I have been shifting to a new house and hence was missing from action the last couple of weeks. I have read Dennis’s post.
I will start again with modifying the EA later this week.
The thing that keeps bugging me is increasing of lot sizes with the growth of accountbalance(). I think it is wrong. To keep it mathematically correct we should increase lot size only with accountequity(). Afterall it is the equity-growth which matters for an account and not the accountbalance().
As for Dennis’ summary of primers here are my two cents:
Main primers = (Total No of Normal & Primer Buys - total No of Normal Sells)/3 {For sell primers}
Sec primers = (Total No of Normal & Primer Buys - total No of Normal Sells)/3 {For sell primers}
Sub Primers = (Total No of Normal & Primer Buys - total No of Normal Sells)/3 {For sell primers}
If you add 1 + 2 + 3, it is equal to drawdown, hence any more equity loss if price keeps going down is avoided. By placing appropriate TP, SL and Primersteps we can turn equity from stagnant to green. {this i believe is M’s idea of using primers}. If you are little more risk taker then I suggest SubPrimers with smallest TP should be bigger than the remaining. this because they are sure of hitting TP. For eg. Price breaks below 1.5000 where you have placed your first set of primers. Your main primers and sec primers may hit BE 4 times in a drop of 300 pips due to retracements which means you might have made only 10$ on each primer on a drop of 300 pips. But the sub primer is sure to hit 300 pips of TP. So a bigger sub primer and a smaller main primer might be good for a low risk low return trader.
If price now retraces back up, then you will be carrying back the primers and hence at a certain stage will again face drawdowns because of the open sell primers which are bigger than the normal Buy lots. Hence we must place Buy primers with a calculation as below:
Main primers = (Total No of Normal & Primer Sells - total No of Normal Buys)/3 {For Buy primers}
Sec primers = (Total No of Normal & Primer Sells - total No of Normal Buys)/3 {For Buy primers}
Sub Primers = (Total No of Normal & Primer Sells - total No of Normal Buys)/3 {For Buy primers}
But in between we must start trading normal trades to raise equity. these normal trade lots should increase gradually on a percentage system based on equity.
[B]personally i think you a right with the:[/B] Main primers = (Total No of Normal & Primer Buys - total No of Normal Sells)/3 {For sell primers}
with the accountbalance() VS accountequity() im a bit devided… when using an account with a margin call i totally see the idea in using equity for the increase, only thing bugging me, is that when getting low on equity the lot size should NOT decrease, but primers should activate instead, so that we dont go from lets say 0.09 to 0.01 in lot size because of an equity drop…
last time we tried with equity the lot size fluctuated alot…
by the way, could you also take manual trades into account when calculating the primers?
if i have made some manual buy’s, then they will still add to the drawdown, so they should also be accounted for when placing primers
i just connected my channel to myfxbook, but keep in mind that im combining the EA with manual trading, as the primer part of the EA is not working optimal yet… and i might f#¤%& something up with my manual trading
I’ve actually started using the lot increases from the manual system. I don’t know how M calculated this, but the thing is, the quicker you increase the lot size, the less relevant regs far away and open primers going against you become irrelevant. With larger lots the profits you get where the rate is right now becomes more important to balance than the regs you can’t do anything about, so increasing lot size quicker than we have done so far helps, it doesn’t hurt.
On the opposite side, if you calculate lot size from equity, then you’ll end up with a situation where when you need bigger profits to extend you SL, you’ll instead get smaller profits as the lots decrease.
This would be the same as opening a single primer to cancel out the entire drawdown. If you do that a sell primer will cause ChannelTop to be triggered within about 500 pips, then the buy primer will cause ChannelBottom to be triggered with 250 pips, then 125, etc. In a matter of days you’ll have ChannelTop and ChannelBottom on top of each other and no more channel.
Now you’re just changing the functions of main primers and sub-primers. Firstly there is no guarantee that sub-primers will hit TP, and since TP and distance is the same for sub-primers, a new one will open. Assuming you get far enough below ChannelBottom to trigger main, secondary and sub-primers once, you bring one of each with you back up when the rate turn. I’ve included the option to replace secondary and sub-primers in my code, and it can help a lot on multiple retracements, but you’ll also end up with multiple open primers when rate finally turns.
A typical scenario I’ve been facing, is that rate goes down slowly, but with large retracements of 100-150 pips taking out SL unless you use really long placement distance, so I increase the size of sub-primers to make up for it. Then as you’ve finally gotten a big dose of sell primers, the rate suddenly jumps up 150 pips and since equity is still really low, and you now have lots of sell primers, boom, your dead.
it can hurt… if you increase your lot size to much (or to fast) you can come in a situation where you have not earned enough money to cover the drawdown in situations where the cable suddenly goes on a 3-400 pip trend like the one 6 june, i earned alot that day, but got a bigger drawdown than the profits due to the lack of retractions on that run… so personally i wont increase lot size faster
Dennis is right, the sec & sub primers should not be the same size as the main primers, that will for shure give us to much drawdown when the rate turns
Yes and no. Like I said, I don’t understand the calcs behind the manual system lots, but at 0.01, the profits for each order with the trend will cover SL for 1 order against the trend, the problem is that you have lots of orders against the trend hence you need a big account balance to cover it all. When increasing to 0.02, your profits will still cover SL for an equal order (placed at the same time) of 0.02, so nothing has really changed there. However, once ranging starts again, each TP will now cover SL for 2 of the open 0.01 orders far away. This means that the orders far away will become less of a drag than before, while the cost/profit ratio of the orders where the rate is stays the same.
I find it frustratingly slow to learn from M as he keeps referring to the “basic math”, but doesn’t show it as “there are too many variables and scenarios you can encounter”. I’m sure he’s right, it just doesn’t help me very much. I’d rather have too much information and need time to sort through it than not enough.
Lately I’ve been thinking that balance and lot sizes are less important than cash. If we could somehow set a center for the channel using averages for some time period (M suggested April 2009), we could calculate how much money we would need to extend the channel by x pips from out current situation. “x pips” could then be S/R lines. Primers would then need to be sized by that need so that if there’s a support line at 1.4830, how much money do we have to secure to survive to that point, and if rate breaks that line, the next support line will be at 1.4780, so we’ll need another primer of size y to trigger there.
I know that M says it’s all math and that he doesn’t use indicators etc, but he is clearly looking at S/R lines, and I’ve never seen any actual math beyond the cost of drawdown per pip.
yes, but the problem comes in a really trending market, because now i maybe have 20 x 0.01 open AND 10 x 0.02 against the trend, so now im getting much more drawdown pr. pip than if i had 30 x 0.01
when i have a TP of a 0.02 trade, i still continue to get the drawdown from the opposite trade, so they dont equal eachother out… when im at the egde of my channel i then only get a plus from 1 x 0.02
it is correct that the smaler trades (and their drawdown) get less important after lot increase, but you need to remember the drawdown created by the new bigger lot sized trades
No, you’re missing my point. Say your channel is fro 1.6000 to 1.5000, all 0.01. Then lot size grows to 0.02 as you move down to 1.4800. You place 0.02 regs both ways so the drawdown doesn’t change as a result of lot increases in those 200 pips (just the general drawdown from the old orders), since profits from 0.02 will cover SL from 0.02 in the same way 0.01 vs. 0.01 will. When you return above 1.5000 again, you replace your old 0.01 regs with 0.02 regs by removing any pending undersized orders and closing open 0.01 regs to make room for 0.02 regs instead. This way the profit/cost ratio stays the same for where you are, but the 0.01 regs far away become less of a problem.
Yes I saw it, and it might work, but as M said in his reply, this is a completely different system. We know that M’s system works (if we can just figure out how he does it), so I’d rather try to learn what M does than start all over again with a new system. (Although I’m salivating at the thought of learning the negatvely correlated system. It sounds much better suited to an EA than the hour-glass).
There was just a very helpful thread on this at M’s wall:
snip: Averager: @viking1961 Hi morning Michael! I have to bother you explain a little for channel centre, I cannot quite understand the explanation you gave to Dennis.
Maybe you can use my channel as an example and explain how to derive my channel centre. I started this Channel on 18Feb2013, all trades are 20cents per pip. etoro.tw/19ZDBrz
After we find our channel centre, how to make use if this information for our decision?
Hope you don’t mind repeating in a more layman terms. 44 minutes ago from Singapore
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2 More comments… Hide comments viking1961: Right, I did explain it somewhere in one of the basic info´s but can´t really find it now. Since we are trading a situation, which of course is the crisis now, we need to follow how the crisis develops for various countries / states. Now since I am trading the cable, this is what I focus on. Since the crises which actually started in 2007 , where the cable rose above 2.2000 and then when the crisis hit Europe , the cable dropped like a rock bouncing back at the 1.37xx area. In April 2009 it started to settle down , so this is what we use as a starting point. When I started my channel in 2012 , I think now after having checked that the centre of the movements since April 2009 was around 1.5740 . This was the average rate since then. So I used this as my centre. Now the rate has been below it a few times and this time,its been lasting for quite a while, lowering the centre to 1.5600 ( approx) . Which means that you should have your channel stabilized around this figure.
12 minutes ago
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viking1961: Meaning that your equity when being at this level, should be around neutral, not going up nor down when the rate moves until you hit a tp above or below. Then your lenght of your channel should be 1000 pips before you would have needed to change your equity from going in minus to going in plus, by using the primers. So it´s basically a neutral point where the channel should be in balance, as its the average rate since the crisis became ( stable) . Nonne of the parties involved in the crisis are interested in bigger fluctuations of the exchange rates as in a crisis you need stability as to know what you are up against, this is also why sometimes the market doesn´t react as we think it would. The rate remaining stable or going up when it should go down etc. So basically this is your best indicator of how its going during the crisis .
/snip
To me this means that primers aren’t all about short term drawdown only, but needs to take into consideration the larger picture as well. Need to ponder on this.
