Testing High Leverage Compounding

Rules for Thread:

You are welcomed to post here but please follow these guidelines

1. No commercial agenda please.
2. Keep the tone of the discussion positive.
3. If you want to make predictions or calls on pairs, please present invalidation points to go with your ideas and at least a vague description of the move potential or your trade idea.

***

Following How to Compound with High Leverage with Minimal Risk

Example: EUR/USD Buy Trade

D1 Uptrend


60 min Uptrend


Has recent leg travelled 5 x ATR(200)? -- Yes.
Is there CT retrace on 15 min? -- Yes


5 min CT


Entry


Exit


No Scale-In.

Example 2: GBP/JPY Short

D1 Downtrend


H1 Downtrend


Has recent H1 downtrend leg travelled 5 x ATR(200)? No.

5 min CT


Entry

Cont. GBP/JPY Short

First Scale in



Take Profit

Today's pairs in focus:



Comments and suggestions very welcomed. I'm hoping to draw out some truly profitable traders here to talk about their methods with me and explore how to make things better and exploit retail FX's unique advantage of leverage.

P.S. May miss trades OR Posting may lag because priority is my intraday trading on other account. Intraday is a fast paced business.

P.P.S. Made this system in < an hour based on core principles of FX market and trading so may see minor adjustments, but overall will stick to this for next month.

Regarding Levels

This system does not rely much on levels, except 050/000 for jumping stops.

From my personal experience, using levels worsen edges because they add a layer of subjectivity and this layer tends to fall apart during critical moments. They make me fall into the trap of thinking, "Maybe if I can just analyse the market better and find better levels then my system will work." But that's usually not the case. No matter how you identify the levels, you are going to have losing trades and the key is to stick to the same method...

Personally I think the whole focus on levels is a big trap for traders. Not that levels don't work, but they only work during certain times and their edge can be exploited without even identifying them. In other words, you don't need to know that there's a level there to sell or buy. When price moves, you just get in. The more important thing is to not fight the dominant trend/bigger picture order flow (especially when the traders perpetuating these trends are most dominant in the market i.e. NY early-session and London session).

Maybe it's just cause I am weak in this sense but I see no purpose in hitting my head against levels. Instead I tend to avoid levels altogether and focus on my strengths.

Levels are good if you are level-headed all the time or if you trade on swing-trading with a long-term perspective.

Too busy trading my live account to trade the demo... I'll update with charts later.. Many triggers today. GBP/CHF (short), GBP/CAD, and now EUR pairs (long) looking like triggering soon.

Actually there're many opportunities these two days but my intraday trading is hectic enough.

Took a AUD/JPY long trade that I am in on my Live acct has well. Fulfils all the rules.

Don't trade live with this straight away, the high risk settings will likely kill traders psychologically. Not many can endure a 40% drawdown and still stick to the system.

Will post a nice set of pictures later.

Entry: 95.488
Stop: 95.246
TP: 96.5
Risk: 5%

rmb first post:
Expected Win-Rate: 15% winners, 35% breakeven/partial win, 50% losses.
Expected Max Drawdown: 40~50%
Expected Profit Factor: 1.7
Expected Monthly Gains: ~70%

Pairs in focus today.

EUR/NZD -- long
GBP/JPY -- long
GBP/USD -- long

Long GU taken

GU survived the retrace and is looking good. Seems like a classic 000 line bounce after consolidation.

Expecting at least a break-even on this trade but from experience, it's probably a winner.

fyi, this is what a complete system looks like. The so-called systems in the trading systems forum are more like trading "edges" that you can use to build a system.

Imo a system/strategy consists of at least 3 parts:

1. Trading edges/filters
2. Trade management plan
3. Risk management plan

And all 3 parts must complement each other. i.e. the edges will impact how you manage your trade (SL/TP/BE/shifting SL), and the risk has to be tailored to the system's expectancy and expected drawdown.

Most traders focus way too much on edges, and even then they are only looking at a basic entry filter, which is tiny tiny tiny.

***

Also this has nothing to do with discretionary v.s. mechanical. Using discretion doesn't mean no rules, it just means your rules are more nuanced and harder to express. Still, you need to be very clear what your decision rule is, i.e. what is the TEST of whether I should do something or not.

I can have a rule that is, IF I feel fear when price is going up, I will BUY. That is discretionary but still a rule.

But I left out something important, that underlies the 3 parts of the trading system.

That is your trading philosophy. If you don't understand WHY your system works, or what the heck you are doing, or what the principles for long-term success are, and are just blindly following the rules, it'll not work. For most people at least, they'll crumble under the stress and start breaking the rules. I know I will if I trade something I don't understand.

Notice I did not mention psychology. That's because the psychological factors will dissipate once you fix your philosophy and develop a system you are comfortable with. It takes time to do so; I know I took nearly 4 years to be able to develop working systems in under an hour. Even then I had to trash many that don't fit my style of trading.

Trade Management
SL at Break-even.

News Management: Remove TP if major news release (interest rate/unemployment/central bank) that was highly unexpected. Let Jumping Stop take me out.

Watching 12pm news release very closely. If we get a surprise rate hike or something really unexpected, will re-enter the trade if TP is hit by spike. Barring that, TP stays.

Trade Management

SL shifted up to 1.5450.

No news is good news. Should continue trend move in NY session or maybe tmr london.... Looking for scale-in entry on 1min chart now.

My scale-in rules are problematic. May tweak it as time goes on... Looking at 020 levels to see if I can add directly via momentum. Need more testing...

The situation now is in a bit of a conundrum.

This current retrace is too shallow to count, and if price spikes here, the intraday trader I am will want to short it in my live account.

Whereas if the retrace gets too deep, it'll take out my protective stop, but I will want to go long on my live account .

However, that said, it's better to let the system be as it is than to make special rules. the more robust the rules are, the more likely it'll work in the long run.

So let's see how it goes.

And so I went short on my live account... lol most likely this demo buy trade will get stopped out. but who knows.

Well interesting development, the odds of it hitting my TP has increased (stopped out for short). Nothing much to do now. Not gonna be trying to scale in -- I'm shifting my attention away from GU and demo and looking at EU for shorts on LIVE soon.

GBP/USD Long
TP Hit, +135 pips, 19.6% gain



What went well?
- SL worked well.
- Trade management was perfect.
- Was ready for news.

What went wrong?
- A bit unsure about the scaling-in rules.

What could be better?
- Currently the scaling-in is quite passive/cautious.
- Will need to study more historical trades and forward test more to understand how these trades tend to play out. So far all the ones I've seen tend to be high-powered, high-momentum and tend to reach the profit targets very quickly. If that is the case then I need to scale in a lot more aggressively in order to benefit from the leverage and momentum.

End.

For asian session:

Pairs in focus

AUD/CAD - short
AUD/JPY - long
EUR/NZD - long
CAD/JPY - long
NZD/CHF - short
NZD/JPY - short
USD/JPY - long

Long EUR/NZD


Long AUD/JPY