Sorry Dale, been a bit busy lately. Anyway, the volatility system is still working ok, I am tracking gold, gbp/jpy, aud/jpy, and usd/cad at the moment. The only open trade at the moment is short aud/jpy, which was in profit as much as 300 pips but is now back down around 30-40 pips at the moment. I have not yet got any other signals, although gold is getting closer and also gbp/jpy. I hate to say this, but something happened yesterday with the TBP system, and 8 of my 10 trades hit the stops!!
It wiped out about 70% of the profits I had made with the system over the past month. I still plan on using the system, it looks like things are setting up for me to gain some of that loss back in the next few days as some big moves in several pairs seem to indicate some reversals, at least in the short term. I want to start using the swing index system, and I am almost done with school for the term so I will have some free time in about a week.
With regards to my "weighting" theory, it is really quite simple. Let's simplify it by only using 3 pairs: gbp/jpy, eur/gbp, and eur/usd. First I would find the difference between the TBP target and TBP stop for each pair, for the past 30 days or so, and find the average of this, which is the "range". I calculate this by taking the "ABS" function in excel (gives the absolute value) and then subtracting the stop from the target level, so if I come up with a negative number it is changed to postive by the "ABS" function. This "range" is basically a measure of the volatility of the pair, as more volatile pairs will have a bigger difference between the stop and target (obviously). Then, I convert this range into pips, by dividing each of the ranges by their "pipfactor" which for non-jpy pairs is .0001 and jpy-based pairs is .01. With my calculations, (which are a bit outdated so don't try to recalculate them) I came up with a range of 376 pips for gbp/jpy, 179 for eur/usd and 78 for eur/gbp. Just from these numbers it is obvious which pairs move more than others. The next step is to figure out the actual weighting of the pairs. The first thing I did was decide what my "baseline" trade size is, which for me is $0.20 per pip. Since I trade 10 pairs with the TBP, I found the median range of these ten pairs (which happens to be eur/usd at 179) and set that equal to the baseline, so my trade size for eur/usd is $0.20 per pip. To get the trade size of the others, I calculate a multiplier by taking that pair's range, subtracting it from the baseline and then divide by the baseline to get the % difference from the baseline. Then, I add 1 to get the multiplier. So, for eur/gbp the range is 78, minus the 179 baseline divided by 179 is -.436, plus 1 equals .564, which means that the range of eur/gbp is 56.4% of the baseline, so the trade size needs to be increased to make up for the lower volatility. To get the final trade value, take the baseline level ($0.20 per pip) and divide by the multiplier for each pair, so for eur/gbp you would get $0.35 per pip. Since eur/gbp moves less, you are trading with bigger pip values to average everything out, so pairs like gbp/jpy have much lower pip values (only around $0.09 per pip for me).
I apologize for all that, hopefully it makes sense, if you have any questions about it just ask, or I can e-mail the spreadsheet if you want. The only problem I see with it are if certain pairs "behave" better than others, like if you get more winning trades with eur/usd than with chf/jpy for example, since this weighting system totally ignores that aspect. Also, if your broker does not allow you to change your lot sizes like this, then it is not possible to weight the pairs exactly like I have. Oanda lets me make my lot sizes whatever I choose, so I can buy $500 worth of eur/usd, $2,000, or $5,231... it doesn't matter. I can even buy $1 worth if I really wanted, but it would tae quite a move to make any money
Anyway, I had a question for you Dale: Since it has pretty much been determined that stock indices and commodities follow these systems better, I want to eventually switch to trading these instruments exclusively. The problem I am having is finding a broker that will let me trade cfd's and stocks with a lower account balance. The lowest I have been able to find is $2,000 which is a little out of reach for me. I realize that you are dealing with different lot sizes and such and need more margin to cover it but I was wondering if you knew of any brokers with lower account balance requirements. I see that GCI only requires $500 for a forex account, but $2,000 for a stock/cfd account..
Waiting
A new trade was opened at midnight ny time yesterday (5 hours ago or so) and is currently up about 350 pips, the entry was at 994.25 and the target is 1002. Hopefully gold can break into the 1000s again tomorrow! I also couldn't resist and took a short usd/jpy trade yesterday not based on any system, but just the fact that it broke 100.00 for the first time in 12 years! It's rebounded to around 100.50 right now, but all the information I have been reading says that it has nowhere to go but down, especially after the upcoming fed rate cuts, I think citibank projects it to hit 95.00 in the next 3 months or something.
Linear Mode
