GBP/JPY Equity Building Profitable trading strategies

[rrram2]

gbp/chf destroyed
surprising action going on. I was looking at the GJGC overlay last night it looked really werid!

in deeper on NJ eeek!!!

[rrram2]

Andrew is pretty much right on with his understand of my trading methods.

The idea here was to get people to change their thinking and change their trading results, I added more thoughts for clarificaton of the last few days.

I feel OK holding onto NJ LT I have 32 1k Lots and I am way up there at 12.54%.

IT is here that you FIGURE out how far you can go down as clearly I have TMTH. So to do that you do 32 x .09 (price per pip for NJ) so I am playing 2.88 per pip, so almost $3.

So If I have available, useable margin left of 700 which is my balance - my drawdown + my interest. then you have 700 divided by 2.88 which is 243 pips before I am at 100% 78.26 - 243 pips = so down into 75’s.
Looking back there was lows on 3/17 and one the previous August.
Sadly if we run down more I am going to dig my heels in for the long haul.

Things are looking up economically, I gave away $400 so far to people in need.
Its going to be a great month!

NFP wont be as bad as expected and expect GJ to shoot for the moon.
Yen strength cannot continue.

Figure out UJ and GU and you will get a greta understanding of GJ.

That’s just it, and I’m assuming Elijah knows it, but he has never stated it fully. In fact, the method has never been expressed systematically, for which I think there is good reason.

My thoughts on the method:

1. The method’s given title features the phrase “equity building”, which refers primarily to the rolling collection of positive swap on long positions. However, a used margin percentage spilling over into double digit numbers is bordering on excess. This means any rational, experienced practitioner of this method will derive swap on a maximum of 10% (lower or higher at any given time depending on usage) of the position they command while they hold it. The realized “equity building” impact? Positive, but nominal. What keeps this from playing a larger role? More swap requires a larger position which requires greater margin usage which heightens the risk of a call on a drawdown which may be very shallow.

2. This method is really about buying bits and pieces as the pair declines, with the expectation of liquidating later at B/E or slightly higher. If there is a massive drawdown, negligible use of margin ensures a call does not occur. While waiting for the pair to resume an uptrend or waiting for it to bounce back, positive swap is earned. Again the benefit is small; but if the waiting period back to break-even is long, the swap can accumulate to a significant amount. The downside inherent in that strategy, however, is that trading capital is tied up earning pennies because eventually the pair will (well, is expected) to return to former higher levels. Too many too high (TMTH as rrram has referred to it) can result in a very long wait. A quick review of the last years GBP/JPY chart shows that longs picked last July are still thousands of pips from B/E. There is an implicit commitment to a 100% win percentage (or as close to as possible), which may entail waiting for years to zero out positions at no loss.

3. In a market that oscillates more so with no catastrophic decline, the opportunity exists to buy drops and exit for small profit - these are the “scalps”. The position sizes opened for the buys are very small relative to the account balance, so the profits are minimal, but multiple lots are typically opened and closed at profit. These are where the profits (the overwhelming majority) derived from the method are generated.

The virtue of the method, correctly applied, is that one’s analysis can be pathetically wrong but where margin is effectively managed, realized losses won’t be incurred unless a truly catastrophic decline results in a margin call.

The crux of the method is not swap/rollover or the carry component: at least, not in the real world. In actuality, “scalping” many small lots for their small profits is where the money is to be made, whether in an uptrending market, or in a ranging market.

This is however, where it becomes tricky. Does it matter where you buy? In a ranging market, not as much - unless you buy in at an absolute top, you’ll be able to buy and then sell at some point relatively soon for a profit. But in a more widely oscillating market or in a strongly trending market, it is very important. Relentlessly buying every 10, 20, 50 pips sounds easy enough, but over hundreds of pips, that a lot of drawdown and a lot of margin used. No matter, you say, it will return. But when?

To avoid potentially weeks/months - years? It’s not impossible - sitting in a massive drawdown is key, even though you’ll earn some swap. What does this mean? It means that buying cannot occur at random, but will require analysis so that you concentrate positions “low” (toward an objective market bottom) rather than just “lower” (buying lower buying lower buying lower buying lower buying lower with no real end in sight, margin permitting).

This is very important, and the most difficult part of the method to grasp because success here is almost purely discretionary. Buy a lot of orders up high and then go into a 1000 drop? Bad call on your part. Tough luck until the market brings you back to B/E 4 months later. Usually if you screw up, you’ll be fine: this method does not require an astute analyst. What it does require is the willingness to wait out and weather massive drawdowns for as long as it takes for them to aright themselves. Stops are out of the question because they negate the purpose of using tiny lot sizes. The margin call is your only stop, and your margin should be managed to avoid that at all costs.

Could you use that capital elsewhere to make money, rather than simply dig yourself out of a loss? Would the money made elsewhere outstrip the rate of return derived from the swap you’re accruing? Yes; and almost certainly yes.

So is the method viable? Yes, if managed appropriately, just like any other method. The essential difference here is that method adherence, other than not going short, is solely a matter of money management.

Is the method trading? Kind of. More like a dense series of tiny investment positions, bought at a alleged discount (“GBP/JPY will go UP UP UP”) and sold at fair value.

That’s a lot to read, but thought it was important to condense what’s has evolved over the last 136 pages and to clarify or dispel some notions that may be unclear or incorrectly held. I guess it’s ironic that I have not and do not trade the method.

[jerryd_99]

4xStar, you should check out your web page.

[4xStar]

4xStar, you should check out your web page.

I know … forgot to pay the domain renewal on time :eek: It should be back up soon, wthin an hour or two I would guess. Thanks

[mytwopips]

She’s getting cheap, but may have plenty more room to fall.:eek:

I got one real high (214.05). Bummer.

and two more on the way down.

[mytwopips]

Someone’s about to be an Honorary FX Man.

[pakiestra]

@mytwopips

She’s getting cheap, but may have plenty more room to fall.:eek:

I got one real high (214.05). Bummer.

and two more on the way down.

From IKH point of view:

She is just hanging aroung within the cloud, so far the bottom of the cloud (Senkou span B) hold the test for now (212.00). From there she can ride the bus either to the north or rather she goes on holiday to Mexico ?? If she goes south next drop down level to defend is rising trend line at 209.00 -don’t get TMTH as this can be possible there. Maybe spacing the entries every 100 pips for mini accounts or using the excel sheet to check the drawdown. I just wondering, we need The Expert to speak.

[nzpenny]

She’s getting cheap, but may have plenty more room to fall.:eek:

I got one real high (214.05). Bummer.

and two more on the way down.

I have been demoing this system and have realised that it actually takes a little bit of maintanance to keep up with the buy orders! The way I have been doing it is buying 3 times for every 100pip drop So for eg I would have buy orders at 212.75, 212.35 and 212.00 then 211.75, 211.35, 211.00… I close the .75 and 35 entries at 40 pips and I leave the .00 entries to run and move the stop loss up to lock in 100pips. That way I can use them as security for big drops but take the bigger gains in a ranging market. This system is working well for me I think as long as I keep the risk smallish. There is alot of pips to be made with all the bouces if one can keep up with the buy orders.

[4xStar]

I have been demoing this system and have realised that it actually takes a little bit of maintanance to keep up with the buy orders! The way I have been doing it is buying 3 times for every 100pip drop So for eg I would have buy orders at 212.75, 212.35 and 212.00 then 211.75, 211.35, 211.00… I close the .75 and 35 entries at 40 pips and I leave the .00 entries to run and move the stop loss up to lock in 100pips. That way I can use them as security for big drops but take the bigger gains in a ranging market. This system is working well for me I think as long as I keep the risk smallish. There is alot of pips to be made with all the bouces if one can keep up with the buy orders.

I agree … in demo mode, the trick is to always buy in groups of 3-5, take profits on all but one at (in my case) +20, +30, +40, +50 and let the last one run. Sometimes I take profits at +5 if price action seems stalled. I do not have a set interval to buy, I just watch for what look like good dips.
My account is now $1,074,000 up from $500k and I buy 7 lots at a time x 5 positions = 35 lots. Making money faster as it builds. I started buying 1 lot at a time, then when I passed the $750k mark I increased to 5, now 7.
Even a 5 pip profit gives me $350.
At the moment I have 4 older positions at 214.90 and 4 more at 213.90, all lower ones are cashed out. Now it gets interesting because if she drops to the 209’s and then does not return to 215+ anytime soon … some predictions are that she will go back under 200 :eek: … so I will have to see how to manage that scenario if it occurs. Interest is building but not enough to cover a major dd.
Well, that is what this account is all about … to see what would happen in a ‘worst case’ scenario.
A pullback to 209.40 (the 200 ema on daily) would most like be followed by a retracement back up, at least to 211-212… so I think I would watch price carefully there & if it looks like the next move is back down, then I will just close those higher positions. I see no point in riding them down to below 209.
I “think” I would put a 500 pip max drawdown on positions, that is a $35k loss per position, which is not nice but not that big a deal in a $1m + account
In a $10k account, playing micro lots, that would be a $350 loss per position.

My aim is to thorougly test this to develop a set of guidelines that can double an account within 2-3 months (my demo acct took under 8 weeks to double). IMO the minimum to start would be $5k with a micro account and one would have to be careful until the account reaches $7,500. After $10k, still trading micros, there should be plenty of money not to worry about normal dd’s, though perhaps the 500 pip cap would still need to be in place.
By this formula, a minimum of $50k would be needed to switch from micro to mini and $500k to switch from mini to full.
However, starting with $10k and doubling every 3 months would yield $1million in 21 months. I can wait

[sumwatt]

4xStar: Are you trading this in your Zulutrade account yet?

Given the gain/loss you are talking about, would it not make just as much sense to use short hedges on a drop? Instead of increasing your lot size, you just take a short hedge at the same time (instead of 5 lots, do 4 long/1short). This should help to let you weather a drop in case it goes against you and goes below 209? It should help to protect your margin a bit while you wait for the upward bounce.

-edit-

I’m assuming you trade out of the shorts before EOD to still capture those long interest rate payments

[4xStar]

4xStar: Are you trading this in your Zulutrade account yet?

No this one is too volatile for zulu, as a provider I am trying to make sure dd’s are as small as possible.

Given the gain/loss you are talking about, would it not make just as much sense to use short hedges on a drop? Instead of increasing your lot size, you just take a short hedge at the same time (instead of 5 lots, do 4 long/1short). This should help to let you weather a drop in case it goes against you and goes below 209? It should help to protect your margin a bit while you wait for the upward bounce.

-edit-

I’m assuming you trade out of the shorts before EOD to still capture those long interest rate payments

You know, I agree totally … the problem is finding the correct ratios. I was thinking a 3:1 ratio of long to short … like 6 micro lots long and 2 short. But I am still not sure if it is better to do this or to just short the G-Swissy. It is something I am still trying to work out, if I find some sort of formula that seems to work well, I will certainly let everyone know!
I may start another demo account just to test this out.

Another problem is … what if it goes to 209, bounces back to 211 but then continues down to 206, 204 or below. It could happen… At that point better to just be flat and if one were short the G-C, could ride that one down instead.
So … hedge? or set a firm stop loss? I don’t know yet.

[nzpenny]

I agree … in demo mode, the trick is to always buy in groups of 3-5, take profits on all but one at (in my case) +20, +30, +40, +50 and let the last one run. Sometimes I take profits at +5 if price action seems stalled. I do not have a set interval to buy, I just watch for what look like good dips.
My account is now $1,074,000 up from $500k and I buy 7 lots at a time x 5 positions = 35 lots. Making money faster as it builds. I started buying 1 lot at a time, then when I passed the $750k mark I increased to 5, now 7.
Even a 5 pip profit gives me $350.
At the moment I have 4 older positions at 214.90 and 4 more at 213.90, all lower ones are cashed out. Now it gets interesting because if she drops to the 209’s and then does not return to 215+ anytime soon … some predictions are that she will go back under 200 :eek: … so I will have to see how to manage that scenario if it occurs. Interest is building but not enough to cover a major dd.
Well, that is what this account is all about … to see what would happen in a ‘worst case’ scenario.
A pullback to 209.40 (the 200 ema on daily) would most like be followed by a retracement back up, at least to 211-212… so I think I would watch price carefully there & if it looks like the next move is back down, then I will just close those higher positions. I see no point in riding them down to below 209.
I “think” I would put a 500 pip max drawdown on positions, that is a $35k loss per position, which is not nice but not that big a deal in a $1m + account
In a $10k account, playing micro lots, that would be a $350 loss per position.

My aim is to thorougly test this to develop a set of guidelines that can double an account within 2-3 months (my demo acct took under 8 weeks to double). IMO the minimum to start would be $5k with a micro account and one would have to be careful until the account reaches $7,500. After $10k, still trading micros, there should be plenty of money not to worry about normal dd’s, though perhaps the 500 pip cap would still need to be in place.
By this formula, a minimum of $50k would be needed to switch from micro to mini and $500k to switch from mini to full.
However, starting with $10k and doubling every 3 months would yield $1million in 21 months. I can wait

My personal opinion is that you need to be more careful and aim for less gains. I work out what I can risk doing the 3 trades per 100 pips and be able to comfortably face a 2000pip drop with no stress. imho this is the way to trade it. With the 2 trades you will get consistant profit and with the other trade it will not matter if it does not return to the start. I trade a similar system live with the gbp(though I hedge) and I trade very small ammounts but consistantly get 15% a month and I am happy with that. Just my thoughts

[mytwopips]

go Guppy Go !!!

[4xStar]

My personal opinion is that you need to be more careful and aim for less gains. I work out what I can risk doing the 3 trades per 100 pips and be able to comfortably face a 2000pip drop with no stress. imho this is the way to trade it.

That is what I made up my spreadsheet for, to caclulate how much dd can be tolerated according to acct size, position size, leverage etc.
But … a 2000 pip dd?? That is what I am now starting to question myself about … do I really want to ride such a dd? Why not get out at -400 or -500 pips, sit out another 1k pip drop and then get back in?
I don’t have a clear solution for this yet … still working on it. But preferably I’d prefer not to ride through a large dd and I don’t want to short her either.

BTW, 15% per month gain takes a $10k account to $1million in about 30 months … not bad

[jerryd_99]

Do you still have the spreedsheet on your web site?

[holypendant]

That is what I made up my spreadsheet for, to caclulate how much dd can be tolerated according to acct size, position size, leverage etc.
But … a 2000 pip dd?? That is what I am now starting to question myself about … do I really want to ride such a dd? Why not get out at -400 or -500 pips, sit out another 1k pip drop and then get back in?
I don’t have a clear solution for this yet … still working on it. But preferably I’d prefer not to ride through a large dd and I don’t want to short her either.

BTW, 15% per month gain takes a $10k account to $1million in about 30 months … not bad

you do need such a drawdown. why do u get out at -400 or -500? what if it went up right after you get out? u will be asking what if it went dwn all the way n never get up. the ans i can tell u is that it is impossible… plus dun 4get what rram said. u muz haf lost leader… i do not have lost leader. i got lost squadron. coz whenever i feel the price cant go upo anymore n i equity is in positive, i gif up my lost squadron. u may not need to have lost squadron or lost leader. u may need lost group or lost battalion… different people have different management but with almost similar concept… hope u can understand what i say…

[rrram2]

When I was rolling it was VERY hard to keep up with the limit long entries as I was doing them as many as 10 10K lots per 100 pips. But that leads to THTM for sure unless youa re deep with margin.

It is a very adaptable system and as long as margin is closely smartly managed it is almost too easy.

GJ is looking to move higher. She has been bouncing down. I am long from
212.75 or so in the demo acct, but it is averaging down since it is a FIFO FOREX ACCT. I have 9 standard lots averaged to there TP set to just above 214.00 Of course if she can dip back into 212.20 or even 212.40 I would buy another. But she is acting very explosively I think and she is bound to break
at any time. UJ is strong. GU has to be near its bottom so expect a big move up here in GJ before week end.

I have been demoing this system and have realised that it actually takes a little bit of maintanance to keep up with the buy orders! The way I have been doing it is buying 3 times for every 100pip drop So for eg I would have buy orders at 212.75, 212.35 and 212.00 then 211.75, 211.35, 211.00… I close the .75 and 35 entries at 40 pips and I leave the .00 entries to run and move the stop loss up to lock in 100pips. That way I can use them as security for big drops but take the bigger gains in a ranging market. This system is working well for me I think as long as I keep the risk smallish. There is alot of pips to be made with all the bouces if one can keep up with the buy orders.

[rrram2]

There seems to be a little bit of this crazyness going around.
How is GJ going to go to 209? We could touch down to 209.91 possibly
in London tonight, but They wont be able to run it down that low.
It would be a wonder if she could even touch 211.50. Heck I am hoping for 212.20 which doesn’t even seem likely. But the strength during londons open
is huge and often it gets run down 100 pips then turns around and goes back up 269 pips, so study those charts in that 144 london open window,
for several days weeks or months, and if the light doesn’t go on you may have failed to pay the power bill.

[mytwopips]

212.20 ish showing strong support.

Are we going to be in the money!?!?!?!

or another break down fast to discount land???

My margin is good, so I am fine.

On the other hand I have all these usd/cad shorts.
I don’t like this pair and now I know why.

Tech… overbought
Iran… showing their butts
Hurricane… showing up in just the right places

Oil… Down WTF:eek:
usd/cad… up WTF:eek:
Mytwopips account… down:mad:

[mytwopips]

See, she doesn’t alway look like u/j. She looks like the cable sometimes. Like now.