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  #4632  
Old Jul 7, 2011 10:37pm
pipEASY's Avatar
crede quod habes, et habes
 
Member Since Dec 2009
More than 10 Vouchers  885 Posts
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Good morning all

Thank you for the continued interest.

Apologies for my absence from forum activities however it is proving to be a very busy year for myself.

The book is almost complete. Just on that note, I have noticed that the content of the book does not differ much from the content I have contributed in this very thread apart from a planned flow of explanation.

I did not have a chance to read all the posts after my last post in the thread however I can clearly notice that traders are 'finally' looking at market/trading through a different but 'sensible' perspective.

No one or any one entity can ever influence/forecast the movement of price. It is somewhat possible in markets with limited/smaller volume (pork belly, orange juice, platinum) of transaction however 'definitely' not in foreign exchange.

So give up using indicators to forecast the next 50 pip movement. The last 50 pip movement you have correctly forecasted was just a random ripple in the ocean in which you 'chose' (unknowingly) to believe that it happened as per your calculations. That is the biggest fallacy in trading.

Once the above finally sinks in, you will look at things completely different because your paradigm has now shifted. And this is a very important phase in your trading career. Some traders agree to the above but they are unknowingly clingling onto the 'notion' of 'trying to forecast' once again. Paradigm shift is vital as it 'finally' opens your 'eyes' in which with the new sense of understanding, you are finally able to ask the right question and seek the right answer.

What is a paradigm shift? It is nothing new and there are books on the subject. An example; you notice a man crying in public with his hands covering his face. Straight away your focal interpretation would indicate that he is unhappy/sad. And then you would ask the man, "why do you cry sir?" "can i help you?" "you look troubled"

But.. what if the gentleman is crying because he had all these financial problems only to have just realized that he has won the lottery of the night before and the emotion of joy was too overwhelming for him to continue walking down the street. Now here is the problem. If the man does not respond to your offer of assistance and does not share with you his new found stroke of luck. Then there are no changes in your thoughts/understanding. You would probably walk past him, go home and tell your partner that you met a man on the street crying into his hands and most likely exaggerate that he was a junkie in his appearance.

That is happening right now to most traders but of course in the context of trading. But what if the man did decide to share his joy with you and told you that he has just won the lottery. Then your paradigm shifts completely. You look at him completely different the very instant you hear this. Your actions change instantly from standing back to shaking his hand, patting his back, taking pics with him and so on.

The crying man is the market. And everyone still throws a lot of assumption based on their own interpretation (of course with the help of these so called indicators). At the end of the day, the only person you are fooling is yourself but there is no one to tell you that you are wrong apart from the crying man himself.

I appreciate all the linear efforts to improve your trading but a new angle is required. And this is the part that will do so many traders head in. Its just too much thinking and hassle and research to do any of that. There are few traders here who do the unthinkable of most and gather statistics. Testing methods on a long-term basis and gathering statistical data; average loss per week, maximum drawdown, and so on. Analyzing weakness and strength of their theorem and using such data to further tweak and improve their method. They are guaranteed to succeed in this business and without a slightest notion of exaggeration they will be able to bask in absolute luxury with such means at their disposal.

So, here is one for your thoughts. It may sound like a riddle and shrouded from clarity but believe me when i say it is not and completely direct for your understanding.

You enter 1 sell position (as per your reasons, engulf, pin, s/r,..)
It travels 200+ pips down
Then you notice that there is a shift in the market (fundamental, technical,..)
You enter 1 buy position (because you are one trader who do truly believe that forecasting the market is impossible)

Notice what happens to your floating equity.....

Im sure everyone knows what happens...

It wont move anymore.

Floating 200+ pip profit will be frozen. It wont move. Some trader might just hit the ceiling or not but if you have noticed this before and walked right past it you have just ignored a blatant advantage to trading... Sometimes I wonder if this is one of the reason why you cannot trade both directions in US.

Your floating profit is locked while the buyers push it up and sellers try to keep the price down.. Do you care? Ofcourse not cause it does not effect your profit. Let them fight cause your intentions are different.

Do i need to continue explaining what the possible outcome is or can everyone think for themselves what they can and should do afterwards.

Only 2 possible scenarios will happen and either way you will win at the end.

Scenario 1. Price returns back to your sell position closing it at BE.

Then look at the floating profit when your sell position gets closed at BE. It will still have 200+ pip profit.

Now here is a very important sentence/question that you must digest.

Are you going to sit there and tell me that the fate of the market is just measely 200 pips? Draw the box. Draw a line at the sell position and another line at buy position and will you sit there and look at those lines and completely ignore the fact that 'sooner or later' price will move past these barriers? And when it does what happen; Your floating profit grows as the time passes. Please re-read.

Scenario 2. Price stalls, buyers fight but lose and the price continues down. You might experience a small loss here and there but the important fact is that the price is now moving towards your original anticipation and your sell position is now growing bigger.

But then you are not going to sit there with just 1 position are you? You will of course (as per good/sound money/risk management) extrapolate/amplify this opportunity by adding more position into it. And this paragraph applies to scenario 1 as well.

Whatever happens your aim is for the price to move and grow your positions enough (at least 500 pip growth on one of the position) for the whole endeavor to be worthwhile at the end. "endeavor to be worthwhile..." Not all this trouble for 70 pips but megapips... And to achieve all this all you need to do is trap the price in an imaginary box that needs to broken out of 'inevitably.'

On eurusd (open your weekly chart), I have multitudes of buy positions from earlier this year and a new bunch of sell positions surviving from few weeks back. I did not attempt to fully hedge myself but I just found this morning that the total 24 positions (both buy and sell) are somehow completely hedged. Floating profit is not moving but it makes me smile to know that it does not matter. Why should it matter when it is not my money ..yet..

My box? Low price of the year and high price of the year. Cause I have all the patience in the world and know sooner or later (might take months, years) but it will move out of the box and whilst it crawls along as per my anticipation I will be taking chuncks out of the move here and there just to keep me happy.

The reason for this post is that a lot of traders do not fully understand and appreciate the strength and the need to participate in both direction. I just do not understand why traders keep stating that fully hedging makes no money when infact you are cleverly trapping the price into a tight box that needs to be broken out in which you are already participating in.

I just more or less covered hedge, trading both directions, core principals to profitable trading. And I sincerely hope it does give some benefit to the seekers of the right answers.

Also, please stop using stop losses unless it is part of a sound money management plan that 'has' proven its worth in statistical data. A 50-70 pip stop loss 'cushion' is a fart in the wind. Guarantee yourself a win then placing measures to guarantee a loss.

My wishes and thoughts are with everyone.

Sincerely,

Graeme

Last edited Jul 7, 2011 11:23pm
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  #4637  
Old Jul 8, 2011 2:13am
pipEASY's Avatar
crede quod habes, et habes
 
Member Since Dec 2009
More than 10 Vouchers  885 Posts
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Quote:
Originally Posted by scottymoll View Post
Graeme, your posts never cease to amaze me. Thanks so much for taking time to write that encouraging piece.

One quick question. Throughout most of the thread, you always stressed the importance of keeping a tight stop on entries. Now it appears you are saying not to use stops anymore. Is this correct? I know the age-old philosophy is cut your losers short and let your winners run, which is exactly what you taught. Are we now taking away that first half of the equation? Thanks again for everything you've done!!!
Good afternoon, scottymoll

Thank you for the question.

Apologies I should have been far more thorough in my post but was already shocked to see the length of it.

Good observation and here is my answer for everyone.

I use the stop loss in a different context to most traders. I do not use stop loss as a method of 'cushioning' the volatility. However, I use the stop loss as a part of money management plan that aides me when the action comes too frantic and im in the midst of stacking positions. Ofcourse the main use of the stop loss for myself is to move it to BE as a sign to myself to indicate that, that part of the job has now been complete.

Most traders use stop losses as a cushion whilst I use it as a means of symbol and indication.

I hope this answers your query.

Sorry to address everyone in same post but thank you for the warm compliments, Oooops and VEEFX. It is greatly appreciated.

Sincerely,

Graeme
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  #4639  
Old Jul 8, 2011 2:49am
pipEASY's Avatar
crede quod habes, et habes
 
Member Since Dec 2009
More than 10 Vouchers  885 Posts
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Quote:
Originally Posted by VEEFX View Post
For those curious to know how I am doing with my basket of crosses, things are looking really good. I began replicating my real trades in a demo account to check out the 'Trade Explorer' features here at FF. I am opening my account to public until sunday night for those who want to look or asked for my trading performance. I took those trades with no SL and some are moved to BE after 100+ pips in profit. Please PM to avoid clutter on this thread. Here's the link... http://www.forexfactory.com/veefx

Attachment 737599
Good afternoon, VEEFX

Thank you for the summary of your trading status.

Impressive.

Just a quick analysis of the pic of your summary indicate that (no disrespect but just a analysis for the rest of the readers);

My analysis could be wrong as I can only interpret from the pic posted above.

But this the type of analysis every trader should be performing on a weekly basis of their progress.

I assume this account is approximately few weeks old. I assume 4 weeks just for the calculation purposes.

100+ trades in the last few weeks. Good
Avg. number of trades taken per week. 25+
Gross profit in pip. +1506
Realized loss so far in pip. -924
Current net profit in pip. +582
Current floating profit in pip. +908

Maximum drawdown 4%
(assuming this account is 4 weeks old)
Realized loss based per week in pip. -231
Realized profit based per week in pip. +426
Profit to loss factor, almost 2:1. Excellent but you can do much better (soon)

*Using above statistics, I can project your future results (under the assumption that current progress is somewhat median)

Estimated for the next 52 weeks.
Expected median-maxi realized loss for 52 weeks in pips. -3003
Expected median-maxi realized profit for 52 weeks in pips. +5538
Profit to loss factor, 1:1.5 (this is absolute median as we are not even considering the potential floating profit for the whole year)

In regards to your current floating profit of 908 pips based on the assumption that this is a 4 week old account.

You do not work out expected floating pips for the year by multiplying it by 13. Instead floating profit is considered as a mode of acceleration here. If the potential is there to add 200 pip per week as a floating profit on the average throughout the whole year (from the looks of the last 4 weeks and assuming this is the median progress once again). I would take this into consideration by considering a worst case scenario of only 10% of this amount as an realized profit, hence adding 20 pips of realized profit into the overall calculation. Creating the absolute worst case scenario.

All in all everything points in the right direction. Now this will be the most important paragraph of this whole post. Time will tell if the past 4 weeks of your endeavor was the median progress (average progress) or not.. However, time will also tell if the above result was one of the better results that happen/s/ed from now for the next year in which the above figures/expectancy will dramatically decrease. Ofcourse I only hope that the last 4 weeks was rather a poor progress compared to the upcoming one year of events in which the above figures will be much smaller than your true realized profit in the one year time. At the moment (just from 4 weeks), one can forecast 200-220 pips per week but I think the true median could be anywhere between 50-200 pips ONLY if the current method you are adhering to is 'consistent' for the length of experiment.

VEEFX, you will find the final answer when you question yourself how to ensure 'consistency.'

Sincerely,

Graeme

EDIT: Analyzing your progress on a regular basis will show you the ins and outs of your method. The trade summary that shows profit or loss is nothing compared to the amount of insight you gain from taking your trade performance apart and looking through every nook and cranny. How will you build a car if you don't know the inner mechanics... Anyone can drive. But driving alone does not build a car.

Last edited Jul 8, 2011 3:05am
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  #4640  
Old Jul 8, 2011 2:51am
pipEASY's Avatar
crede quod habes, et habes
 
Member Since Dec 2009
More than 10 Vouchers  885 Posts
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Quote:
Originally Posted by TradeStar View Post
Hello Graeme,

Nice to hear from you again. You have already created a paradigm shift in many of us with this thread. Thank you and please keep posting whenever you can.

Your point on SL clearly points to the minimum requirement that

Any trader who wants to take up this approach, should have the basic skill of picking up right entry points, where price almost always moves in his favour immediately.

So that one would have the maturity to leave a trade open and let it play with out a SL

Perhaps the reason for 20x3 preparation exercise.

Warm...
Good afternoon, TradeStar

Thank you very much. Perfectly said.

3x20 exercise is one the main reason I became the trader I am.

It will teach anyone so much more than just reading.

Sincerely,

Graeme
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  #4641  
Old Jul 8, 2011 3:09am
pipEASY's Avatar
crede quod habes, et habes
 
Member Since Dec 2009
More than 10 Vouchers  885 Posts
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Thank you for your participation and the questions today.

I will spend this weekend answering all the messages.

If you have any new ones please send them through before Monday and it will be promptly answered.

Currently there are 100+ messages to be replied so please understand if my answer is bit short.

Sincerely,

Graeme
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  #4651  
Old Jul 11, 2011 10:14pm
pipEASY's Avatar
crede quod habes, et habes
 
Member Since Dec 2009
More than 10 Vouchers  885 Posts
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Good morning all,

Here are my replies to the questions after my last post

alexandersv - rules are simple. you are trying to hit x3 20 take profits each day. you could trade on any session, any timeframe, any pair. The only rules are that you only enter buy positions if price is above open price of the day and sell positions if price is below the open price of the day. It does not matter if each broker shows different open price. I will explain the reason below when I reply to member: costa. Please feel free to ask further.

veefx - good question. when it comes to analyzing ones own statistics, how does one count 'potential' unrealized profit over a given period. THe only way possible is similar to forecasting future population growth. You work out average unrealized profit of the last few weeks/months/days and project this forward for the given period of testing. If you have results from last 4 weeks then you would work out the average and project it forward for the next one year. However.. The last 4 weeks could be 'of better result' or 'of poor result' hence you would need to continue analyzing your stats often. You will notice a large deviation with the first few analysis only to notice a plateau few months in. That plateau is your true median. Hope this helps

costa - Different times of daily candle does not matter. It does not matter if the screen you look at is different to all the other traders. Infact, it will differ from broker to broker. The entries may differ between traders of different daily candle however as long as the trading principal based on long-term growth on the main trend, inevitably you will both arrive at the same door of profit. At the end it will still look like pasta even though i strain mine first and you choose to strain yours last.

veefx - Outstanding on eurznd. So simple yet so sensible. Hope all other readers notice what you are trying to establish.

andante9, ardi- thank you very much for the compliments.

Sincerely,

Graeme
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