Multi-Lot Multi-Timeframe Position trading

GOLD

Taking top lots off in profit this morning after good overnight moves in 4 lots each on EU, EG AU shorts. UJ long +30 but still 60 pips risk total on 2 lots. Decided risk is reasonable and letting it play out. Out of town the rest of the day. Letting remaining lots ride.

Exited UJ at BE. Nice fat profits built up on EU, EG, AU shorts. Cut loses short. Best is to cut them before they even become losses, if possible. Let profits ride. How long? Longer than you ever have before.

Yep got a few trades triggered over the past 48hrs. Finally! Movement in my direction.

And with TPs of 2:1 set to them I am getting some auto exits as well. Woohoo! Free money! I love riding a trend all the way but have to admit these auto TPs of 2:1 are beginning to feel like the way I should go. Of course I need to overlap multiple trades such as another at +100 and then +200 and so on but autoclosing with profit is a really good feeling.

That's great MM. There's not much difference between what I'm doing and what you are. We are both riding the trend with multiple entries and taking profits as we go. It's Rodeo season here in Houston Texas. As we say in the arena, Ride'em cowboy!

Hi Graviton
Great thread you have going here with lots of great input from others.
i like the way you trade. Im reading from the beginning, on page 15 now, have a ways to go until i catch up with you all.
I trade with large time frames and weekly daily and H4 to trade with the trend.
I will write more later after read more of your great trading.
Keep up the good work everyone.
I have read a lot of threads over the years and this is the best one so far that I like.
thank you for all your advise and giving your time to help others to be that 5%.

I took two off last night as well EU Short TP 1.10726 +152 Pips and 1.1700 +150 . I'm not to sure about letting them build up a large amount of pips instead of just taking them off at TP and putting another lot on, maybe you meant extend your TP. Still smarting from last weeks 260 pip retrace when I did that. Got 4 x EU Short on now up +300 not a lot of Resistance till 1.0500 maybe a pause around 1.0650 then open ground.

There is talk on the wires of Euro becoming a funding currency for carry traders, due to negative rates, not sure how that works unless you have huge positions, is it only banks and large players that this will apply too.

I got your point as well G, thanks, it was nice to read a little about Quantum Physics though, and get a bit more insight from your detailed reply, after listening to Physicist, Prof Brian Cox (Works for BBC and CERN,) on "The Infinite Monkey Cage" yesterday.

Woke up to a nice move this morning. Like you said before Graviton...sometimes you make the most money while sleeping...That's a great feeling.
Added positions on E/G, E/U, E/C and U/J. Moved up stops on all existing orders to more than cover the risk of the new entries.
I've not closed out any positions but just locked in profits like I mentioned before.

I have 1 short on A/U at about +90 but it's not very convincing.

Thanks! Steady as she goes.

A few posts back Graviton was talking about edge and about how important it is to have an edge you believe in.

I believe that trading with momentum or trend is one of the best edges the retail trader can get hold of, because it is so easy to quantify and understand.

It is possible to identify a trend very crudely, just by asking whether the price of X is higher or lower now than it was Y periods ago.

Financial academics define this as "time series momentum".

When I first came across the academic literature, it seemed too good to be true, so I decided to run a little experiment, part of which I will reproduce here to share with you guys and maybe spark some discussion.

Let's imagine that at the close of each week, we decide to go long any major pair if its price is higher than its weekly close X periods ago, and short if lower. We close each trade (theoretically) at the following weekly close. Very simple.

No leverage, no stop loss, no take profit, no transaction costs.

The chart below shows the results achieved by the 4 major pairs from 2002 until the end of 2014, using 4 different time intervals for the Y look back:1 month, 3 months, 6 months and 1 year.

You can draw your own conclusions, but I think this is a great graphical representation of the edge of trend following. In case you are wondering, the transaction costs might have taken 10%/20% off each total at most.

I would not recommend following this strategy in real life (yes, the CHF moves lately would have been a big negative). But it shows you how powerful very simple momentum/trend following can be in terms of an edge.

Even your best case that is only 5% interest compounded over 12 years, not that powerful counting inflation you will be losing money. If 5% your aim then there are easier and less stressful ways to achieve that. Thinking it about the increase probably is inflation.

Like I said, it is not meant to be a strategy, its meant to exhibit the propensity of at least the major 4 forex pairs to trend.

Well, if you understand Quantum Physics, don't tell anyone. They will lock you up as a madman until you earnestly recant. I'm sure there's a good reason for that.

Seriously, I do think that accepting the statistical nature of the markets is one of the most difficult hurdles to clear in trading, but it is a prerequisite for success. In my own humble opinion, there is no method on Earth that can tell you that the market will go up. But there are some very good methods that will tell you it's more likely to go up than down. Since that is the best we can ever hope to achieve, we have to be satisfied with optimizing those statistical methods.

Note that this was done with no leverage. Just adding 10:1 leverage would increase the return by 10X. Of course it was a simplified example to prove a point, but point taken.

Great chart. Thanks for sharing. I could write a book about it, but I'll keep it short. I would just point out that all successful methods are trend following methods to some degree. Even counter-trend trading is following the trend of the retracements. If one doesn't believe the markets trend, then the only alternative is that they are completely random, in which case it would be impossible to make a profit after transaction costs. Thanks again for the chart.

you can only come out positive with the trend. there are trends within trends.

Yes, it's amazing the pips that can be made by doing nothing. Many famous traders have said they made most of their money sitting on their hands, or something like that. It's often hard to let profits run when a good trade is doing well. If the temptation to grab the pips before they get away is too strong for me to resist, I take the most profitable lot off and put a new one on. It costs me a bit of spread, but it makes me happy and rich, so that's well worth the price, for me at least.

So, I've taken off 5 lots from EU in profit this month and put new lots on. That cost me about 10 pips in spread and I took off 1900 pips in EU multi-lot profit. If someone else can manage to let their profits ride to huge amounts without taking any off until price has hit a max, then good for them. They will make a little more profit than me. I understand the math says it is more profitable to just put the whole trade on and let it run to completion, but my psychology doesn't work that way. I have to be comfortable with my trading at all times. If that means I need to spend a little spread to rest well at night and still make the lions share of the available pips, I'm OK with that.

To paraphrase the great Yogi Berra: Trading is 90% psychological and the other half is having a solid method.

Here is a pretty picture using the Heiken Ashi. EU is now short for 5 lots. Stops are moved to about BE just above two lower highs, counting back, so there is no risk to the 1900 pips profit already taken off the trade. There has been no overall risk in this trade since the first lot was taken off for profit to fund the trade. Initial risk was a 70 pip sl, so overall reward to risk ratio is 27 to 1, so far. I have another 750 pips in unrealized gains as well on this trade. That's just one pair and one extended trade. It takes a lot of work to create a piece of work like this, but the rewards are priceless. Just a few of these a year will put a trader in the top 5% that can make a living off this stuff. After you've created a few of these, they get easier to do. They look like artwork to me.

I once said in this thread I'd show subscribers how to make thousands of pips on a trade. This trade has only been running for 10 days. Here it is:



Isn't she beautiful?

I totally agree with you that taking a hit on the spread cost would be well worth it to bank those profits and then open a new lot. That is...if...you were just replacing the lot you had closed. What I'm trying to do is move my stop on my order up and the add another lot on top of it. I move my stops up to make the trade risk free in case of a retracement. But if the market moves my way then I keep that original lot and add another. My goal is to get to the end of the trend (however you want to define that) with as many positions/lots as possible.

What's your Edge?

When I started trading back in ancient times, I had neither the self discipline nor the technical knowledge to be a consistent winner. I tried to exercise self discipline, but I always fell short, holding on to a loser too long, cashing out a winner too soon, letting a winner become a loser, etc. My trading was governed by my emotions of fear and greed and I no idea what to do about it. After years of disappointing results and studying everything I could find on the subject, I realized I needed a trading plan. Not something vague, like I plan to trade for a profit, but something very specific so that I would have rules to follow and I could evaluate my progress at developing self discipline by how well I followed my own rules.

My first set of trading rules weren't very good, in fact they were awful. But that's ok, at least I now had a fixed set of rules that I could follow and work on improving self discipline. It took years of practice to even begin to develop self-discipline in my trading. Over the years of study I sometimes tried to implement other peoples rules, but that never worked at all for me. I had to logically understand the reason behind each rule and craft it to agree with my own trading style. Progress was slow and it took years before I could see any at all. Eventually I noticed that I wasn't losing as much as I had previously. Losing less isn't as good as winning, but at least it was going in the right direction. Over the next year my losses diminished and my winning streaks got longer and longer. Then, after many years of study and practice, it just all suddenly came together. Within 6 months I went from inconsistent loser with a questionable set of trading rules and even more questionable self-discipline to consistent winner with self discipline and confidence.

I've talked to other traders who said the same thing happened to them. Eventually after years of practice and study it was as if someone just turned on a light switch and suddenly everything made sense to them. I suppose it's possible that some people are just naturals at trading and it comes easy for them, though I've never met one. Perhaps for some, the light never comes on, but I think that could be fixed in most cases. The vast majority of people will never trade for a profit, but I firmly believe most have the ability to if they would put in the required effort and could find the right guidance.

As we've discussed before, trading is not like anything else that we do in our daily lives. It is an endeavor to shift the probabilities of a situation to be in our favor so that we can profit from it's outcome. Most people have a very bad understanding of probabilities in the first place. If you ask most people would you rather have $1,000 cash right now or a 25% chance at $5,000 in 30 days, almost everyone will take the $1,000 cash right now, rather than the statistically better offer of a 25% chance at $5,000 in 30 days. Even if we understand the statistics of the two offers, there is just something inside of us that makes us choose the wrong offer. We all feel that a bird in the hand is worth two in the bush, even when it can be proved that's not true. Our feelings let us down. Our instincts are all wrong for trading. It's not enough to just know logically what the right trading decision is, we have to study and practice over and over until we successfully "re-wire" those incorrect instincts and feelings. It's like practicing a musical instrument. When you get very good at it, you don't even have to think about where to put your fingers to form every note perfectly. If someone made you the same offer as I noted above and you immediately and instinctually replied without hesitation, I'll take the 25% chance at $5,000 in 30 days, you are a trader. May the Lord have mercy on your soul.

Shifting the probabilities of the outcome of a situation is as strange as a UFO to most sensible people. In almost everything we encounter in our daily lives the probabilities are already fixed by someone else or something else. In fact, the outcomes of each trade are fixed by other things. We can't affect central banks or economic news. We can only do two things in trading. We buy and sell. We can decide what and when to buy and sell, but how can that shift the underlying probabilities of the outcome of the situation? The answer to that question is as we have discussed before, we can trade with the trend, if there is one. Doing so allows us to pick out profitable non-random events from a sea of random noise that would otherwise just eat up our capital with transaction costs. But it's a bit more complicated than that because we can't precisely tell which events are non-random and which are truly random. The best we can do is estimate the probability that an event is non-random and buy and sell on that basis. So, we aren't really shifting the outcome of any individual trade, that would be impossible. We are shifting OUR selection of trades to take those that are most likely to generate a profit. The better our selection of events is, the better our outcome will be, but it can never be 100% accurate. Even if it was possible to be 100% accurate during the selection process, one bit of news released anywhere in the world could change the probability of the outcome and that could come at any time, or not. This needs to be deeply internalized for us to be profitable. This is our edge. It is the only reason we are in the markets. It needs to be as thoroughly understood as is humanly possible. Once our edge is thoroughly understood, a good set of rules and the self discipline to follow them falls out very quickly. You could say, it's like turning on a light switch.

First of all, why is there a trend? Why doesn't price just go immediately to it's new correct value when new information comes out? (to be continued...)