Hi again, here is a new concept that I would like to put toward the thread and discuss. This is something I am yet to backtest as I am still backtesting the original methods (using daily charts with 55/21/10). So my thinking is about trying to lock in profits. I realise this approach will take out a few trades with profit too early so it might miss some longer/larger moves. So it will likely increase the win ratio but will probably lower the average profit per winning trade:
Lets work with a 20 DC breakout with an exit on TS with an opposite 10 DC:
Lets say we risk 1% using 2xATR(14). Now as we move into profit, we lower the opposite channel TS based on numbers similar to the following:
Once profit is up by x ATR, we change the opposite TS and make it tighter.
if we are up 0.5ATR, we lower the 10 TS channel to, say, 8.
if we are up 1ATR, we lower the 10 TS channel to, say, 6.
if we are up 1.5ATR, we lower the 10 TS channel to, say, 4.
I made these numbers up for the sake of presenting my idea, and backtesting will suggest optimal inputs for these.
What does everybody think about this approach? Breaking the rules and cutting profits too early on small pullbacks, or improving the win ratio and (hopefully) profitability by creating new expectancy inputs?
My account finally in a gain…It has been a long month… Now, hopefully it will grow and cover all the losses and some.
This is a 10 day channel, traded on daily charts.
Adrian, what do you think about running it exactly like this on a cent account and then only placing well established (over 100 pips?)trades on another normal account?This will increase the profitability, and the cost for those losing trades. Or is this also exactly what the Jerry Parker poster is referring to?
So let me make sure I understand. You put on a position of say 100 units in an account that allows that size on the break of a channel. Then you put on 1,000 units in an account with a minimum lot size of 1,000 at 100 pips further into the trade from the entry? Is that right? And then you exit both trades at the same level? Explain the exact details please.
I am not saying that Parker’s word is the gospel. But my mind does tend to see things the same way as he expresses there. Although I have heard that he has invested in a stock fund that does technically implement a technique that in a sense cuts winners short, but it also cuts losers even shorter. But it does so indirectly I would say.
Here is my main thought: I ONLY get paid for the change in price from my entry to my exit. Why should I care what happens beyond that? If I buy at ten and the price shoots to a hundred and back to fifteen before my exit is hit I made five. Some would say I lost eighty five but I say that is just counting chickens before they hatch. As soon as I go to cash in at a hundred I will inevitably watch it go to two hundred before my channel stop is taken out.
Dennis and hus crew got in with a long channel and exited with a shorter one. What I do is a pure Donchian approach.
The reason I do that is because I can run five systems on each fx market whereas the turtles could not for various reasons (technology, granularity, whatever).
But also I use a moving average direction filter as did Donchian, the turtles did not. The turtles used a sort of trade frequency reduction rule that looked to keep the out of whipsaws in the shorter channel but always took the entries on the longer channel. I have considered doing that but I have decided the moving average filter already reduces trade frequency dramatically.
I like how you have found an approach that you are happy with and can apply it consistently. I have found this with my intraday discretionary trading, but am yet to settle on a longer term strategy. I like the idea’s behind turtles and donchian trading, just trying to find the exact approach within these principles that suits my personality. I am more of a trader than an investor.
Same here. I have been at it for maybe a month and a bit. Still haven’t locked in anything but losses. As an ex-intraday trader, it is extremely difficult for me to pipe down my involvement (I think this hugely affected my trading negatively) I am trying to limit myself to one view per day (myfxbook) and to only intervene once a week when adjusting my stops. It is a bit like dieting/quitting smoking. It requires a lot of self control.
My two cents guys, I use more than one approach to get my trades inn. I look at the market conditions over all before i pick a pair . First my monthly goal is between 600 to 1000 pips , this allows me elbow room and less stress , we have enough stress in trading. I start with intra day but if i need to go longer i will. As a trader i need to just to the market NOT the market to me. Happy trading.
Totally. There is nothing we can do to “fix” the implementation, the key is to just let it run. Trend followers usually see a string of losses slowly pulling the equity curve down until a big pop up wherein there are strong gains followed by another string of losses and so on. Unseasoned traders will quit running the system as it goes into drawdown and miss that big pop. The key to sticking to it is position sizing.
What do you think was the major factor that detracted from the results?
For kicks, a year ago I ran a channel (can’t remember what length exactly) on a five minute chart in a certain pair for a certain portion of the day for two whole weeks. I was profitable every single day, but not by much. The experiment showed me just how expensive it is to try to get returns from a market at that resolution.
Fees/spread costs: In a good trade I might bag 30 pips or perhaps even 50. But most of the time I would bag just 10 or perhaps less. With the spread and fees eating up 2.5 pips, a 10 pip winner was actually a 12.5 pip winner with 2.5 pips in costs. That puts costs at 20%. The more long term you trade, the lower that percentage gets. That alone should have us starting at the opposite end of the spectrum looking at the longest possible terms we can.
Screen time: Looking at the screen every five minutes to make adjustments is basically looking at the screen all day. Eight ours of that is a full time job. If you pay yourself just minimum wage or say $8 an hour you need to add $64 for an eight our session to your costs. If you want that $64 to be at least as small as your fees and spread costs, you need to be trading a 256,000 position in a currency quoted in USD to give 2.5 pips a cost of $64. If you did, you still need to bag 5 pips just to break even on the trade (and that is if you just do one trade that day, costs go up with each trade). If you are trading just 100,000 units, you need to win 6.4 pips a day just to make minimum wage. Now it becomes a no-brainer when you can trade longer term and put eight hours a day into another job that pays much more than minimum wage.
Headache: The emotional/mental stress and strain of trading that way is enough alone to simply go longer term. I personally found it too demanding to trade even daily charts and have simply gone to weekly data alone. If you miss entries because you had to pick up the kids at school or if you have to turn your girl down on some good fun while you adjust your positions, you may be making more trouble of this unnecessarily.
I have no doubt that someone can get their exits to be in the green on an intraday time frame, but at what price? It is very expensive.
What specifically put you off of the intraday stuff?
After two and a half months, I am only properly in the green now. I have been in and out the last month or so, but lately it has been green for a few days (probably because of the Paris incident?) There has really been quite a few times that I wanted to give up and I can see how so many do…
I have been following some longer term news about some currencies, but scraps that I get from here and there. Can you suggest some websites that give overview of medium term (>1 or two months) for currencies? Something I can perhaps keep at the back of my mind while opening new trades?
Also what are your views on scaling in on certain positions. How do you establish when it is feasible to open a new trade with a bigger lot size?
Adrian, are you still running different channels on FXCM? Your publisher has not updated since Sept 30th…
Yeah, I should update it when I get home tonight. I am now running a 7 week channel with a positive swap direction filter in that account. It has not changed much at all since September. I am actually contemplating making the rollover as my directional determinant in all my systems but perhaps only when the differential is above a certain threshold. I have not decided. I am not doing anything like that in any other accounts, those just trade the pure systems.
Please do…I like to monitor them to see if I am on the right path… I will keep an eye on this 7 week channel and see how it fares… Theoretically it is a sound idea…
Just a recap then…I am finally at a “breakeven point” if I had to close all my positions now, but this will have more weight if I can lock that profit in. So the idea then is that I will hopefully lock in on trends that when stopped out will eventually pay for all the swap charges incurred and the losses in finding those trends.
Nobody knows how long a trend can last, and when we will be stopped out of a position, but can we roughly estimate that it can happen less than a handful times per annum?
