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Multi-Lot Multi-Timeframe Position trading

  • #861
  • Feb 8, 2015 8:22pm Feb 8, 2015 8:22pm
Quoting ezcurrency
I long UCad (1,2442, 1.2487), and shorted AU (.7806) also. This news should make EU fall more next week: http://www.zerohedge.com/news/2015-0...-day-ultimatum Regards, EZ
Well, EU gapped down which I expected, but not a lot of follow through. I don't like the price action so exited AU, EU, UCad positions all for profit, and now longed GU and EU long (tight SL in place).

EU futures are heavily shorted (record levels) ... see my analysis here: http://www.forexfactory.com/showthre...74#post8053874

When that happens and everyone is on one side, it may reverse. The price action made me exit, and reverse. We will see how it plays out.

Regards,
EZ
  • #862
  • Feb 8, 2015 8:51pm Feb 8, 2015 8:51pm
I like the idea of using 1 trade to see if we are right and closing when we are and then loading it up as it goes from there.

One could always use multiple trades of % of account eg 1% risked each trade. So then when 1st trade is up 1%, you close it for profit and look for 2nd trade which will also be 1% risk. Then 3rd and 4th and etc. That way is the stops you take are different per trade it wont matter.
Winners add to winning trades!
  • #863
  • Edited Feb 9, 2015 5:22pm Feb 8, 2015 10:31pm | Edited Feb 9, 2015 5:22pm
When to hold 'em and when to fold 'em (Part 3.)

Note that in the above considerations I assumed that the trader would allow price to retrace all the way to the stops to exit. Of course, that isn't optimal trading. In the best trading, we would always see that a trade is going bad before it hits it's stop, and manually exit, taking more profit out than I gave in examples above. Of course, if we are peacefully sleeping, we can't exit early to save some unrealized gains, so the reason we can sleep so peacefully is we know in the worst case we have set our stops so we can't lose any trading capital on this trade. I'll move on now to discuss placing the 4th lot on. Hopefully this will get boring and repetitive soon. Good trading is always boring and repetitive.

With 3 lots running, when price goes up 75 pips from the entry of the third running lot, we make +225 pips in unrealized gains. Sweet! So by the time we are ready to put the 4th lot on, we will be up +225 pips in realized gains cashed in from the first earlier lots taken off for profit, and 450 pips in unrealized gains from the existing 3 lots that are running (75+150+ 225).

When the 4th lot goes on, we will only risk unrealized gains. From this point on, we will never take any risk with our protected realized gains. They are now locked up safely in our trading capital account and we won't let them go for any reason. We have a total of 450 pips in unrealized gains that we can place at risk when the 4th lot is put on if the stop is set to BE on the bottom lot. So we can move our stop up when we put the 4th lot on to not risk more than that 450 pips of unrealized gains. So if we move our stop up another 35 pips to the entry point of the 2nd lot from the bottom, we would lock up another 35 X 3 lots running = 105 pips of realized gains, for a total of 225+105=330 in realized gains. We will now be risking 225+150+75 = 450 pips on the top three of 4 lots in unrealized gains. The bottom lot is at BE, so no risk there. So, 4th lot on, no risk to 330 pips in unrealized gains which are now safely locked up in our trading account. Worst case is we are sleeping and a major reversal occurs of 225 pips or more and we wake up stopped out on the entire trade, but we made 330 pips on it for a return to risk ratio of 4.4:1, so not a bad outcome.

From here on, we simply take a little profit off as we go, always protecting all of the capital in our trading account. If things get out of balance, we just take profit off by cashing in a trade, or widen the spacing, or skip putting a new trade on in one cycle to bring them back in balance. Usually I'll do a combination of the above. Protecting our precious trading capital comes at a cost, as does all risk management. Limiting how much risk we take with our trading account can reduce the profits of a good trade by half, like from 2,000 pips to 1,000 but the reduction in risk is well worth the cost. Without a clear focus on the equity curve in our trading account, we will make huge pips, but we will take even larger losses as well. That's not good trading.

In a sense, I feel like I've given the readers a stick of dynamite and told them to use it to build a campfire. With a clear understanding of the risks involved, this method can be a good tool to make a good trade better. It can't make a bad trade good and it can blow up an account if not used with great caution. We can discuss this more going forward and drill deeper into the details. I'll provide some better examples and hopefully we can clear up any questions.

G
  • #864
  • Feb 8, 2015 10:37pm Feb 8, 2015 10:37pm
Quoting AlbinaGrande
{quote} One more question G, Do you factor ATR into deciding what pip spacing to use for your trades? AG
No, I usually don't directly use ATR, but the more volatile the pair the wider the spacing I'd use. Typically my spacing will be around 50 to 100 pips. I'll usually start out with a tighter spacing like 50 or 75 pips and widen it as I go.
  • #865
  • Feb 9, 2015 12:10am Feb 9, 2015 12:10am
Thanks Graviton, clear and detailed. Looking forward to using that info. You have said in the past that trends appear a lot, I'm feeling like I've arrived (Oct - Feb) just as they are all ending and going into a long Ranging period.


In the future would you mind discussing using info like on Trading and Economics and how to select the right information to analyse strengths and weakness opportunities ( some graphs and some relevant figures that can be drilled down into by someone with more experience than me.).

I am sourcing my info from Investing.com, being very selective about what I read and using it as a yardstick, rather than a source of facts, and a few commentators like Boris Schlossberg and Marc Chandler to gauge direction and influences on the market.

Thanks again for all your time, your thread has improved my knowledge and trading, and made it a lot more enjoyable (read less stress).
  • #866
  • Feb 9, 2015 8:32am Feb 9, 2015 8:32am
Good morning everyone.

Thanks G for the explanation. Anyway, opening the 4th lot is riskier than we can percieve. All is explained in the image attached. The thing is that with that tight stoploss we basically risk a lot to hit the stoploss. I suggest we bring the 75pips spacing to 150 or even 200. We should have more space for a retracement.

Thanks
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  • #867
  • Edited 10:09am Feb 9, 2015 9:46am | Edited 10:09am
Quoting lemming78
Good morning everyone. Thanks G for the explanation. Anyway, opening the 4th lot is riskier than we can percieve. All is explained in the image attached. The thing is that with that tight stoploss we basically risk a lot to hit the stoploss. I suggest we bring the 75pips spacing to 150 or even 200. We should have more space for a retracement. Thanks
Yes, I agree. Things start to get very risky at the 4th lot and above. We need a clear understanding of the risks involved with multi-lot trading to mitigate those risks and still gain the benefit from the method. Widening the spacing or just plain skipping putting on an additional lot (same as doubling the spacing) when risk is too great is a good method of mitigating that risk. Taking off a lot in profit every so often also improves the equity curve and reduces pips at risk. One good suggestion that was made earlier was to leave the bottom lot running and take off a center lot for profit. So, for instance, if you wanted to add a 4th lot, and the risk is too great, you'd take the center lot of the three running lots off in profit, reducing risk and taking a nice profit over to your capital trading account. That method leaves the bottom lot running for the longer term trade as an "anchor lot". Managing the risk and harvesting profits consistently is now the focus of this thread. I appreciate your drawing. Best success.

G
  • #868
  • Edited 7:31pm Feb 9, 2015 12:00pm | Edited 7:31pm
Quoting Graviton
{quote} Yes, I agree. Things start to get very risky at the 4th lot and above. We need a clear understanding of the risks involved with multi-lot trading to mitigate those risks and still gain the benefit from the method. Widening the spacing or just plain skipping putting on an additional lot (same as doubling the spacing) when risk is too great is a good method of mitigating that risk. Taking off a lot in profit every so often also improves the equity curve and reduces pips at risk. One good suggestion that was made earlier was to leave the bottom...
Hi G,

I have enclosed 2 worksheets that I developed that are something along the lines that you have been describing except that there is no SL concept included. Strictly a thought experiment looking at the consequences of holding multiple positions to some "largish" Drawdown point. The model is for the recent rise in UJ in late 2014 with the subsequent correction. Spacing is every 100 pips by whatever Entry technique you like. It is certainly possible that each rung on the ladder had several Entries and Exits but only 1 is presumed to be carried forward to the end.

The first worksheet shows a steady accumulation of positions without any Harvest, some 14 in total from 107 thru 120. I stopped at 120 strictly for convenience, but I know that you had exited a bit higher and that the correction was a bit deeper. Sweet 9100 pips in Floating Profit, BUT nearly half is lost on a 300 pip Pull Back.

The second worksheet looks at taking profits at regular intervals - perhaps by TP exits at local extremes - and holding a set number of positions by adding new positions to replace the harvested positions until the Drawdown point. There is a column for each of 2 thru 6 rungs, 200 - 600 pips, on the Harvest ladder. Eg. with 2 rungs the position entered at 107 is harvested at 109, but with 6 rungs not until 113 and so on. Mind you the Exits could have been set up as a TP order without the Close or MA having reached the same level. As a practical matter more rungs does not result in substantially more profit as you will reach a point of diminishing returns, not the least of which is running your string out on an aging Trend.

The Key point at the bottom of worksheet 2 is that this approach steadily builds your Bank while reducing your Floating Profit exposure, which is exactly what you have been teaching. It seems to me that the number of rungs on the ladder can be modified on the fly pending the strength and integrity of the Trend.

Hope this is of interest,

AG

Attached Image (click to enlarge)
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Attached Image (click to enlarge)
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EDIT: Changed FP Harvest 1.0 to 1.1
Do not dwell in the past, do not dream of the future, concentrate the mind.
  • #869
  • Feb 9, 2015 1:27pm Feb 9, 2015 1:27pm
Quoting AlbinaGrande
{quote} Hi G, I have enclosed 2 worksheets that I developed that are something along the lines that you have been describing except that there is no SL concept included. Strictly a thought experiment looking at the consequences of holding multiple positions to some "largish" Drawdown point...
Wow AG. That's a good piece of work. I'm going to study it a bit and come back to you with questions. Thanks!
  • #870
  • Feb 9, 2015 2:16pm Feb 9, 2015 2:16pm
Hi@
very worthfull discussion here.....
Will try to take part if having time.
Keep on the good work here.
Have a nice day
  • #871
  • Edited 5:30pm Feb 9, 2015 3:25pm | Edited 5:30pm
Quoting AlbinaGrande
{quote} Hi G, I have enclosed 2 worksheets that I developed that are something along the lines that you have been describing except that there is no SL concept included...
AG, what does EQ stand for in the first chart?
  • #872
  • Feb 9, 2015 5:27pm Feb 9, 2015 5:27pm
your system look a little like what abokwaik do with the ladder trading system.
the question is the following:

what is the value of your entry selection mechanism, is it better to enter at random 'scout' with a small stop ?
as for the pyramiding, is it better to just enter when price move past the next level of the ladder ? or use an entry selection process
if the entry selection is too low in timeframe compared to the expected length of the trade then what is the value of it ?
its like trying to call the bottom or the top of a very high timeframe on a 1minute scale.
if you put your stop further away then its probably no better than random and you'd better select in a timeframe that is not so far of the expected length of the trade

now for the stop loss, appart for the ball emptying down trend we currently have, the previous up trend was rather nasty in terms of shakeups and deadly spikes.
nobody knows how the trend will evolve but you'd better align your stop strategy to the known trend shake up volatility and stop trying to trade with a trend that shakes too much
  • #873
  • Feb 9, 2015 7:17pm Feb 9, 2015 7:17pm
Quoting Graviton
{quote} AG, what does EQ stand for in the first chart?
Hi G,

Sorry. I should not have included that column. It was from another line of thought. Only the Floating Profit column is relevant here.

AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
  • #874
  • Feb 9, 2015 7:36pm Feb 9, 2015 7:36pm
Quoting felixis
your system look a little like what abokwaik do with the ladder trading system. the question is the following: what is the value of your entry selection mechanism, is it better to enter at random 'scout' with a small stop ? as for the pyramiding, is it better to just enter when price move past the next level of the ladder ? or use an entry selection process if the entry selection is too low in timeframe compared to the expected length of the trade then what is the value of it ? its like trying to call the bottom or the top of a very high timeframe...
Hi Felixis,

Lots of food for thought. Remember this is just a thought experiment to look at a best case scenario. Trend quality is of great interest to me, and I suspect G. as well.

Best, AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
  • #875
  • Feb 9, 2015 10:29pm Feb 9, 2015 10:29pm
Quoting felixis
your system look a little like what abokwaik do with the ladder trading system. the question is the following: what is the value of your entry selection mechanism, is it better to enter at random 'scout' with a small stop ?

I'm sure there are many good entry systems. Mine usually will put me in a trade in the direction of the long term trend if there is one, which is what I am aiming for. So that's it's value to me.

as for the pyramiding, is it better to just enter when price move past the next level of the ladder ? or use an entry...
Yes, the question is, do I do better, worse, or just the same trying to enter after the completion of a retracement? I don't have any good testing data on that, but it seems I often avoid entering on a peak price by waiting to after a retracement seems to be ending.

I'm not sure what else you mean there. The last stop I hit was a few weeks ago when I was sleeping. I don't count those since I wasn't awake to prevent it. All other exits were taken manually. I'll take an exit manually 2 pips before it hits the stop if I have to just to keep from hitting the stop.

It's a matter of principal. Hitting stops is a poor way to trade, in my own humble opinion. Why leave your exits to the whims of the market? Suck it up, be tough. Take the pain of the loss rather than looking for the excuse that the market did it to me. Look that loss right in the eye and tell it, you have no power over me. Then click the exit button. Take control of your exits. Just my opinion.
  • #876
  • Feb 9, 2015 10:54pm Feb 9, 2015 10:54pm
I like it Graviton...... :-)

Well....Don't just stand there whistling dixie.....Take the hit like a man!!!!!

Attached Image
  • #877
  • Feb 10, 2015 4:05am Feb 10, 2015 4:05am
Quoting Graviton
{quote} Yes, the question is, do I do better, worse, or just the same trying to enter after the completion of a retracement? I don't have any good testing data on that, but it seems I often avoid entering on a peak price by waiting to after a retracement seems to be ending. I'm not sure what else you mean there. The last stop I hit was a few weeks ago when I was sleeping. I don't count those since I wasn't awake to prevent it. All other exits were taken manually. I'll take an exit manually 2 pips before it hits the stop if I have to just to keep...
the question is to locate good trends

so what are good trends?
its the current EURUSD trend on the monthly timeframe for example

a good trend is a trend that dont have killing spikes relative to the timeframe you use

this good trend always exists its just that it move from one timeframe to the other.
sometimes you have a such an animal on the 1mn sometimes on the hour somtimes on the weekly

detecting the onset of this situation with an ea for example could gives you an edge
there is no problem to pyramid on a lower time frame if the trend is gentle and cooperative
  • #878
  • Feb 10, 2015 6:27am Feb 10, 2015 6:27am
Quoting ezcurrency
{quote} When that happens and everyone is on one side, it may reverse. The price action made me exit, and reverse. We will see how it plays out. Regards, EZ

Hi EZ
I too am wrestling with the Euro story and watching very closely. It is very one-sided as you say. andI can't fault your analysis. COT is very short indeed (but can always go further). Everyone and their aunt are talking Euro/Dollar parity or lower. Even in the pub last night, people who don't follow currencies or investments generally were talking Euro down which is greatly troubling.

I'm reminded of the story of JP Morgan and the shoe-shine boy...

Regards
NB
  • #879
  • Feb 10, 2015 6:56am Feb 10, 2015 6:56am
Hello Graviton and others,

Just found your thread and have been reading along. Only up to post 94 but really enjoying. Wanted to say hello before I continue the read as it may take awhile.
I've always been a Millipede fan so and like your "different but similar" approach. Already have some questions forming but again, want to wait till I'm done reading...no doubt many will be answered.

Anyway, keep up the good work.
  • #880
  • Feb 10, 2015 7:43am Feb 10, 2015 7:43am
Quoting felixis
{quote} the question is to locate good trends so what are good trends? its the current EURUSD trend on the monthly timeframe for example a good trend is a trend that dont have killing spikes relative to the timeframe you use this good trend always exists its just that it move from one timeframe to the other. sometimes you have a such an animal on the 1mn sometimes on the hour somtimes on the weekly detecting the onset of this situation with an ea for example could gives you an edge there is no problem to pyramid on a lower time frame if the trend...

I've put this chart up before, I believe it answers most of your questions. I'd advise you to plot it yourself and study it a bit. I've already discussed all my thoughts about trends in previous posts, but I'm always happy to talk about trends, apparent trends, real trends, detecting trends, trading trends, etc. This stuff takes tons of patience. I've been patiently waiting for 2-1/2 weeks for the EU consolidation to end and the trend to resume.
Attached Image (click to enlarge)
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