Good (Sunday) morning everyone,
Thanks for all the posts since Friday.
OK - well - I have to be very honest with you:
At this point - I’m more than just a ‘little p****d off’ - with this ‘system’ of ours AND forex trading in general. I mean - I waited for days (weeks) on end to get ‘valid’ Parabolic SAR trades - and - for the most part - it sure seems that everything has - and will - go pear shaped on ALL of the trades that I waited so long to get into.
I have spent the entire weekend asking myself: ‘What are we missing here? We must be missing something and I don’t know what it is’. I mean - as I stated above - I waited AGES for EVERY SINGLE ONE of our ‘rules’ to be ‘satisfied’ - never wavered - had patience - and the end result of going to ALL of that ‘trouble’ is a ‘nice fat loss’ at the moment.
(Also - are we (I) not trying to trade long term with a short term mentality???)
Now - while this ‘nice fat loss’ MAY turn to a profit at some time in the future - to be honest - on the positions that I hold at the moment - I can’t see it happening - not without some HUGE drawdown - and - with the instruments that I currently have open positions on - I’m not sure that my account would be able to withstand these drawdowns if I get stopped out and have to stop and reverse (admittedly I’m ‘overtrading’ my account at the moment but still) - and - to be quite honest - at this point - I’m not even sure that I’d have the ‘guts’ to stop and reverse if I got a signal to do this from Parabolic SAR (Gold and Silver being VERY good examples at the moment).
One thing that keeps ‘firing off’ in my brain: J. Welles Wilder Jnr. ONLY traded commodites (like Soybeans, Lumber, Coffee, Live Cattle, etc. etc. etc.) - could THIS be why this indicator is not performing that way that we expect it to (or would like it to) on forex? There is a MAJOR difference between the price action / behaviour of Soybeans (for example) and forex pairs. One MAJOR difference (and this SEEMS to be where our ‘weakness’ lies) is the fact that commodities ARE NOT subject to huge ‘spikes’ because of economic news data and the trends that commodities follow appear to be far more ‘stable’ as it were. COULD this be the reason we are battling here? I’m not sure - and any input on this matter would be greatly appreciated.
Now - please don’t get me wrong - it is NOT my intention to ‘take the wind out of everybodys sails’ - but we CANNOT simply go on with ‘blind’ faith in the ‘system’ and accept drawdown after drawdown HOPING that we’re right EVEN ALTHOUGH backtesting results show long term profits. It’s fine to show long term profits with backtesting but remember one VERY important thing: you have to have the margin to sustain these drawdowns before showing profits at the end - and - obviously - if you’re margin called at any point - it really does not matter HOW much profit backtest results show if you can no longer be in the game.
SO - again - getting ‘Analysis Paralysis’ and analysing every single chart on every single timeframe - I THINK I MAY have found something that COULD very well change our fortunes and it’s really very simple:
50 SMA and Parabolic SAR. That’s all!!! (Where have you heard THOSE words before)???
The idea is this:
You go short when the price has CLOSED below the 50 SMA and you go long when the price has CLOSED above the 50 SMA and you use Parabolic SAR to set stops and take profit.
Once stopped out and profits taken you DO NOT reverse the position i.e. you ONLY open a new position once the price has reversed to the point where it has crossed AND CLOSED above the 50 SMA again. In other words - for example - let’s say that you were in a short trade based on the ‘rules’ above - you used Parabolic SAR to set stops and take profit - and you only went long if or when the price crossed and closed ABOVE the 50 SMA Obviously the reverse applies if you were in a long trade based on the ‘rules’ above.
These ‘new’ ‘simple’ ‘rules’ APPEAR to benefit us how?
Well - for one thing - margin is not unecessarily ‘tied up’ for days (periods) on end while the price is making up its mind. In other words - I’ve noticed that MANY times - when Parabolic SAR has given you a ‘valid’ entry signal and you take the position - the price seems to ‘hang around’ at that point for quite a while before it starts moving (hopefully) in ‘your’ ‘right’ direction.
It also APPEARS that we would be kept out of trades more often than not where Parabolic SAR was indeed wrong to start with.
I mean - take a look at my daily chart of GBP/CAD - my prize ‘f**k up’ of a position on Friday. Based on these two new simple rules - I would NEVER have been in a long in the first place AND look at the results of the short position that I COULD have taken a couple of days prior. No contest.
I don’t know what you all think. Take a look at some charts and backtest. See what YOU come up with.
One other thing that appears to be evident is that this ‘strategy’ can be used on ANY timeframe as well. Of course - the shorter the timeframe - the smaller your potential profits (and of course potential losses or drawdowns) are. If you need to make money fast (as I do at the moment) trade the shorter timeframes with bigger lot sizes. Aside from having bills to pay - I found out yesterday that bookings for Tarja Turunen’s promotional tour of her new album ‘My Winter Storm’ are open - and ‘come hell or high water’ - I at least want to have the CHOICE as to whether or not I’ll see ‘the angel’ this year and THIS my friends is not my usual ‘music banter’ either!!! (And by the way my Finnish friends: she has also put out two promotional tracks from the album and it SURE does look like she’s going to ‘stick it’ to Tuomas and Annette)!!!
Once again - I’m EXTREMELY dissapointed with the way things have turned out so far BUT refuse ‘point blank’ to give up. This business has cost me FAR too much financially and personally - and - SOMEHOW - I’ll make it work for all of us.
The ‘bottom line’ now from where I sit is this:
I reckon that if you want to trade using ‘pure’ Parabolic SAR - trade commodites - less volatile - and better ‘suited’ to ‘pure’ Parabolic SAR. Of course - the problem with this is of course that the ‘payoff’ is not as good and you need to invest HUGE amounts to make decent profits. That’s why forex trading is so popular i.e. highly leveraged and volatile and it appears to me NOW that Parabolic SAR cannot ‘react’ fast enough on forex pairs (at least not fast enough for me anymore. It would NOW appear (again - to me anyway) that using ‘pure’ Parabolic SAR on forex pairs is like trying ‘to fit a square peg in a round hole’ as it were.
Look - please feel free to disagree with me - and to play around with different MA’s (SMA’s, EMA’s) and values - maybe you come up with something better.
Let us all know if you do.
Regards,
Dale.
