Great ideas here.SteveHopwood » Fri Sep 22, 2017 11:38 am wrote:Out of the bath, so here are my thoughts about groups of trades being left behind by a leaky toilet:Give it some thought.
- we do not need to care if our account is sufficiently well capitalised. I am thinking trading 1 pair at 0.01 lots per $10,000. It sounds feeble put like that but TJF's set file is netting c. $50 a day. The account will double every 10 months.
- not many here will be in the above category and so a badly unbalanced position is something to worry about. Besides, my ambition is to create an EA that friends and relatives can open a $500 account, load up the EA and watch the account grow. Here are a few thoughts just before I move on to dealing with imbalances:
- we are (mostly) trading this on the M5 by accident. I never intended this; it has happened because I had the bot running on GJ M5 to generate trades and discovered it was profitable. Is anybody testing any higher time frames?
- given that we are still trading the M5 thanks to TJF's genius, should we be trading such a volatile pair. Might we be better off picking a pair so sleepy that it takes dynamite to move it, and just enjoy the ranging?
- given that we have defined a point at which our position becomes unbalanced, what to do about it? Let's say for the sake of this discussion, that a position becomes unbalanced when there is a difference of 10 between open buys and open sells and that we have 13 sells and 3 buys:
- the nuclear option:
- the instant variety: close the position immediately.
- the margin level option: close the position when the margin level drops below a certain level.
- the phased option a la the Friday night closure: close the position when the DD has shrunk to an acceptable level.
- offsetting:
- temporarily suspend the usual trade management and offset groups of winners against losers on the opposite side.
- resume normal management when the position becomes 'balanced' again.
- hedging:
- hedge the losing group if the latest higher time frame HGI signal is in the wrong direction. In our example, we would add the equivalent of 10 buy trades.
- lift the appropriate side of the hedge following a change of HGI signal.
My thoughts are that nuclear option and margin close is last resort because it doesn't solve the problem of what to do next i.e. when to restart.
I think offsetting could/should work here because without a JS taking out the winning trades so soon there should always be enough new trades in the direction of the move to close out the biggest loser. If price keeps going in one direction it shouldn't take long to run out of losers because price will obviously break candle highs more often than candle lows in an uptrend and visa versa. So I think with offsetting we don't want to suspend normal EA activity once a position gets unbalanced. We just start offsetting from 3 or 4 and this becomes the method that all trades close instead of BE, JS and SL. In this way it could trade like RnR but because a break of the candle high/low is where each new trade gets filled it should be biased in the right direction more of the time than not. Perhaps this is what was missing with RnR?
Alternatively hedging would also be interesting to try and perhaps the EA keeps adding new orders as usual after the hedge was applied so that the positions becomes unhedged again but now in the correct direction that price is moving. Basket close at BE might then work to close all?
