Electric, What are these systems you are referring to exactly? The first system you say go long and short on the EUR/USD or use EUR/USD and USD/CHF which are 90% correlated. Why would I want to go with trades that offset each other...This is confusing to me. What a waste. Why can't I just pick a direction with tight stop losses and reverse if I am wrong? on the second system: You hold trades to make the interest...wouldn't the price volatility erase all your gains? Seems like gambling to me. What do you do when all your money runs out and you get a margin call? Wifey.
ok, System #1 As we speak THE EUR/USD is trading at around 1.2909 and the USD/CHF is at 1.1993. I am long on both....(for those of you that know, when the EUR/USD goes up the USD/CHF goes down close to an equal amount) I use the Pivots of the previous 2 months daily bars. I draw these horizontal lines all over my charts...looks like I am a Murry Math Trader...lol I currenty am waiting for a target of 1.2006 to hit in USD/CHF and I will replace that entry with a limit order as soon as it clears. At the same time I am waiting to enter another trade in the EUR/USD at 1.2892. As you know I have accumuated quite a few trades on its way down. All these limit orders are lined up on both charts and the horizontal lines are there as markers.. If the target does not hit in the USD/CHF then guess what? The target of 1.2941 will hit from the entry of 1.2916 in the EUR/USD. Either way my realized P/L clicks up another notch causing my next entry to be slightly more...a slight martingale effect, because my trade ticket is set at 3.30%, not a fixed number of units.. My labor and maintenence of this system consists of replacing trades 24 hours a day.. Also, each evening at the formation of the new Oanda daily bar drawing the new pivot point line (22:00mst)...There are never any trades closer than 10 pips to each other and I trade all night. Its easy... I wake up and glance at my laptop on the nightstand and go back to sleep if nothing needs to be replaced. I make about $300.00 or $400.00/mo on this little $1,500.00 system...(I also have a reserve account in cash in case I calculated the 10 year possible range wrong or if new ground is realized... See attached spreadsheet in the next post.... Michael B.
Here is system #2 Assuming you are in the USA and have an USD account, just trade these three pairs in the "interest earning" direction indicated: Long: AUD/JPY (APR=126.62%)* Long GBP/CHF (APR=109.12%)* Short EUR/HUF (APR= 94.50%)* * I update the Interest earning Ranks of the 30 Oanda pairs monthly... Plan on making a miniumum of 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 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 3.30% 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 postions 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. 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 and go to tools/save current layout. 6) Wait 24 hrs. and repeat steps 1-5 Okay now this is a very flexable 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 you will be chasing around the price with your horizontal lines...you really should not care about the high unrealized drawdown this system can carry at times. You just want to make your 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 accont 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 postions 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: www.mataf.net I have attached this spreadsheet that you might find helpful (it has both of my systems on it)
If any of you that have voted that trading is gambling and you would like to change your vote, I believe you can ask the moderator for help...
............................................................. ElectricSavant said: Lar, Thanks for your thoughtful response so comman to these threads... Lets take it like this... if 2+2=4 could 2-1+2+1-2+2= 4? In this set could you trade some of the subsets and still arrive at the same place? without gambling? OR KNOWING THE OUTCOME? forget edge! .............................................................. ElectricSavant, Without knowing the outcome of which number is coming up in the current sequence, could I get to 4 without gambling? I don't think so. I think I'd have to gamble that the proper numbers would come up. As with the market, 2 could come up or 9 or -727 or something much further out in the universe of possibilities. In fact, I'd expect them to not net out at 4. So I would catagorize this as a very wild gamble. The reason I don't want to forget "edge" is because that is what assists me to believe the odds are in my favor that I will arrive at a favorable destination. For planning purposes, an edge reduces the universe of possibilities. Not the actual possible outcomes - the "probable" outcomes one can seek to accomidate. My head is starting to wobble (grinnin' here). Lar
System #1 may be a wastful way to trade, but I find hedging works like automation for me. I am not a programmer and am unable to automate beyond this.
Wobbling is a good thing...your thinking.. Go with this for a minute...just give it a chance... re-read the thread tomorrow and reflect... Post here if you still disagree ok? Promise? Michael B.