Sorry, I got to burn a post but it’s important.
Todd,
If you have already read my last post, please read the bottom edit. I forgot one more positive of only hedging half of your positions.
Well, so maybe some more experienced guys can let me know what they think of my play calling last night…
There were 3 critical prices I was watching. The temp resistance she’d hit twice at 205.5x. A 38% fib line at 205.80. A 23.6% fib line at 204.58. The fib lines come from the high at 8/10/2008 22:00 candle, the low at 8/13/2008 9:00 candle, 1H chart. I was also keeping a close eye on that rising wedge/trend channel on 1H. The price had bounced off from the 204.58 fib, and also the lower end of the wedge. She was heading up, on the 8/15/2008 6:00 candle, and past the 205.5x and looked to be encroaching on the 205.80 fib. So when she hit 205.8, I was thinking it would hold as support and price would go up to 206.50, put in a call alert so if it hit, I’d re-instate my hedge. So that is where I took off my hedge, at the 205.7x.
Looking back, it looks like I was off by 3 pips, ugh!
^^ However if andrew/rram/m2p/pipsquit/4xstar could review my thoughts and let me know what they think. I’d be most greatful <—which isn’t a word?
Cheers ya’ll, its the weekend and boozing time 
<edit>
Oh and don’t feel too bad. I’m only 24 and lost a total of 500 bucks initial investment. So in all I look at this as an excellent learning run. I never realized how much emotion have tied up with my money, and only 500! That in itself has been an incredibly valuable lesson from forex.
Hope you make it out of the woods Pipsquito!
Great, thank you…that’s the sort of insight I was looking for. But it is too late for the “half short” idea since I am already in a full hedge.
I am also not sure if I understand…if I short half my long position, which is already in the red and won’t break even until 214…how would I end up with money if we hit 214? That is 900 pips away. And if I break even on the longs in 900 pips, but have 450 pips of loss…?? I’m sure I am missing something here…I never did well with the “if you had a speeding train going 120 miles an hour and two ducks swimming in a stream at an angle of 45% against the train track…”
I am mainly concerned here with what to do with the situation I am in right now…a full hedge, 70 pips in the red with the guppy headed toward a possible turn back down in 100 pips.
Just a thought, but with your short, you could start closing out partial positions. Like if it goes down and you close it at a profit, you could start closing out partial positions of your longs as they hit break even with the profit on the short. Make 500 on a lot on the short, close 0.5 lot at -1000 pips on the long. That way at least if it headed further down you wouldn’t have as many longs riding down. Hope that makes sense.
im sorry…i was just introduced to this thread…i skimmed thrugh the 1st 10pages and decided to jump to the present moment…how did yall decided to start hedging it? what are the pros and cons? i understand that u have to open less shorts than longs cuz of the swap.
im on my second demo…1st demo was a mini starting with 5000 and i was throwing 10k lots all the way down.yea i know i know,lasted about 2 days…now im on a micro acct where im throwing 5micro lots out at a time. and it seems more effective.
i place entry orders 20 pips from each other all above the curent price.each one with a 20pip profit target…and ill do that every time i visit the chart…about once a day, im at a total of 7mini lots(not micro) and its only takin about 5% of my margin…and im up $80 in intrest from the positions that open themselves but do not close. i like this. alittle slow but effective, especially if u throw my ‘‘10k to 1mill in one year’’(<~~~search it) concept into it…like when the acct(not sure if i should decide on the realized or unrealized, someone help me on that please) reaches 6000,ill start throwing 6micro lots at a time and so on and so forth
it was out of necessity and desperation that we started throwing hedges at it. we got too many too high (TMTH!). we had too many lots too high up where the drawdown was making our accounts get called cause we didn’t have enough funds to support the losses we had. So, we shorted hoping to drop the shorts where we magically pick the exact bottom. (hahaha…if only) we’re all learning here and personally, I’m only gonna run this system when the weekly and monthly time frames are headed up based on stochs and a few other indicators. that way it’ll at least be trending up on the long term. live and learn i guess.
Isn’t FX a two way market? Meaning you can make money buying or selling, so why is this thread making it seems like a criminal offense to short the “GUPPY”?
The market moves and will always moves three ways not one, it moves up, down and sideways. Its as simple as this BUY when the trend is up, SELL when its down(like now). I some what understand what you guys are trying to do here all I can say is “good luck”. Not trying to be negative here but all i’m seeing here is accounts being wiped out, what about that “huge” interest? Its obvious that it will never match nor close to the draw downs some of yall are facing.
“runs for cover”
Ignore the whole hedging thing, that’s my personal stuff. It is a bailout tactic that if you are doing things right (keeping your margin in check and not opening too many trades) you are not supposed to have to contend with. It is not part of Elijah’s system to hedge anything. Talk to M2P…I think he has managed a way to avoid ever being threated by a margin call. He is either a genius, a sorcerer, or has found a broker that pays less than a penny a pip.
I have been in this situation three times now, twice with live accounts. All three times the guppy dropped as no one ever expected it to drop. No matter how careful you are, there is a spot the guppy can go where you will get wiped out. 200? 195? 185? 100? At some point your “bet” is off and you fail. Elijah says this can never happen. It would be like saying you will never fly in a plane because at some point that plane could crash. If you flew it 1,000,000 times, there is a great possibility you would die. Of course you can’t live your life that way. Same with forex. But for me, it has crashed three times. But maybe I am not doing it right. M2P possibly IS doing it right, and he is OK…no hedges for him. So I am not saying this system is screwed…I don’t think it is…I think it is pretty cool. But I also see it more as a carry trade investment. No one has seen the light of 242 in quite some time…and you would have to have one hefty balance to support the drawdown from up there if that is where you started.
Don’t judge this whole system based on a couple of people’s misfortune with it. I have been active posting here just for fun. I am not trying to knock this. I am not confused or dismayed or feeling betrayed. I just don’t think I have done this carefully as I should have. It is my blunder that has put me in this position.
Basically, in my opinion, what this is about is holding GBP/JPY…and scalping as it moves, but essentially just holding it. The worst case scenario is if it never moves and you have to hold on forever…but making interest all the while—so that is a good worse scenario. If you short, you don’t make interest, so the idea is NOT to hold a hedge, or any shorts. This is not trading in the usual fashion…it is carry trading to some degree, but more active than that as you DO scalp (basically ALL you are doing is scalping, because your profits are made in small 10 pip increments.) As you gather these 10 pip prizes you just place more trades to replace the ones that profited. That way you can make the same 10 pips a dozen times. This the genius of the system. You hold your longs, make interest, and gather the toll each time this crazy yo yo passes a 10 pip threshold, and you’ve got traps set all up and down the range…hundreds of them. It doesn’t matter if you ever reach your first trade again, you may carry a $100,000 drawdown for ten years. Who cares, if you have the balance, and the room to go down another 2000 pips, then you will always make interest, and always be in a position to collect 10 pip profits as it jumps up and down 100’s of pips at a time.
However, you must have the margin and the balance to do it! If you don’t you get caught in the trap I am in. I cannot afford to constantly be putting in my 10 pip scalp longs because I don’t have the margin, and my balance will be wiped out if she keeps going down. So I miss out on one of the major attributes of this system…building my balance as she flies all over the map. I am making interest, but that is no good if I get a margin call and lose my account. If I was playing this as a normal trader and shorting and buying etc. etc. then it would be like any other system and we wouldn’t be on this thread yakking about it.
In my opinion, you may have to have such a huge balance to play this comfortably that it isn’t a good return on your money. But I really could be way off on this. I would like to see how much you would have to have in your account to buy down every ten pips with a drop of 4,000 or 5,000 pips. The odds of a drop like that are pretty low. Of course you can adjust on the lot size…that is why I am saying you may need a $100,000 account balance and trade micro lots to make this work…making $10 a day at best.
The spreadsheet should be able to figure this out, but I am too dense to use it. Obviously!
One guppy trade pays around 800 pips a year in interest.
I said “around” because the rates can change and I have not spent the time to calculate the exact present number. Maybe someone can do that and give us an exact number. But 800 is real close if not right on the money.
Now if you cover all your positions, if you are able, to a true leverage of 1:1, you will never face a margin call unless England gets wiped off the map.
Now the question comes as she keeps falling of “Do I buy more and let them appreciate and grow interest?” That’s a tuff question because it requires speculation and risk because each buy will increase your true leverage.
One major down fall of this strategy is time, time, and time. It can turn from trading to investing real quick.
A second downfall is greed and wanting to fast forward time. You now have to decide if you want to fast forward time, it will cost you more leverage. That increases your risk.
Besides that, this strat will always pay off.
As I stated in my other thread though. This situation made me realize that I want to trade and not invest. So this will be my last guppy trade ever like this. I will start trading the guppy like I do other pairs on my other thread. So losses are going to happen, but overall account growth will always be up. Unless the market one day renders my strat useless. That could and does happen. If so, I will adapt and change with the market.
Hey pip, the answer to your question would be, from a 214.00-174.00 price drop. Buy every 10 pips, buying 1k lots. You’d need a balance of 80,000 USD to cover all the draw down etc. needed.
You would also be looking at about 7,300 USD in interest yearly. With 400 trades open, the fluctuation up/down is about 40 USD a pip.
What do you mean by “true leverage 1:1”?
And…if you are constantly scalping those 10 pip moves aren’t you trading AND investing? I see this, in the ideal scenario, as both. The trading (scalping) nested within the outer frame of the carry trade. If you have 400 trades open starting at 214 say, all the way down to 185 or so, and you are still within “safety”, wouldn’t she be moving around alot within that frame? And while she is moving up and down within the overall trend (lets assume if she is at 185 she has “bottomed” and is headed back up momentarily) wouldn’t you be grabbing tons of pips as she oscillates back and forth? For arguments sake, lets say 185 IS the bottom (for now)…can’t you be trading in the center of this overal carry trade?
I would say that when it is strictly an investment is when you are at the very bottom of your tolerance (if you had an $80,000 account and were close to the -4000 pip point as mykungfuisgood has pointed out) AND IT NEVER MOVES. Which of course isn’t possible. If she moves up, you will be trading, if she moves down, you are screwed (or you fund your account.)
So…to answer my own question…I should keep refunding and keep buying down as she fluctuates and add to my account…of course after getting rid of this hedge short!!
Am i flawed here? Certainly possible i am…if not probable.
I think you got it. That about sums it up.
Now about 1:1 true leverage:
A hypothetical example:
If you are trading $50,000 worth of contracts with all your positions added together, you would need a starting balance of $50,000 dollars. If you keep buying more and now are trading $60,000 dollars worth of contracts, you will need to put 10g more into your account to get you back to a true 1:1.
Now if all you have in your account is $1000 and you are trading $50,000 worth of contracts… well do I need to really explain this one. Lets just say “Your screwed”.
To add to my last post:
Why 10 pip buy increments and tp increments? That’s too darn close (IMO). Why not 50 - 100. Oh well that’s a whole other debate. I don’t want to debate it, just something to think about.
I like to tp around 65 - 70 pips because that is about a months worth of interest. If I can get a whole months worth of interest in a day, why not close it and look for a place to get another.
I think, and maybe I am wrong here, that the 10 pip increments are necessary to take advantage of the volatile guppy swings, that keep going over the same territory. If your TPs are too large, you may get the 50 or 100 pips once, but not potentially dozens of times. It is about “resolution”…if it is too coarse you don’t sweep over the increments mulitple times. The actual market activity may prove me wrong…say, to take a 1 minute chart and look at its history over a 24 hour high volatility period…but it seems to me you would make more if you kept re-entering those 10 pip gains and she kept backing up and grabbing them and then doing it again and again. There certainly would be times this wouldn’t be true…say on one of those skyrocket moves where she never looks back. But for instance the other day I got sea sick watching her go over 205.00-205.60 a dozen times …or so it seemed.
Oh I forgot to comment on a post made a while back on why Elijah didn’t name this thread “The Carry Trade”.
Well why doesn’t Dodge name all their red cars “The Red Car”? and all their blue ones “The Blue Car”?.
The answer is, because he didn’t want to.
He named it what he wanted to name it. Part of the reason is it’s a little bit more than just a carry trade. If you are wondering what the “little bit” is that I am talking about, start at page one and keep going until you reach this point again.
Hey, does anyone here think it is reasonable to think that you can double your money every two months in the forex? Of course some months that won’t happen…but basically being successful enough to do that? High risk of course…or maybe not.
Before stumbling on this guppy thing that is easily what I was doing…even in my live account. I actually made an attempt to NOT make money because I was afraid I was doing something wrong and would pay for it dearly down the road. But I consistently did really well. And in my demo accounts I am still doing well. My live accounts have suffered because of this system messing it up…but when I was trading my own system with careful money management and careful trend watching etc. i was doing well.
However, not for very long…just this year actually…maybe 8 months. Before that I was failing, although slowly figuring it out. So…I know 8 months isn’t enough to be sure of anything…so I am asking…should I slow down? Should I back off on my lots, my risk taking etc. and stop being so successful???
Am I doomed if I keep making such high returns and am just waiting for the ax to fall?
After all this guppy stuff I do wonder if I am too much of a cowboy for this. My strategy does not allow me to get too far in the hole…low drawdown etc. It has stop loss strategies…what killed me with this system is the huge drawdown and a very naive approach in believing I would be “OK”…
I second the above, the only way to win using this strategy long term, is to buy right in the first place. Just like buying a house, a stock or any other ‘investment’. The problem is people were mixing trading with investing … two different animals. This is after my own experimentation, luckily in a demo account
1:1 true leverage just means you are not using any margin, you can only buy to the limit in your account.
I don’t think you can have only 80k in an account and buy every 10 pips down from 214 to 174! Something is wrong there. The spreadsheet I made will calculate that, when I get a moment I will run the numbers.
In the meantime, I am back to trading … if I ever have an extra $20k to speculate with AND the guppy bottoms like she did in March or in 2007, then I may buy some & plan to hold & gather interest. Otherwise as a trader, I buy in uptrends and short in downtrends ;). Or look for short term value like with the M2P strategy.
And yes, I think a skilled trader should be able to double their account every 2-4 months, maybe a bit longer with a much larger account. 7% profit a week will double an account in 3 months, 9% a week will double it in 2 months.
To double every 2 months a 10k account would need 900 pips profit the first week trading mini lots, or 90 pips trading standard lots By the time you are at the 8th week, you need 1640 pips profit (9% of beg. balance) trading mini lots or 164 trading standard lots. At week 31 (8 months) you need to be making 1238 pips of standard lots to sustain the 9% growth (your balance would now be $150k).