Deadline June

This is a discussion on Deadline June within the Trading Journals forums, part of the Reception category; This is where your mechanical system becomes discretionary, as you get to choose the markets you trade. USD/CHF is not ...

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Old Oct 24, 2010, 8:25am   #513
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Re: Deadline June

This is where your mechanical system becomes discretionary, as you get to choose the markets you trade.

USD/CHF is not nearly as liquid as EUR/CHF. Or, to put it another way, USD/CHF is not a "real" currency pair, in the same way that GBP/JPY is not.

Perhaps you should stick to the pairs which are the most actively traded, EUR/USD, GBP/USD, EUR/GBP, AUD/USD, USD/JPY, USD/CAD.. that's probably about it for the liquid ones.
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Old Oct 24, 2010, 2:59pm   #514
 
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Re: Deadline June

Adamus started this thread I didn't realise USD/CHF was so illiquid. I guess I should know this stuff. But I also don't think there's a correlation between liquidity and profitability - in backtesting at least.

I think there's a lot of scope for huge spikes knocking your system out of trades and appalling fills in the cross-currencies, but how much I'm not sure and whether it would destroy the profits I also don't know. But then I've actually had my worst fills on GBP/USD.

I'm considering trading stuff like GBP/AUD and AUD/JPY to balance the USD exposure.

Currently it's not so bad with the leverage I'm using but with 150,000 to 200,000 per trade the exposure is more obvious.

EUR/USD, GBP/USD and EUR/GBP is a great trio. Maybe I should concentrate on other systems and leave the 3Ducks as it is instead of constantly trying to improve stuff.

PS in fact the more I think about it the more I think that a system like the 3Ducks should work on a currency pair regardless of the technical details of the market. It might not be directly traded from e.g. AUD to CAD, but if AUDUSD moves a little one way and USDCAD moves a little the other way, those moves may not be tradeable , but the resulting move in AUDCAD could be.
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Last edited by Adamus; Oct 24, 2010 at 6:24pm.
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Old Oct 24, 2010, 10:45pm   #515
 
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Seeds of a system

Adamus started this thread I'm looking at the currency markets opening up 22:15 Sunday London time after the G20 finance meeting produced an agreement (which sounds like hot air to me).

Some of the gaps on the cross currencies charts are gaping chasms! There must be a system in there somewhere.

I got caught on the wrong side of the NZD/USD, not because my system was long, which is was, but I tried to close all my positions on Friday evening and forgot that the kiwi stops trading on IB at 20:00, unlike everything else. If anyone else was my employer except me they would have fired me by now. So I lost 300 bucks on that one - well, I would have done if I closed it immediately. I put in a stop in the hope of trailing it down because I can't see that gap remaining unfilled.

But those gaps - cable gapped down by 10 points and AUD/USD gapped up by 80 points and on the GBP/AUD chart it looks like the gap is something like 110 points. Most of the crosses gapped 40 points.

There must be something in there that's tradeable. I guess the best strategy would be some option spread but there might be some kind of serial correlation in there. Worth investigating.
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Old Oct 24, 2010, 11:17pm   #516
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Re: Seeds of a system

Quote:
Originally Posted by Adamus View Post
I'm looking at the currency markets opening up 22:15 Sunday London time after the G20 finance meeting produced an agreement (which sounds like hot air to me).

Some of the gaps on the cross currencies charts are gaping chasms! There must be a system in there somewhere.

I got caught on the wrong side of the NZD/USD, not because my system was long, which is was, but I tried to close all my positions on Friday evening and forgot that the kiwi stops trading on IB at 20:00, unlike everything else. If anyone else was my employer except me they would have fired me by now. So I lost 300 bucks on that one - well, I would have done if I closed it immediately. I put in a stop in the hope of trailing it down because I can't see that gap remaining unfilled.

But those gaps - cable gapped down by 10 points and AUD/USD gapped up by 80 points and on the GBP/AUD chart it looks like the gap is something like 110 points. Most of the crosses gapped 40 points.

There must be something in there that's tradeable. I guess the best strategy would be some option spread but there might be some kind of serial correlation in there. Worth investigating.
The gap usually gets filled, which on EURUSD you can see has filled. You should test that.

Can i put things in perspective a little bit in terms of risk? The average hedge fund will make 11% per year on its money, and you would like to think that they have a better understanding on how to manage money and risk. I'm not totally sure of your risk in terms of percentage per trade, but rather intrigued. Risking 2% per trade can be suggested to be a comfortable amount of risk, as long as you dont have 10 trades on at once, because that is 20% risk of your account. On paper it might well within the drawdowns of the system, but psychologically damaging. How do you deal with it because you arent trading a small account, well larger that probably 95% of anyone on this forum?
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Old Oct 25, 2010, 12:58am   #517
 
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Re: Deadline June

Adamus started this thread And the NZD/USD gap got filled, although my trailing stop was 10 points away when it rebounded sharply and took my stop out.

LTCM was a hedge fund. I don't assume that they knew what they were doing. Lehman Brothers - did they know what they were doing? So the average hedge fund is probably run by Beavis and Butthead.

But that's beside the point regarding risk. I think it depends on your perspective.

I started out having £100K and I spent half of it before I even put a trade on. So I realised at that point that I was kidding myself that I was a trader but never actually putting my money on the line. The systems I have would allow me to succeed unless I'm grossly unlucky. I use fixed fractional money management to work out what my leverage should be, following Ralph Vince. You work out what the worst trade is going to be (Ralph Vince takes what your worst trade was in backtesting which underestimates it).

The drawdowns can be much more than 20% per instrument, but hopefully not much more on the basket. Even so, with forex I can adapt my lot size down to the precise % that Vince's optimal f formula says it should be, and I can keep going through drawdowns until the lot size falls to the IB minimum.

But having said that, I just halved my leverage to what it will be when I introduce a second system. So optimal f requires cohones grandes, and I couldn't hack it. It'll be optimal f when my second system goes online though. Perhaps.
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Last edited by Adamus; Oct 25, 2010 at 1:08am.
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Old Oct 25, 2010, 2:20am   #518
 
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Re: Deadline June

You have time risk too. You have lots of options at this point, which is fantastic. You could learn how to trade. You could continue with automation. You could give up on 3 ducks or you could carry on with it.

Isn't it time to cast aside what you want to believe about the 3 ducks and start looking at the reason the 3 ducks exists ? It's really a vehicle for selling training courses. Surely there are better models out there.
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Old Oct 25, 2010, 9:54am   #519
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Re: Deadline June

I suppose my question would be "why do you believe an automated system should work"?

For example, many people look at support and resistance; it thus becomes self-fulfilling in some shape or form. Many people use TA on EUR/USD, so there might be some edge in that.

But what about EUR/ZAR - is it worthwhile using TA in that "pair"? After all, it is not a real currency pair, it's simply a function of EUR/USD and USD/ZAR.

Do you see where I'm going with this? Would you expect 3 Ducks to work on BRL/JPY? If yes, why?
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Old Oct 25, 2010, 10:07am   #520
 
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Re: Deadline June

Adamus started this thread Peter, I feel you don't believe in the 3 Ducks. It's not too late, you too could still be saved. Close your eyes and imagine your aunty's living room wall, with the pink flock wallpaper. See above the mantelpiece? Those three ducks? They are lining up for a reason, trying to tell you something. Hallelujah!

As for USD/ZAR, there's no data out there for it which I can get my hands on so I wouldn't know if it works on that or not. I suspect it would though. As for the cross EUR/ZAR, I guess you missed what I added as a postscript here:

PS in fact the more I think about it the more I think that a system like the 3Ducks should work on a currency pair regardless of the technical details of the market. It might not be directly traded from e.g. AUD to CAD, but if AUDUSD moves a little one way and USDCAD moves a little the other way, those moves may not be tradeable , but the resulting move in AUDCAD could be.
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