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Reverse Engineering a Profitable System (REPS)

  • #101
  • Aug 13, 2015 7:11am Aug 13, 2015 7:11am
Quoting PipMeUp
We reverse engineer a perfect trade but no position survived between 1.25 and 1.29. It isn't that perfect! The reason is obvious: the trend wiggled. Is it possible to hook a few trades in there without increasing the risk or aborting the series? I wondered how we could enter the retracements with the tools we have, i.e. the DCs. I got an idea. What do you guys think about this: when the DC on D1 is still going down but the DC on H4 is going up we enter at the B/O of the H4 channel. Picture: (green entries survived, yellow taken @BE, no loser) {image}...
Nice move PipMeUp. :-)
  • #102
  • Aug 13, 2015 7:17am Aug 13, 2015 7:17am
Thanks guys. I agree with Spy' that it may be too aggressive. I'd like to find a way to not get the whole pyramid destroyed if such an entry fails.
No greed. No fear. Just maths.
  • #103
  • Aug 13, 2015 7:21am Aug 13, 2015 7:21am
Quoting PipMeUp
Thanks guys. I agree with Spy' that it may be too aggressive. I'd like to find a way to not get the whole pyramid destroyed if such an entry fails.
Well, yes, it's greater risk, but the point in using our E/U example was to maximize the trend opportunity and mold our system accordingly. In keeping with that philosophy, it would seem that it would be an improvement.
Granted, in forward trading, it may take us out of a series earlier, but then again, it may pay off as it would have in the E/U trend.

Well, I'm off to my day job (at least for now ) I'll check in later.
  • #104
  • Aug 13, 2015 8:10am Aug 13, 2015 8:10am
Quoting PipMeUp
Thanks guys. I agree with Spy' that it may be too aggressive. I'd like to find a way to not get the whole pyramid destroyed if such an entry fails.
To be less aggressive, why not simply adopt both entry conditions (the breakout entry of the primary Donchian and the retracement entry of the H4 DC) as legitimate primary trend entry points, set initial stops at the outer H4 DC and move to BE when H4 DC reaches the entry price of either condition. Only consider new entries when BE on prior trades have been reached. Trend ends still on breach of D1 DC.

You should be able to pack more profitable trades into a trend this way while still strictly managing risk. Using the H4 DC you are also ensuring that trade entries are positioned where trend momentum on D1 is in your favour.
  • #105
  • Aug 13, 2015 8:15am Aug 13, 2015 8:15am
I just had fun paper trading E/U in 2008-H2 only using the H4 B/O entry. Only one single of those aggressive add-ons would have stopped out the pyramid. But almost at the bottom! One of them died at BE after a floating profit of 805 pips (aaaaah). Only very few survive but we're reaping pips per the thousands!
No greed. No fear. Just maths.
  • #106
  • Edited 8:37am Aug 13, 2015 8:24am | Edited 8:37am
Quoting PipMeUp
I just had fun paper trading E/U in 2008-H2 only using the H4 B/O entry. Only one single of those aggressive add-ons would have stopped out the pyramid. But almost at the bottom! One of them died at BE after a floating profit of 805 pips (aaaaah). Only very few survive but we're reaping pips per the thousands!
B**gger it. Let's be aggressive.

PS To keep out of the rough I still like Spidey's 20 period Donchian on W1 as a basis to initially enter the trend.
  • #107
  • Aug 13, 2015 8:46am Aug 13, 2015 8:46am
Quoting Copernicus
I still like Spidey's 20 period Donchian on W1 as a basis to initially enter the trend.
They seem to be best when the channel is narrow. When it is wide a W1 trendline B/O looks like a good option. Start drawing the TL from a pivot which is also a pivot of the whole DC.

EDIT: well not so good in the end...
No greed. No fear. Just maths.
  • #108
  • Aug 13, 2015 9:24am Aug 13, 2015 9:24am
Quoting PipMeUp
{quote} They seem to be best when the channel is narrow. ...
How about a profit target for those retracement entries to harvest those nice trend impulse moves in conjunction with a trailing stop.?

Bed calls. Night guys. :-)
  • #109
  • Aug 13, 2015 9:56am Aug 13, 2015 9:56am
Dunno. Wouldn't this turn a trend following system into a swing trading system? Not that it is good or bad, just that the idea is to catch the big whales. Also we must keep in mind that the power of the system comes from the MM. If we take profit too early the "half of the locked profits" that fund the additional entries stops growing. Yet I hear you, watching a 800 pip runner returning to the BE line is sad. We could partially TP at some point but the next entry will be smaller. We need to compare the bottom line in both the cases.

Good night-
No greed. No fear. Just maths.
  • #110
  • Aug 13, 2015 10:30am Aug 13, 2015 10:30am
Quoting PipMeUp
If we take profit too early the "half of the locked profits" that fund the additional entries stops growing.
That's exactly the beauty of the MM. Once the 2nd entry is triggered, we are in a risk free ride ... no matter if it continues or reverses at this point ... no matter how many positions we might have during this ride ...
MT4/MT5 EAs/Indicators/Alerts coder
  • #111
  • Aug 13, 2015 1:32pm Aug 13, 2015 1:32pm
Love the brainstorming here guys.

So if we're moving our stop to BE when price clears the H1 DC then wouldn't it make sense to just trail at the upper H1 DC, rather than just wait till it hits and move it all at once.
Now part of my philosophy with this is not to be sitting in front of a screen all day, so watching the H1 DC every hour doesn't sound appealing. Wonder if there's a trade management EA out there that handles DC's. I don't think Steve Hopwood's does.
In any case I would think it's advisable to at least trail the H4 DC.

Of course that brings up the issue of what to do with the trade progression if our stop gets taken out somewhere between our original stop and BE.
  • #112
  • Aug 13, 2015 8:08pm Aug 13, 2015 8:08pm
Quoting PipMeUp
Dunno. Wouldn't this turn a trend following system into a swing trading system? Not that it is good or bad, just that the idea is to catch the big whales. Also we must keep in mind that the power of the system comes from the MM. If we take profit too early the "half of the locked profits" that fund the additional entries stops growing. Yet I hear you, watching a 800 pip runner returning to the BE line is sad. We could partially TP at some point but the next entry will be smaller. We need to compare the bottom line in both the cases. Good night-
Yep. Guys, we need an EA for this so at least we can long-range test options across a basket. The rules are sufficiently rigid for an EA. I am ok for the crunching if someone could program a bot and many heads can assist in interrogating the analysis. Following that, if everyone is happy we could look at a Portfolio Manager/ Dashboard. It could be fun and is a great way to engage the diverse skill sets of this community. :-)
  • #113
  • Aug 13, 2015 8:16pm Aug 13, 2015 8:16pm
Quoting Copernicus
{quote} Yep. Guys, we need an EA for this so at least we can long-range test options across a basket. The rules are sufficiently rigid for an EA. I am ok for the crunching if someone could program a bot and many heads can assist in interrogating the analysis. Following that, if everyone is happy we could look at a Portfolio Manager/ Dashboard. It could be fun and is a great way to engage the diverse skill sets of this community. :-)
PS As with all trend following systems, it is going to be the volatility of returns we need to deal with and I would love to see a brains trust get together from this forum to work on this.
  • #114
  • Aug 13, 2015 9:15pm Aug 13, 2015 9:15pm
Trades entered this evening.

Back in Eur/Cad and now Eur/Nzd.
  • #115
  • Aug 13, 2015 11:20pm Aug 13, 2015 11:20pm
Hi guys, very, very interesting ideas being developed here.

Sorry, I won't be trading along with you BUT this has given me a great idea on how to pick the direction for a Grid trading EA - it has a Sell or Buy only setting, so once I determine direction plus when and where to turn it off, then it should be good to go.

And if a longer trend develops, so much the better.

May the pips be with you
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It takes a lot for me to IGNORE you, but you can try.
  • #116
  • Aug 13, 2015 11:54pm Aug 13, 2015 11:54pm
This is quite simple to catch the trend and only one indicator is needed on the chart. The key is the large stop but the bigger secret is the trailing stop. I used to day trade but I never knew how to hold positions and finally I had an ahhhhhh Haaaaaa moment.
Emotions and trading do not mix so the method that I use on live accounts is mechanical and all I do is set my pending orders and let it run its course.
You only need one moving average. The 50 simple on the Daily and a 300 Simple on H4. 300 Simple is the same as 50 on H4. Trail the stop with the moving average. sometimes the stop will only move 3 o4 4 pips. Another method of trailing the stop is the SAR but I have tweeks for that ride.
Intuition and trading do not mix...just when I think it's going one way it goes the other way...The market rules so let it rule and ride it out.
I don't want to but in on this but I would love to share some ideas. This is a great what you started here. Some traders need to be in a trade all the time and everyday. Maybe this is it.
  • #117
  • Aug 14, 2015 3:50am Aug 14, 2015 3:50am
Quoting spyderman
Love the brainstorming here guys. So if we're moving our stop to BE when price clears the H1 DC then wouldn't it make sense to just trail at the upper H1 DC, rather than just wait till it hits and move it all at once. Now part of my philosophy with this is not to be sitting in front of a screen all day, so watching the H1 DC every hour doesn't sound appealing. Wonder if there's a trade management EA out there that handles DC's. I don't think Steve Hopwood's does. In any case I would think it's advisable to at least trail the H4 DC. Of course that...
If you trail the SL above the BE and get stopped out you need keeping track of all the losses you took and take them into account for the next entry lot size. That makes things quite complicated, just my opinion. That's why I prefer jumping at BE in one step. Also if we trail too early we offer our SL to the market.

Another option is to open two positions. When DC-H1 cleared the entry both SL are set at BE. One of the SL is trailed with DC-H4. Again the final profit is limited in the perfect scenario. But this may increase a bit the capital as well in the other cases. When the "big day" comes we have more money for the 1st entry. The two entries don't have to be equally sized but it makes things easier.

I dislike trailing all the SL of the series to the DC-H4 when we add a new entry. The risk of aborting the whole series in a near perfect scenario is too high. Let's not waste an occasion that only appears after months. Say we trail the series with the DC-D1 while the addons have their SL at the DC-H4. We will have cases where this SL is hit and the series isn't stopped. The loss is rather big (50% the locked profits). How shall we manage this when the next add-in opportunity comes?
No greed. No fear. Just maths.
  • #118
  • Aug 14, 2015 4:54am Aug 14, 2015 4:54am
Quoting PipMeUp
{quote} When DC-H1 cleared the entry both SL are set at BE. One of the SL is trailed with DC-H4. Again the final profit is limited in the perfect scenario. But this may increase a bit the capital as well in the other cases. When the "big day" comes we have more money for the 1st entry. The two entries don't have to be equally sized but it makes things easier. I dislike trailing all the SL of the series to the DC-H4 when we add a new entry. The risk of aborting the whole series in a near perfect scenario is too high. Let's not waste an occasion that...
Nice......but by having a SL for each individual trade at the DC-H4, if the trend bends to exit at the DC - D1, unfortunately we are still going to be dipping into our cumulative profits from the surviving progression (that represents the distance move from the DC - H4 to the DC - D1). At least we are not knocked out of the progression entirely and there is a chance price will resume back in trend, .....so how about this........As we get deeper into the trend and reach the next 'add-on level' we progressively widen the trade management DC at each leg with the objective of ultimately coinciding with the D1 - DC if we get this far to reduce this final profit leakage as the trend bends.

For example, the first level add-ons (2 trades) can be managed with an initial SL at the DC - H4, then for the second level add-ons we move to the DC - H8, then DC - 12 etc etc etc to progressively expand the trade management DC to hopefully ultimately conincide with the DC - D1. As each prior series moves to BE, the new add-on position sizing would be appropriately scaled using the same trade risk% based on distance to the expanding DC, thus slowly creating more room to breathe for each sequence and thereby more aggressively protecting the floating profits as inevitably we know the trend will bend.

This may be unnecessarily complicating things...... but the principle of progressively scaling up position size utilising 50% of floating profit appears to me to be probably too much overkill which is likely to enhance the volatility of returns given the infrequent nature of these type of trends.
  • #119
  • Aug 14, 2015 6:08am Aug 14, 2015 6:08am
The problem remains. If the addon SL is hit but the general SL isn't we lose 50% of the locked profits. The risk I see is that we may insist in entering in a weakening trend and give back all the money. Three failed attempts that's 87.5% of the profils lost! If the addon fails, we close everything. The whale may escape but the boat doesn't sink.
No greed. No fear. Just maths.
  • #120
  • Aug 14, 2015 6:19am Aug 14, 2015 6:19am
Quoting Erebus
Hi guys, very, very interesting ideas being developed here. Sorry, I won't be trading along with you BUT this has given me a great idea on how to pick the direction for a Grid trading EA - it has a Sell or Buy only setting, so once I determine direction plus when and where to turn it off, then it should be good to go. And if a longer trend develops, so much the better. May the pips be with you {image}

Hope it works out for you Erebus. Thanks for stopping by
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