Gravy Trains & Weather Vanes

[RisklessPips]

The chart below for USDCAD shows what your pairs' activity will often look like.

Long and short trades framing the range within which price travels. In this channel nothing much goes on. Yawn.

However, when price decides to venture beyond the range limits (as it does many times a day) we travel with it, making money AND accepting losses on the SL of the opposing trades when necessary.

Those of you adventurous enough will see a little game that can be played here. I play it ONLY on EURUSD but it can be played on any pair that has a high volatility. I will not reveal it (due to the risk it introduces) - but if you think incrementally from the rest of this thread you will discover it for yourself

USDCAD normal state of play.png

[SteveHopwood]

Charles, you couldn't lose that idiotic grid that always infests your chart, could you? Please? Pretty please? Just for me. It drives me nuts.

I promise, you will wonder why you ever insisted on having it present once you have done away with it for a couple of days.

[RisklessPips]

Charles, you couldn't lose that idiotic grid that always infests your chart, could you? Please? Pretty please? Just for me. It drives me nuts.

I promise, you will wonder why you ever insisted on having it present once you have done away with it for a couple of days.

Done !

[RisklessPips]

The TIME between a seed becoming a Weather Vane and hitting its stop loss is critical.

This period MUST be used to add contra trades that :

a) Mitigate the loss the seed will inevitably sustain at SL and
b) Make a profit into the bargain

WV trades are stop orders, so if price does not continue in the contra direction your orders are not executed. (And your seed does not get taken out !)

Even with careful placement of SL in MPTM at 100 pips for a (guaranteed) 10 USD loss, if you are (sometimes, often) not at your Forex trading station when price tells you to add another bunch of WV trades by breaking the last stack even, the hit that will come at seed SL can be more than the gain made from the stacked WV trades !

This is a loss that you should not be OK with because it comes from not using time effectively and not following a lead the ultimate leader (price) is giving you at the appropriate moment !

Play around with your trade entry models so that you add as many WV stacks as are necessary to mitigate the seed's inevitable loss AND make a profit WITHOUT adding so many it blows your account margin level and cause a margin call.

[nwannao]

Hello,

What if I a couple of WV trades has been triggered or opened so as to mitigate loss of an initial GT and price starts to improve again towards the GT leaving the WV trades in losses.

And also on bloody event days such as NFP where price moves in seconds and you have no time to react or enter counter WV orders.

What are your take on these scenarios?

[RisklessPips]

Hello,

What if I a couple of WV trades has been triggered or opened so as to mitigate loss of an initial GT and price starts to improve again towards the GT leaving the WV trades in losses.

And also on bloody event days such as NFP where price moves in seconds and you have no time to react or enter counter WV orders.

What are your take on these scenarios?

Excellent questions - well done !

Price moves in waves ! Up and down - The only thing I can say for certain about price is that it does not flatline !

So you are absolutely correct there are times you will set WV trades off and then price reverses on you and starts to head back to the GT. Over time these loss making trades are removed as they hit their SL's BUT hopefully if you have been diligent, vigorous and active in adding trades when price tells you to do so you will make more than the losses as and when they occur !

This is the heart of trench warfare !

Price will form a channel - see my earlier post of USDCAD and the channel will be framed by buy and sell trades. It will meander in this channel, not doing much for a lot of the time.

However, it will periodically (see below) move to the outer range levels and then your additional trades (and SL's) will once again kick in.

My observations:
Asia session is often quiet with price happy to be in the channel
Asia London crossover can be "busy" with prices moving to the range extremities quickly. Mid London also tends to be quiet.
London / NY crossover can be volatile with prices at the extremes.

Special events such as NFP cannot, IMO, be catered for by ANY method other than by being out of the market.

The movements are unpredictable - for reasons we have discussed in this thread AND as you point out they are very quick even on longer TF's

For this reason if you are in the market on those days and at those events - suck it up soldier, this is war !

Charles

[RisklessPips]

A refinement due to the question posed above.

As stated in the thread, in order to manage margin issues, we use different size lots for

1:100 leverage broker

Seed - 0.01
GT - 0.02
WV - 0.02, 0.01, 0.01, 0.01

1:500 leverage broker

Seed - 0.01
GT - 0.03
WV - 0.03, 0.02, 0.01, 0.01

EDIT 22/8/17 - GTWV EA uses one lot size regardless of other considerations. The above lot definitions is therefore redundant.


The trouble is this.

Reversing price can leave you with many lots of 0.02 and 0.03 size hanging around waiting for their inevitable death at SL. These will of course be stopped out at double and treble the 10 USD loss of a seed.

To "alleviate" this you can try the following.

Make ALL your input trades 0.01 lots BUT on a GT (1:100) add 2 trades and on a (1:500) add 3 trades instead.

(Similar logic for the WV trades)

This will do two things

1) Your individual trade risk will be lowered to 0.01 lots
2) Because these trades are stop orders, if price reverses on you the exposure is limited as the stop orders not already open will not trigger

EDIT 22/8/17 - GTWV EA adds one trade at a predetermined lot size. This does away with need for the compensatory recommendation above. - read on for more


Charles

[RisklessPips]

OK Guys - its time to crank it up !

After seeing my request for an EA to partially automate GTWV, our host Steve very kindly modified his brilliant MPTM to create an EA for GTWV.

This EA will replace MPTM and any scripts in the GTWV method.

I have been testing this out and it looks very cool - So many thanks to Steve.

I am in the final stages of the test and will roll it out this weekend, before Monday open, with a full explanation not only of how to use it, but also the changed operational circumstances for GTWV.

This EA will be of immense use to all traders following this method but with particular benefit to those short on time.

The partially comment above will be fully explained because this EA does not and was never meant to absolve you of all action.

Charles

[lwtrade]

Typical! I spent a few hours today working on an indicator for the white support line, which if crossed would fire off the WV set of trades. I will abandon my lame attempt, Steve's mod sounds so much better... Steve, you are a my hero!

[RisklessPips]

Typical! I spent a few hours today working on an indicator for the white support line, which if crossed would fire off the WV set of trades. I will abandon my lame attempt, Steve's mod sounds so much better... Steve, you are a my hero!

Are you building an S/R zone indi ?