Testing High Leverage Compounding

Current exposure:

Long AUD
Short JPY
Short NZD

AUD/CAD setting up for short -- may enter because it passses correlation filter to offset long AUD exposure.

"Correlation Filter: Is there a trade of the same currency (EUR/CHF/GBP) already open trading in the same direction? If yes, no trade."

No other correlated trades until these trades resolve themselves. (SL or TP)

Gentle reminder to all reading/following:

These are my expected returns:
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%

I expect to lose or BE 80% of my trades, so don't follow, most likely will be loser

Question: Anyone here finds it strange that this system (its rules and all) may be so profitable??

In general, for any human endeavour, the rewards are greatest when one can overcome 1) ego 2) embarrassment 3) fear of failure.

Nothing is more embarrassing and hurting to the ego than being wrong. The profitability arises naturally from human nature's inclination to want to be right most of the time. That's why all martingale systems and grid systems FAIL, and any system without SL is bound to destroy itself in the Long run. The larger your losing/BE %, the greater potential your system has. Well not always, provided you exploit the right edges and follow a consistent method. This is not to say you can't be profitable with a high win %, of course you can, but the system is likely to be fail when market conditions change/ be less robust. Which would you rather have? A stable win % that is LOW or a volatile but high win % that changes like the seasons?

to put it in more technical terms, the conditional probability of price travelling X pips up after travelling X pips up is in general higher than the probability of price travelling X pips from any arbitrary point. or in other words, TRENDS exist.

Time To Learn
A young but earnest Zen student approached his teacher, and asked the Zen Master:
“If I work very hard and diligent how long will it take for me to find Zen.”
The Master thought about this, then replied, “Ten years.”
The student then said, “But what if I work very, very hard and really apply myself to learn fast — How long then ?”
Replied the Master, “Well, twenty years.”
“But, if I really, really work at it. How long then?” asked the student.
“Thirty years,” replied the Master.
“But, I do not understand,” said the disappointed student. “At each time that I say I will work harder, you say it will take me longer. Why do you say that?”
Replied the Master,” When you have one eye on the goal, you only have one eye on the path.”

AUD/JPY Long

Trade management: SL shift to BE.



EUR/NZD Long

Stopped out.

Pre-European Session Update

AUD/JPY well in profit, 6 pips shy of next jumping stop target. 40 pip shy of TP.

Re-entered on EUR/NZD long after price stopped me out and recovered.

Pairs in Focus

GBP/AUD - long
GBP/CAD - long
GBP/CHF - long
GBP/USD - long
EUR/GBP - short

Trade Management

EUR/NZD stop at BE.



Not doing any trades European session because focusing on Live account. In a nice GBP/USD Long trade.

Shift EUR/NZD SL up to 000 line.

Meanwhile on my live account, GBP/USD long take profit +60 pips

AUD/JPY SL shift up to 95.00

At this point the title seems a bit misleading, because I'm not really using high leverage and neither am I compounding/scaling-in.

Still experimenting/observing when/where best to scale-in. Appreciate any input from readers.

How I estimate the expected returns

While the details such as time frame, pairs to trade, entry/exit rules are all different, the principles are largely similar to my Live account's method. I'm an intraday trader and I have traded my system live using up to 1% risk per trade. This generated returns of around 15% per month on average. so I figured if I *5 the risk, everything else will approximate *5 and that is how I estimated the returns from this system.

So far, this system is outperforming my expectations. Too few losers... Probably a good month? Not sure. Have to test more. It may turn out to be a better system than the one I'm trading live right now, if so, I might incorporate this to diversify risk.

First attempt at compounding. EUR/NZD long.

Added 0.17 SL at break-even.

EUR/USD long setting up../triggering

Entered EUR/USD long

Attached Image (click to enlarge)

EUR/USD LONG

Trade Management: SL at BE

Trade Management:

TP Removed because of key news differing from expectations significantly.

Expecting a runner, may keep overnight.

SL shifted up to 050.

EUR/USD Long

Seems to be setting up for a massive move. If retail & institutional stops above are taken out... could run for 400 pips from here.

Scaled in twice so far.

Stops are tight.

I estimate this should run around 60 pips more today at least, but a stop out here is fine too with good profit.

SL Shift to 060 level

Note that this was my initial profit target.

In a similar trade on my live acct

Scale-in Follow-up

Previously I mentioned that it is difficult to scale in. So far all the winners have been high momentum moves, further reaffirming my belief that I should adopt a more aggressive scale-in strategy.

But don't want to jump to conclusions too soon... Let's see what happens for the next 100 trades.