See my recent post on this..... and the final question was: How do you determine WHEN TO PULL THE PLUG ? What is the criteria ?
For me it's a little discretionary, which isn't good, but I have a good idea of when I would pull the plug and I'd say it's when you start noticing some major drawdowns... major being the system is making new drawdowns. I'd start getting nervous at that point. It hasn't yet, but it will.
See this post: http://www.elitetrader.com/vb/showthread.php?s=&threadid=64497 Current drawdowns that are beyond historic are the trigger IMHO.
I like to call the "Draw the Line" point, my "Uncle Point". I am told by a few professionals that trade OPM, that investors start to get nervous at around a drawdown of around the 15% level. I am over the accepted 5:1 leverage, just now as I am trying to push yield. Generally, if you use a lot of leverage you will have larger drawdowns. "Always in" systems such as mine are a different, longer term animal. But...I have introduced gridding and scalping to this beast with some discretionary selection, with some interesting results. mixing a strategy with long-term and short-term profit taking, together in a positive interest earning carry environment, has made my system rather unique. If I could manage yield... as well as I can manage drawdown and leverage use, I would be managing millions/billions by now. Michael B.
I may have to pick your brain sometime on your short-term scalping/gridding ideas... I'm always in as well, which can range from 1 day to 2-4 days... As you know, being in for 2-4 days on a currency is a nice win... I'm currently working on a scalping strategy on EUR/USD and EUR/JPY with limited results in my backtesting so far...
Without revealing my short-term methods (They are comprising most of my profits and my future "living"). I must say that the stuff I use is all mine. It is proprietary. Hey its not that great, as there are traders out there that trade me under the table. I scalp two ways. Arbitrage is my newest time consuming addition. Also, I have an indicator based scalping method that I have tweaked to my needs. I also Grid trade which is not scalp trading....a whole thread can be devoted to this, which I am not prepared to do. Then I subscribe to a few pay services to get my fundamental news and "feeling" for this wonderful Global market. In one of these services from UBS I find levels that are very important. I do not trade those levels, but they tell be how heavy to get exposed and if i need a hedge. MY DREAM IS TO HAVE ACCSESS TO A BLOOMIE... I also position trade in the carry side of the basket, I currently have nine positions on...yes nine...but it is not as complicated as you think. Anyways you can try to pick my brain and reverse-engineer, but you will need to find out what works for you, as the quants and the HF cannot figure out what I do, BECAUSE THERE IS NOW A DISCRETIONARY COMPONENT TO MY TRADING! I suggest in whatever you do, have several methods, systems, choices at your finger tips as the market will tell you which one of those will work best at that time. If you follow those precepts in my opening post, you will gain the time you need in this negative-sum game of trading retail spot forex. Everyday is a losing game and you need several edges to grab the profit the market will give to you for a very short blip of time, before wiping you out...get that profit and stay exposed correctly and you shall do fine. And system traders... try goosing your system with some discretion! Michael B.
No trades today. I am testing a new arb type system...and it has taken all my time. I did not sleep last night either ( I have pulled 1/2 a percent out of another account that I trade in 24 hours). I will most likely integrate this intraday arbing into Cash & Carry (Grid). Don't worry as I am not breaking any rules as I am not taking advantage of any temporal imbalances....dealers do not allow picking...some call it scalping...I am doing everything legal as I do not want to lose my account or get that sort of reputation. There is plenty of money for all of us, without cheating. Hint: correlations can work for you or against you....when they run together in an anti-correlated way they offer tamed volatility. Interest is big today because of my leverage, so I will get in some fractional percents....no worries because if I do nothing at all at this current leverage that I am carrying, I would still make an estimated 21.9% annual ROI. (you aint seen nothin' yet, it is now just how fast I want to show what I can do...babby I got the tiger by the tail...) The current progressions are going to give me an awesome 3rd. and 4th. quarter...I might even turn the leverage down as I do not need it, with this compounding thats happening... Electric...breathe...keep everything calm and don't lose your perspective...Now get some sleep, nothing is happening at this hour... Michael B.