The issue is that we must trade in markets that move. 'A flat market will never create any surpluses. This system -for example- would have banned you from trading euro-swiss frank (back then when swiss frank was pegged to the Euro) because it was a pair that was not moving at all. And history showed that it was good to not trade it.
The direction of trend does not concern us in this system, it only concerns us that the pair is moving and is not beeing flat. where the trend goes, start or ends? who cares? this is “thinking, guessing and opinionated analyzing”- those 3 things have been discarged out of this system and the system was created to participate in trend movements and in trends.
The trend analysing part is there only to confirm that the pair is trending, where its heading to or where its going to reverse or should perform xy at point xy does not concenr us.
Suppose we see a up trend in the 4 and 10 years chart and a zig zag (still trending) in the 1 years chart. Should we go long only because the 4 years and 10 years chart says its a uptrend? For a financial institutuon they would go long-yes. but we dont have the luxury to survive a 15% move in counter direction. The system is made to follow the closests trend. If its a upmove of 5% this week then you will be in, if its a down move of 5% you will be in - no matter if the pair made a upmove of 80% in the last 3 years and the market is clearly a bullish market.
Excellent series of posts. As quick as I am to jump on someone when they are wrong, I will certainly give credit where it is due.
Credit here should also go to the late Richard Donchian since the methodology is classic Donchian channels which are available as an indicator on many platforms. No need to code anything, it has already been done.
For example here on Babypips the free real-time chart function offers Donchian Channels just set the parameter to 5 on the daily chart.
The good news is that Donchian channels are a proven methodology for succeeding in the markets. Richard Donchian is considered one of the founders of trend trading. This “new” system was the basis of the very successful Turtle Trader experiments of Dennis & Eckhardt in 1983. Even though all the participants used the same system the results varied wildly so discipline is required. One of the participants was Ed Seykota who took that experience to become an extremely successful trader and is very well known. But all that information and history is available for free at your local library.
This is a system that is worth the time of new traders, to consider, learn, and test. The hardest part once the basic mechanics of the system is understood is to learn to stomach the large drawdowns that will occur upon occasion as you get whipsawed.
Speaking of whipsaws, it is best to let Mr. Seykota describe the essentials of the system is his own word. (CAUTION: Humor ahead)
Everything already exists. cant invent the wheel new.
Thank you for your post. In the first page i mentioned that this system is a combination of a few systems which had already withstand the test of time (yes Turtle and donchian is one of the systems i combined in this- you discovered this very well) and wrapped up in precise guidelines and RR-management and diversification rules.
Comes in handy for people who want to earn money without having a deep knowledge of the market and the technicals and what moves where and when.
and no. the donchian channel function of your trading tool is helpless in this system as it does not show clear boundaries of when to go short/long or step out. So the coding of Steve is very much welcome and helpful.
I know it belongs to this method but I do not (yet) leave positions open over the weekend. So I took an early profit as it was approaching one of my own target regions. It has since bounced back up to higher than the entry level so I will see what it looks like on monday before deciding whether to re-enter.
It was anyway a nice move considering the recent uncertainty in this pair - and it is always good to start with a profit whenever trying anything new!
With my trade manager/EA you will not need 1/2 hour per day to trade 30 Forex pairs per day. Following me we even don’t need that many. Maybe 15 max. I will update you next week with my trade manager/ea.
It isn’t really “strategies” that are profitable: it’s more the traders who use them: contrary to what one might imagine, the criteria that realistically determine whether or not a “system” will be profitable for any specific trader actually have far, far more to do with the [I]trader[/I] than with the system itself.
Forex trading is a field of endeavour without high overall success-rates, and it’s typically when people make the mistake of imagining that all they’ll need to do, to make some money from trading, is to “[I]copy[/I] something that just ‘works’,” that all the accidents tend to arise.
Now, let’s try to help you … initially with some “light forum reading” …
The “School” pages here are a good [B]starting-point[/B] (but they won’t in themselves equip you to trade profitably [I][U]without a lot of further input and practice[/U][/I], too!): School of Pipsology | Learn Forex Trading
Something I’ll never be. Now to the Rasuli. For duck sake bro. You have just been handed a gold mine. But just like a gold mine, its up to you to dig the wealth out. That involves a bit of hard work. I’ve read your breif posts and you’re in for a world of pain.
Best you go back to the beginning and start school. Apart from that i wish you luck. You might just need it!
I wish!!! That’s why so many are rolling in the [B][U]proverbial[/U][/B] sh1t
All jokes to one side though, learning and getting to grips with trading is one heck of a challenge - from my own experience anyway! However, once you have crossed the threshold of knowledge and experience, solving problems become just that much quicker.
You’ll be pleased to know that staring at your screen in disbelief for hours on end wondering “[I]how did that even happen, against all the odds[/I]” becomes second nature
One thing that one does not talk about much on here is automated/coded trading… When people say ‘I traded this’ ’ I buy and sell’ in a professional trading context, when you dig a little more you then learn that they don’t ACTUALLY press buttons physically but have an automated system that does that for them, or have signals/alerts that warn them of price approaching significant levels…
So doing trading manually with little capital and no investment in a coding system or automation means that if you do not trade for a living (which requires a huge amount of capital) then you will miss out on a lot of trades. Sure, you can use entry orders, but even managing those manually every day (deleting/updating untriggered ones as price moves further away from them) is time consuming.
I personally have not invested in my trading other than putting money in my account (and losing it all), so it is no wonder that I have struggled and still struggle.
My personal belief, having listened to all 100+ ‘Chat With Traders’ podcasts and reading interviews with professional traders, is that very few pro traders use no mechanised systems or execution… And those who do everything manually have huge capital and can justify waiting by their screen for hours without trading… When you work for a living and have very little time for day trading, you will push/force trades in the limited time you have, which is the wrong way to go about it…
So, when people say ‘let trades come to you’, they mean have a mechanical system that will only trigger at the ‘right’ price, so that you do not have to be glued to your screen - which you cannot anyway, because you are working.
A lot of generalisations in my post here, so I apologise if I made some rather broad remarks, but every system requires data mining and that is best done with coded/mechanical systems (to save time and to improve accuracy)… When people start trading something it is often for the wrong reasons, and have not done due diligence… So research is a huge part of trading and a lot of us do not do that: we look at charts, see a pattern and go ‘Trend!’, but that is about it… Currencies are hugely dangerous to trade in forex because of the lack of real volume information across markets, so you have no idea what will happen next, meaning whether a candle bouncing up is backed by real market volume and is an actual buy, for example… Futures have a completely different capitalisation but they offer the centralised volume… So, really, marketeers should get traders to go for currency futures rather than spot forex, but that is not in their interest.
Just be smart, and be realistic: if you are young enough to spend years and years training, then invest properly and get some professional mentoring… Doing it at home manually with little capital and zero training is the losers’ way.
There are people like Turbo and Lexy who are making good trading revenue and share their experiences here, but there is a lot of bad advice and I have myself been guilty of that. Truth is, pro traders rarely post on here, on the whole, so you will get a lot of retail traders’ sentiment/opinions but very few people on here make a living from their trading alone. So we need to distinguish what we want to aim for too, and what kind of trader we want to be: if you make 1% a month on average and invest 100,000, that is on average 12% a year, which would bring you up to 112,000… you could be very conservative with your trading and aim low but because of your higher capital level you would make the kind of money that would be significant in real-life terms…
So if you do not invest enough capital you can compound all you like but with a 1,000 account a 1% per month will earn you 120 a year… which is awful money for all your hard work … So you have to be realistic… And hoping for a home run that will make you an overnight millionaire is fine as a dream but you will lose a lot of money chasing that one big trade…
So everyday, small-gains trading is best done automatically rather than manually, if you have a day job… but you need a lot of capital to make those small gains mean anything in terms of buying power in your real life… If you can withdraw something close to 1,000 per month then you could save it in the bank or put it to work for you and your family… and you would still have your day job so that you would not have to rely on that variable trading income…
As anyone who runs their own business knows (like me), trading money is no different in that it changes every month, depending on opportunities/contracts… and you live a life of never truly switching off… So living off trading requires a lot of capital to buffer losing periods (you still have to pay your bills) and also being able to take the good contracts and leave the bad contracts behind, tempting as it may be to go for anything because you are hungry for more…
A lot more to say but the bottom line should be:
THANK YOU TO TURBO for sharing his insights into trading, a real gem in a sea of doubt.
Interesting perspective when considered in the context of this method presented by Turbo. I think there is a difference between a mechanical system and an automated system.
This is, at present, an on-going mechanical system in that it pre-defines the exit immediately on trade entry as well as triggering the next entry immediately on trade exit. But it is not automated. The trader still has to place the orders, update the levels while the trade is progressing as well as pre-select the markets that are actively trending.
But it could be automated, and I guess fairly easily.
But in the long run is that [I]really [/I]of any benefit to a new, young trader?
It is all very well for a seriously experienced trader, who is already well-versed in the industry and how markets function, to move on to an automated system where he can watch, appreciate and evaluate what is actually happening without actually manually always initiating or interfering with it.
But if one is a newcomer to forex, what are they going to learn from this? How will they cope with assessing its performance over time and which markets are best and when to change etc, etc?
If one does not understand (or even want to learn and understand foreign exchange) then there is no point in personally adopting any kind of automated system - you may just as well put the funds into some kind of managed account and let it roll.
Turbo is clear that this is not a hugely time-consuming method, but that it does provide ample activity and plenty of brain stimulation for anyone interested in combining active trading with developing their knowledge and experience in foreign exchange.
I don’t think the issue of time consumption is a serious problem for people who are deeply and broadly interested in their subject whether they are hobby trader, investors or serious traders (full- of part-time). It only becomes a problem when one is more focused on the end result of making money rather that the means itself.
For example, I love my trading. I dedicate hours to it even beyond the time needed to actually trade. But I don’t play computer games, I watch hardly any TV. It is what I enjoy. if it didn’t absorb me I wouldn’t be trading. It is a demanding master but I wouldn’t want to work for any other - and I always feel that my “overtime” is well-rewarded in one way or another.
So, yes, maybe automated is a sensible solution, but at what stage in one’s journey in forex?
I am not convinced yet that this method is always profitable or whether it is entirely suitable for newbies and traders with small capital. When the markets move sharply, but not for many days, then there is a risk that drawdowns can be high since the exit remains distant but within “spike” range for some days before “catching up”. Equally, when markets are ranging/consolidating over a broad price range there is a whipsaw risk that could be expensive. For this reason, I think any [I]unseasoned [/I]trader should monitor carefully what is going on and not go blindly into an automated version until it has earned a buffer and a good track-record and gained a high level of confidence in its overall performance as well as evidence of the magnitude of its interim drawdowns.
Turbo, if it interests you, I am continuing with the trade that I started last Friday with a break of the low on EURUSD from Weds 8.2.
I closed it on Fri because of the weekend and am waiting for a signal to re-enter from my own method. At present the price is 1.0645 but I have no sell indication yet…
I am keeping a record of how it works out in theory compared with my own actual trades within the same move alongside. These are recorded on the spreadsheet below.
If I have understood right then my current stop for today is at 1.07502 from last Tuesday’s daily high, which I will use if/when I get a sell signal to re-enter.
The main aim here is, of course, to monitor how the method performs according to the rules applied on a daily basis. I understand that the concept is based on a “portfolio” of (5) positions and not just one, but I think this is an interesting way of creating a concrete record of at least one pair?
If you don’t follow the exact rules by closing your trades before the weekend and re-opening after the weekend then your stats are useless. (Sorry to sound harsh)
No it is not useless. As I said, I am running [B]both [/B]alongside each other for comparison. I am not in the business of putting real money into a scheme before it proves itself to me. I am also interested how my own trading methods compare with the longer term holding positions.
Naturally, this does not account for some slippage and comms etc but these are somewhat minimal compared with the bigger picture here.
Test trade update:
EURUSD entered 10.2. at 1.06385.
Trade is still open and the stop has now dropped to the new 5-day high from last Wed 8.2. at 1.07141.
Marked-to-market at close yesterday (1.05915) profit was 47 pips.
Current MTM = 1.06180, profit is now 20.5 pips.
My own actual trades in the same trade context yesterday was pretty lousy. I entered short on signal but close out with only 11.5 pips profit for no real reason whatsoever! If I had left it then my close would have (should have) been around 1.0600 when my method went neutral. I am now flat. My method is again short-term up and I am waiting for a new sell signal to re-enter in the direction of the test trade.
One personally interesting revelation yesterday was why I closed out early without a signal to do so. I had a lot of things to do yesterday and there was a lot of interesting stuff here on BP so I was not 100% on my trading. But when I had to go out, instead of leaving my usual limit and stop, I closed my position because I was trading against this High-5 test trade and preferred to book a profit rather than risk a loss!!! Just shows how psychology can really influence one’s trading decisions!
I have to remind myself that this is not a competition to see if I can beat the High-5 trade! It is meant to be comparative…
I have for a long time now been working on evolving my trading to take the best from both long term and short term methods and combine them into one trading model. This is the reason for my methodogy here. The High-5 is my long term (test) method and my own method is my short term method. In this experiment I am trading my own method whenever, and only, when it is in the same direction as the test trade for as long as the test trade is open.
In theory this means I am always trading in the direction of the long term trend, gaining on at least some of the long term trend, avoiding overnight/weekend exposure, avoiding large retracements/spikes, etc. The down side is missing out on large chunks of the move when not in the market.
There are various possibilities here:
keep one position open constantly according to the high-5 and another in the same direction only according to the short term position
keep one position open constantly and open hedge positions against it whenever the short-term model reverses (not good!)
Only actually trade according to short term model whenever it is in direction of the current High-5 trade
I am using option 3 and the current status of both is as follows:
EURUSD test trade:
Interesting dilemma:
Still flat and market drifting higher all morning. Waiting on Fed meeting and Yellen speech. What will be Fed’s comments in view of new administration’s comments on fiscal easing, undervalued euro and protectionism!
This would be a good level to re-enter if the market continues its underlying downtrend…but I have no sell signal on short term model! I guess I wait for a signal even though price will need to drop back below 1.0610 level - such are the dilemma’s of short term in/outs!!!
Test trade update:
EURUSD entered 10.2. at 1.06385.
Trade is still open and the stop has now dropped to the new 5-day high from last Thurs 9.2. at 1.07096.
Marked-to-market at close yesterday (1.05727) profit was 65.8 pips.
Current MTM = 1.05810, profit is now 57 pips.
From the short-term trade method, I took a quick short trade before the Fed release and closed it for a mere 5 pips ahead of the release. And then sold it again after the number after missing the initial instantaneous drop, of course! But there was little follow-through after that and my method went neutral again towards the day’s close. So I closed it for a gain of 14 pips. I am again flat and waiting for the next move…
On one hand, this long term Test position is unexpectedly relaxing as there is only the stop level to be concerned with and it is so far away that nothing is likely to change that rapidly except as a result of something like the Fed release yesterday. But on the other hand, the open position is constantly on my mind and I find myself constantly thinking about it. I don’t like that very much. One benefit of short term day trading is that you choose your time window in which you concentrate 100% on your trading and then you switch off and relax and do something else.
But this is a very subjective issue. I don’t think I could live with constantly open positions. This is just one Test position and the High 5 suggests up to 5 such positions. Hmmmmm.
Interestingly, the results are working out just as expected. The long term position is well ahead due to being able to hold it through a major release/event (in this case the Fed release). It has involved incredibly little “maintenance” work, almost to the point of boredom. But all its gains are still unrealised and constantly changing with the market, and the stop/close is still a long way beyond the breakeven at 1.06385. Crunch time comes when the market eventually reverses and how far the stop is at that time (tomorrow, for example, it drops to 1.06676, if I am understanding this method right!)
But one other consideration is that pips do not tell the whole story. The comparison in the table below is based on a 1 lot position in both the Test position and in the actual short-term trades. But in reality, the position size used in short term trades can be several times larger than what we would be prepared to risk in the long-term positions that are open overnight and weekends, through all releases, with initial distant stop levels, and vulnerable to any unexpected event that could take place at any time.
So far, I am impressed with the concept of trading short-term chunks that are strictly in line with the High-5 “Donchian” approach - but that, of course, also relies on the effectiveness of the short-term model being used!
One other observation is that my own actual trading is forced into a severely disciplined “go with the flow”, “the trend is your friend” mentality as I am only looking for short opportunities in the same direction as the current “high-5”. In other words, I am looking for small chunks out of the overall trend move. Maybe it gives a lower overall profit, but also much lower overall risk exposure and closer stops. So far, every trade has been a plus. The pip amounts are small but that is more a factor of the small ranges overall recently.
I think it is clear that the High-5 approach will produce significant results if and when the trades are in good trending markets as the positions are “forced” to remain open for the duration of the trend. However, I am personally, nervous about the concept of constantly having 5/6 open positions. If there is a major event in global terms then there is a significant risk of being part of it (which admittedly could even be a benefit- but there is some legislation against that in the form of Murphy’s Law?!)
Test trade update:
EURUSD entered 10.2. at 1.06385.
Trade is still open and it has been an interesting day!!!
Started off with more USD strength which pushed the position to over 100 pips profit, But then the afternoon saw a strong reversal back to above 1.0600. Current mark-to-market (1.0604) profit now back to 34.5 pips.
With the short term method I entered two stages of the morning’s down move, exited both of them far too early (!), but made a combined profit of 20 pips. So the total short trades so far stand at 65.8 pips.
Since this exercise is solely to trade in the direction of the High-5 position, I didn’t enter any long positions in spite of the good reversal - I would normally have done so.
Tomorrow’s stop level moves down - and the market has moved up. Will tomorrow be decision day or is there still downside potential for the EURUSD! Here are the table results so far and a chart of the short-term trades to show the signals, entries and the clear reversal.
I would like to ask, is anyone actually following the High-5 and reading any of this? If not, then I won’t post these, I’ll just carry on privately. I don’t want to screw up Turbo’s thread here…
