Gravy Trains & Weather Vanes

[TraderJoeForex]

:hi: Reading with interest and can see this thread becoming one of the must reads for all traders.. look forwards to seeing where you take us.

[lwtrade]

Struck a chord with me!
Got a couple of qns but will wait as you will probably answer as time goes on...

Eagerly looking forward to seeing where this train takes us!

[RisklessPips]

Starting today I will serialize the user manual for Gravy Trains and Weather Vanes (GT&WV)

The purpose for this approach is simple: - As we develop the approach in bite sized installments I am looking for you to speak up with concerns and any other comments so we can build a robust methodology that achieves the stated aim in post 1 above. For such comments and observations I will be grateful.

Preamble

Gravy Trains and Weather Vanes (GT&WV) is a Forex trading method some may call it a strategy but the name is unimportant.

What is important is that GT&WV is designed to perform one function and perform it profitably AND consistently. That function is to generate an income for the trader.

Simple concept yet difficult to achieve in practice, let’s see how well we do.

Prerequisites

Trading account – This method has been tested on both spread and ECN (Commission) brokers. Choose your preferred market intermediary and test on their demo accounts before making decisions about going live !!

Account type – This method has been trialled on accounts with 1:100 and 1:500 leverage with an initial balance of 500 USD.

There is a slight difference in the operation of the two account types because of the number of trades that may be indicated by price once the method is initiated. EDIT 22/8/17 - Both now run exactly the same with GTWV EA - read on for more

Indicators – Two exponential moving averages (on closing prices) for each chart and TF traded.

H1 timeframe – I use a long EMA of 24 periods (1 day) and a short EMA of 8 periods (1 working day)

D1 timeframe - I use a long EMA of 30 periods (1 month) and a short EMA of 5 periods (1 week)

Expert advisors – Steve Hopwoods’ MPTM – available on this site. EDIT 22/8/17 - Now runs with a custom EA called GTWV EA - read on for more

Scripts

I use 6 scripts to place trades as and when directed by Price. 3 for long trade variants (stops and market orders) and the same for short trades. EDIT 22/8/17 - Scripts replaced by GTWV EA - read on for more

Time – This is not an “occasional’ trader’s tool ! You need to commit to managing and actively monitoring your trades with this method. Earning a living in Forex is a job – treat it as such.

This does not mean you will be stuck in front of your monitor 24/7. On the higher TF’s you may get away with a quick peek at your charts once an hour. On the D1 once a day may be sufficient. However, this infrequent review of charts is mandatory – you must be in place when price tells you it is time to act ! EDIT 22/8/17 - GTWV EA takes away the need to be immediately there when price dictates action BUT read on for more

Traded Currency Pairs

I only trade the majors, specifically :

AUDJPY
CHFJPY
EURGBP
EURUSD
GBPUSD
USDCAD
USDJPY

Trading other pairs may work differently – testing is required !

Environment Setup

Empty4 environment.png

I arrange the 7 pairs on a single profile on Empty4 as depicted above.

In the bottom left, I position my navigator for quick access to the trading scripts as and when Price tells me to take action. EDIT 22/8/17 - Changed slightly due to GTWV EA - read on for more

Pre Initial Trade

Initial position 1.png

Above is an example of what a “naked chart” looks like before the first trade.
The TF = H1 with 2 EMA (Red = 24 period, White = 8 period)

Initial position.png

The image above is a close up of the current position of prices from the Pre Initial Trade Image above.
In this image you can see the 2 EMA’s clearly.

Next post we look at the initial trade

[RisklessPips]

Quick question which has a bearing on how GT&WV works.

Can you think of a situation in which it would be OK to lose X USD ? (where X is any figure you care to use)

Hint : Think long term !

[BobbyT]

Quick question which has a bearing on how GT&WV works.

Can you think of a situation in which it would be OK to lose X USD ? (where X is any figure you care to use)

Hint : Think long term !

Of course it's ok to lose money. So long as you take that loss and learn from it it's not really a loss.
I forget how it goes exactly but don't they say only a fool does the same thing over and expects different results.

A loss is a chance to learn from your mistakes, to see where you strategy and trading psychology falls down. If you don't learn from your mistakes (losses) then you are doomed to fail as a trader.

Cheers,
BobbyT

[TraderJoeForex]

Quick question which has a bearing on how GT&WV works.

Can you think of a situation in which it would be OK to lose X USD ? (where X is any figure you care to use)

Hint : Think long term !

I would say when X is less than the profit already banked that day, week or month etc depending on the prospective trade timeframe...

[GT3RS]

Quick question which has a bearing on how GT&WV works.

Can you think of a situation in which it would be OK to lose X USD ? (where X is any figure you care to use)

Hint : Think long term !

It's perfectly OK to lose X dollars as long as you followed your edge.

I firmly believe that as long as you trade your method, you have traded successfully.

A losing trade just means your edge didn't work out that time, but in the long run, it's totally insignificant................. [provided you have a winning edge, of course!]

[RisklessPips]

Of course it's ok to lose money. So long as you take that loss and learn from it it's not really a loss.
I forget how it goes exactly but don't they say only a fool does the same thing over and expects different results.

A loss is a chance to learn from your mistakes, to see where you strategy and trading psychology falls down. If you don't learn from your mistakes (losses) then you are doomed to fail as a trader.

Cheers,
BobbyT

Hey BobbyT

Thanks for your answer. Some observations if I may.

I agree it is OK to lose money - and indeed if you cannot cope with losing trades, days, weeks and even months then perhaps Forex trading isn't best suited to you.

Learning from losing trades in Forex is quite difficult because a trade can move into red ink and teach you zilch. Sometimes however, and I will come back to this, you can learn from "a general environment of loss" such as if your Stop Losses tend as a rule to tail gate price and therefore get hit too often. This ironically often happens because traders want to protect against loss.

Price needs room to move and if you strangle that room you may have losing trades and a pattern that you can learn from may emerge.

Charles

[RisklessPips]

When the root of the lost money is the inherent cost of holding a favorable long-term position and the subsequent trade. Also, not all trades will end positive. Losing is a natural part of the game, like the costs of any business or investment... :hi:

Hey Viktory

Unless I misread you, you are saying it is OK to lose money if the loss is treated as a trading cost which simultaneously paves the way for a subsequent (and hopefully profitable) trade.

I like this idea and you will see it play out in GT&WV

Charles

[RisklessPips]

It's perfectly OK to lose X dollars as long as you followed your edge.

I firmly believe that as long as you trade your method, you have traded successfully.

A losing trade just means your edge didn't work out that time, but in the long run, it's totally insignificant................. [provided you have a winning edge, of course!]

Hey GT3RS

Philosophically I hear you. If you follow your (robust) strategy and lose - take it on the chin and march on !

But, what if your method is "wrong, weak or lacking" for some fundamental (and provable) reason. Would you still say losses from such a method followed to the letter are OK ?

GT&WV may have holes which is the reason for sharing it here so that any such holes can be plugged. If we then come out with a robust methodology we can then take losses with a stoic attitude.

Charles