Very simple trend-following set-up

This is a discussion on Very simple trend-following set-up within the Swing & Position Trading forums, part of the Methods category; That said F, psychologically I can 100% understand why people want to strive for higher winning percentages, and being comfortable ...

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Old Mar 9, 2015, 2:19pm   #25
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That said F, psychologically I can 100% understand why people want to strive for higher winning percentages, and being comfortable with what you're doing is more important than anything else, as otherwise you won't be able to do what needs to be done !!!
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Old Mar 9, 2015, 2:27pm   #26
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I really think that winning percentages are pretty meaningless.

This guy is at a major hedge fund:

[B]Brett Steenbarger:

"
Well no time for Brett Steenbarger and I will explain how I see it - and obviously my thoughts don't count as much as Billionaires like George Soras - etc etc - but only this week Warren Buffett admitted he made a major mistake not dumping his Tesco shares - ( or maybe should not have bought them ? )

The formula for maximum efficiency and profitability as to contain the following

Win ratios / RR 's / drawdown / exit size / stake sizes / time in trade along with the maximum amount of trades you can get on whilst keeping them in profit.

HFT as changed the old ballpark - but the old school are fighting hard to make sure it does not continue to provide the profit success of its first few years and therefore using all possible methods to provide a "spoiler"

Its obvious if you could have a 90% win ratio and all winning trades had RR over 3 or 5 and say 50% over 10 - and all losses were dumped under 30 mins - you would make far more money than any trader with a win ratio of only 40% and his RR's never making over say 10

Its getting the balance and combinations correct and as Jessie Trader quite rightly proved with a very low capital amount the idea of 5000% or even 65000% roi within a month or two is all possible on very small account - if you know what you are doing and are aware that you could lose a small account of money

For example whats the difference for me to trade just 0 5% stake on a $50k account - ie $250 risk on stop or be prepared to risk say 5% stake on $1k account - ie only $50 - ie I am actually trading with less risk of actual cash.

$50 or even $500 is not the end of the world for most retail traders - but losing $25k on one trade would out psyche most retail traders - and cause them probably serious embarrassment - but on a $10 or $20 million account - it would not be even worth thinking about - ie its small and irrelevant

However - to do even 100% on say a $10 or $20 million in a month or two would be very very difficult to do - because of size obstacles - HFT could do it - until the rest of the industry saw what might happen.

Its so important to make sure all retail traders know that retail trading any capital under $100k - or even quarter of a million - is a totally different ballgame - ie different risk structures - different psychology - different methods - different results etc etc to hedge funds and trading big capital.

I could write a book on how I see it - maybe - one year I will ;-)

All the best

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Old Mar 9, 2015, 2:32pm   #27
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Its obvious if you could have a 90% win ratio and all winning trades had RR over 3 or 5 and say 50% over 10 - and all losses were dumped under 30 mins - you would make far more money than any trader with a win ratio of only 40% and his RR's never making over say 10

All the best

F
Of course I totally agree with that.

It's the IF of that where it gets kinda tricky matching the vision with results.

But all the best to you too.

Done for the day, moi, off for a quick beer by the water.

Gotta focus on what's the important stuff.

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Old Mar 9, 2015, 8:17pm   #28
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tomorton started this thread I always respect the 200EMA but I'll never get a 5:1 ratio.
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Old Mar 9, 2015, 11:30pm   #29
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I always respect the 200EMA but I'll never get a 5:1 ratio.
Hi tomorton

I suppose thats the nice part about multi intraday trading - a RR of 5 is possible off just a 17 - 20 pip move.

Best swing trade I have ever got - which was last year - worked out a RR of approx 200 ( yes 200 ) off the Eur/Aud falling over 4 months - but I only had either 15 or 20% of the original stake left on from the entry and during the move I had to allow pullbacks up to 180 pips to stay with it -which did have a 900 + target - but even then if I had been taken out i would have still ended up with an RR of over 40.

I appreciate unless you are maybe full time and also intraday - it not possible to manage these type of trades and so most longer term swing traders using the 50 / 100 / 200 MA set up need the 60 to 150 pip stops to look at getting a RR of anything like 5.

All my trades are of soft stops of 3 to 7 pips and a good swing trade for me will be 2 to 5 days with an aim of over 200+ pips. Maybe less than 10% make it - but maybe 20% make over 50 pips - and so even then a RR of approx 10 - and the rest all then end up with anything from just 2 pips to 20 pips based on moving the stops into profit after the initial scalp by dropping stake size

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Old Mar 10, 2015, 8:34am   #30
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tomorton started this thread Sounds good F, and it certainly works for you. I don't have any of the personal tools for daytrading but happy to credit rewards of 5:1 per trade intraday are possible - in fact maybe should be routine, to justify the effort, time and risk.

Its always disappointing to read industry features about trading which suggest the most fantastic returns on a specimen trade - but don't highlight the amount of time and work required to launch just that one trade - and that it only lasted 5 minutes. You're doing a good service by being so absolutely clear about the blood, sweat and tears and toil it takes to become a good daytrader.
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Old Jun 15, 2015, 9:07am   #31
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tomorton started this thread After reviewing old trades and performance, some slight revisions to this simple method -

1. last Close must be above 200EMA
(unchanged)

2. vertical sequence on chart preferably reads, from high to low – price, 50EMA, 100EMA and finally 200EMA
(downgraded from 'essential' to 'desirable')

3. swing phase using 3-bar reversal chart must be bullish (i.e. last swing, low or high, is higher than previous)
(unchanged)

4. how many daily Closes are above 50EMA in last 3mths?
(simplified trend measure)

5. how many consecutive weekly bars are completely above 200EMA, counting back from the most recent? (the more the better)
(timeframe extended from 50EMA to 200EMA, point of reference changed from weekly Close to whole bar)

6. is last full week’s bar completely above 50EMA? (caution if it straddles it or is completely below)
(unchanged)

7. how many adjacent weekly bars overlap the last full week’s range? (caution if more than 3)
(unchanged)

8. has price risen over last 1mth and 3mths?
(new - obvious)


Applied across a market, 1 and 8 alone should give a pretty clear basis as to whether to consider buying or selling a particular target. In forex, that might mean e.g. buy EUR/JPY, sell USD/CHF, and no trades right now on EUR/CAD. I use the 'consensus' of these results from across the pairs I can spreadbet, applied to the major currencies to then allow a sense-check that my longs and shorts are on the right side of the bias. At present, I see -
AUD - 1 buy, 2 wait, 4 sell
CAD - 2 buy, 2 wait, 2 sell
CHF - 5 buy, 1 wait, 0 sell
EUR - 4 buy, 6 wait, 0 sell
GBP - 5 buy, 3 wait, 1 sell
JPY - 1 buy, 1 wait, 6 sell
NZD - 0 buy, wait, 5 sell
USD - 3 buy, 8 wait, 1 sell

I hope this goes some way to quantifying the indecision in the majors at the moment for various fundamental reasons, the USD and EUR especially. Currently, I am long GBP/JPY, short NZD/USD.
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Old Jul 6, 2015, 8:21am   #32
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tomorton started this thread I like this simple trend-following systen too, FX-Ed, by Ed Ponsi ("Forex Patterns & Probabilities", 2007)

* Check 10, 20, 50, and 200EMAs in descending order (for uptrends)
* Check for at least the last 10 consecutive closes above 10EMA
* Buy when price dips intra-day below 10EMA
* Set a stop-loss equivalent to half the daily ATR (14 days) below the 10EMA: trail this higher as price rises, leave it alone if price falls.

(invert directions for short in a downtrend)
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