Revert to the Mean

I can hardly wait for the markets to open and take this beauty for a spin...

Took a looks at bb400 and bb800 but this bb600 looks the best.
Too many signals in 400 and not enough signals on 800.
600 minutes, is 600 bars... is 10 hours moving average on a 1 minute chart.

Following one pair has it's advantages. Becoming more sensitive to how it is trading.
I want to monitor several pairs. But this may become too confusing for me, at least at first.
Have to be careful of not spreading my attention too thin.

Positions very rarely hold over night. They are completed during that day.

Same as the day before. A dip down during Sidney. Light trading.. 6 pips...
then a complete reversal just before London
The median is the general direction but to wait for prices to actually correct to it not practical in most cases.
Just heading towards it sufficient.

That first signal, pulling inside the bb is stops being taken out. It's only good for maybe 5 pips.
Use .05% there just in case it should continue on up quickly. then the loss will be very small
If it's good for a few pips. What's wrong with that?
the second signal is 1% twice as much.
It is possible to go even further if it's a strong move, so the next position size would need to be 3%.
It can add up quickly if it keeps going.
The next position size would need to be 6%.
So that would put about 12% at risk. So have to start out small to make it work.
But one thing is it is the 1 minute and markets do close, which means traders go home..
If it's a strong move some will want to take some profits before going home.
The need for more than 3 positions at the very most would be very very rare...
that's why the subsequent position sizes need to be larger to compensate for the smaller moves as it reverses in order to recover any losses and usually end up showing a net gain.

Hi Jiva,

I like the thread so far. This is nice mathematically proven way of trading (in fact, a lot of hedge funds do this on the long time frames). I'm just having some trouble seeing which one is your bb600 and which is the sma600 on your charts because the lines are the same color.

How do you decide when to cut your losses if the trend keeps going against you?

This is the kind of harrowing situation that can develop. The trade carried over night. It was the Fed speak aftermath.
I had to go to the 4th level on Martingale which brought percent at risk 12%.
Not where I like to go. But it can be spectacular when it turns around.
It took 17 hours to complete. I need to consider that. 17hours of "What's going to do? What's it going to do?"
How prepared am I for 17 hours of hell?
Overnight. What about sleep?
I don't know if I could have actually carried that out without ending up in a straight jacket.
It's one thing to trade it in the simulator at high speed. Whole thing lasting 10 minutes...
another to watch it playout for 17hours......................
Well, the debut and test drive in the live market with a micro account is next.

USDCHF for 6 days average 35 pips ...not counting a huge trade that I'm not sure I actually could have executed successfully. Just from the stress... Would have made the average per day for the 6 days 67 pips. All wins (net gain for positions) no losses.

Hi Steve, thanks for stopping by. I was posting on the strategy forum but too much commotion over there. The thick green line is the sma. the bands are green too but lighter lines.

that's always the question of the day. when to cut losses and run away.
It's not real world to think there won't be losing trades even using the martingale.
I'm just counting on it being the 1 minute chart which is the most volatile of all the time frames to bring about a big enough reversal so that there will be net gain. So far it has always worked. there's a huge difference tinkering around in a simulator and trading s live account with money. so it's not just mechanics. It's the psychology, nerves of steel are needed it seems.

My strategy is to start out very small position size. .05%... then if I have to enter again I use 1%. that means it only has to reverse .05% to break even.
If it still goes against me I enter at 3%, and so on. Like I say I'm counting on it being the 1 min and the high volatility to bring it at least close to break even using Martingale if the entries were a bit too soon. But Martingale is famous for blowing accounts up. So I'll have to see how it plays out. I really can't go more than 4 levels of Martingale. that would be max..... between 10% and 12% at risk at 4 levels. So If I can't go higher than 4 levels I would just have sit there helpless and wait for it come back to the mean wherever that is. After 4 levels the mean would be pretty far away from the first level entry so the loss could be substantial.

Out of desperation at that point I might look at the 5 minute, to see what was going on there. Problem is developing bad habits erodes the discipline. Looking at anything else is not part of the strategy. The way it works is... say I look at the five minute or the macd or anything else and it works... I get out of the trade alive. Then I develop a habit of doing it. Like a thief. A thief will steal something and get away with it. Then he steals again. And again. Until he gets caught and ends up in jail. So deviating from the strategy may work a few times but in the end... I've lost my focus and discipline and more money than I had to begin with.

So good question. How much loss is acceptable? When I really stand firm on it I will be a successful trader. Working on it. It's a battle. This is the psychology part. Strategy is one part psychology is the other.

I don't know how much loss is acceptable at this point. Problem is there haven't been any losses in 50 trades on the simulator. So I'll keep hacking away at trading different pairs and hope for a loss.

Something to ponder... Interesting so far.

I notice you mentioned 1,2, and 4% or some variation but what you haven't mentioned is, 1% of what?

How can you determine your percentage when you don't know how far the market will run, pip wise? before dropping back into the BB.

Thanks.

account size.
Here's a link to position calculator.
http://www.myfxbook.com/forex-calculators/position-size
I use mt4 for analysis but I use Oanda for live trading. I can trade any position size with Oanda FX.
Here's their link for a demo account.
https://www.oanda.com/forex-trading/...-demo-platform
So for a micro account with $500 using 100 pip stop loss (it's the 1 minute.. so that's a pretty generous stop limit)
1% is 500 units.

That's not bad, not much of high risk. So great.
I'll keep an eye out.

By adjusting position size to a percentage of the account balance the account can grow exponentially. And losses are reduced.

I'm stuck in a bunch of trades from last week using a strategy that seems like a broken down jalopy compared to this 600 bb.
Have see about unwinding them gracefully.
Closed one for a small gain another one is going my way.
Huge dumb long on EURUSD way in the red but it is getting ready to turn.
I was trading the 4hr using two settings of MACD cannot compare to this 600bb on the 1min.
But my funds are tied up in the EURUSD.
Could get a margin call.
Drat.
But then I will be able to start over with this fresh and clean.
Maybe no margin call.. It's that big dumb position in EURUSD..
Never again.

No serious data on Monday and the holiday is getting close.
Traders leave early for traveling. So trading gets light.
I think it is perfect time for EURUSD to reverse.
So I should be okay there.
No new breakouts expected... And the currencies should drift back to the means if they have big runs.
Just my guess
Fed rate hike is already baked into the cake by now.

Okay unwound 2 positions from last week one loss one gain. just about break even. Have two trades going with the new strategy.
and the EURUSD honker. I may have to live with it for a while.
At lest the margin is workable now with the two positions closed.

This was opened last week using the old strategy but it coincides close enough with the 600bb.
This is the first live trade using this strategy. I'm just looking for net gain somewhere around the 600sma

This is the other trade opened last week that coincided close enough. I wanted to open a third level martingale but there was not enough margin since I hadn't closed the other two positions yet. Once I get these left over trades unwound I'll have some room to breathe and move around in.
If it goes significantly higher I'll open a third level Martingale.

Went ahead with a third level Martingale.
It's only Tokyo, all the data is out...