Joe's Journal

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Re: Joe's Journal

Postby Joe T » Thu Jul 15, 2010 3:26 pm

(103) 07/14 18:03 sell 0.01 1215.2 @ t/p 1209.15
(104) 07/14 18:59 closed (103) @ t/p, +6.05
(105) 07/14 19:54 buy 0.01 1203.05 @ t/p 1206.09
(106) 07/14 20:28 closed (105) @ t/p, +3.04
(107) 07/15 15:52 sell 0.01 1215.20 @ t/p 1209.15
(108) 07/15 16:40 closed (107) @ t/p, +6.05
Joe T
 
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Re: Joe's Journal

Postby Joe T » Thu Jul 15, 2010 11:06 pm

Update as of 7/15/2010 here:

http://digitaldiatribes.wordpress.com/2 ... -07152010/

Summary:
As of 6/30/2010 the close price of gold was $1,242.08. As of 07/15/2010 the close price of gold was $1,208.08 (-2.74%)
As of 6/30/2010 my account equity was $4,000.85. As of 07/15/2010 my account equity was $4,352.26 (+8.78%)

As of 10/31/2009, when I started this, gold price was $1,045.45, so that has increased in value by 15.56%
As of 10/31/2009, my account equity was $2,360.46, so that has increased by 84.38%.
Joe T
 
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Re: Joe's Journal

Postby Joe T » Mon Jul 19, 2010 12:07 pm

(109) 07/16 15:20 buy 0.01 1203.05 t/p 1206.09
(110) 07/16 15:23 closed (99) @ t/p, +3.02
(111) 07/16 15:45 buy 0.01 1191.02 t/p 1197.07
(112) 07/19 16:33 buy 0.01 1179.11 t/p 1188.13

* - off-strategy, also bought 0.01 of usdjpy on 07/16 @86.47. At this point, I'm trying to eliminate my USDJPY positions altogether. So, right now I have three positions that cumulatively have a breakeven level the exchange rate increases to 90.31. I may add to this if exchange drops below 86. At some point, this will bounce back and then I'll get out at a small profit on a combined basis.
Joe T
 
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Re: Joe's Journal

Postby Joe T » Tue Jul 20, 2010 4:58 pm

(113) closed (112) manually, +5.67

Rationale: Saw a big spike up in price this morning and many times that will reverse. I had to leave home for work and decided to bank my profits, and then resubmit a buy limit order at 1179.11. Well, as it turns out, I would ahve been better off letting it go, because price did jump up enough later to take-profit levels. Sometimes you win on those and sometimes you lose, but in that case I'll bank a guaranteed profit most times.
Joe T
 
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Re: Joe's Journal

Postby mikee23 » Tue Jul 20, 2010 7:11 pm

Hi Joe,

I was looking around and saw your AUDNZD strategy.

Similar idea I have tested extensively , hower it was EURUSD I looked at.
I have made some conclusions which might be of use to you, so I try to share.

1. EURUSD can also be seen as range limited pair. It has been 0.80-160 for more than 10 years
and during last 7 years has been 1.10-160 which +/- 25cents from 1.35 average.

2. The benefit for the EUR/USD pair is that it has much lower comissions. Comission costs are essential with this strategy. In addition it means you get more trades when everything else is equal and spread is smaller.

3. Only open buy deals when the price is below average and sell when the price is higher. Of course the average is not something fixed, it changes during the years. EUR seems to be climbing up last 10 years. There have been 13 crosses of current price with average during last 10 years. It means you are break even (close all your losers) once per 9-10 months

4. Capital management is vital. Generally you need to have account balance 2 times bigger than your yearly revenue in order to stand 25% price change away from average

5. Yearly revenue depends only on the frequency you make deals and your average pip profittake. Depending on the distance you place your orders it seems that there are different pip profittakes that maximize the revenue
As in your example with when order placing distance 100pips, profittake for EURSUD needs to be 35pips in order to maximize your revenue. 25pips and 50pips profittake yield approximately 15% less than 35pips profittake. I have not tested AUDNZD, but believe it will be pretty much the same there. Profittakes 100,200,500pips, etc are a waste of money in the long run. Yes you take one big deal, but unforunately lose much more smaller which as a total accounts for more than that single one.
For example - 75 pips distance maximize with around 30 pips profittake
50,25,10 pips distance maximize with around 15-20 pips profittake

6. I do not recomend increasing the lots when you are nearing the borders of the pair coridor .
First it makes the money management more difficult, but what is more important is that doubling the lot only doubles the profit, however if you instead decrease the distance between deals from 100 to 50pips it gives few % more in addition to the doubled revenue.

7. As far I understood you are applying the same strategy with gold. I assume the general principles will be pretty much the same, However the gold price range seems more unclear to me and i would not risk jumping in with the same strategy there. Gold is too much specific.
Oil would be petending to be much more of candidate for such strategy, but unforunately transaction costs are a way much higher than EURUSD spread. Gold transaction costs a also higher btw.
mikee23
 
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Re: Joe's Journal

Postby Joe T » Wed Jul 21, 2010 1:03 am

Mike, thank you for your comments. I have thought a bit about how to incorporate this with different pairs, and your insights on eurusd are a valuable addition. Over time I may try and test that. I have thought along the lines of shorting at the top 25% of the range, going in both directions in the middle 50% and going long on the bottom of the range. But that is just a quick thought with no particular backtesting.

I agree completely that the entire key to profiting on this is money management and taking profit when it's available. You profit in this strategy from volatility. Occasional trends are nice because you load up on positions, but what you ultimately want is price bouncing around. But you must trade small lots along the way and be willing to absorb drawdowns.

The reason I trade gold is because it is pretty volatile, which makes the pip spread on commissions less of a concern. But I admit that I am very bullish on gold. So I mainly trade it because I personally do not see a risk of a major major move downward, though I try to protect myself against the possibility.

I am not as concerned about spread as others may be. Very often the spread simply reflects volatilty. Since this method profits from volatility, I'm willing to pay for that if necessary.
Joe T
 
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Re: Joe's Journal

Postby mikee23 » Wed Jul 21, 2010 8:57 am

Joe T wrote:I have thought along the lines of shorting at the top 25% of the range, going in both directions in the middle 50% and going long on the bottom of the range.

Well, in such case you risk filling 75% of the range with losers which would not be fun.
If you just strictly sell above and buy below the average, you will get max 50% of the range wih losers which as a total amount is 2.3 times less than the amount you get for 75%.
Better idea is just to decrease the pips distance between your deals (e.g. 50pips instead of 100)
This of course also increases amount of possible losses, but if you for example double the number of deals by splittingthe pips distance when you hit the border you need to stand only 2 times more losses.
Of course you should always be prepared that price jumps out of your predicted range and this is when this 0.3 additional helth (if available :D ) can make the difference between life and death.
mikee23
 
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Re: Joe's Journal

Postby mikee23 » Wed Jul 21, 2010 9:14 am

Joe T wrote:I have thought along the lines of shorting at the top 25% of the range, going in both directions in the middle 50% and going long on the bottom of the range..


Another drawback is that such aproach never closes all losers.
mikee23
 
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Re: Joe's Journal

Postby mikee23 » Wed Jul 21, 2010 9:40 am

Also I have the gut feeling that applying very distant stoplosses (500 or may be 1000pips) would prevent catostrophy in those 0% probability :D when the pair takes course straight out of the range. At least You would have limited your losses and have the ability to stop and see what the hell is happening.
Of course using very distant stop losses would result in you acquirng some minuses maybe 15% of the time, but you are still collecting proits 100% of the time and do not risk being knocked out once.

This is only a feeling, I have not made any particular studies, but believe I should make such.
mikee23
 
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Re: Joe's Journal

Postby Joe T » Wed Jul 21, 2010 4:05 pm

Good thoughts. In fact, this discussion inspired me to set up a little spreadsheet to assess risk.

For a given account balance, you can select the range you want to buy in (bottom 50%, bottom 75%, whatever) and the range you want to sell in (same thing - I allow for different criteria if desired). You can set the range as desired, and then I spread the distance between entry points not by even Pip spread, but by a factor. For example, If a buy-in point is 1.5000, I define the next one as being calculated by applying a factor of 98% or whatever is selected.

Why? Because a Pip above 1.000 is different from a Pip below 1.000. Suppose you trade in a currency whhere the exchange rate is 0.8000. The corresponding exchange is 1.2500. (1/0.8 ) A move from 0.8000 to 0.8500 corresponds to a move to 1.1765. What is a 500 pip move below 1.000 was a 735 pip move above 1.000.

That's why things tend to get more volatile with higher exchange rates. It's why GBPUSD is more volatile than EURUSD. It's why spreads are generally higher on these pairs.

So, to equalize what that spread means, my gap is not a constant but a multiplier.



Anyway, that's kind of a digression. The spreadsheet basically allows me to select the range to trade both buys and sells, it allows me to define the range, it allows me to define the gaps between entries, and then it calculates what that means from a dollars risked so I can select an approach that allows good money management.


Fun exercise. For example, on the USDJPY I could implement a strategy right now of defining a range of 79.75 to 160.33, trading 0.01 lots with gaps on entry points with a ratio of 97.11% of the previous one, and buying the lower 70% of the range and selling the top 67% of the range, based on my current account balance.

This spreadsheet should work with any currency, just need to adjust for whether or not a pip is a hundreth or a thousandth, and adjust the value per pip as required.


I'll be sticking with gold for the moment, because I have a comfort level with it and, well, I'm satisfied with an 84% return in 8.5 months... but I may demo test this on some currencies if I fell up to it.
Joe T
 
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