experience very low drawdowns on their principal trading capital. Lets review some rules and guidelines and see if we can tighten this up a bit.

When to hold 'em and when to fold 'em (Part 1.)

First of all, if you are able to establish a good multi-lot trade never let it go into a loss. That's rule #1. The reason is that at that point you have successfully pyramided your trade to make more pips faster off your profitable position, but if price turns, and it ALWAYS will, you will lose pips MUCH faster than if you had just taken a single lot position.

Second, price WILL turn. The more lots you have on, and the more pips you have made in unrealized gains, the more you need to remind yourself that you will have to exit at some point to make a profit. If you exit too soon, you will still have money in the bank and can always attempt to re-enter and rebuild your position. I've done that several times in the past 12 months, taking my profit off on what I considered a peak price, only to re-enter as price continued in the long term direction. Each time I walked away with a nice stack of pips. Sometimes I was not able to re-enter and spent a few pips trying to get back in, sometimes I was able to get back into the same trade. When trying to re-enter, I always consider it to be a brand new trade, no matter what has happened in the past. But on the other hand, if you exit too late, you can wind up giving back most or all your hard earned gains so fast it will make your head spin. The old saying, "Nobody every went broke taking profits", applies here. So, how do we both stay in a trade to let it run and exit on what we believe is a peak price to capture our profits before they slip away?

Short of being able to tell the future, the best we can do is some sort of reasonable compromise. Suppose we have 5 lots on with 100 pip spacing. The first lot will now be +400 pips in profit. Price is moving well in our direction with occasional minor retracements. Now suppose price goes up another 100 pips, do we add another lot, or take profit? It's sort of a judgment call, but, if you haven't taken any profit off the trade, when do you intend to do so? You can't win at this game if you never take profit. It's a simple fact, you MUST take profit. So the question isn't if you should take profit, you MUST. The question is really when you should take profit. That's Question 1. When should we take profit?

The fact is, we can take some profit off of these multi-lot trades at any time, and continue participating in the longer term trend as well. If you are trading in the US, the FIFO rule applies and you only have the choice of taking off your oldest and most profitable lot for profit, and that's probably not a bad decision. Your greatest risk to unrealized gains is your oldest and most profitable lot. By cashing it in, for 500 pips in the above example, you remove the greatest risk in this trade and convert it to a gain in your capital account. If price continues up, you can put that 5th lot back on top, and continue on. After a couple moves like that you are up +1,000 pips and maybe then you feel brave enough to now put a 6th lot on. Even if you are wrong now, if you follow Rule #1, the worst you can have happen is you walk away with +1000 pips in the bank.

We can see it makes no sense to just keep putting lots on and never take any off for profit. You MUST take lots off for profit to win. So, lets back up a bit and take this imaginary trade just one lot at a time. Let's look at all of our options and decide what makes sense at each decision point in advance. While trading, you can adjust each of these decision points to be more or less aggressive as you think best, but let's at least form up a baseline to adjust from. More risky trading would always be to let lots run longer for more profit before cashing them in. Less risky trading would be to take some profits by cashing in profitable lot(s), reducing risk to unrealized gains and turning that risk into realized trading capital.

If I'm not very sure of the trade (about 75% of the time), I'll take the first lot off for profit when it's a little more than 1 X sl into profit. Then I'll re-enter when entry conditions are satisfied, but even if the re-entry attempt fails and I lose that 1 X sl, on that second entry attempt, my capital account is unaffected . No drawdown! That's a fairly good first goal of trading, take care of your risk first, then make your pips.

Now let's consider what to do if we get a good entry and it goes up to our preferred spacing and we get a second lot on. We are now trading multi-lot. If we move both stops to near the first lot entry, that means we are still only risking about 1 X sl on the trade, but since we have already taken 1 sl profit off, there is still no risk to our capital account for the trade. If things reverse now, we can exit a few pips before our sl for a few extra pips profit, and try again if conditions are favorable, or even if it hits the sl we can still start all over with no hit to our trading capital. Still no drawdown. Sweet! Try to do all this without ever actually hitting your sl. It builds character.

That's all the possibilities of the first two lots considered. In Part 2, let's consider price has moved up enough to allow us to put a third lot on. We'll just keep going until this gets repetitive and boring. That's the way good trading should be, repetitive and boring. Questions? Comments?

Graviton,

As usual, great post! Regarding your quote above (I am a U.S. Trader), the FIFO rules only apply if you are trading the same lot size for each position. If I open 0.1 lots (10,000 units with my broker Oanda), if I want to add I'll usually add something like 10,001 lots, then 10,002 lots. These are all essentially 0.1 lots, but I can then close how ever I want. If your broker can't do that, then 0.11 is close enough.

I generally trade like you do, but regarding to closing I do it a bit differently. What do you think of this method (example below for illustrative purposes):

I keep my lowest position (for longs) as long as I can, and liquidate last. For example, I am currently long GBPJPY from 176 ... depending on how the BOE rate statement is on Thursday, I will add to my long if it looks like its uptrending, and fundamentals look good. SL is at b/e, so no risk.

Lets say things look good, and I add at 179. I'll move overall SL to b/e (or slight gain), so again no risk. Lets say it goes to 180 and breaks out, and I add more ... again moving SL to overall slight gain on all positions. Now if it runs to 182, and for whatever reason at the time I do my analysis and it looks like its topping, or may have a big retrace. I'll exit the longs from 179 and 180 at 182 (so net 500 pip gain), but still long from 176 (unrealized gain of 600 pips).

If we get a retrace down to 179 again and looks like it will continue up, I'll add a long at 179 (so net avg. is again 177.5, so SL is above that). After it runs up again and looks strong, I may add right away (lets say 179.3), putting the 179 SL at b/e ... and overall SL for the other two longs at b/e.

Anyway, I continue doing this ... but always keep the lowest position as the 'anchor.' I call this Anchor Trading ... keeping a position low to 'anchor' the others, which keeps my avg. cost low for longs (vice-versa for shorts). That way when I add, I have one position from way down low which keeps my average low ... psychologically its trading from a position of strength, as I have some positions way in the $.

Regards,
EZ

Hi Graviton

And congrats on a very well thought out approach. I first came across this thread nearly a year ago and it was very wordy and talked about concepts I already knew and used so I dismissed it and didn't read beyond the first few posts. I picked it up again after christmas and have now read and digested it all (which took some doing - an awful lot of good info in there).

What interests me most in this is less the whole entry system or the lining up timeframes but actually the way you handle risk and money management. I have used something similar for years, but mine is complex and inelegant. This is simple - straightforward and very elegant indeed as a solution to what is in effect a traders biggest problem - staying with the good trade and milking it ( I use that analogy because I think of it as like milking cows every day).

I do find initial entries into trades vexing, having less than 10% of my initial entries turn into viable trades. But cutting losses very short indeed means it is not a huge impact on the overall outcome since the <10% that I do manage to work in successfully go on to make good gains indeed. I have failed miserably to get into anything much so far this year and am still up a good 15% so far.

I've done some basic comparisons between your MM/RM and mine applied to last years results and had I followed your approach to these areas I would have increased my haul by over 50%. So I'm gonna start as far as I can to apply it as a paralell approach in a sub account. Should be interesting.

Now a question for you. What % of your initial entries turn into 'trades' as opposed to testing the water (as so many of mine are)?

thanks

NB

Sounds like a great idea EZ. You are carrying a lot of risk to unrealized gains on the anchor lot, but that risk is limited and managed and in turn you are exposing part of your trade to the trend for a very long duration, improving your edge. I'll give it a try. I'm always looking for a way to improve my edge. Best success.

USDCAD long here? It looks like it got hammered from recent 1.28 highs due to rally in oil and lots of USD longs bailing USD across many positions. As I see oil now, its already falling off from highs ... I bet its back in the 40's next week, which will make USDCAD rally.

I'm long USDCAD 3 positions around 1.24 ... 1 SL at b/e, 1 tight SL, one loose SL.

Also short AUDUSD from .7795, long GBPJPY 176.

Regards,
EZ

Does anyone follow rules where they close out some or all of their trades at the end of the week should they be up a certain %?

Like others on this thread I was up 100% on my account last week since new years and then over the past 2 days a lot of those were stopped out and my current trades still open are now down 15%. So If I was to close out all my trades today I would be back to where I was at new years

Kinda thinking that if at the end of the week I am 10% or more up on my account I should close all "multiple trades" leaving an original 1 on each pair if open. Or maybe moving all stops to above break even? Or maybe closing out all trades and leaving 25% of each position open.

Just an idea how to lock in some hard earned profit where and when I can.

PS I am already using the "above average" candle idea G posted a while back. So if the Daily candle closes above average size I tend to close the trade or part of it with a profit.

Another idea I had is to use "overlapping trades" as a way of using multiple trades. So instead of opening a trade and when it goes well adding a 2nd and then a 3rd and so on, you open a trade with a TP of say 1:1 or 1:2 RR and then you set Orders at 1 and 2 and 3 for similar trades so as price increases you are auto entering and auto taking profit as you go.

Example may be to enter with a stop of -100 and a TP of +200. Then as price gets to +100 it enters again for you with a stop of -100 and a TP of 200. Then when price gets to +200, the original trade auto exists for +200 profit AND opens a 3rd trade with stop of -100 and TP of 200. Then when price gets to the +300 mark it auto exits trade 2 with +200 and enters trade 4 with stop of -100 and TP of 200.

Hi nbfx, welcome aboard. I'm glad you found something of value here. I'm getting some good ideas from the other traders here as well. My successful trades seem to come in groups. They vary from about 10% of attempts to about 60% with an average of about 30% success making it to the third lot where I consider it a successful trade. Of course, if I cut my losers off quicker I'd have a little fewer make it to a successful trade, and if I'm willing to risk a larger entry loss, I'll have a little higher number of trades survive. As long as those adjustments aren't extreme, I don't think they have much effect on my results. Recently, my success ratio has been better than in the past. That could be due to my placing more emphasis on fundamental factors these days, or it could just be one of those random things that can't be explained. Lining up the trends in all the timeframes only affects my entries. Once I'm in a good trade, all of the decisions are made based on price movement. I'm essentially trading from the profit line in the terminal window. The widgets and pretty pictures can be more of a distraction than anything else at that point. Best success.

G

I've used that method and it worked well to capture profits as the trade progressed. I wasn't very consistent about closing out the trades on Friday though. If the trade had made a very large profit during the week I'd close it. If it looked dead or was turning against me I'd close it and if it seemed to be just developing but needed more time I'd carry it over the weekend. This might could be refined to smooth out the equity curve.

Hi G

Thanks for the welcome and especially for the info. Clearly I need to be more selective on my initial entries then and perhaps a little more tollerant (but that is a subject for statistical analysis). I'm working primarily off price action and S/R levels with a good deal FA thrown in, and it can be very hit and miss at times. perhaps adopting a slightly less agressive approach to entry timing might help the hit rate.... Stuff for me to consider.

Either way, your thread has made me re-consider many aspects of my own approach, and I've always been ready to find enhancements.

Thanks again

NB

In case anyone missed it. Taken from RBNZ governors' speech this evening.

 

1. The New Zealand dollar exchange rate is at exceptional levels compared with its history. The Trade Weighted Index (TWI) is above its 90th percentile calculated from historical data. Relative to the yen and Euro the exchange rate is above the 90th percentile. It is close to the 90th percentile against the Australian dollar.

1. The upward pressure on the TWI reflects several influences but primarily investors have been attracted by the broad strength of the economy and our higher interest rates. The strong exchange rate has boosted the real disposable income of consumers but been a significant headwind for export firms that are not experiencing high international prices for their products, and for manufacturers and other businesses that compete with foreign imports.

1. Within the overall TWI some important adjustments have occurred. We welcome the 11 percent depreciation of the New Zealand dollar against the US dollar over the past year[5]. However, the New Zealand dollar has appreciated by 7 percent and 4 percent respectively against the euro and the yen during this time. This reflects the impact of considerable policy easing by the ECB and Bank of Japan, which has further widened long term interest rate differentials with New Zealand.

1. While the New Zealand dollar has eased recently on a TWI basis, the exchange rate remains unjustified in terms of current economic conditions, particularly export prices, and unsustainable in terms of New Zealand’s long-term economic fundamentals. We believe that, over time, New Zealand’s growth differentials will narrow vis a vis the advanced economies, making the New Zealand dollar more likely to undergo a significant downward adjustment.

He went on to say how the economy was in a good position and talk about strength and growth and of course potential interest rate rises. One wonders how he can talk the currency down against a backdrop of a higher interest rate and expanding Yield gap and a more favourable outloook going forwards and expect his currency to fall. Should make for an intersting struggle...

It's been going up the past few days, but generally the NZD will go where the RBNZ wants it to go. The longer term trends are down. I expect it to eventually make a lower high within 10 days or so then fall back to make a lower low. I'm willing to take it short if I get a good entry, but right now the H1 is trending up, so it's a no go for me. We'll see.

No good trades for me atm. Just waiting...waiting...waiting...

That looks like a good trade, there has been a nice retracement and price should head up again if the trend holds. I've been short on eurcad since 1.446 and I'm waiting for 1.40 before maybe exiting. This pair has been ranging lately but the weekly and monthly trend still seems to be heading down