Volatility-based Trend Trading

UPDATE: 8:00 pm, EST_Thursday, March 3, 2016

Open positions:
GBPUSD: Buy 536 units @ 1.4065; opened 3-3-16;stop-loss @1.4125; current Pip P/L = +107 pips (re-entry trade; locked in +56 pips)


Closed positions:
EURCAD: sell 401 units @ 1.468; opened 3-1-16; stopped out 3-3-16 @ 1.468; Pip P/L = 0 pips
GBPUSD: Buy 536 units @ 1.3981; opened 3-2-16; stopped out 3-3-16 @1.4037; Pip P/L = +56 pips


total (closed) pips this week = +28
total (closed) pips to date = +1124

UPDATE: 5:30 am, EST_Friday, March 4, 2016

Open positions:
EURCAD: Buy 401 units @ 1.4723; opened 3-4-16; stop-loss @ 1.468; current Pip P/L = +28 pips

Closed positions:
GBPUSD: Buy 536 units @ 1.4065; opened 3-3-16; stopped out 3-4-16 @1.4149; Pip P/L = +84 pips (re-entry trade)



total (closed) pips this week = +112
total (closed) pips to date = +1208

UPDATE: 8:00 pm, EST_Friday, March 4, 2016

Open positions:
None

Closed positions:
EURCAD: Buy 401 units @ 1.4723; opened 3-4-16; closed @ BE prior to NFP ; Pip P/L = 0 pips
GBPUSD: Buy 536 units @ 1.4177; opened 3-4-16 (1 hr post NFP); closed at end-of day @1.4149; Pip P/L = +45 pips (re-entry trade)



total (closed) pips this week = +157
total (closed) pips to date = +1253


Total Trades to date = 38
#Scratch Trades = 10 (26%)
#Winning Trades = 14 (37%)
#Losing Trades = 14 (37%)
Total pips won = 1669
Total pips lost = 416
Ave Winning Trade = 119 pips
Ave Losing Trade = 30 pips

Hi Dave,

Thank you for this thread. I share your philosophy as set out in your first post and have been intrigued by TKimble's methods for some time. Your trading idea really resonates with me. I've never posted before but I wanted to contribute a bit given what you've provided. You mentioned you had a spreadsheet you work with. I created this one to make calculations much easier (not to suggest your spreadsheet doesn't work for you!). You only need to enter the previous weekly close and ATR for the initial entry and the current price once you've been stopped out for re-entry. Everything else will be calculated based on your rules. I did not include anything on lot size as I'm still thinking this through. You'll see I've added the GBPJPY. That was for my own sake. I'd like to keep an eye on that pair to see whether it would work with your system.

Anyway, feel free to use and amend as you see fit.

All the best!

Thank you INFJTrader!

I'll definitely work with your spreadsheet... as I mention in a previous post, I update my re-entry positions via manual calculations into a pocket-size notebook that I keep with me while at my day job...old school, lol... but I just realized that I can download an excel app for my iphone...

With regards to lot size, the calculated trade units (Oanda) is simply based on the %ATR and amount to risk...

units traded = $risk/(pip value * %ATR).

Anyway, please feel free to post your results... Btw, have you looked at other methods described by Tkimble?

Best,

Dave

Hi Dave,

You're welcome! I hope you find it helpful. With respect to lot size, does $risk represents the amount of money you're prepared to lose on a given trade if the stop loss is triggered. For instance, if trading with a $1000 account, and you're prepared to risk 1% on a given trade, the $risk would equal $10. Is that correct?

Regarding Tkimble's methods, I've been looking at both the daily and weekly scalping methods. Of course your approach here is a modified version of his weekly scalping method. I'm not sure if you've looked at his daily scalping method. It's the same idea as his weekly but instead of a straddled approach an entry is initiated on the basis of the previous day's movement. His focus was primarily on the GBPUSD but at some point the GBPJPY was used as well due to its volatility.

The reason I like these methods, as I like your approach, is that the setups are not based on whether we think a pair is going up or down. We really have no idea what will happen in the future. The setups are based on being in a position where we can take advantage of movement regardless of direction. It's really volatility that will fuel these systems.

What I'm really interested in finding out is why his methods lost popularity on FF. Was it because people got frustrated due to a few days or weeks of whipsawing? Was it because the market changed so significantly that the methods were no longer profitable? Or was it because filters were introduced to try and optimize the systems only to blur the original rules and their simplicity. Then, when markets changed and the systems didn't produce the results people were looking for they moved on in search of another potential Holy Grail. I'm not sure but my plan is to do what I can to find out.

My focus at this point is to learn as much as I can about algorithmic trading. Basically, taking the trading rules of one or two systems, programming them as EAs and then taking the time to do extensive back and forward testing. I'm hopeful that this exercise will allow me to find the answers to my questions above. It's a new area for me so it has been quite a steep learning curve, but I find it very interesting. I'd be more than happy to share results once I'm at that stage. I have a day job as well so it's a bit tough juggling everything!

In the meantime, I will continue to follow your thread.

Take care!

Yes, that is correct...

I have...and with that said, the re-entry method of using a position straddle with a 10% weeklyATR spread is geared toward TKimble's daily method, but using volatility to dictate the direction of the entry...I did a back-test of long-term daily trends to determine the % of days "up" vs. % days "down" and you'd be surprise that in most trends (up or down) the % up days vs % down days don't vary significantly from one another...


I mentioned the inclusion of filters in my first post....it seemed that for the majority of threads that proposed very simplistic trading rules for entry/exit, the onset of whipsaws always caused a flurry of "add-ons" to the original rules, seemingly always by posters other than the OP (who genuinely seemed to be perfectly happy with the simplicity of the initial rules). Don't get me wrong, whipsaws are a crappy aspect of trend-trading, but IMHO I don't see how any filter, indicator or otherwise, can predict the future direction of price movement - but if a trader can do it, great! With regards to the Volatility Trend method and the issue of whipsaws, off-hand the only modification I can think of is to 1) rapidly move the stop to BE once price reaches a pip gain of 5% of the weekly ATR regardless of the %ATR used for the position straddle, and then move the stop at every pip gain of 10-20% weeklyATR thereafter, or 2) keep the position straddle at 20% regardless of whether the trade is the first of the week or a re-entry - this would allow the market further breathing room to re-establish a trend, or 3) combination of 1 & 2. The advantage of suggestion 1 (or suggestion 3) is that you're risking very little to probe the market for the start of a trend- the disadvantage is that you will get stopped out even more frequently as a scratch trade relative to the current method. In "ranging markets", this method would be the most beneficial for minimizing account draw down- albeit, a "ranging" market is only ranging in hindsight; we will never know when a trend starts (or ends) until after the fact. But, if we can probe a market with little risk, then all the better...


Please do!! I hope other traders will contribute as well... as I posted previously, it will be interesting to see how other traders will take this method, if they chose to, and modify it as needed to make it their "own"...

Best,

Dave

UPDATE: 8:00 pm, EST_Tuesday, March 8, 2016



Open positions:
EURJPY: Sell 540 units @ 124.57; opened 3-7-16; stop-loss @ 124.57 ; current Pip P/L = +89 pips (re-entry, but set SL at entry + (20%*weeklyATR))
EURCAD: Buy 401 units @ 1.4730; opened 3-8-16; stop-loss @ 1.4730; current Pip P/L = +27 pips

Closed positions:
GBPUSD: Sell 536 units @ 1.4168; opened 3-6-16 stopped out 3-7-16 @1.4227; Pip P/L = -59 pips
EURJPY: Sell 540 units @ 124.57; opened 3-6-16; stopped out 3-7-16 @ 125.16 ; Pip P/L = -59 pips


total (closed) pips this week = (-118)
total (closed) pips to date = +1253

UPDATE: 5:30 am, EST_Wednesday, March 9, 2016

Open positions:
EURJPY: Sell 540 units @ 124.57; opened 3-7-16; stop-loss @ 123.98 ; current Pip P/L = +138 pips (locked pips = +59)

Closed positions:
EURCAD: Buy 401 units @ 1.4730; opened 3-8-16; stopped out 3-9-16 @ 1.4730; Pip P/L = 0 pips

Pending:
EURCAD: buy @ 1.4812; stop-loss @ 1.473
EURCAD: sell @ 1.4648; stop-loss @ 1.473
GBPUSD: buy @ 1.4286; stop-loss @ 1.4227
GBPUSD: sell @ 1.4168; stop-loss @ 1.4227


total (closed) pips this week = (-118)
total (closed) pips to date = +1253

UPDATE: 7:30 pm, EST_Wednesday, March 9, 2016

Open positions:
EURJPY: buy 540 units @ 124.57; opened 3-9-16; stop-loss @ 123.98; current Pip P/L = -19 pips (locked pips =-59)
EURCAD: sell 401 units @ 1.4648; opened 3-9-16; stop-loss @ 1.4648; current Pip P/L = +54 pips (locked pips = 0)

Closed positions:
EURCAD: Buy 401 units @ 1.4730; opened 3-8-16; stopped out 3-9-16 @ 1.4730; Pip P/L = 0 pips
EURJPY: Sell 540 units @ 124.57; opened 3-7-16; stopped out 3-9-16 @ 123.98 ; Pip P/L = +59 pips

Pending:
GBPUSD: buy @ 1.4286; stop-loss @ 1.4227
GBPUSD: sell @ 1.4168; stop-loss @ 1.4227


total (closed) pips this week = (-59)
total (closed) pips to date = +1253 (excluding current week)

UPDATE: 5:30 am, EST_Thursday, March 10, 2016

Open positions:
EURJPY: buy 540 units @ 124.57; opened 3-9-16; stop-loss @ 123.98; current Pip P/L = -15 pips (locked pips =-59)
EURCAD: sell 401 units @ 1.4648; opened 3-9-16; stop-loss @ 1.4648; current Pip P/L = +93 pips (locked pips = 0)

Closed positions:
none

Pending:
GBPUSD: buy @ 1.4286; stop-loss @ 1.4227
GBPUSD: sell @ 1.4168; stop-loss @ 1.4227


total (closed) pips this week = (-59)
total (closed) pips to date = +1253 (excluding current week)

UPDATE: 7:30 pm, EST_Thursday, March 10, 2016

As noted below, at 7:00 am (EST) I closed my EURJPY buy position prior to the Euro zone minimum bid rate announcement at 7:45 am. I closed it because many news analysts were suggesting that the EURUSD would fall due to the expected lowering of the minimum bid rate. To me, this also meant that the EURJPY would fall due to its very high weekly (and daily) Directional Similarity to the EURUSD (>80%); I kept my EURCAD sell position open due to the expected weakness in the Euro...

Open positions:
EURJPY: buy 540 units @ 125.15; opened 3-10-16 (approx 1 hr after 7:45 am news); stop-loss @ 125.74; current Pip P/L = +100 (locked pips = +59)
EURCAD: Buy 401 units @ 1.4647; opened 3-10-16 (approx 1 hr after 7:45 am news); stop-loss @ 1.4895; current Pip P/L = +279 (locked pips = +247)
GBPUSD: buy @ 1.4286; opened 3-10-16 (approx 1 hr after 7:45 am news); stop-loss @ 1.4227; current Pip P/L = 0 (locked pips = -56)

Closed positions:
EURJPY: buy 540 units @ 124.57; opened 3-9-16; closed 3-10-16 @ 124.57; Pip P/L = 0
(position was closed at 7:00 am EST just prior to news at 7:45 am)
EURCAD: sell 401 units @ 1.4648; opened 3-9-16; stopped out 3-10-16 @ 1.4648; Pip P/L = +206 pips

Pending:
None

total (closed) pips this week = +147
total (closed) pips to date = +1253 (excluding current week)

UPDATE: 5:30 am, EST_Friday, March 11, 2016

Open positions:
GBPUSD: buy @ 1.4286; opened 3-10-16; stop-loss @ 1.4227; current Pip P/L = +12 pips (locked pips = -56)

Closed positions:
EURJPY: buy 540 units @ 125.15; opened 3-10-16; stopped out 3-11-16 @ 126.32; Pip P/L = +117 pips
EURCAD: Buy 401 units @ 1.4647; opened 3-10-16; stopped out 3-11-16 @ 1.4895; Pip P/L = +247 pips

total (closed) pips this week = +511
total (closed) pips to date = +1253 (excluding current week)

UPDATE: 11:30 am, EST_Friday, March 11, 2016

Open positions:
Done for the week

Closed positions:
GBPUSD: buy @ 1.4286; opened 3-10-16; closed manually @ 1.4410; Pip P/L = +124 pips

total (closed) pips this week = +635
total (closed) pips to date = +1888 (Including current week)

Total Trades to date = 48
#Scratch Trades = 13 (25%)
#Winning Trades = 19 (40%)
#Losing Trades = 17 (35%)
Total pips won = 2422
Total pips lost = 534
Ave Winning Trade = 127 pips
Ave Losing Trade = 31 pips

I spent the weekend doing some extensive back-testing on numerous pairs... the whipsaws were extensive even during long-term downtrends & uptrends, more than I could psychologically tolerate... back to the drawing board... I guess this is when i start adding "filters", lol....

Best,

Dave

I believe that I've found a workable solution, though it deviates from the original approach. Will start trading live this week or next, as well as describe the trading approach...

Best,

Dave

Re-started this trading approach... all details are described in post #1.

UPDATE: 10:00 am, EST_Monday, December 12, 2016


Open positions:
GBPJPY: 500 units, buy @ 146.23; opened 12-12-16; SL @ 145.23
GBPUSD: 500 units, buy @ 1.2640; opened 12-12-16; SL @ 1.2572
USDCAD: 500 units, sell @ 1.3129; opened 12-12-16; SL @ 1.3177

Closed positions:
None

Pending (OCO):
EURAUD: 500 units, buy @ 1.4237 (SL = 1.4171) / sell @ 1.4105 (SL = 1.4171)
EURCAD: 500 units, buy @ 1.3973 (SL = 1.3910) / sell @ 1.3847 (SL = 1.3910)


total (closed) pips this week = 0
total (closed) pips to date = 0

Total Trades to date = 0
#Scratch Trades = 0 (0%)
#Winning Trades = 0 (0%)
#Losing Trades = 0 (0%)
Total pips won = 0
Total pips lost = 0
Ave Winning Trade = 0 pips
Ave Losing Trade = 0 pips

UPDATE: 6:30 pm, EST_Monday, December 12, 2016

Open Positions:
GBPJPY: 500 units, buy @ 146.23; opened 12-12-16; SL @ 145.23: current Pip P/L = -62
GBPUSD: 500 units, buy @ 1.2640; opened 12-12-16; SL @ 1.2572: current Pip P/L = +33
USDCAD: 500 units, sell @ 1.3129; opened 12-12-16; SL @ 1.3177: current Pip P/L = -2
EURCAD: 500 units, buy @ 1.3973; opened 12-12-16; SL @ 1.3910: current Pip P/L = -4

Total Net Pips = -35

Closed positions:
None

Pending (OCO):
EURAUD: 500 units, buy @ 1.4237 (SL = 1.4171) / sell @ 1.4105 (SL = 1.4171)

total (closed) pips this week = 0
total (closed) pips to date = 0

Total Closed Trades to date = 0
#Scratch Trades = 0 (0%)
#Winning Trades = 0 (0%)
#Losing Trades = 0 (0%)
Total pips won = 0
Total pips lost = 0
Ave Winning Trade = 0 pips
Ave Losing Trade = 0 pips

My trading screen:



trailing stop:
For buy position:
1) move stop to break-even when P/L = entry+(weeklyATR*0.2) pips
2) move stop to entry+(weeklyATR*0.2) pips when P/L = entry+(weeklyATR*0.4) pips
3) move stop to entry+(weeklyATR*0.4) pips when P/L = entry+(weeklyATR*0.6) pips
4) move stop to entry+(weeklyATR*0.6) pips when P/L= entry+(weeklyATR*0.8) pips
5) move stop to entry+(weeklyATR*0.8) pips when P/L= entry+(weeklyATR*1) pips

For sell position:
1) move stop to break-even when P/L = entry-(weeklyATR*0.2) pips
2) move stop to entry-(weeklyATR*0.2) pips when P/L = entry-(weeklyATR*0.4) pips
3) move stop to entry-(weeklyATR*0.4) pips when P/L = entry-(weeklyATR*0.6) pips
4) move stop to entry-(weeklyATR*0.6) pips when P/L= entry-(weeklyATR*0.8) pips
5) move stop to entry-(weeklyATR*0.8) pips when P/L= entry-(weeklyATR*1) pips

NOTE#2: additional positions can be opened at price targets "2-5".

Re-entry (when stopped out):
buy entry = current price + (weeklyATR*0.1)
sell entry = current price - (weeklyATR*0.1)

initial stop placement for re-entry trade:
For buy: current price - (weeklyATR*0.1)
for sell: current price + (weeklyATR*0.1)
Move the stop to BE at current price + (weeklyATR*0.1) for buy; thereafter move the stop for every increment = weeklyATR*0.2 pips
Move the stop to BE at current price - (weeklyATR*0.1) for sell; thereafter move the stop for every increment = weeklyATR*0.2 pips

All information regarding the trades- the good, the bad, and the ugly- can be viewed in the Trade Explorer. I follow the rules regarding "when to move the SL" as described in post #1, and reiterated in post#39. Re-entry trades are also described in the aforementioned posts.

So for instance, my GBPUSD trade was just stopped out at BE. Earlier today, when the trade went +70 pips, I moved the stop to breakeven per rule#1 for buy trades (move stop to break-even when P/L = entry+(weeklyATR*0.2) pips which currently = 70 pips for GBPUSD). The trade went as high as +90 pips before reversing. Now, I have a Re-entry trade pending at 1.2675 (buy)/1.2607 (sell).

I will no longer update the individual trades on a daily basis other than to tally the total net pips gained/lost. Again, the details of individual trades can be seen in the TE. Unfortunately the TE doesn't show when/where trailing stops are moved. But if anyone is interested to ask questions, I'll do my best to answer them.

Best,

Dave