Holy grail

[Hoggums]

If anyone can, perhaps they might calculate the stats on the 1,2,3 system.
Just to refresh or instruct any minds unfamiliar with the system it runs as follows:-
Put your initial stake on say £1
If that loses put on £2
if that loses put on £3
if that loses return to £1
Imho the system may have some merit if one's success rate is high enough. Perhaps a win rate of > 52% over time would show a profit ( just for these purposes one might have to assume a fixed x profit ). Therefore my question is how high should the win rate be, to break even ???
Anyone ?????????

I doubt very much that this would be a profitable strategy

e.g. - trade 10 point barriers at £1 a pip

1st trade hits -10 points open 2nd trade £2 - running loss £-10 (ignoring spread)
2nd 10point barrier hit - open 3rd trade £3 - running loss £-40
3rd 10 point barrier hit - open 4th trade £1 - running loss £-100 (1x30 + 2x20 + 3x10)
market move back 10 points - close all trades (?) -
1st trade closes at £-20, 2nd -20, 3rd £0, 4th +£10
That's a -£30 profit. If you add in a typical 2pnt spread then your loss increases to £-38

In my opinion it would take a reasonably high win/loss ratio to beat this. If I get the time I'll do the maths.

 

[Hoggums]

I doubt very much that this would be a profitable strategy

e.g. - trade 10 point barriers at £1 a pip

1st trade hits -10 points open 2nd trade £2 - running loss £-10 (ignoring spread)
2nd 10point barrier hit - open 3rd trade £3 - running loss £-40
3rd 10 point barrier hit - open 4th trade £1 - running loss £-100 (1x30 + 2x20 + 3x10)
market move back 10 points - close all trades (?) -
1st trade closes at £-20, 2nd -20, 3rd £0, 4th +£10
That's a -£30 profit. If you add in a typical 2pnt spread then your loss increases to £-38

In my opinion it would take a reasonably high win/loss ratio to beat this. If I get the time I'll do the maths.

I've cobbled together a crude spreadsheet for you, if you assume you have no problems with margin etc and no spreads then this system actually has a small positive expectancy

However if you take into account spread size then your system needs a win/lose ratio to overcome this. e.g. for a 2 pip spread you need a 53.5% win ratio (as saved in the spreadsheet).

However you can't guarantee win rate, nor can you guarantee accurate execution of the strategy - if you slip on average 1 pip per trade (a reasonable amount) then your accuracy needs to be 55.5% to overcome this.

The spreadsheet itself is not perfect either - it assumes that the probability that the trade will move in your predicted direction remains constant - no matter what the market is/has been doing.

Anyway I hope you find this helpful.

 

[Pat494]

I doubt very much that this would be a profitable strategy

e.g. - trade 10 point barriers at £1 a pip

1st trade hits -10 points open 2nd trade £2 - running loss £-10 (ignoring spread)
2nd 10point barrier hit - open 3rd trade £3 - running loss £-40
3rd 10 point barrier hit - open 4th trade £1 - running loss £-100 (1x30 + 2x20 + 3x10)
market move back 10 points - close all trades (?) -
1st trade closes at £-20, 2nd -20, 3rd £0, 4th +£10
That's a -£30 profit. If you add in a typical 2pnt spread then your loss increases to £-38

In my opinion it would take a reasonably high win/loss ratio to beat this. If I get the time I'll do the maths.

My maths is pretty poor but
1st trade hits s/l of 10 = -10
2nd trade hits s/l of 10 = -20
3rd trade hits s/l of 10 = -30
overall loss -60
or
1st trade hits s/l of 10 = -10
2nd trade hits s/l of 10 = -20
3rd trade ok = +30
breakeven
or
1st trade hits s/l of 10 = -10
2nd trade ok = +20
profit +10
or
1st trade ok =+10

can't work out win % to cover this !

 

[Hoggums]

I've cobbled together a crude spreadsheet for you, if you assume you have no problems with margin etc and no spreads then this system actually has a small positive expectancy

However if you take into account spread size then your system needs a win/lose ratio to overcome this. e.g. for a 2 pip spread you need a 53.5% win ratio (as saved in the spreadsheet).

However you can't guarantee win rate, nor can you guarantee accurate execution of the strategy - if you slip on average 1 pip per trade (a reasonable amount) then your accuracy needs to be 55.5% to overcome this.

The spreadsheet itself is not perfect either - it assumes that the probability that the trade will move in your predicted direction remains constant - no matter what the market is/has been doing.

Anyway I hope you find this helpful.

I just realised I made a mistake on calculating the cost of the bets - and it significantly affects the results. (attached)

To break even with a 2pip spread on 10 point barriers you need a win ratio of 56%
Up that to 4 pips - you need 62.5%

Of course you can combat this by increasing the size of your barriers - which jepardises your ability to execute the plan due to margin requirements.

It appears I've miss understood your requirements! I was assuming you keep the gets going - I'll alter the spreadsheet for this later.

 

[Hoggums]

I just realised I made a mistake on calculating the cost of the bets - and it significantly affects the results. (attached)

To break even with a 2pip spread on 10 point barriers you need a win ratio of 56%
Up that to 4 pips - you need 62.5%

Of course you can combat this by increasing the size of your barriers - which jepardises your ability to execute the plan due to margin requirements.

It appears I've miss understood your requirements! I was assuming you keep the bets going - I'll alter the spreadsheet for this later.

OK Done - this system has a positive expectancy with 2 pip spread and 50% win ratio.

However - it's all mathematical & theoretical and takes no account of how you'd feel picking the wrong direction on a trending market and losing over 200 pips on your first bet!

This would also only ever work if you keep your trade size constant - otherwise other factors come into play.

 

[fxwinner22]

I'm sorry - I must be a bit thick.

Can someone tell me why you would keep buying when the market is falling?

an old friend used to say that's like 'putting lipstick on a pig'

 

[jiggly]

I'm sorry - I must be a bit thick.

Can someone tell me why you would keep buying when the market is falling?

an old friend used to say that's like 'putting lipstick on a pig'

averaging your position is not all bad, so long as you take into consideration and manage the risk involved in doing so, what is the worst case scenario? and what is the likelyhood of it occuring? and what impact would it have on your equity?

example you may want to take a trade and risk 5% of your capital, some may shoot the lot on a single clip, others way choose to buy a maturing dip improving their position by buying lower and averaging out the position.

so someone may want to buy a falling market based on this rational with the expectation of a longer term up move.......and if it fails, may end up risking less on the assumption that they were wrong and have withdrawn any further capital from entering the market.

I personally see nothing wrong with thinking about things in a different perspective, such as this in occasions where you have researched and understand the risk you are taking on, it comes under the topic described as 'tactics' which not may books, courses, etc go into too much detail over.

I have personally been experimenting with a method that has no stop losses, trades very small unit sizes and averages down on a constant increment, no martingle effect and no set TP level, it is flexible to move with the changing conditions of the market.

the strategy is proving to be sound, because I know where to take losses when i have to and know where i need to get out to make even the smallest profit if need be. it is an always in the market startegy with a high probability of expectancy, with the occasional high loss, but it seems to be holding to my initial analysis.

before anyone starts criticising, I would like to say, that i have been trading for a while and this is not the only strategy I am using, all in about 3, and it helps smooth the combined equity curve.

so in contrast a method like this has merit, in some cases, and there is a time and a place to exercise any idea in the market. so long as can find the answers for the questions I raised in the first paragraph.

 

[fxwinner22]

didnt mean to sound facitious Jiggly.

Just that i've been there and worn the tee shirt.

Your last post suggests that you are getting back into trend anyways albeit on a higher timeframe.

my message is a warning though - the important bit in your post are the words 'take a loss' - most who average down don't know how to do this when they get to their last planned addition. I didnt.

I had a system of trading in this way and classed the whole selection of trades as a single trade - so for example 4 trades added in would be one trade. - after three my only objective was to break even and most of the time it did.

I had almost 70 trades in a row winners - lasted about 6 weeks, i couldnt believe it. you actually get to the point where you want the market to go against you!

Then came the killer - one trade took me into equity loss wiping out the 60+ winners and the second time it happened almost crippled me.

I now see this strategy as majorly flawed because you add to losing positions in the hope it comes back but the ones you get right that go straight into profit are only in small lots. doesnt matter how long you go on, it will get you in the end. This strategy cost me around $12,000 in 2 trades

It's much easier to say oh, its failed so close it and wait for an entry the other way.

The use of a strategy like this shows the lack of ability to take a loss until it's just too painful to stand. I for one dont enjoy sweating a trade but if you do, then this is the ultimate sweat maker.

All in my opinion of course and I hope you fair well my friend.

 

[Hoggums]

didnt mean to sound facitious Jiggly.

Just that i've been there and worn the tee shirt.

Your last post suggests that you are getting back into trend anyways albeit on a higher timeframe.

my message is a warning though - the important bit in your post are the words 'take a loss' - most who average down don't know how to do this when they get to their last planned addition. I didnt.

I had a system of trading in this way and classed the whole selection of trades as a single trade - so for example 4 trades added in would be one trade. - after three my only objective was to break even and most of the time it did.

I had almost 70 trades in a row winners - lasted about 6 weeks, i couldnt believe it. you actually get to the point where you want the market to go against you!

Then came the killer - one trade took me into equity loss wiping out the 60+ winners and the second time it happened almost crippled me.

I now see this strategy as majorly flawed because you add to losing positions in the hope it comes back but the ones you get right that go straight into profit are only in small lots. doesnt matter how long you go on, it will get you in the end. This strategy cost me around $12,000 in 2 trades

It's much easier to say oh, its failed so close it and wait for an entry the other way.

The use of a strategy like this shows the lack of ability to take a loss until it's just too painful to stand. I for one dont enjoy sweating a trade but if you do, then this is the ultimate sweat maker.

All in my opinion of course and I hope you fair well my friend.

Words of wisdom indeed. In my search for a fully auto system that I could plonk on oanda's API I've backtested all kinds of strategies like this, different time frames, different ways of averaging down, I tried all sorts of techniques to control the drawdown - all it resulted in was the profits being far less - and they ALL went belly up at some point. With a system like this It only takes 1 bad week in years of trading to wipe out your account and be back where (or worse off than) you started.

I think fxwinner and I now have much the same strategy (?)- I've found what works best for me (my personal holy grail) is riding the long term trend on the futures (there's actually a little more to it than that - but it's the main gist). It's completely stress free, you can ride out the turbulence like we've experienced in the last 3 weeks, the winners are usually 3-5x the losers and I get to hold on to the profits. You may not get rich "quick" (realistically - almost no one will) but with a conservative use of leverage and favourable trending markets 50-100%pa is within grasp.

 

[fxwinner22]

Hi Hoggums, sound's like we are similar although im not sure on your definition of long term.

Personally i take the trend on the 4 hour and 30 min chart - some trades like my recent cad trades last weeks and weeks and some just a few days.

My method of entry is around 65% right and winners around 3-5 times same as yourself.

I am agressive with leverage though but change it according to the pair traded, for example i wouldnt use the same leverage on GBPJPY as i would on EURUSD - the calmer the waters the more i will leverage.

Doing this I average 10-20% per month on closed positions.

always following the trend though.

 

[Hoggums]

Hi Hoggums, sound's like we are similar although im not sure on your definition of long term.

Personally i take the trend on the 4 hour and 30 min chart - some trades like my recent cad trades last weeks and weeks and some just a few days.

My method of entry is around 65% right and winners around 3-5 times same as yourself.

I am agressive with leverage though but change it according to the pair traded, for example i wouldnt use the same leverage on GBPJPY as i would on EURUSD - the calmer the waters the more i will leverage.

Doing this I average 10-20% per month on closed positions.

always following the trend though.

I used to trade the 4hr bars - I found it a little too choppy for my liking - particularly with my CS account and overnight stops not working during closed hours. I now trade the weeklys which lets me sit back and relax during the week, the bars tend to behave in nice linear channels for weeks at a time. It also means I dont need to close my positions when I go on holiday. My trades are usually 3 weeks minimum and unlimited max - I roll on to the next future when it expires. I too am sitting happily on a nice profit shorting GBPCAD at the moment. I've organised my portfolio so that I don't have too much exposure to one CCY - however it is tricky avoiding the $ particularly as I invest gold & silver. I base my leverage on the historic std deviation of daily moves in the ccy pair.

It's been a good year so far, I'm up just short of 50% realised - but this does include option and exotics strats I have going too. 15% in April alone, I've not done the figures yet but May looks like a slow month - maybe 2-3% realised. However there's some unrealised profit on some indices (& GBPCAD) which has yet to be taken into account.

I am following your 30min thread with interest.

 

[minx]

Doing this I average 10-20% per month on closed positions.

always following the trend though.

fxwinner and hoggums, can you give me an idea of your margin/equity ratio for your returns. Fwiw, I'm making around 5% a month on an 11% M/E Ratio. This may not seem like the most efficient use of my capital but there are external reasons for this.

 

[fxwinner22]

I'd love to trade weekly charts and take my hat off to you for doing it - personally i dont have enough capital of my own for the stops needed. My client accounts have enough but i'm not comfortable with going that long term yet. Maybe if it was 300m instead of just a couple

as for the account used, well I have Cap Spreads for the majors that would close the stops overnigt, CMC and IG for the others and Mig for the stuff i want to automate. I'd prefer all on CS to be honest but as the minors are not available from 9pm to 7am I cant.

Client accounts are on a totally different interbank system.


Minx, im sorry, but i don't understand the question, can you expand a little?

 

[minx]

I mean how much of your equity do you have on the table at any time? I realise SB will be slightly different but they do require some minimum margin per £1 bet. In futures you'd just use exchange margin, eg- Bund is €1750 per lot.

 

[fxwinner22]

must be honest, i don't measure it. I just know i have bags and bags of margin - never had a margin call yet.

im not the kind of person who moves money in and out of an account - some do this keeping their margin usage high, personally i can't be bothered and just withdraw

 

[minx]

k, was just curious how hard you sweat your capital for your returns.

 

[Hoggums]

k, was just curious how hard you sweat your capital for your returns.

I only trade the weeklys using SBs so I can afford the large stops/margin required by trading relatively small amounts. I wouldn't be able to afford real futures in this way.

To minx - the margin I'm using is all dependent on the status of my position. With my IG account the margin is fixed so I usually only have max 20% of my account margined up at any one time. With CS because the margin is taken to your stop, in theory could go up to 100% but usually is around the 25% mark. It all depends whether my positions are in profit or not.

Back in April I entered the investors chronicle SB competition (run by CS) and bought and held FTSE and a few ccy pairs. I didn't do any other trading, just held those positions. (with a lot of leverage). Interestingly enough - I finished 6th out of 200+ entrants and I was in the top 5 for most of the competition. Doing nothing!

I think I'm going to try the same thing again this month if the competition is still running.

 

[AC007]

Which broker you people use for FX trade? I am thinking of using FUTURESBETTING,their spread is very good. Only concern I have is that they are based in GIBRALTAR.

 

[Pat494]

Thanks for your efforts Hoggums
Perhaps I should try it on the roulette table. No spread, no skewing !

 

[jiggly]

didnt mean to sound facitious Jiggly.

Just that i've been there and worn the tee shirt.

Your last post suggests that you are getting back into trend anyways albeit on a higher timeframe.

my message is a warning though - the important bit in your post are the words 'take a loss' - most who average down don't know how to do this when they get to their last planned addition. I didnt.

I had a system of trading in this way and classed the whole selection of trades as a single trade - so for example 4 trades added in would be one trade. - after three my only objective was to break even and most of the time it did.

I had almost 70 trades in a row winners - lasted about 6 weeks, i couldnt believe it. you actually get to the point where you want the market to go against you!

Then came the killer - one trade took me into equity loss wiping out the 60+ winners and the second time it happened almost crippled me.

I now see this strategy as majorly flawed because you add to losing positions in the hope it comes back but the ones you get right that go straight into profit are only in small lots. doesnt matter how long you go on, it will get you in the end. This strategy cost me around $12,000 in 2 trades

It's much easier to say oh, its failed so close it and wait for an entry the other way.

The use of a strategy like this shows the lack of ability to take a loss until it's just too painful to stand. I for one dont enjoy sweating a trade but if you do, then this is the ultimate sweat maker.

All in my opinion of course and I hope you fair well my friend.

I know what you mean about wanting the market to go against you to accumulate in anticipation for the turnaround.

It can be very dangerous if you dont manage the risk, and I think that the majority part of this trading lark, is about managing money and risk, so this was the premise that I used to develop the strategy which ultimately does not predict direction in any sort of way, almost like a grid style system, but nothing is fixed, the grid is flexible and moves with the market..........

I am not as large trader as you, but I hope that you recouped that $12,000 fast enough.

but by and large, this style of trading, I agree, is very dangerous and completely flies in the face of conventional principles and axioms. certainly any martingale style system should be approached with extream caution.