Strategy Evaluation

Greetings fellow traders. I am writing this because i need some feedback to my new 2 month old now strategy.
I have picked The AudCad pair because it has one of the lowest ranges from 1.12 to 0.75 ( i think) so its around 3700 pips . Now that i am writing this thread the pair at 0.9840 and ranging between that and 0.9700.
My strategy is to open a position trade (on a 30k account , 1 lot size which meana 10 euros per pip) shorting it for 100 to 200 pips and after profit taking on the short trade going long , worst case scenario it will go up an other 1500 points so there will be a trade losing-15000 euros but at some point it will reverse. And in the meantime use the other 15 to be going long scalping the uptrend (IF there is one to begin with.) I dont want to realise a lose NEVER so it requires some patience but the market always comes back afyer a certain point even if i have to wait a year or two, i will be making money scalping the other direction. I would really appreciate your feedback!

Hello Chris

I would suggest to assume the worst will happen and adjust your risk management accordingly.

Judging from the possible drawdown you are willing to incur (-1500 pips) my guess is that you wont be using a SL. If so, that is extremely dangerous and perhaps you should reconsider.

As far as never wanting to realise a loss, I believe this is also a dangerous mindset. There is nothing wrong with taking a loss, its a part of the business. The last thing you want is to hold a losing position too long for fear of actualising a loss.

The strategy you have outlined isnt a strategy I would be comfortable with but thats just my opinion.

Best of luck and happy trading to you.

1 Like

Hello Pancho and thank you for your reply, much appreciated! If i have the capital and even more than the capital required though , why wouldnt you recommend trading this way without a stop loss?
I cannot get a margin call this way and can be winning at the same time scalping the opposite direction!
Its like i open a business and having the money inside, which i have used as a deposit and can only withdraw the profits!

On what analysis (fundamental, technical, sentimental or guess and hope it goes in the right direction analysis) do you base your strategy. In my opinion this strategy is not good at all.
And remember loss is part of the game never expect 100% profit bcus those losses are lessons on their own.
Sincerely speaking i’ll advice that you reconsider your strategy.

Many clever people have attempted top profit from a long-term mean reversion strategy but ion the end the cleverest of them blew up.

But maybe you are onto something here -
What factors keep this pair in a narrow range?
Are they permanent?
Would you be able to detect when they start to lose influence?

The top factor that changed the direction of Aud was interest rates. Fell to 1.5 and stays there for some time now. Even if it goes against me by 1500 pips i still have a safety net of an other 1500 pips to go against me. As long as jey factors dont change within the aussie or cad then there is nothing to worry about. If something does change then we are adjusting our trade accordingly, which doesnt mean though we will have to realise a loss. When you trade a big account having space to move helps you adjust better in the markets and filter out noise.
At least thats what i think…!

There is some good observation in what you say. This is a low volatility pair. Interest rates have been a key factor. Rates are not a binary factor, and they tend to be adjusted incrementally. You haven’t mentioned global demand for commodities but this would also tend to be an incremental adjustment.

This could work in this context but its putting your money to a low work rate. If you short from here you might expect a 1500 pip profit to the floor of the range. But that might take years, while if you traded long/short on the way down, you would multiply your gains. And you wouldn’t have to worry about price not hitting the range boundary, preventing you from reversing.

I wonder if you’re just finding a strategy which respects the principle of “no losing trades” while ignoring the aim of the game (profit)?

Yes you are maybe right. Its a " no losing trade" strategy. My target profit would be around 300 to 700 pips though not 1500 as i think thats kind of hard to hit the bottom of the range and everything will depend on the streng of the trend and when the trend weakens then i would take the other direction (long) after realising the first trade’s profit. Thats 3000 to 7000 euros there in a course of less than a year . I know it doesnt sound much if you consider that this will be on a 30k account but its 0 risk strategy. Plus i m planning to be adding around 5k per quarter so that i can trade bigger lots still at the same amount of risk.
If you strictly think of it as a business i think it has good returns for the hours you dedicate.
For example i have several rental apartments in Athens and in order to have them ready to rent them out requires at least 100k for the property and an other at least 10k for the furniture so that you can rent it out for 100 to 150 euros per day (Airbnb, etc) Plus the taxes and the time that you have to wait for the guests to come.
If you put that into perspective trading on a 30 k account and making this profit with little to no work is really great return ( i always think it as euros/hour of work)

1 Like

Interesting ! I’ll maybe take a look at that pair later, but it’s a scary strategy !

1 Like

I wouldnt say scary if your capital can afford it. This pair and also check Aud/Nzd same range about 3500. Therr we go long :smiley:

It sounds like pure gambling. You better stick to your appartment bussiness… And if you have this much money, why would you want to invest it in a completely stupid strategy which wouldn’t work in a real life?

Markets don’t work like that. You would tangle in your opposite trades and eventually, if not blow your account, then lose big portion of your money.

Markets work exactly like that and thats why the theory of economic cycles is created, price will come and find the same level it was on. If you think that this strategy is bad and will cost me money please go ahead and explain HOW could this go wrong, if thinking long term. A simple no doesnt help either me or the other people that may be interestes in some point of trying that.

If you would know how markets work, then you wouldn’t be posting ridiculous strategies on babypips. But okey, let’s discuss your strategy with examples.

If you have, for example, a long position and the price turns against you, you then open up a short position, as you yourself said. But then the price turns back up again and now you have this short position who now is in a loss. What would you do then? As I said, eventually you will tangle with all your positions and will end up losing nonetheless.

If it changed directio from my initial position n i would scalp the market for maybe 10 to 20 pips at a time. If then again it would go against me , well that second one would be my losing position and i would be making money from the other one. Wouldnt close the main trade till it hit at least 300 to 500 pips depending on the strength. You cant lose if you have the account to back it up.
I still cant see where you spot the error. Cant lose if i am winning on one trade and lose in an other. I really want someone to point out where the mistake is so i can consider an other strategy. If you cant by simple math please skip this evaluation strategy thing. Hey maybe this js the holy grail but it takes time…

I can’t really explain to you in writing why this doesn’t work for you to believe me. But really, all I can say is that in all my years of trading I have traded many kinds of strategies without stop losses. And in theory they sound very good and without any flaws, but in real life, mixed with human emotions and errors, they just don’t work.

And judging from the fact that you don’t like to lose, most likely you won’t be closing your losing positions, if market goes against you. And in time they will get unmanageable and cause a big loss or blown account.

But of course we can argue back and forth about this kind of strategy, so I suggest to you to try it in a demo account and then come back here with your results so that we can discuss them. I guarantee, if you would trade like that, you would definitely make psychological errors and lose your money.

Purely a personal preference. It’s not that I dont think it will work, it just doesn’t fit my style and is beyond my risk tolerance.

I think there is some merit to your strategy after reading some more of your posts.

Im interested in the long term results of this strategy. Please keep us posted.