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Gravy Trains & Weather Vanes
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Author:  rapple [ Thu Sep 28, 2017 5:37 am ]
Post subject:  Gravy Trains & Weather Vanes
Thanks Charles

Will give it a go. I am using a very simple system where I place trades on a 4H CSS cross

Looking forward to seeing your setup

Cheers Richard
Author:  RisklessPips [ Thu Sep 28, 2017 5:38 am ]
Post subject:  Gravy Trains & Weather Vanes
Following my musings, at the start of this week I set GTWV with ADX and HGI off into a contest between the two signal services.

It is only 3+ days but the results so far are looking good. :good: I will post some summaries when the datasets of closed trades are more substantial.

My setfile does not open a huge number of trades because I have freed up price to do its thing.

How have I done this ?

I have stopped taking BE as soon as price gets above entry :yahoo: I am now ready to wait for price to get closer to TP before I even think of BE. My risk (SL) settings are still no more than 2% of my account opening balance for all management styles

The positive change in trade outcomes (average wins vs average losses) is worth analysing in detail because it is significant.

I opened two demo accounts at 500 USD each. (Very small accounts but if this thing can work at this level the only way is up !)

I looked at my pairs and ditched the majors because they did not make sense in terms of their average range of movement at the level my account can afford.

I am therefore trading
AUDUSD
EURCHF
NOKSEK
USDSGD
USDHKD
SGDJPY

These have an average ATR at H4 that even in the busy crossover of sessions has not risen above 30 (PoM tells me this). My 2% risk appetite handles this range of movement better and gives price room to move towards profit territory.

The setfile below uses ADX signals (The only difference with my HGI setfile is that I switch ADX off and allow HGI signals - all other settings are the same)

The two signal services are doing well and both accounts have equity above opening balance - which is doing better ? Time will be the judge of that.

I am not using RR during these tests.
ADX-Risk.set
Charles
Author:  RisklessPips [ Thu Sep 28, 2017 5:47 am ]
Post subject:  Gravy Trains & Weather Vanes
rapple » Thu Sep 28, 2017 7:37 am wrote:I am using a very simple system
Music

Charles
Author:  zafh [ Thu Sep 28, 2017 8:00 am ]
Post subject:  Gravy Trains & Weather Vanes
RisklessPips » Thu Sep 28, 2017 5:38 am wrote: How have I done this ?

I have stopped taking BE as soon as price gets above entry :yahoo: I am now ready to wait for price to get closer to TP before I even think of BE. My risk (SL) settings are still no more than 2% of my account opening balance for all management styles
I have following this thread with great interest.
Doesn't the above basically mean you are now just using a 2% trailing stop?
Enter seed with 2% stop, when it is close to TP, move to BE so 2nd trade opens with 2% stop, so first trade closes (it was near TP).
Author:  RisklessPips [ Thu Sep 28, 2017 1:47 pm ]
Post subject:  Gravy Trains & Weather Vanes
zafh » Thu Sep 28, 2017 10:00 am wrote:
I have following this thread with great interest.
Doesn't the above basically mean you are now just using a 2% trailing stop?
Enter seed with 2% stop, when it is close to TP, move to BE so 2nd trade opens with 2% stop, so first trade closes (it was near TP).
Hi Zafh

Thanks for your interest. Allow me to clarify the trails.

My starting point in all cases (and especially when my account balance is so small) is the question what is my acceptable risk ?

I am prepared to risk 2% of initial balance on every trade I take.

Caveats :
1) Note : For strictly correct risk management this should actually be a maximum of account equity not account balance

2) I only ever use the 2% maximum risk ceiling on ranging prices which is where ADX and HGI are very important. On other management styles (trending and HGI rad prices) including default my ceiling is lower down to only 1% of account initial balance. This is why understanding the average ATR of the instruments I am trading becomes an important consideration. I am risking less of the account (i.e smaller SL) so I want to trade instruments whose movement can be accommodated in that lower risk profile.

Having set my risk appetite on each trade, I then look for a good Risk Reward (RR) ratio between SL and TP. (This is where the new RR logic will come into play.)

I normally set RR to a minimum of 1:1 on ranging prices and up to 1:3 on trending prices. My Rad and default settings are somewhere in between.

So far so good.

BE is like taking early profits because you are moving your stop and thereby reducing the room within which you are allowing price to move. Yes this locks in some profit, but it also prevents price from moving lower before taking off to an even higher (unpredictable) profit.

For this reason I set BE as a high percentage of TP pips so that if price gets close to TP but not quite I don't let a winner become a loser. This also ensures BE happens late in the move to TP so that I do not strangle price's trench before it has had time to do its thing by first moving lower.

I normally set BE at 75% of TP pips on ranging prices up to 85% of TP pips on trending prices. Default and rad price conditions lie in between.

On the trails I use a standard trail set at 10 pips more than my SL pips . (i.e if SL is 50 pips, my trail is 60 pips)

Reasoning : Price can move in any number of patterns from entry to TP or SL.

If price is going towards TP (a GT), I start trailing it before BE when it is 10 pips beyond entry price. This 10 pips gives me some confidence it is not a false breakout move before I start moving my stops.

Knowing my average ATR is under 30 pips, I have confidence if the price moves 10 pips in my favour (more than one third of ATR) I can start closing down SL thereby reducing my average loss on trades. This is vital for positive expectancy !

If price goes up to 9 pips and then turns back (as it does frequently in false breakouts) my stop has not moved and I am able to accommodate the reversal within my risk appetite ceiling before SL confirms the trade was wrong. A new trade is opened up if price gets to SL.

Charles
Author:  RisklessPips [ Thu Sep 28, 2017 3:36 pm ]
Post subject:  Gravy Trains & Weather Vanes
Many apologies Zafh - I deleted your post in error !

Your comments are in quotes
I thought one of the main purposes of this idea was to add additional positions once you moved your initial stop to BE?
Correct
For example say your risk is 100 pips and TP is 100 pips.
You enter the initial trade it goes 75 pips in your favour.
It moves to break even and adds a second trade.
The first trade hits your TP of 100 pips ( you are now 100 pips in profit).
Now say your 2nd trade reverses and hits your stop loss (-100 pip)
You are no flat 100 pips -100 pips.
Isn't the net effect almost the same as have one trade with a 100 jumping stop that jumps every 100 pips?
You are slightly better off as you add the next trade at 75 pips, but you only have the advantage of have 2 trades open for 25 pips.
True - and interesting point. I hadn't looked at it that way :clap:

However, 2 trades open for 25 pips is not a bad advantage in my opinion. If you are breaking even at 75% of TP in say trend market conditions, there is a good chance in your favour - (and that is all you want - that might be your edge) - prices will continue in the same direction on the GT.

If they don't, c'est la vie. Lets start with the WV's.

Good observation. Well done,

Charles

ps - just thinking this thru again - when trade 2 moves the 25 pips from BE to TP - it has started trailing the stop so your eventual loss will not be 100 pips on the reversal rather something less. This is of course if you set trails to start before BE !
Author:  zafh [ Thu Sep 28, 2017 4:09 pm ]
Post subject:  Gravy Trains & Weather Vanes
Are your weather vains using the same logic? (BE at 75% of target)
Author:  RisklessPips [ Thu Sep 28, 2017 4:45 pm ]
Post subject:  Gravy Trains & Weather Vanes
zafh » Thu Sep 28, 2017 6:09 pm wrote:Are your weather vains using the same logic? (BE at 75% of target)
I think I see where you are going with this :smile:

My instruments move under 30 pips ATR every 4 hrs. That fits in my 1 - 2% risk profile comfortably.

Hitting TP at one leg and opening another at 100 pips SL means the pair has to move 3 times ATR against me to get to SL. Without going back TP direction.

This scenario clearly happens.

Enough to invalidate the logic?

Not in my ecperience but that's part of what we are testing :smile:

Charles
Author:  zafh [ Thu Sep 28, 2017 4:58 pm ]
Post subject:  Gravy Trains & Weather Vanes
Well I was working off the initial idea in the first post where if your seed trade doesn't work out, you still make some money on your WV which may remove the seed loss.

But if you add new positions when price has reached 75% of it's target you will never make enough to cover the loss even in perfect conditions as there isn't enough pips to do it unless your WV is bigger than your seed trade.

That's not to say what you are doing won't work.
Author:  RisklessPips [ Thu Sep 28, 2017 5:35 pm ]
Post subject:  Gravy Trains & Weather Vanes
zafh » Thu Sep 28, 2017 6:58 pm wrote:Well I was working off the initial idea in the first post where if your seed trade doesn't work out, you still make some money on your WV which may remove the seed loss.
Correct
But if you add new positions when price has reached 75% of it's target you will never make enough to cover the loss
What loss at this point? At BE you are winning. New trade is added so 2 trades in the game. No loss yet.

What you seem to be describing are whipsaws of 100 pips. No doubt they happen. But 50 on the trot? Not in my experience to date. Price will move in your direction beyond a TP often enough (or recover into that direction after a correction) to make this an academic discussion more than a practical reality. IMHO.

Charles
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