Supersmall "Loss Recovery" trading

Post your EA's using ALR here
brcumming21
Posts: 4
Joined: Wed Aug 05, 2015 10:49 pm

Supersmall "Loss Recovery" trading

Post by brcumming21 »

The core of the strategy is the same as loss recovery: place a trade in the direction you think the market is going to go, but if the market goes against you, then place an opposing trade with a larger lot size so that you will eventually get to break even. But instead of having large zones like 50 pip ALR zone and a 150 pip TP, why not reduce the zones to something like 5 ALR and 5 TP or 10 ALR and 10 TP. You may be thinking, "Isn't obvious why you don't do that?":

(A) Too small of zones means that the chances of the trade reversing multiple times skyrockets, resulting in more drawdown.
(B) A TP:ALR ratio of 1:1 means that your lot size per reversal increases dramatically (i.e. .01,.02,.03,.06,.12,.24,.48,.96,1.92... for a breakeven lot sequence).
(C) Commission and spread would eat you up.

I understand all that logic and agree with it for the most part, but I have a slight hunch that price doesn't range in 5-10 pip ranges for long, especially in certain situations. The key to the proposed strategy is to figure out where price doesn't like to sit around for long at all. Maybe something like round numbers or period opens like the daily, weekly, or monthly.

If you open a daily candle chart for EURUSD you will notice that price rarely hovers around the daily open. Somewhere throughout nearly every single day, price tends to stray away from the open by 30+ pips. If you open a weekly candle chart for EURUSD you will notice that price strays away from the open by 60+ pips each week. If you open a monthly candle chart... you get the point.

So the proposed strategy is to use the ALR concept at the open of a daily, weekly, or monthly period. Price may bounce around for a bit initially but it always seems to run in one direction or the other for a considerable amount of pips eventually. Also, to help the profitability of the strategy we could use the lot sequence of a 1:1 ratio such as the one above but instead of actually using a TP of 10 for an ALR of 10, we use a TP of 20 or 30. That way the ALR won't just breakeven; it will turn the trade into a profitable one.

Now, I have no clue how to back test any of this. So I don't have any proof if it's profitable or not, but theoretically I believe this or a modification of this strategy could be wildly profitable. Feel free to add ideas or tell me how dumb I am.

Best Regards
europer
Trader
Posts: 11
Joined: Mon Aug 10, 2015 9:28 pm

Supersmall "Loss Recovery" trading

Post by europer »

Agree, I am using the loss recovery with no hedge (what I guess called here ALR2) with the exit zone 10 and recovery zone 7. Since this is just 17 pips (max distance) this happend many times per day. I use EURUSD.
spread do not really come in to account and I have approx 4-6 trades per day. Max until now was 8 trades in a cycle but can go with my setup until 19.

Of course its important to look the market that it is really moving, so most of the time is to find out the best indicators to find out when the market is moving good, even if we cant see in the further I would like to know if somebody know the best indicators for

a) how the volatility of the market and b) an indicator what can "see"/estimate how the market will be for a time frame ahead (not the direction, just movement of the market).
I use ADI and CCI and MACD and Volume but the most critical time, even
when you know best time frame in the market is when the marked ad hoc stops to move....Then you really catch many trades in the cycle and makes it critically.

Cheers
brcumming21
Posts: 4
Joined: Wed Aug 05, 2015 10:49 pm

Supersmall "Loss Recovery" trading

Post by brcumming21 »

Additional thoughts:

Instead of having a 1:1 Take profit to Recovery Zone ratio, let's change the ratio to 5:1 so a Take Profit of 25 pips and a recovery zone of 5 pips.

The trade sequence would go as follows:
Screen Shot 2015-08-31 at 8.03.53 PM.png
I believe that this is the holy grail of trading because you don't have to predict which way the market is going at all. You simply just enter into the trade sequence (which will be easiest with an EA) and wait for price to exceed beyond your take profit zone; it's that simple. Better yet, worst case scenario is that there is only a 0.42% chance of going to thirty round turns in the current set up but even if you do get to thirty round turn and get stopped out 5 pips away, you only end up losing $320 because 6.4 lots ($64 per pip) times -5 pips equals -$320, and the other trades go to break even.

Please let me know if this is sounds appealing to you. I would like to further improve the system through vast discussion on the subject.

Best regards
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dannyboy
Posts: 4
Joined: Sun Aug 30, 2015 6:22 am

Supersmall "Loss Recovery" trading

Post by dannyboy »

Hi Br,

Looks very interesting, I would love too see this in ea form. It might be worth doing some analysis of % chance of loss vs $ size of the loss so you can find the sweet spot in terms of risk.

Are you using the ALR2 revised sequence in your spreadsheet calculations? Would you be willing to share your spreadsheet? Would love to have a play in it.
brcumming21
Posts: 4
Joined: Wed Aug 05, 2015 10:49 pm

Supersmall "Loss Recovery" trading

Post by brcumming21 »

dannyboy,

I'm going to have to be honest and tell you that I'm not quite sure exactly what the ALR2 revised sequence is... Perhaps you could post the thread link?

But what I do know is that my sequence calculations are quite simple. Let's say you have a ratio of 2:1. I simply just multiply the total lots long (or total lots short depending on the current market position) by 1.5 and subtract the total lots short (or long) to get my next lot size.

Example:

Long 1 lot
Trade goes against me
1 long lot * 1.5 - 0 lots short = 1.5 lots short
trade goes against me again
1.5 lots short * 1.5 - 1 lot long= 1.25 lots long plus the 1 lot I'm already long. So 2.25 lots long.
trade goes against me again
2.25 lots long * 1.5 - 1.5 lots short= 1.88 lots short (rounded up) plus the 1.5 lots I'm already short. So 3.38 lots short.
Repeat over and over.

The algorithm is the same regardless of the ratio. The only variable to change is the multiplier depending on your ratio.

For 1:1 ratio use a multiplier of 2
2:1 use 1.5 or (3/2)
3:1 use (4/3)
4:1 use (5/4)
5:1 use (6/5)...

It might not be the most efficient sequencing multiplier, but the multiplier is intended to breakeven exactly at the take profit.

Here is the spreadsheet:
Supersmall recovery algos.xlsx
Let me know if I can answer any more questions! Thanks for the response!

Best Regards
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europer
Trader
Posts: 11
Joined: Mon Aug 10, 2015 9:28 pm

Supersmall "Loss Recovery" trading

Post by europer »

Hi all
Let's move on from the spreadsheet to real trading. I have tried all combinations like 5/25 or 8/35 or 7/9 or 8/8 or 10/25 (recovery zone/exit zone) and on paper all are good and I personally like the 5/25 since a market will more or less move more then 30 pips.
But here the challenges.
All EAs have problems to perform good when it get closer to 5. Even at 10 pips in recovery zone its still not without problems.
Why is this like this? Most EA also most EAs I have founded here works with SL and TP for the pending order (next trade if the previous did not go in) and most accounts will have a distance for pending orders from market around 3-5 pips (eurusd) but even demo accounts with just 1 pip distance make problems since sometimes the market moves easily 4-5 pips and then the problem is to set a new pending order and then you have a huge problem.
First let us overcome this problem and there are some more to come....
OK how to overcome this is that we hide the next pending order. This we do that we exercute a new order directly (the EA does it). The EA also takes care about the SL (what is most critical) internally instead of setting SL and TP for the next order. This would mean we can go so tight as we want.

Next issue would be slippage

BTW the context is with the ALR2 since we use less lots and to manage 30 trades simultaneously in a calculation with slippage and spread changing makes ALR not to be the right tool for this

Cheers
dannyboy
Posts: 4
Joined: Sun Aug 30, 2015 6:22 am

Supersmall "Loss Recovery" trading

Post by dannyboy »

Hi Europer

Any updates re your last post?

I very much agree that smaller exits and ranges with high amount of trades are the way to go and don't want to see this thread die!

Thanks.
europer
Trader
Posts: 11
Joined: Mon Aug 10, 2015 9:28 pm

Supersmall "Loss Recovery" trading

Post by europer »

Hi
No there are no interest more for this issue I think.
Anyway I use at given time a semi scalp setup (exit/recovery zone) 40/20 and 35/15 real and in demo 25/5, 32/8, 35/8, 30/10,.40/10 and 50/10. But with comersiall software but what I don't like and why I'm here is to know what is inside and the EA producers don't tell you this and when you trade your real money you want to know to know this. That's my train here to share my knowledge with other in a open forum and benefit from each other.
A small note I always try to get the first trade right and if not this takes over
Cheers
PS my real trades makes with very less risk and good money management very hight profit. Between 0.5-5% per day. Average 1%
dannyboy
Posts: 4
Joined: Sun Aug 30, 2015 6:22 am

Supersmall "Loss Recovery" trading

Post by dannyboy »

europer » Sun Sep 20, 2015 6:45 pm wrote:Hi
No there are no interest more for this issue I think.
Anyway I use at given time a semi scalp setup (exit/recovery zone) 40/20 and 35/15 real and in demo 25/5, 32/8, 35/8, 30/10,.40/10 and 50/10. But with comersiall software but what I don't like and why I'm here is to know what is inside and the EA producers don't tell you this and when you trade your real money you want to know to know this. That's my train here to share my knowledge with other in a open forum and benefit from each other.
A small note I always try to get the first trade right and if not this takes over
Cheers
PS my real trades makes with very less risk and good money management very hight profit. Between 0.5-5% per day. Average 1%

Interesting, thanks for that. What kind of results did you get with those set ups?

The big question for me is What exit and recovery zone is best.. I've been using recovery zone of 30 and exit of 15 with some success. What are your thoughts? what recovery and exit ranges have you had the most success with?

I think the recovery range needs to be tied to your initial strategy, so for example, if you have a 25 pip take profit you want to have a range of at least 25 to keep a 1:1 risk/reward.

Nice results! What strategy/EA are you trading? Do you use ALR with your real trades?
europer
Trader
Posts: 11
Joined: Mon Aug 10, 2015 9:28 pm

Supersmall "Loss Recovery" trading

Post by europer »

dannyboy » Sun Sep 20, 2015 12:39 pm wrote:
europer » Sun Sep 20, 2015 6:45 pm wrote:Hi
No there are no interest more for this issue I think.
Anyway I use at given time a semi scalp setup (exit/recovery zone) 40/20 and 35/15 real and in demo 25/5, 32/8, 35/8, 30/10,.40/10 and 50/10. But with comersiall software but what I don't like and why I'm here is to know what is inside and the EA producers don't tell you this and when you trade your real money you want to know to know this. That's my train here to share my knowledge with other in a open forum and benefit from each other.
A small note I always try to get the first trade right and if not this takes over
Cheers
PS my real trades makes with very less risk and good money management very hight profit. Between 0.5-5% per day. Average 1%

Interesting, thanks for that. What kind of results did you get with those set ups?

The big question for me is What exit and recovery zone is best.. I've been using recovery zone of 30 and exit of 15 with some success. What are your thoughts? what recovery and exit ranges have you had the most success with?

I think the recovery range needs to be tied to your initial strategy, so for example, if you have a 25 pip take profit you want to have a range of at least 25 to keep a 1:1 risk/reward.

Nice results! What strategy/EA are you trading? Do you use ALR with your real trades?

Hi I think that the recovery zone has to be less then the exit zone. Minimum 1:1. This is even a very expensive setup. The ration 1:2 or above where we are around 1:3,5-5 is cheaper and less risik due to money management. Depending on the pairs and how they move in the market, I had very nice profit with 40/20, 35/15, 30/60. (exit/loss zone). Yes I also mean that if I want at least my first trailing stop to be around 25 pips (1 trade) I also at least want 25 pips profit when I go into recovery modus..
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