I'll be trading the weekly charts using no margin, or 1:1 if you will. So for every $1,000 trade, you need $1,000 equity in your account. If you trade with a broker that allows smaller trades, you can get away with less equity to start. I'm going to be opening $100 trades on Oanda, making sure I have $100 in the account for every $100 trade placed.
If this seems over kill, imagine trading GBPJPY in the early 2000's. It starts out okay. We start buying after the 12/10/2000 Candle, buying at about 165.80. Midline is missing on this, but it would be the only trade, closing on after the 4/21/02 candle at about 186.40, for a nifty profit of a couple thousand pips in a little over a year.
All excited, we open a sell trade @ 186.40 and the great wait and drawdown begins.
Peaky Fifo
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cozybooks
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Peaky Fifo
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cozybooks
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Peaky Fifo
Here's the part where if you doubted my sanity on this strategy, you will be absolutely convinced that I have none whatsoever. Over the next few years, we would have opened a total of 12 sell trades, ranging from 181.50 to 240.00. I'm doing manual chart research, but I'm just estimating the daily ATR being about 250 pips back then, so the actual number of trades and entry points could be slightly different, but not too much.
Finally, after the 6/8/2008 candle, we have a buy signal at around 210.80. Unfortunately, our average entry price was about 210.20, so we are running a loss of a little under 1,000 pips, and I'm requiring a minimum profit of 1.0 * Daily ATR PER TRADE to close the set of trades, which would be about 3,000 pips profit (very roughly)
So we leave everything open until we reach our next buy signal, which is after the 3/22/09 candle. We've been selling for about seven years, but we close at about 140.20, leaving a profit of about 84,000 pips (7,000 pips per trade * 12 trades)
Finally, after the 6/8/2008 candle, we have a buy signal at around 210.80. Unfortunately, our average entry price was about 210.20, so we are running a loss of a little under 1,000 pips, and I'm requiring a minimum profit of 1.0 * Daily ATR PER TRADE to close the set of trades, which would be about 3,000 pips profit (very roughly)
So we leave everything open until we reach our next buy signal, which is after the 3/22/09 candle. We've been selling for about seven years, but we close at about 140.20, leaving a profit of about 84,000 pips (7,000 pips per trade * 12 trades)
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cozybooks
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Peaky Fifo
So the gorilla in the room is swap rates. Before you enter a trade with this strategy, you need to know the swap rates for the pair with your broker. Ideally, you're looking for positive swap rate pairs (although things can change over a few years of holding trades), or pairs that are as close to flat as possible.
Average trading time in one direction will be 2-3 years, but you could see a year or less or the other extreme of seven years or more like the GBPJPY example.
I'm trading pairs that traditionally have a lot of movement from one Sixths line to the other, like GBPJPY, GBPAUD, EURJPY, EURNZD, EURUSD, GBPUSD, GBPCAD, etc. The hope is that large movements will offset any swap rates that come into play.
Since I'm trading with no margin, I'm not worried about trading the same pair more than once.
I manually tested a number of pairs looking back at twenty-five years of data where possible. The maximum number of trades I had open for one pair is twenty trades, and yes, it still turned a handsome profit. If you had a $1,00 per trade minimum, you would need to commit to providing up to $20,000 in equity for a pair if necessary, although in most cases you could get away with dramatically less. 3 or 4 trades is much more typical, and sometimes you only open the one trade and that is it.
Oanda claims to offer a no swap rate account. I haven't heard back from them yet on the details, but if I find a no swap option with reasonable fees, I'll post it here.
I haven't automated this strategy yet, although I would like to, but you are checking charts only once a week if you want to run it manually.
Could it run on lower timeframes? I think so, but I suspect you would have to commit to closing all trades on an opposite trade signal and just taking your losses on some trades. If Steve or someone else wants to write a legit automated version, I'd be happy to pay the $100 fee and let everyone else play with it.
Those are the basics. It's the most boring strategy you will ever see, requiring you to sit and do nothing for months and years at a time, but this doesn't preclude you from having more exciting strategies on lower timeframes to keep your interest. Let the 20-year live test begin! I'll report back from time to time, if I haven't been banned for extreme displays of lunacy, lol, but I'll most likely stop reporting if I pass away in the meantime (or get sucked into an alternative universe where there are no U.S. FIFO requirements on Forex trading).
Happy Trading!
Average trading time in one direction will be 2-3 years, but you could see a year or less or the other extreme of seven years or more like the GBPJPY example.
I'm trading pairs that traditionally have a lot of movement from one Sixths line to the other, like GBPJPY, GBPAUD, EURJPY, EURNZD, EURUSD, GBPUSD, GBPCAD, etc. The hope is that large movements will offset any swap rates that come into play.
Since I'm trading with no margin, I'm not worried about trading the same pair more than once.
I manually tested a number of pairs looking back at twenty-five years of data where possible. The maximum number of trades I had open for one pair is twenty trades, and yes, it still turned a handsome profit. If you had a $1,00 per trade minimum, you would need to commit to providing up to $20,000 in equity for a pair if necessary, although in most cases you could get away with dramatically less. 3 or 4 trades is much more typical, and sometimes you only open the one trade and that is it.
Oanda claims to offer a no swap rate account. I haven't heard back from them yet on the details, but if I find a no swap option with reasonable fees, I'll post it here.
I haven't automated this strategy yet, although I would like to, but you are checking charts only once a week if you want to run it manually.
Could it run on lower timeframes? I think so, but I suspect you would have to commit to closing all trades on an opposite trade signal and just taking your losses on some trades. If Steve or someone else wants to write a legit automated version, I'd be happy to pay the $100 fee and let everyone else play with it.
Those are the basics. It's the most boring strategy you will ever see, requiring you to sit and do nothing for months and years at a time, but this doesn't preclude you from having more exciting strategies on lower timeframes to keep your interest. Let the 20-year live test begin! I'll report back from time to time, if I haven't been banned for extreme displays of lunacy, lol, but I'll most likely stop reporting if I pass away in the meantime (or get sucked into an alternative universe where there are no U.S. FIFO requirements on Forex trading).
Happy Trading!