Clint,
It will take me a few times reading your post for me to fully digest it. A great one, Clint. Very informative. Thank you for opening me up to binomial probability distributions and calculations.
Nice Clint, very helpful stats to have in consideration when a trader has a portfolio. Very enlightening indeed.
I started applying MG99 methodology in my paper trading (Iām still a newbie) and I got some grade of success, and also I discover some mistakes I could fix.
However I still have an strong feeling about many things that escape to my understanding about price action, and that makes me feel uneasy. I got a copy of Al Brooks book and I started it. Very dense material, but very rich. Iām not going to carry on trading until I progress with the book. Anyone can trade, but not anyone can be a trader 
[B]cyanidez, soul786, abrsive, Prince of Pips,[/B] and [B]alfonsomg[/B] ā
Thanks for the kind remarks, guys.
I hope that nobody will take that post as the final word on portfolio risk; itās just the starting point for an investigation of a complex subject.
At first glance, portfolios of positions, utilizing actual leverage of 20:1 or more, look very risky. And, if we just multiply our normal metric for risk by the number of positions in the portfolio, we get some scary numbers ā like the 18.65% loss of account [I]seemingly[/I] being risked by Mastergunnerās portfolio.
Yet, as Mastergunner has indicated, we know intuitively that the actual risk is less than that. And, if the math in my post is accurate, it appears that the actual risk is [I]much[/I] less than that.
The best way to find out whether the math is accurate is to evaluate lots of forex portfolios, to see whether binomial probability distribution describes whatās going on in those portfolios.
Iām quite sure of one thing: The best way to make your trading more robust ā including portfolio trading ā is to improve your win-ratio (provided you donāt do it at the expense of your reward:risk ratio). Your win-ratio (the percentage of your trades which result in profit) is negatively correlated with (1) your risk in individual positions, (2) your overall risk in a portfolio of positions, and (3) the risk associated with devastating strings of losses.
Regarding portfolio risk specifically, as the Mastergunner numbers in my previous post illustrate, improving your win-ratio will make your portfolio significantly safer.
Iāve gotten through reading this thread the whole way through again and have one question regarding the methodology and specifically the trade entries.
Looking for PA setups on a long term basis donāt come all that often, so are we always looking for the best setup to enter a trade, or are we looking for existing PA to continue and IF we have a bias (rather than a PA signal) just enter in that direction?
Reason I ask is because looking for specific PA signals means I see one or two signals a week, how could I possibly enter even 10 positions across different pairs let alone 28?
Any opinion on this is greatly appreciated.
Iāve been using this methodology with my own āstyleā and I try to enter on a pullback if possible. If the overall trend is up, there are quite a few ābestā areas to get in that may not ever come. I usually try to get in on a retracement on D1 if I can get it, or on a smaller TF.
Have you found yourself managing a āportfolioā per say, of pairs that you manage over time? I like the idea of having risk spread across the board. At one time are you in xx number of trades at once?
I too use my own interpretation of PA on the daily t/f and the criteria I look for is continuation based after a pullback with a pin or engulfing bar to confirm. I never have trades going on all 28 pairs at the same timeā¦I may get a signal on 2 or 3 pairs at the same time, and then end up with up to 10 in the days that follow if/when those pairs give their signal. Like youāve noticed, it may be awhile on the daily t/f before you see a signal on any pair, but at least you only have to check all 28 pairs once a dayā¦ at the close of your daily candle.
I never seem to have trades open āall the timeā. Itās more like I have a batch of trades open, then they eventually all get closed before I start getting any new signals again which could be more or less a week apart. That could be due to my filtering out certain pairs based on another method.
Once you decide what your criteria will be, then stick to it while you test it out.
Somewhat, yes. Iāve been using this method for only 2 months now, and given itās nature of holding time Iāve made less than 50 trades. That being said Iāve been active in as few as 5 pairs and as many as 14; I have yet to manage anything close to the 28 limit.
I am similar to Sweet Pip in that I can very quickly go from 10 open trades to 4 open trades, and it will take a week or two before I decide to open up more. I feel like entry is the most important aspect of the trade, so I have no problem waiting out price movements to get into an area that I like. I think somewhere between 1 to 3 signals a week is perfectly fine with this style of trading.
Hello guys,
Itās good to see many people are trying this methodology. I have also been trying this for more than three months now. The main problem I am having now is when all the open trades go against me. Most of the times they will change direction and become favourable in a few days, but hanging on to the losing positions for a while appear quite difficult for me, at least psycologically. This usually happens when the whole portfolio is heavily burish or bullish towards one currency, as balance can go down by 10-20 percent.
What do you do in this situation? Do you think there could be something wrong with my position sizing?
Thanks for your input.
You said that [I]most of the time,[/I] a group of losing trades (which happen to be in correlated pairs) will turn in your favor. This indicates that you have identified the trends correctly, but your entries were not perfect.
[B]Rather than messing around with your position sizing, I would suggest that you work on timing your entries.[/B]
An emerging trend, suitable for trading with Mastergunnerās methodology, will generally offer you more than one optimum entry point. If you can nail one of those [I]optimum[/I] entry points ā and thatās the big challenge, isnāt it? ā then your position will move immediately into profit, never showing you a loss on paper.
As I see the task for all of us who trade this methodology, there are three main parts to each trade, and we have to do a good job (at least, overall, on average) with each one them. They are (1) identify a suitable trend [I]early,[/I] (2) identify and grab a [I]workable[/I] entry price, and (3) identify a breakdown in the trend [I]early,[/I] and get out at that point.
From what youāve told us so far, it appears that youāre doing (1) and (3) well enough.
But, itās probably being too early or too late with your entries ā item (2) ā thatās causing those scary drawdowns.
Thanks Clint,
I couldnāt agree more with your three points. As MG mentioned he was entering the trades on retracement. At times I see a strong trend which doesnāt show indications of retracements any time soon and I want to jump on that. Some times it works like recent movement of AUD/USD and some times it doesnāt as price retraces and if this retracement is big the drawdowns can be big. It appears also quite important to recognise the market we are in. This goes back to your first point. As I see it, and I might be wrong, the methodology can only be applicable in trending market and not in many ranging pairs we see recently.
As you mentioned I should work on my entry points among other things like when to take the profit or how much give room for the trade. These could be quite challenging as there could be some rollercoaster movements in the balance.
Thanks again.
This methodology is pretty interesting. But I somehow need to know more about entry points.
Letās say I started a trade, there are 2 reasons that will prompt me to exit the trade.
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The trade had gone 50 pips against my trade.
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The trade had not gone in any direction in a week.
Are those good reasons? But if my bias does not change, should I continue to hold on to those trades?
Iām guessing that you want to know more about [I]exits,[/I] rather than entries.
Your question #1 implies that you have a 50-pip stop-loss ā or, that you think maybe a 50-pip SL would have been a good idea ā and, therefore, a 50-pip move against you indicates a possible failure of your trade.
And your question #2 implies that you think a certain profit target should have been reached in a period of one week, and therefore, failure to reach that target indicates a possible failure of your trade.
The portfolio methodology, as originally detailed by Mastergunner, contains no specific rules for exiting a position. There is nothing in the methodology regarding an initial stop-loss, or an initial profit target.
In simplified terms, the methodology involves identifying and entering a valid trend, and holding your position for as long as the trend remains valid. Obviously, this requires a solid understanding of trend-trading, including successful strategies for (1) identifying a trend, (2) entering in the direction of the trend, and (3) identifying the end of the trend.
[B]In the Mastergunner Portfolio Methodology, the end of the trend is the basic exit signal.[/B]
Mastergunner has not specified rules for identifying trends; instead, he has left it to each trader to use his/her own preferred method of trend identification. There are many ways to identify a trend, and entire books have been written on that subject. Iām not going to attempt a review of those methods. You can study trend-trading on your own time.
I will tell you that my preferred method involves simple trend-lines and trend-channels, and that I define a breakdown of the trend as a retracement (of a certain size) out of the trend-channel. The retracement which triggers an exit (for me) is the close of a daily candle below an up-channel, or above a down-channel, by more than 38.2% of the channel range. For example, if an up-channel has a range of 200 pips between channel boundaries, then the close of a daily candle more than 76.4 pips below the lower channel boundary signals an exit of the position. Why 38.2%? Because itās an easy percentage to drop onto a chart using a Fibonacci tool, and it seems to work.
None of the above is meant as a recommendation for you; itās merely an example. Develop your own ways of identifying trends, and identifying when they collapse.
A number of traders on this thread have introduced the idea of adding stop-losses and profit-targets to this methodology. And that can definitely be done successfully. But, it represents a different trading concept from the one outlined by Mastergunner; and, if you go that route, you need to understand that you are trading a [I]variation[/I] of the original methodology.
To return to your question #1, above, if you are a competent trend-trader, then part of your competence involves being able to select good entry points. Generally, this means entering a trend, in the direction of the trend, [I]on a normal retracement within that trend.[/I] If you get it exactly right, then your position will move directly into profit, without retracing further. In other words, you wonāt suffer an initial loss (on paper), before moving into profit.
If youāre good at this, you may decide that (1) when you get your entry right, you donāt even need a stop-loss, but (2) when your entry is defective, you ought to bail out before your loss exceeds x-number of pips. If thatās how you determined the 50 pips mentioned in your question, then it might be a very valid exit strategy. Once again, itās a variation of the basic Mastergunner methodology. [B]But, what matters is what works.[/B]
If ābiasā ( as you are using the word) means the same thing as ātrendā ā then, yes, hold onto those trades ā if you intend to trade this methodology the way it has been presented here.
Re-read the two statements in bold type, above.
Thanks Clint. It has been a very informative reply to my question. I started with a live account which was a big mistake. Now I am trading a demo acc and a small live account, taking things easy and zen-like. Scalping is not for me anymore.
I am still practicing how to look for the best entry points and staying in the trade that I entered. And staying long in the trade without getting emotional is probably the hardest thing to do. Also allowing breathing space in the form of probably 40pips for retracement is needed too, for more volatile pairs, a larger pips difference may be needed. I will try all methods with the demo account and will paste all results in a month time to see how well mg99 methodology works for me.
Hi! Iām Back after a while. I have lots of work and new responsibilities! I expect to be able to trade and post again on next week
Welcome back Medi, your fxbook hasnāt updated in over 2 weeks, hope your positions are okay =p
look forward to seeing your posts again!
hi guys hows eve is everyone doing?..there are no posts in a whileā¦hope that is not a bad sign
i am following this thread for a few months alreadyā¦some other things in life prevented me from committing to this as much as i wanted, but now am i backā¦making a one word.doc out of this whole thread and getting with my demo startā¦hope everyone is having a good results
take care
Iām very very busy on my job, that barely had time to trade, not even to post. But today I have a little time.
Iām still using this methodology and I think Iām fine tuning it at this moment. I found some of my errors and Iām trying to fix them.
Basically my errors are to force trades. I need to see a pattern in the chart and sometimes Iām placing trades when there is not the pattern.
thanks for the reply medisoftā¦ glad to hear this thing is still going onā¦
a lot of things in real life get me sideways to, so i will try to get on this thing hard
Popping my head in to say, āHiā.
Catching up on some of what I have been absent from and Iām blown away by Clintās analysis. Nice work and thanks.