I was just as likely to go long had it bounced off the Golden Ratio. However, I wasn’t going to straddle it, because if it was going to do that I would wait a day to see if price continued to move up.
So, that would also likely been the point where I would have considered the trade bad. If I was already in a short position.
Hi mastergunner99,
pardon me if my questions might sound a little silly. So im assuming you go through the 28 pairs on a daily basis and skim through for trading opportunities just like the USDCHF analysis that you just posted?
Hi MG:
Yea, I have a question, could you post the list of all the actual 28 pairs you monitor/trade?
That’s exactly what I do. I’m sure I could over analyze and spot more opportunities, but that could lead to forcing trades.
I pick opportunities that stand out. I’m generally in 20 trades at any given time because in a month each pair is liable to provide two or three opportunities to trade.
It takes about a month after you start to be able to manage a full portfolio and reap in consistent profits. Expect to sustain a loss your first month as you are closing out the losers and letting the winners run.
eurusd
usdjpy
audcad
audchf
audjpy
audnzd
audusd
cadchf
cadjpy
chfjpy
euraud
eurcad
eurchf
eurgbp
eurjpy
eurnzd
gbpaud
gbpcad
gbpchf
gbpjpy
gbpnzd
gbpusd
nzdcad
nzdchf
nzdjpy
nzdusd
usdcad
usdchf
Another question, how do you usually determine when to exit a trade? Wait for the candle to close for the day to see the market situation and make your move?
I always wait for the candle to close before rendering any decisions. If it doesn’t look good, I will place a stop loss. As this USDCHF trade develops I will illustrate when I put in the stop loss.
Hey MG:
Thanks…what was your method of arriving at these pairs for determining optimal diversification in FX? In other words, what was your thinking behind choosing these 28 pairs?
MG,
Thanks for starting this thread, it’s a refreshing change. Can I ask, would you allow this current trade to turn and go negative? If not, why wouldn’t you place a stop at BE to prevent this happening?
Thanks again.
Lee
Yes, [I]attempting to[/I] clarify this question resulted in the discovery that there are a number of dimensions to the term “Drawdown” and ways it can be sliced.
Let’s use the definition of [B]Maximum Drawdown[/B] as the largest “peak-to-trough” decline or top-to-bottom loss – and restrict it to just pips, since you’ve already stated that a pip is roughly equal to .01% of your account.
Let’s further qualify Maximum Drawdowns as [B]Realized[/B] (booked) vs. [B]Unrealized[/B] (potentially worse “on paper”, but perhaps recovered some prior to realizing/booking – something that you may not even track/record).
What then has been (for this [B]Trading Year[/B] and, if you like, throughout the [B]Lifetime[/B] of this trading strategy):
. the Maximum Realized (and, if available, Unrealized) Drawdown from a single trade; and
. the Maximum Realized (and, if available, Unrealized) Drawdown from one series of trades?
You also mention in a prior post: [I]“I look at the average drawdown vs what I pulled in profit.”[/I]
How do you define [B]Average Drawdown[/B] in that context, and if you keep a Running Average of each trade’s Average Drawdown, the current value for this Trading Year would also be of interest.
[The point of lo these many questions is to better help prepare some psychologically for the potential and likely bad swings one might endure throughout such a trading methodology – though with so much diversity/hedging actively in process at any one time, I’m guessing its actually somewhat minimized. Thanks again!]
I know that these are basically the eight major pairs, and I’m going to spend today analyzing as well. But in terms of the pairs that make up the USDX, why have NZD instead of the SEK. Is it to see when correlation between the Aud/USd is breaking down?
I avoided pairs and currencies that offhand looked just ridiculous and difficult to determine price action.
Yes, I’d be fine if it went negative provided it looked like it would be able to recover. If not, I’d put in a stop loss that would still give it a chance, but would close out if my suspicions were correct and it was moving against me.
Most trades will go against me generally right away. My losers are almost always cut within a week, while my winners run their course.
There’s always room to tweak this and that, but for now I just continue as is. I’m not against moving positions to break even, I just don’t find it necessary to do at this point.
I’m not against adding SEK. Right now the charts I use don’t provide that feed. And I feel what I have is sufficient to provide me enough exposure in the market.
Remember this is a methodology, not a system. If you care to add more just be mindful of the risk involved.
Okay, the Red Arrow on your chart (at Tue, 01/29) was your trigger to go short IF the price were to subsequently (ideally, the next day) drop below that day’s low, correct?
I assume you placed a Sell Stop order immediately following the opening for Wed, 01/30 @ 0.91910?
What was the chart low of the day on Tue 01/29, and how did you determine where to place your specific entry price (e.g., the first full pip price – i.e. the zero-tenths of a pip price – just below that previous day’s low, one full pip below, two full pips below, etc.)?
Apologies for being so anal … 
Correct. Only if price were to continue down. If the order wasn’t filled in 24 hours it gets canceled. Exception being orders placed on Friday. If not hit by close of Monday, they are canceled.
Not always immediately. Sometimes I don’t have an opportunity to sit down right away. If sell stop was hit and wasn’t too far away by the time I can take a seat, I’ll just enter a market order.
1.91924
I ignore the fifth decimal and just go one pip below or above the fourth decimal.
It has impressive breakouts after ridiculous periods of consolidation. I look for those breakouts.
I would agree. The pair is a bit of a nut.
FYI birdog (just my 2 cents): these 28 pairs represent all possible combinations of what are considered the following “8 Majors” – in order of likely volume traded, although that is somewhat subjective as no ongoing accounting exists to my knowledge beyond a Triennial Central Bank Survey (last published in September of 2010):
USD, EUR, JPY, GBP, AUD, CHF, CAD, NZD
I’ve spent the last couple of hours looking at the COT data in Price Charst that I tie down to an Excel file that I keep of the historical movements. Do you use COT (this is not an indicator per say) because it’s interesting to see what the Commericals are expecting, as well as the overall movement of OI? Based on this I kept expecting a huge bull move in the Yen, which does not seem to be happening, but also this week interesting bullish action in CAD and GBP. Do you have any thoughts on COT?