Elite Trader's Gambler's Anonymous ETGA

Discussion in 'Journals' started by ElectricSavant, Apr 18, 2005.

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  1. In the trading forum was the Poll named, "Is Trading Gambling or Not..What say you? Vote Here.

    I attempted to prove that trading was not gambling with two illustrations of systems that I felt would PROVE trading is not gambling.

    There was a good response to the thread and many voted. At times it was two-to-one in favor of, "not gambling".

    Visit this link below to vote or to comment with your opinions pointing to the illustrations, as to why you think trading is gambling or not.


    As a mild aftershock of the poll, a few PM'd me in regards to those two systems, and here I am. I have no idea as to how many people will benefit from this Journal, but I am told that this is a unique way to trade Retail Spot Forex with Oanda.

    Imagine not needing to know which direction to trade....not long or short...did not matter. Imagine a complete mechanical way to replace limit orders after they were executed that would be clearly explained in the instruction manuel that this Journal serves. This is written for ALL to read and to trade their own system with.

    I have a request, before you post in this Journal to please read the link above from beginning to end and that you vote in that thread. If you do not wish to post in this Journal and just lurk, that is fine too. I hope you find this as rewarding as I do and good trading to you.

    I will post the instructions for the two systems shortly.

    Michael B.
  2. For those of you that wish to lurk and to not read the link in the above post, I will shortly discuss some precepts that I believe exist.

    When a pair trades the price can go up, and the price can go down (Picture that fat guy in the inflatable raft in the Barron's commercial) I call that, "Flow".

    If you assume the lowest low traded is zero and the highest high to be infinity then it would be hard to measure the range of an instrument and define it. Wouldn't it be wonderful if it could be done? But we DO know half of it, the lowest is zero. I call this possible range, "Capacity"

    If you believe Flow>Capacity then I can show you how to look at the market in a different way and to think outside of the box.

    Michael B.
  3. Now, assuming you believe that Flow>Capacity, could you imagine having enough time to profit from Flow while waiting to realize the Capacity? Now some of you might think how can that be, If capacity is not defined as to how "much" infinity can be.

    Now lets think about this. If Flow were only... lets say, three times capacity, could a method realize the profit from flow before infinity was reached and the unrealized P/L reached margin call proportions? Would one need to just profit from 1/3rd of the flow while experiencing the trip to infinity to get out of the trade?(no instrument trades to infinity in a straight line)

    If a price falls in a straight line such as the EUR/USD and you have it hedged with the USD/CHF then how long could you last before a margin call if you sized your trade to withstand a 10Y historical range? For you Forex traders as you know when the EUR/USD goes up the USD/CHF goes down. Say you were long in both pairs at the same time, and when one side went up the other side went down. Now you would take profit in equal increments and/or add to in equal increments on each side. You simply replace the trades that took profit. You line up your limit orders to buy on each side of the teeter-totter. When one side is going up and taking its profits the other side is going down and accumulating entries.

    I will provide instructions shortly...

    This will be system #1.

    Michael B.

    P.S. Flow can be more than twelve times capacity or more.
  4. Here are the instructions for System#1. This is simple enough for Wifey to trade (she traded system #1 yesterday).

    Open up a sub account at Oanda and park half of your cash that you want to trade this system with, there. So if you use 5k then put $2,500.00usd in the cash sub account. Oanda can sometimes set this up for you over the phone if you have a Primary account opened already. (212)858-7690. You can use any amount of money you wish, but the spreadsheet posted here will reflect a 5k initial capital. I am trading this real time and you will noticed that the spreadsheet starts on 3/30/05. These are real trades.

    In user preferences (you will find this here: Tools/User Preferences), check all the boxes on the left hand side except Auto Extend trendlines left and Hide Weekend Data. There are not any boxes checked on the right side. Use a 1.10% trade ticket in Oanda (this percent is changed and announced here, periodically). Here is the screenshot.
    <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=731390>

    Set you leverage to 50:1. You will find this here: Account/ Change Leverage (you must reboot for this to take effect).

    Open up two charts of candlesticks for the EUR/USD and the USD/CHF and put them side by side. EUR/USD on the left with green/blue candlesticks and USD/CHF with all grey candlesticks. Zoom out/in to give you 2 months of daily bars (I have 21" monitors)

    You will be drawing horizontal lines now, marking the pivot point of each of the two months (or 2.1/2 months) of daily bars. They are the default color of red horizontal lines. I use this pivot point calculator:


    Start at the far right edge and draw backwards in time bar by bar. If a bar your adding is closer than 10 pips to any front running lines don't add it. When your done you have a chart full of red horizontal lines..your a professional trader ....lol. Do this for each chart. At 24:00(est) your new bar forms in Oanda and you can draw a new front line. Eliminate any line 10 pips in your way.

    These lines are markers where you are to replace your trades. You need them! As you update each day they become dynamic and you will need to adjust open orders and open trade targets to reflect this as each day passes. A target is never adjusted to under 10 pips. An open order can be easily cancelled and replaced at the correct line.

    Ok you are now ready to start. Remember this is long term trading and based on a two year time horizon. So here we go!

    Buy EUR/USD (your trade ticket will give you your units as it is set at a percent) Enter you longs at all your lines or enough of them to cover today's big bar. If you buy all of them that is fine, your using limit orders. Hold you mouse over the line to find it's value. I am lazy and don't enter all the lines, but just enough to handle a big move. Set you take profit at the line above each entry. Do the same for the USD/CHF. If you line up your limit orders all the way use a 1 month GTC (default is one week).

    Ok now you have become a trade replacer not a gambler....Simply as each trade executes with your take profit replace it. You can view this in the activity tab, or look for those little triangle on the lines in the charts
    • As you get flow... you get trades.
    • As you get trades you get realized P/L.
    • As you get realized P/L you get larger trade size (slight martingale).

    This is 24hrs a day with Friday nights, Saturdays and Sunday Mornings off (est). You figure out how to manage your time. perhaps you can take a laptop in the bedroom and glance at it periodically in between sleep. But when your making money this is a nice problem. :)

    Michael B.

  5. System 2 instructions

    Assuming you are in the USA and have a USD account, just trade these three pairs in the direction indicated:

    Long: AUD/JPY
    Long GBP/CHF
    Short EUR/HUF

    Attached is the current interest rate rankings for all 30 pair at Oanda, I periodically will update it and post it here.

    Plan on making 30% per year (because you need to hold some cash in a subaccount that only earns 1.9% per year). You need two accounts at Oanda. After you fund your real money account simply call Oanda at (212)858-7690 and ask them to open up a sub account for you. Many times they will do this for you over the phone and they will want you to give it a name.

    Set your leverage to 50:1 (you must reboot for this to take affect).

    Split your money in half...put half in your Primary trading account and the other half in your Sub Account. I have named my sub account.... Cash (if you have an USD account you will earn 1.9% per year). The reason for this is because you need to be able to transfer cash quickly in the event of an emergency. By establishing a sub account before you start to trade this system will enable you to simply click your transfers through the platform when needed. Account/transfer Funds/user name, password/fill in the from and the amount and to which account.

    Set your trade ticket to 1.10%

    You will be using the positions tab and trade tab in the Oanda platform, extensively with this system.

    To start the ball rolling:

    1) Enter in your three trades in the interest earning direction with the trade ticket size above.

    2) Wait 24 hours or when you wake up in the morning assuming you live in the USA

    3) If any of the three positions have gone against you then average down with one more entry and draw a green horizontal line on the chart for your average price (taken from the positions tab). Make it a red line for the EUR/HUF so you know it is a short. You can get the average down amounts from the spreadsheet that I post here.

    4) Wait 24hrs and open up your trade tab. Click the column "Profit (USD)" to sort in descending order. Then if the values in the top equal or exceed the negative value at the bottom, then close them both. You don't really care which instruments. You simply want to cancel out your losing trades with the winning trades.

    5) Don't forget to move your horizontal green and red lines on your three charts after doing step 4

    6) Wait 24 hrs. and repeat steps 1-5

    Okay now this is a very flexible system so you can alter these steps above concerning how often you look at your charts. But everything else is calibrated and fixed, so try not to deviate too much from the systems rules. If you have new ideas, then shoot me an email, perhaps I have researched them and can save you time.

    This methodology of longer term carry trades is not liquid. It may take you 6 months to get money out. So commit money for growth only.

    You will soon notice we are chasing around the price with our horizontal lines...we really do not care about the high unrealized drawdown this system can carry at times. We just want to make our interest, which Oanda pays daily including weekends.

    Always endeavor to keep your horizontal lines as close as possible to the current price. Do not try to predict where the price is going, just simply follow the rules above.

    The optimum point of this system is to try and get all of your 50:1 leverage committed, and this is where your sub-account shall be appreciated. If you max out your entries, you may need to move some cash into your account from your subaccount which takes about 30 seconds. You do not want a margin call and you want to be able to continue to add to your account. These three positions do not move together and it would be very rare for ALL of them to go against you at the same time for an extended time.

    I used this websites free tools to research the volatility and correlation of the chosen pairs:


    Michael B.
  6. Spreadsheet attached. These are my trades with real money. These systems are difficult if not impossible to backtest. I have traded System #2 since July of last year. I have researched System #1 for three months with literally hundreds of questions and view this Journal as my Forward test for System #1 with my personal tweaks and adjustments.

    I will be posting this spreadsheet daily for all to view. But please again...Do not post to this Journal, unless you have read the referenced thread in the opening post of this Journal and have voted in that poll.
  7. Todays Trades
  8. Today's Trades Wednesday
  9. Fixed formula in Parity column and added chart

    Todays Trades Thursday
  10. Added Variable Trade Ticket Column

    Today's Trades Friday
    #10     Apr 22, 2005
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