I have been paper trading on thinkorswim for a year now and have developed a strategy that is working well for me. I want to have someone tell me why this should not work.
I look on barchart.com’s market map and see which currencies are going up or down in every pair they trade in, usually about 7 pairs. I then go into TOS and make a 50K “basket” trade by doing a “blast all” order to buy or sell all 7 pairs in the direction I see on barcharts. After about $40 in spread coverage, I always make money, with very few exceptions. Hitting 92% W/L ratio right now. I made $911 today (06.15.18) and have turned a papermoney account opened 05.27.18 with $10,000 into $28,127 today. I hold each trade just long enough to make between $100 and $150 profit, and then do another “blast all” order to exit all of them at once.
Seems like a legit strategy, and I have done probably 200 of these “basket” trades recently. The pairs that are moving seem to move against all currencies with very few exceptions. I am not even looking at the charts, just going off barchart.com’s market map. No matter what I do I cannot break this strategy, and plan to go live with it in August after a few more weeks of testing.
I think what you are doing would be equivelent to trading DXY, EXY, JXY, etc. which is the value of the currency against all other major currencies, so rather than playing a pair you are playing the base currency itself. There are people that play just the currency, for example the long dollar trade which has been very profitable as of late.
I do take account of the momentum of each currency, and if its strongly bullish or bearish, I don’t take positions against it. But your system is simple and potentially objective - prices that are moving in a trend tend to continue. I think I will demo this a bit. The USD is suggested: I can confirm that on my “strengths” spreadsheet only the USD is really bullish right now, though no other currencies are very bearish.
Obviously, all trends end, but you just have to take the losses when they do and re-set for another series. Or do you have a rule to stop you opening new trades?
I watch them and get out quickly after a set bit of profit, not much. In thinkorswim, I have set up blast all orders, so if I am going long USD, the ones like USD/NZD would be a buy order, but a EUR/USD would be a sell order, effectively going long USD on both. I can blast all 7 orders with a control-click, and after a brief moment of being down due to the spread, if the trend is continuing (I check that on my charts pre-order BTW), I enter the same trade again. May do that 4-5 times while something is trending. Am using MACD (without histogram) on the chart + Awesome Oscillator, and Heiken Ashi candles. So trend reversal is easy to spot.
There are always going to be obvious issues with such a simple approach.
Where do you put the stop-losses?
At what profit level do you close all?
What if 3 positions are losing and 4 are winning?
What if one of the pairs has a really weak chart, would you take that one in the basket too?
If the base currency is in a consistent trend, why close positions for just small profits and then re-open them again, why not just get in and hold?
But overall I like the idea that I would one day trade such a system.
So I’ve been looking at Friday entries. One thing I have noted is that if you e.g. go long on a Friday after strong performance of the base currency, if the Monday session prints a very bearish candle, its usually better to get out Monday at the close, stay in cash for the week and re-review what to do at the Friday close. Something like a bearish engulfing Monday would be a good sign to exit a long opened on the Friday, the intervening weekdays are usually either ranging or further bearish.
Falstaff, I have been doing this for 4 weeks now, hitting about 80% win/loss ratio. But yeah, time will tell, my goal in paper trading is always to try and break my strategy, and if I can’t I keep working it.
This strategy looks pretty easy so if there would be an inefficiency (which actually accounts for your profit), efficient market hypothesis says it had to be already priced in. Try to repeat results on live to see what’s the mistakes. Probably decent capital on your demo has been doing the trick for now. Probably this winning approach can be ruined by the principle “market go upside by stairs and decline by elevator”, I mean your system can be vulnerable to sudden market crashes, a turn to risk-off sentiments, etc.
First time I hear of such a strategy, but if it works its good for you!
Do you set a stoploss and takeprofit level while trading the barcharts currencies?
Nearly impossible to handle all currency pairs at a time. I even never think of it how can one do this. Just 2 or 3 pairs at a time are possible and safe for trading as much you go for multiple tradings you will loose your focus on trading , any ignorance can be a mistake . It is wise to choose pairs that are familiar for a trader , not go for all because each pair works in different mood and direction.
Its pretty easy with TD Ameritrade. Its called a blast order which allows you to bundle a whole bunch of orders into a single transaction. It also can make sense to trade all pairs of a specific currency if you are making a directional play on the currency. As I mentioned earlier it would be like buying or selling DXY, which is a legit strategy.
i m also interested in this type of trading, could you tell me “blast all” is some kind of software to enter or exit at the same time in different currency pairs. [Removed for Forums Policy Violation]
The past 4 weeks have been quite good for trading many strategies as the market has had a few good size moves. It’s not always like the conditions now and there will be periods of losses. Did u run a proper back test. Best is to do 10-15 years+. If you are in and out quick and take a lot of trades, you will need “tick data.” If your holding for days at a time, broker supplied data is ok. I purchase data that also gives me spreads, volume, and simulated slippage. Very important when back testing intraday strats. After all, if your strat can work well in the past 10+ years with no loser years, odds are it will continue to do well! Check with your broker and see what the can do to help with back testing your strat. I use mt4 brokers so not familiar with TOS but Mt4 doesn’t have a way to test baskets. TOS might provide a way to back test a strat with a currency basket. If so, please reply as I’d like to use it!
Interesting concept. Thanks for taking the time to post your idea. I just initiated my first two currency blasts (demo account). Barchart showed AUD and NZD were both long…so i purchased all major pair combos in the correct directionfor each. I just set a trailing stop of 50 pips (pulled that out of thin air for the trial). Have you been using a trailing stop? If so, how many pips? And how long have you been in these trades…a matter of hours, days, or weeks?
Again… thx for taking the time… hopefully we can fine tune it and make some magic happen.
In my opinion, you already work as the smart beginner, I am ever reading about basket trading strategy which open so many pairs at once time, maybe not suitable with my psychology because open may trades also need higher margin on account trading, but if you already comfortable with these strategies I think you can be implemented on live account, as I know broker allowed to trader do with basket trading strategy, but I ever hear if many brokers don`t allow for trade balance
OK…so far this is a bust with the trailing stop…i’ve tried it with 10, 20, 30, 40, and 50 pip TS…all have failed!
I will now attempt this with a stop loss and trail it myself. Any other ideas?
Are you day trading this strategy and monitoring it or are you making a trade and leaving it?
It is important with this strategy to select the correct currency. I have been short AUD and NZD the last couple of days and made money. But I am not trading the above strategy and more of a swing approach.
Hello Av8rdan,
I like your strategy/idea, so I started implement the ‘Forex Map’ in MT4. I started 3 days ago, so still need to be improved, but already part of a trading framework, I should be able to backtest on several pairs… And for sure forward test also… (much more easier…). As you can see on the chart I add some figures, I will probably hide later on. The idea is to open a basket each period (M15, M30, H1, H4), based on the statistics… So the entry/exts rules still need to be tuned. I will try to keep you updated.
Are you still paper trading this strategy? On Live or DEMO account? What’s your plan/feedback? Are you still beleving into this strategy?
Can you explain a little bit more your entry/exit rules?
Regards,
och
I do not set stop losses, I know bad idea but just do it manually. Sometimes the basket goes down into -$200 or so (50K trades each pair) and I just wait it out. Most times since the currency as a whole is going up, that evaporates and I end up either with a tiny loss or profit.
