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Multi-Lot Multi-Timeframe Position trading

  • #1,061
  • Edited Mar 12, 2015 12:30am Mar 11, 2015 6:42pm | Edited Mar 12, 2015 12:30am
Quoting spyderman
{quote} 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...
Yes, as long as you have good rules to exit at the end of the trend. Otherwise you can lose back your profits a lot quicker than you made them. Just sayin'...

I just try to strike a balance, increasing lots as I trade, but also paying myself as I go. So I might not have as many lots running as someone who is pyramiding all of their profits, but if it all suddenly reverses I'll still walk away with a nice profit. So, a 5-lot trade with 200 pip stops set to BE looks like this:
Attached Image (click to enlarge)
Click to Enlarge Name: EU Pretty2.PNG Size: 46 KB

This EU short bounced hard up off 1.05 area and looks like it might take a long while to break it, if it even can.

Forex Crunch says:
EUR/USD fell from around 1.12 to 1.0511 as a low. And below, we have some support at 1.0360: this was the low point in January 2003.
Further down, 1.0170 worked as resistance back in November 2012. It is close to the swing high of 1.0208 seen in July of that year.

I say, don't count your pips before they are banked.
  • #1,062
  • Mar 12, 2015 1:24am Mar 12, 2015 1:24am
Quoting Graviton
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,...
Garviton,

WELL SAID. After reading this i know i probably am in your early stage and have a long way to go in order to be profitable. Have few concept about following trend but have hard time to implement it in real, wait for the light to be turned on. Thx
  • #1,063
  • Mar 12, 2015 2:48am Mar 12, 2015 2:48am
Quoting Graviton
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,...
I find it very important from your side to mention that it took years and years of practice for you to become a successful trader. Also that it took a long time to work on your strategy. You said it many times that no one can become a millionaire within a couple of days with a right risk management, however it always has a personal touch when someone talks about his own experience. Especially if it is an honost experience and on the negative side. I found out most traders are only keen of talking about positive results, although I do not know a single trader who has not wiped out his account at least once. Everyone has to go through that proces and learn from it. Your post was very important and new traders should see it is not ashamed when someone loses. It is part of the game and happened to everyone. The question is only if you come back or not.

Great post again, enjoyed a lot reading it.

Have a nice day,

IBO
  • #1,064
  • Edited 11:30am Mar 12, 2015 9:38am | Edited 11:30am
What's your Edge? (part 2)

Why do trends exist in the first place? Efficient Market Theory says that price should reflect everything known about an instrument at any point in time. One important point is that the market is a "price discovery mechanism". That is to say, no one knows what the correct price for an instrument really is. It is the job of the market place to "discover" the correct price. When a new piece of information comes out, say about a change in central bank policy, the current price no longer is accurate in light of the new information and the market sets out on it's job of "discovering" what the new correct price should be. Price doesn't move instantly to it's new "correct" value, but rather starts moving in that direction as the price discovery process gains momentum.

Initially, many companies, central banks and individuals have based their business on the old value of the instrument. They now need to adjust their prices, exchange rates and future business assumptions to account for the new information. Old hedges are adjusted, new ones are put on, prices are adjusted and it takes some time for the market to "discover" the new correct price. This motion of price, mainly in one direction over a period of time can be interpreted as a trend. As the trend moves price, we get herding effects of traders jumping on the trend, propelling it further and faster. Additionally, anyone who thought the price would move the other way is losing money and eventually they will have to close out their position propelling the trend even further.

Sometimes so much price momentum forms from stop loss orders being triggered and the herding effect of traders jumping on the trend, that price significantly overshoots it's new "correct" value and a counter trend correction forms, reversing the direction of the price movement and correcting it back towards the old price.

Since price movements are fractal across time frames, what appears to be a short counter down trend retracement on an up trending long time frame, like the weekly or monthly, might appear to be a long lived down trend on a shorter timeframe like the H4 or H1. It's rare that price actually finds it's "correct" value and just sits there until the next bit of information comes out. The market is constantly performing it's job of price discovery and price is usually still moving from the last piece of information when the next piece of information becomes known.

One extreme view is that all this price movement is just random motion and it's unpredictable and thus no one can make a profit off it except for the brokers who charge commissions on each transaction. The opposite extreme view is that every movement in price means something to someone and that none are completely random. That is, even if we don't know the reason behind the price movement, or even if we can't possibly know the reason, there is always a reason for every movement in price. These two extreme views are like the two ends of a stick. While they exist as concepts, the vast majority of the reality (the stick) exists between the two ends.

Going forward we will further deconstruct these price movements to determine how we can profit from them in the majority of situations. That will require selecting the price movements that appear to be closer the end of the stick that represents rational price adjustments to known information, and avoiding investing in price movements that appear to be less consistent or don't seem to be supported by known information. Next, we'll look at using charts to define and identify the most consistent trends which will form a pool of possible investments. Then we will look at sorting through that pool to select only the most consistent and rational price movements for investment. (to be continued)
  • #1,065
  • Edited 11:31pm Mar 12, 2015 11:08pm | Edited 11:31pm
What's your Edge? (part 3)

So, let's presume that there is some sort of distribution of trades according to randomness, perhaps like a bell curve, and all trades fall somewhere on that bell curve distribution according to how random their price action is. On one end there are trades that are almost totally random in their price movements, we'll call that 100% random. On the other end of the curve are trades with almost no random element, we'll call those 0% random or completely predictable if you like. The vast majority of trades are somewhere in the middle, a split between random elements and predictable elements. To shift the probabilities of this trading game, we need to be able to select trades from the consistently predictable side of the curve and discard those from the random side of the curve. We really can't shift the probability of success for any individual trade. That is set by forces outside our control, like central bank policy or economic news. But if we can select trades that are on the most predictable side of the curve, then we can affect the outcome of the overall trading game after a sufficient number of trials.

If we study the methods of selecting trades with the most predictability we might soon come to the conclusion that trades with longer timeframes are the most predictable. So say we only select trades with a consistent (by some objective measure) Monthly chart. But we wouldn't want to enter that long term monthly trade just anywhere. If price is going up consistently on the monthly chart, but dropping quickly on the weekly chart, it might make better sense to wait until price is going up on the weekly chart as well to enter that long term monthly trade. But we wouldn't want to enter that weekly and monthly up trend just anywhere. If the trend on the daily chart is dropping fast, it might make better sense to wait until the daily trend has turned up to enter the up trend in the weekly and monthly chart. But we wouldn't want to enter that daily/weekly/monthly up trend just anywhere. Why not wait until the H4 is trending up to enter, and the H1, and the M30 and the M15, and maybe even the M5. That's one way to arrive at the concept of multi-time frame trend trading.

That's one way to arrive at the conclusion that we need price to be consistently trending in the same direction for ALL timeframes to enter a trade. The reason we do that is to move our trade selection away from the random end of the range and toward the more predictable and consistent end of the range. As we get further out on the end of that bell curve, there won't be very many trades that register as extremely predictable and consistent. We might have to wait for weeks for such a trade to present itself, but when it does, it is much more likely to turn out to be one of those "super trades" than one selected on some less objective method. How much more likely? With practice, about 3 out of 4 of these trades will stop out at break even, or with a small loss or gain of 50 to 100 pips. About 1 in 4 of these trades will turn out to be a super trade that will earn hundreds or thousands of pips if traded right. Let's look at some live trading examples.

UCad just broke out of a range that it has been trading in for the past 5 weeks. You might remember that I had said earlier that I was waiting for this breakout. In fact, it broke out, came back and retested the range and now seems to be headed higher. It looks like this on the H4 chart with the range for the last 5 weeks clearly shown inside the blue horizontal lines.
Attached Image (click to enlarge)
Click to Enlarge Name: UCad Breakout.PNG Size: 58 KB

If you use some objective measure of trend direction, like, is the current RSI above or below 50%, or another of my favorites, is the current price on the top half or the bottom half of the chart when it's displayed on my computer in any timeframe (requires no indicators, but is still objective), you'll likely find that the UCad is trending up on all timeframes between the monthly and the 5 minute chart. I'll leave it to the reader to check those other timeframes and we'll just move on. We can do a dozen more analysis on this price movement, but it is unlikely that it will change our decision. Price has already told us all it has to tell and now we must make a decision. You can see that I've already entered this trade with a test lot and with a stop about 3 higher lows back. Why 3 higher lows back? (to be continued...)

Questions, comments, discussion? I know there are many of you out there just lurking. Speak up for goodness sakes. At least say Howdy!
  • #1,066
  • Mar 12, 2015 11:37pm Mar 12, 2015 11:37pm
Quoting Graviton
What's your Edge? (part 3) So, let's presume that there is some sort of distribution of trades according to randomness, perhaps like a bell curve, and all trades fall somewhere on that bell curve distribution according to how random their price action is. On one end there are trades that are almost totally random in their price movements, we'll call that 100% random. On the other end of the curve are trades with almost no random element, we'll call those 0% random or completely predictable if you like. The vast majority of trades are somewhere in...
Howdy G,

Love your work as always - incredible! I was waiting for the part where you explain the EPR paradox and did not want to interrupt your train of thought.

I am still working on my Entries but making good progress - I think - in no small part thanks to you.

AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
  • #1,067
  • Mar 13, 2015 1:56am Mar 13, 2015 1:56am
Hi G, Very very hard to wait for those trades at the right end of the stick, I've had two that I've waited weeks for so far, and both have been worth the wait. EU is looking like it's gaining some momentum again, watching and waiting.

I did take some pips and realised the error, now my SL is too close to price action on 2/4 positions and they went negative for 12 hrs. Now I am sitting and waiting and will use my SL to take profit, if it continues to trend.

I guess, I had the wrong end of the stick,. Looking forward to the next part of What's your Edge, Thanks. It's a very long read for the truly committed, I think more will join as time progresses, another bell curve, they are everywhere.
  • #1,068
  • Mar 13, 2015 2:40am Mar 13, 2015 2:40am
Quoting AlbinaGrande
{quote} Howdy G, Love your work as always - incredible! I was waiting for the part where you explain the EPR paradox and did not want to interrupt your train of thought. I am still working on my Entries but making good progress - I think - in no small part thanks to you. AG
Howdy,

there is not much to say. The thread is like a good and interesting book. I should maybe publish it :-) I guess we always ask or comment if something is not clear or we do not agree.

Nice posts lately of course.

IBO
  • #1,069
  • Mar 13, 2015 2:54am Mar 13, 2015 2:54am
Quoting AlbinaGrande
{quote} Howdy G, Love your work as always - incredible! I was waiting for the part where you explain the EPR paradox and did not want to interrupt your train of thought. I am still working on my Entries but making good progress - I think - in no small part thanks to you. AG
Hey AG. I'm sure the resolution of the EPR paradox must be in the math. Glad to hear you are making good progress. We should be able to nail these entries, at least to a reasonable chance of success. Real time charts are good for discussion. Post some up if you like and we can discuss them. Of course, if all the timeframes aren't trending in the direction of the trade when you want to enter, that would be my first observation. Best success. G
  • #1,070
  • Mar 13, 2015 6:56am Mar 13, 2015 6:56am
G,

Once again...excellent thoughts here. Like IG mentioned, it's like reading a good book, and I enjoy that immensely. Your thread is rapidly moving to the top in my list of "Most Valuable" FF threads. Graeme's Equity Millipede has always been at the top for me as that was a real Aha moment. I'm only sorry I didn't come across it until after he had left, so I wasn't able to interact directly with him.

Having said that, I feel that already (thread is only 54 pages) you've offered many ideas and thoughts of even greater import and at more depth, so definitely, keep up the good work...
  • #1,071
  • Mar 13, 2015 9:51am Mar 13, 2015 9:51am
Just thought I'd stop by here and say hello. Real nice job here Graviton! The information you've provided here is priceless and I enjoy reading your posts very much. I don't post very much, rather listen than yap, but I'll be lurking and awaiting any of your future posts. Btw, I think I know why you set your stop there on that UCad trade, but want to hear your thoughts. Also interested to see how you play it out since it is nicely in profit now. Well done and best wishes.
  • #1,072
  • Mar 13, 2015 10:23am Mar 13, 2015 10:23am
Thanks so much for the kind words. Yes, we are now in a "good entry" in UCad. It's about +120 pips. How did I do that? Was it just pure luck? What is the chance that I would pick a winning trade at random? Well, I monitor 25 pairs and each could be traded up or down. Probably only a few of those have moved 120 pips in the right direction without first retracing to stop loss, so say a 1 in 10 chance. It's possible it was just pure luck, but it's also possible that we are succeeding at shifting the probabilities of the overall trading game by picking a trade more likely to succeed. Think what you want, believe what you want, but this was a live trade shown as I took it, so we know this is the real deal. No Hocus Pocus, no let me cherry pick a winning trade of the past or even worse, I'll just make one up and mark levels on a cherry picked old chart and show you what you "could have made" had you bought my expensive system. Don't even bother asking why I'm selling my expensive trading system to you instead of trading it myself. Oops, sorry. I'm off on a rant.

So, the UCad trade looks like this, now about +140:
Attached Image (click to enlarge)
Click to Enlarge Name: UCad Breakout.PNG Size: 49 KB

We have two options, take the 140 and start over with a fully funded trade, or put a second lot on and move the stop up. I'm here to make pips, so I'm going with the second option. It's not the most conservative option. I'll set both stops just below the old top of the trading range. If price goes below that, the breakout has failed and thus the reason for my trade has been invalidated by price action. So, it looks like this now:
Attached Image (click to enlarge)
Click to Enlarge Name: UCad Breakout2.PNG Size: 50 KB


All that was done with no morning coffee. Now for a cuppa Joe!
  • #1,073
  • Mar 13, 2015 11:03am Mar 13, 2015 11:03am
What's your Edge? (part 4)

I've been talking a lot about Higher Lows and there is a very good reason for that. There are two common objective measures of a trend direction, say an up-trend. One is it's a series of Higher Highs and Higher Lows. The other is it's more simply just a series of Higher lows. Either definition works, since if the intrinsic volatility of the pair is fairly constant, and you are making a series of higher lows, the Higher Highs will probably come eventually. You can't know when, and really, it's just very probable that the Higher Highs will eventually come, it's not an absolute certainty, but that's ok. We will grow to recognize and appreciate probable situations that are in our favor. I always default to the simplest option, since I am in essence a simple minded guy. So I primarily consider a series of Higher Lows as an up trend, and I look at Higher Highs made along the way as confirming price action.

To complete the definition of our objective, tradable trends, we need to consider what is a series? Only one is definitely not a series, two is a series, but a very short one. Three is definitely a series, so lets call an up-trend a series of three or more Higher lows. It's an objective definition, and we can allow a little wiggle room for Higher Highs as confirming price action and only two Higher lows as a very short series. So now we have a clear definition of our objective. We are seeking to trade a series of higher lows for an up trend, or a series of lower highs for a down trend. This is a very important definition. It is the first and central element of our trading plan. We should keep it in mind going forward. OMG, aren't trends just the most wonderful things ever? (to be continued...)
  • #1,074
  • Mar 13, 2015 11:52am Mar 13, 2015 11:52am
Quoting IBreakOut
{quote} Howdy, there is not much to say. The thread is like a good and interesting book. I should maybe publish it :-) I guess we always ask or comment if something is not clear or we do not agree. Nice posts lately of course. IBO
Hmmmm. OK. I see your point. Thanks for the "heads up". I claim Copyright protection for all my writings as of this date 3/13/2015. Any reproduction of my original writings without prior permission is prohibited. All rights are reserved.

My lawyers are very expensive, but unbelievably good and always collect for damages plus their sky high fees.

LOL, thanks again for the heads up!
  • #1,075
  • Mar 13, 2015 12:24pm Mar 13, 2015 12:24pm
Quoting Graviton
{quote} Hmmmm. OK. I see your point. Thanks for the "heads up". I claim Copyright protection for all my writings as of this date 3/13/2015. Any reproduction of my original writings without prior permission is prohibited. All rights are reserved. My lawyers are very expensive, but unbelievably good and always collect for damages plus their sky high fees. LOL, thanks again for the heads up!
:-)))) Always enjoy when we put some fun part into the serious discussions!
  • #1,076
  • Mar 13, 2015 1:34pm Mar 13, 2015 1:34pm
Hi,

I just found this thread; Im on page 7 at the moment so it will take me a while to catch up with all of you. I can already see the value of learning this material and participating with charts so we can all learn from what is being presented. That was Graviton's idea from the beginning. Equity millipede, an all-time favorite from the things Ive read, but it's a very difficult way to trade, psychologically having to take many losses and watching your account bleed for months is something that requires good strength. I always hoped there might be a way to make it work for me. If pipEASY showed what can be done, Graviton is introducing one way to get there or a blue print if you will; a consistent method that is accessible to the majority. I think the edge, the pyramid strategy, the trade/money management, essential things of this puzzle that were not discussed deeply, now they are revealed all in one place. Now as a whole, everything is starting to fall into place and for once, Im starting to see the light at the end of the tunnel.

I already have questions but i need to finish reading the thread as they might have been answered.

Thanks Graviton, I hope you stick around for a while until this method is understood and disseminated.

When I catch up and start posting charts, I hope you wont laugh.

The very best to you
  • #1,077
  • Mar 13, 2015 6:18pm Mar 13, 2015 6:18pm
Quoting saunga2nd3
Hi, I just found this thread; Im on page 7 at the moment so it will take me a while to catch up with all of you. I can already see the value of learning this material and participating with charts so we can all learn from what is being presented. That was Graviton's idea from the beginning. Equity millipede, an all-time favorite from the things Ive read, but it's a very difficult way to trade, psychologically having to take many losses and watching your account bleed for months is something that requires good strength. I always hoped there might...
Welcome aboard. I wont be laughing. I've made plenty of mistakes myself. Everyone has. We are all somewhere on the same learning curve. I still make them, but I try to keep them small enough that my winners pay for them with profits left over. Best success. G
  • #1,078
  • Mar 14, 2015 4:20pm Mar 14, 2015 4:20pm
Hi G, Tinkering in my garage much to Mrs AG's amusement:

Here is what I have been doing recently by way of trying to improve my Entries. I have been trying to blend Daily Candle structure and Price flow with lower TF Entries - typically H1, not lower. One of my stumbling blocks has been traditional candle structure which I have been reluctant to abandon, tho as you can see here, for the moment Price flow seems to play with my mind a lot better. I know that there are a number of amazing PA traders on FF, but try as I may, I just can not seem to get the hang of it. Emmanuel7788 on TMS comes to mind. He is extraordinarily generous with his time and teaching.

I have included a chart from this week for UC by way of example. The days of the week are delimited by the corresponding Daily Open Lines. I have termed this approach as "MTF CandleScan" in deference to a past life, as I am not quite sure how else to describe it. You can see several different TFs are represented on one chart with Price flow shown as a 5 minute "Tick" flow overlain on an H1 format. Underneath at a larger scale, if you will, are D1 elements represented by Bollinger Bands and the D1 ema21 rather than the more usual BB center line.

I think that you will relate to the sub windows immediately as I have incorporated, in addition to a H1 TDI chart, your Stochs and a MTF RSI Heatmap . Incidently, I had previously looked at both MACD and HA Heatmaps which are virtually superimposable on the RSI Heatmap pending parameters selected. For convenience the blue center line divides the Higher and Lower TFs between H1 and H4.

Attached Image


The general idea is to find a pair with a stable, favorable D1 candle structure AND Higher TF RSI Heatmap appearance. Thereafter, I want to find Entries on H1 that will be moving away from extremes using the Daily Open Line as a reference. For Buys I want to see RSI H1 under 50 (the reverse for Sells.) At the same time I want to see your Stochs "sensibly" aligned.

You will be grateful that I have left off a few Gigets and Gadgets as there is more than enough here to give a your viewers a serious headache. But, I think that you can get the general idea.

This week I plan to take this invention out for a test drive on several pairs that look promising. My choice of pairs is for another discussion altogether, so I will leave that for the moment.

Hope this is of interest and not a distraction, AG
Do not dwell in the past, do not dream of the future, concentrate the mind.
  • #1,079
  • Mar 14, 2015 11:12pm Mar 14, 2015 11:12pm
Quoting AlbinaGrande
Hi G, Tinkering in my garage much to Mrs AG's amusement: Here is what I have been doing recently by way of trying to improve my Entries. I have been trying to blend Daily Candle structure and Price flow with lower TF Entries - typically H1, not lower. One of my stumbling blocks has been traditional candle structure which I have been reluctant to abandon, tho as you can see here, for the moment Price flow seems to play with my mind a lot better. I know that there are a number of amazing PA traders on FF, but try as I may, I just can not seem to get...
Well, honestly, I just simply buy when price goes up and sell when it goes down. I'm thinking that if you make things too complicated, there is always another way to look at them, so you can never reach consistent profits. Every win seems like the Holy Grail and every loss requires a change in the system. It can be a bit like chasing your tail. I've seen people who swear by candle formations on their charts. Then I point out that my charts have different candles because my brokers server time is different. They see a doji and I see a hammer or whatever. What makes theirs right and mine wrong, or visa versa?

I think it's a huge waste of time. I simply bought when price was going up and sold when it was going down and made 40% profit in the last 2 weeks. The previous two weeks I couldn't find a trade at all. That's just the way it is. It comes in waves. This is a zero sum game. I just don't believe you can win it in the long haul by being more complicated than Goldman or Morgan. I'll look over your charts some more and see what I can make of them. I'm thinking, trading should be kept as simple as possible, but no simpler. Of course, that's just my own humble opinion. I could be wrong. G
  • #1,080
  • Mar 15, 2015 7:26am Mar 15, 2015 7:26am
Quoting Graviton
{quote} Well, honestly, I just simply buy when price goes up and sell when it goes down. I'm thinking that if you make things too complicated, there is always another way to look at them, so you can never reach consistent profits. Every win seems like the Holy Grail and every loss requires a change in the system. It can be a bit like chasing your tail. I've seen people who swear by candle formations on their charts. Then I point out that my charts have different candles because my brokers server time is different. They see a doji and I see a hammer...
Hi G,

I agree with you completely. I read AG´s post with interest as I am open to learn any new stuff. However many people try to overcomplicate things which will result in depressing results. We should have our indicators but limit them to a certain point. I prefer most the candlestick action to follow. It is interesting and true what you write about candlestick formations because of time difference. Keep in mind those difference mostly play roles on the daily charts only. Sometimes maybe on the 4H but definitely not on lower TFs as the 1H charts must be the same just like all lower TFs. Also the weekly and monthly should be basically the same because even if you have some time difference, the 5-6-7 hours difference does not usually mean much on a weekly or monthly TF. I do not follow patterns btw, however I like to look into the stories what the differenct candles tell me.

What I do not agree 100% is when I see everywhere it is a zero sum game. I do not think so. Remember how often you also talked about the spread. If the broker charges the spread then it is no zero sum game in my understanding.

Have a nice Sunday everyone,

IBO
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