Hello All!
I originally posted this in Dietmar's original manual method thread before I realized there was an EA thread here. My post really belongs here...
It has some thoughts on RISK MANAGEMENT, which seems to be the biggest worry, and using this method in the USA.
I am super interested in this method -- I hope the guys figure out a way to program a bot for it (and that will be able to make use of this method for us in the USA.)
I am also very interested in seeing if this works (or works even better) on more pairs.
Question and thoughts to George and Gary and the other coders:
Is there a way to have a single EA control 2 different accounts to get around the US hedging rules? Alternatively, is there a way to have 2 EA's "talk" to each other from 2 different accounts so that each account would know at which long or short trap level the other was at and could open the appropriate amount of orders? Seems like there are trade copiers out there that can control another account... Seems like it could work in principle.
Thoughts on RISK
Also, in order to keep losses from spiraling out of control on a particular day,
1) since this method seems to be profitable MOST days,
2) we are then concerned with limiting losses on the REALLY BAD days
3) What if you could put an overall pip loss limit PER DAY. An aggressive or conservative amount could be used (and testing could get us to a good, reasonable number.)
4) This could affect overall profitability of the system because it could stop you out of some trades that would eventually turn profitable. BUT, this also means you live on long enough to make it to the next "high probability day" to trade again.
Another thought. The Bot(s) could be limited in the NUMBER OF TRADES it is allowed to take per day. An EA that could be built to use this system could be used in backtester to help count how MANY trades are taken per day 1) on average and 2) median/ percentile. The 2 measurements are important so that you could get an overall average but also a potential statistical distribution that could show, for example, that one could hit 85% of all trades if limited to say 20 trades per day. (Stated another way, a day that requires over 20 trades has a greater chance of ending in the negative.)
Hope these are some helpful ideas. Let's keep the fire burning here!
Some further thoughts:
Trap Level Distances (Larger vs Smaller traps)
Would there be a statistical advantage by making the trap slightly smaller -- say 10 pips instead of 15 between levels? If this method is taking advantage of high(er) volatility periods, it would seem to me that it is less likely to get range bound in a smaller trap than a larger one.
Dynamic Trap Sizes
Similarly, what about an ADR based dynamic trap size. Example: take 50% of ADR(20) and divide it into the 6 equally sized trap zones. (Please note, I am not trying to curve fit so much as add higher probability of success IF my comments about trap size above prove a statistical advantage.)
This could also be a huge advantage as we try this method on different pairs that have different ADR characteristics.
Filter for Calculating Max levels deep to breakeven based on TP and Spread?
This may seem an extreme case but most of my thoughts regarding risk for this system have to do with higher probabilities at the start, OR knowing when to quit on any given day.
It seems that there could be times when the Spread costs could remove all gains -- even if you where to hit TP -- once you surpass a certain number of trades deep. (Although if automatically/arbitrarily limiting the trap to one day, this may be rare.)
I THINK it is possible to figure a rough estimate of how many levels deep you could go before this occurs (or at least as a filter to check if it is worthwhile before taking any new trade ) -- if we know the distance between levels, the ultimate TP level, and the total spread accrued for all the trades so far (could be based on some average of the spread during that period of trading).
This could further reduce risk by having another bug-out clause (end the trap for the day) -- the system can know when another trade level would cause us to go past breakeven, even if the TP level was reached. Or have I missed something? I need help figuring the logic on this one...  Maybe I over-thought it
I know some of the issues have been sorta brought up before but I thought I would add my 2 cents.
I hope it is helpful!
Cheers,
Rick |
