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| Author: | fxideas [ Sat Feb 11, 2012 6:52 pm ] |
| Post subject: | Longterm Strategy |
Hello all! The last weeks I read the thread building an "equity millipede" started by pipeasy/Graeme. It's really worth the read and I learnt a lot of things by working my way through it. So even if I am going to post a strategy described in this thread which could probably be automated I recommend this thread to everyone who doesn't know it. Perhaps you'll benefit as I did just by reading the inspiring post of Graeme (after having finished the thread I understand truly understand for the first time what it means that a good trader needs to have an edge and how he possibly could obtain it). The link of the thread: http://www.forexfactory.com/showthread.php?t=245149 Near the end of the thread Graeme describes a strategy which could probably be automated as it is based on clear rules. This method is certainly not a get rich quick method. In the longterm however I imagine that it could be very profitable (and with the right money management not very risky). The method is describe in posts #3482 and #3483 of the thread. Link:http://www.forexfactory.com/showthread. ... 9&page=233 That's what I thought when reading this strategy and looked at past charts of the EURUSD: In average I estimate to lose 50 pips per day (this should be an conservative estimate given that some of my trades will also get stopped out at BE). I'll lose 20 days, so every day in one month - 1000 pips. If there's just one day a month I have a winning position which will pay me 1000 pips in the longrun, I am already at BE. When you have a look at the charts, I could imagine that one has IN AVERAGE (this means that there are also up to 3 month with no real winner) much more than just 1 winning position. Because of the two additional positions which are sometimes opened, I am pretty sure that if you trade this method on a "golden day" you will make 2000pips on some day without knowing it at the time you enter the trade. All in all I think that this strategy could be very powerful in the longterm as it incorporates the 3 main aspects of trading, which can make one profitable. Graeme says that these three asprects are: 1. low riks entrys (we risk 25 pips for a potential reward of 1000 pips) 2. participation 3. growth I am trying to trade the method manually at the moment. It would be great to discuss your thoughts about this strategy and -if someone else thinks it might have potential and has coding skills (I absolutely don't - perhaps this a reason to start to learn it)- to devlop an EA. Hope you are interested in this topic! Have a nice evening! fxideas |
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| Author: | JulesvH [ Sun Feb 12, 2012 9:39 pm ] |
| Post subject: | Re: Longterm Strategy |
Copy paste from Pipeasy/Greame's posts. (See link above) This way it is easier for people to read. My opinion is that it's worth reading! Sounds like a decent plan. It gave me insight in one of the ways how Graeme builds his millipede. ---------------------------------------------------------------- This is my train of thoughts. 1. Open eur/usd daily chart at start of new candle (for myself its the asian session) And ask myself 1 question. Is it going up or down? And this simple question is governed by the ema crossover. We all know ema crossover has flaws but 'most' times the candles do move forward as per the direction of the crossover. Let us consider the last few days on eur/usd daily chart Now with the daily candle deleted appropriately So, the 1 question I ask myself is, "is it going up or down?" Ema is crossed over to go up so for now I choose up. Now I anticipate its going up Whats next? Participate in a low risk entry How do I do that? It is by anticipation. You need to anticipate that today will be a good day before it happens. You must assume that today's daily candle will be up with no retrace. Now this is where your personal threshold of stop loss comes into play. For this type of method I choose 15 pips on 4hr chart, 25 pips on daily chart, 70 pips on weekly chart, 120 pips on monthly. This setting needs to be tweaked by yourself through trial and error and find your own confortable level. Lets go back. Since the above chart is daily, I have 25 pip stop loss. So as soon as the day opens, I will open 1 position towards the direction of the ema with my personal threshold. So on this day, I have a loss of -25 pips as the retrace is more than 25 pips. Let us look at a day it did work out for me, eur/usd daily In the month of september it looks like there were 4 days that my stop loss of 25 pips was not hit and would have survived. This is where I ask myself another question. "Ok. Position has survived the retrace and it now 30 or 40 pips in profit. How can I amplify the profit taking if this the day that price will never come back" Alot of ifs when im anticipating. I will open another position and move the first position to breakeven. If today is a good volatile day then price should not make any more newer lows (or highs). With 2 positions in play, you are covering few scenarios. The first position is at BE at open price of the daily candle whilst second position is at -40 or -50 pips with SL at the lowest price of the retrace. That is an average loss of 25 pips per position however the second position has a bigger breathing space. Price will charge on with both positions in profit or price might retrace near the open of the day closing the first position but price does not make a new low so the second position survived to end up as profit at end of day. I would like to stop you here and advise you, you can alter few things above. 1. You dont need to add second position if it doesnt suit your trading style. However, you will need to find other means to amplify your profits. 2. Your personal threshold of stop loss for the first position could be larger than my 25 pips or lower than my 25 pips. Bigger stop loss will see you more positions surviving till end of day however bigger losses. Smaller stop loss will see you more number of losses which are smaller but less opportunities. Now this method above will ensure that you capture those volatile bold movements. Take profit is only again to your personal threshold. I aim for 1000 pips for each positions. Once again you can tweak this setting to your personal threshold. You can aim to catch profit totalling 1000 pips with few positions - This means that you will have few more wins over the course of year than myself. I aim to catch 1000 pips per position - This means I will have less wins than the above trader but bigger potential profit in the long run. You could even adjust the take profit pip of 1000 to 500 with few positions totalling together or 500 pips each position. The adjustments you could do is endless. This method works as 3 vital ingredients were added. 1. Participation - for a volatile breakout 2. Low risk entry - risking 25 pips on daily chart 3. Growth - letting the position grow to its greater extent You will need to demo or live (on small account) for some extended period of time collecting data on your trading statistics and tweaking the above settings. There is one more thing I wish to add.. I believe what Im showing in depth today is from the very first post of this thread. Opening positions at the open of the day. There is something else I also add in to the above method. If today is just another typical day where the daily candle does follow the ema but with usual retrace. Sometimes the retrace is greater than my 25 pip stop loss, so that gets me out of the game. However. Some days there are retraces of more than 25 pips that will come back and charge forward. Let us look at last few days on eur/usd daily So the day had more than 25 pips . When I watch a retrace happening, I set an alarm on my phone so I get alerted when price comes back to open of the day. When I get alerted, This is where I tell myself, 'if today is going to be a typical day up price should not make any more newer lows and move forward from here' Then I would open a position at the open of the daily candle with stop loss at the lowerst price of the retrace. This is where personal threshold comes in. 1. I do not want to see any retrace larger than 50% of the previous candle. This is important. I prefer less than 33% retrace on previous candle. 2. Preferably not bigger than 50 pips retraces. And if my anticipation is correct I will find that price will move on. If it doesnt then Im not interested in a day where price fluctuates between open price and low price of the day. So the first method aims for volatile moves that does not have any retrace and charges forward. These are the best movements in forex market. Second method aims for price to first retrace and then enter when price resumes its anticipated direction. I use both methods simultaneously. Having touched on the framework of my higher timeframe trading, I would like to add as I have been asked few times. Why do I put in the effort to share? Some traders believe that, giving away trade secrets hinders their own profit taking however it is not. If Im going up and more people join in then it is a benefit for myself. However even a large number of followers wont affect the market movement at all. It is still assuring to know that our interest lies together and not against each other. Sincerely, Graeme |
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| Author: | garyfritz [ Sun Feb 12, 2012 10:12 pm ] |
| Post subject: | Re: Longterm Strategy |
I love the concept of Graeme's approach. I'm just unclear on a few points. I haven't read the whole thread yet (!) but I've read the first 100 or so posts. I think Graeme's approach could be summarized as:
I'm not sure how he exits or if/when he moves his stops. If the market keeps moving forever in his favor, then he keeps adding legs and they keep increasing in value. Life is good. If the market turns, whether for a short pullback or a secular trend change, he needs to respond to that. Does he do it by trailing stops, or ...? I *think* he continues the "enter with your choice of entry methods, long and short" approach. Let's say he's in EURAUD and the trend has been straight down for 3+ years. He's built up a zillion short legs and most of his long legs have "died." He has a mountain of open equity in those short legs. But let's say he's in CHFJPY. The trend was up from early 2010 to late 2011, and it's been down since. How does he unwind his profitable position and start riding the trend down? If he just continues the "enter with your choice of methods" approach, he will effectively exit his positions as the market moves back down. But unless I'm mistaken, he'd basically let them go back to breakeven before exiting them. That doesn't make any sense. So how does he unwind when there's a trend change? Does he trail stops? When leg N moves to BE, does he move all previous legs to the same stop level? So far I only saw him talking about moving stops to BE. He talks about having legs in different "groups" -- maybe some groups have close trails, and others give the market more room to breathe? Another point: how often does he add a new leg? Let's say his typical stop is 100 pips. Does he wait for leg 1 to get to get 100 pips into profit, move leg 1 to BE, then add leg 2? That way his risk is never more than the original 100 pips. |
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| Author: | fxideas [ Sun Feb 12, 2012 11:14 pm ] |
| Post subject: | Re: Longterm Strategy |
Thanks a lot for your post and your interest in this topic! Concerning the strategy described in this thread for automation profit target of each position should be around 1000 pips (could perhaps be optimated once an EA exists). SL is always set to BE if the position survived the day. With redard to the general approach of pipeasy I guess the best thing would be to diveresify. This means you could close some of your larger legs you have established if you see a trend change in the longterm trend. Nevertheless you should never close all your long legs in one direction. By trading this approach you should establish some good long and short positions in the longrun... Hope that helps a little bit! |
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