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Day 3
Didn’t do a lot of trading, was busy , tired etc.
However, i spotted a few sweet setups and even got out of a few trades in seconds rather than minutes. More of those please/
3 pip targets
If Saver0 is willing he can add an option to add commission to the TP target,
Feel free to adjust the TP_Pips to something a bit higher to count for the commission. I imagine with commission, your spread would be a lot lower. For example with Oanda, I’m getting about 1.5pips for spread so for both ways thats 3pips + 1pip TP, I need to catch in reality 4pips. So adjust yours for a total TP of around 3pips with commission+spread
Focus, Patience, Determination & Order in chaos
When you have a bad trade. Means trend change and price didnt reach TP for several hours, several days. You cant trade anymore (long and short at same time is forbidden), till the price reach your tp or margin call. So you take counter trade with less probabilty? If you find the trend, why take only 1 pip ? Your probablity based on the trend, but if your are sure of the trend, why take only 1 pip? Then if your are note sure of the trend, it means that is random. The market is reccurent, so 1 pip up and down have a very hight probability.
Very valid points you make and it something to consider for sure. Let me explain the theory again perhaps in a different way.
Based on tick data, there is a 94% probability (94/100) of a trade being successful within 24 hours if placed randomly without regard to direction if the trade is for a total TP of 3pips (we need 3pips to count for spread, etc at least). So this means ever 6 out of 100 trades, if taken randomly, we would be wrong and could possibly face a margin call.
This means the rate of failure is 6%. And let’s say that you can tell the trend direction AT THE LEAST for these 3pips with a 70% accuracy (Should be much easier than catching 10, 20, 50, 100 pips etc). What this means is there is a rate of failure of 30% in you determining this very easy trend detection. I’m sure we all would agree that its much difficult to catch larger amounts of pips with a single trade and for smaller amount of pips its easier. At the end, what you end up with is the following:
6% failure rate to start with and with the trend a 30% failure rate to end up with a final failure rate of 1.8% or 98.2% success rate.In reality, with enough practice, I believe its possible to achieve > 95% accuracy in trend detection and for the times which we are wrong, the 5% of the time, we have the 6% failure rate working for us to end up with probabilities > 99.9%
I hope I am being clear. Let me say it again, so for the times which we fail to tell the trend correctly (the bad trades), we actually have the recurrence nature of the market working for us (since we aren’t using a SL) to increase the chance of getting that small TP.
Focus, Patience, Determination & Order in chaos
I don’t understand very well your math here, infact even using Oanda with 1:50 leverage max allowed , using a TP of 0.5% for 1 pip gain it’s not so hard to hit a liquidation margin which is set (as per Oanda rules) at 50% of the Initial Margin.
You will have a margin call at 100 pips draw down with Oanda, that is correct. You can lower the TP to something more comfortable with your risk level for sure. For starting out, something like 0.2% might be better giving yourself a 250pip cushion for the market’s recurrent nature to take the trade your way. These 1pip TP trades generally end within a few minutes when taken well so its very easy to get 4-5 trades in a day with just 30-60minutes of screen time a day. That’s about ~1% gain per day
Focus, Patience, Determination & Order in chaos
No but my ffcal time is off by an hour somehow lol
Please download the latest version from the first post. I corrected this and the Hour_Offset is a variable which you can adjust now
Also made some performance improvements.Focus, Patience, Determination & Order in chaos
More good news guys!!
Before the 94% with 3pip TP was for a trade ending within 24 hours. I now caculated the probability ignoring the time but for actual pip draw down of 100. The 100 pip draw down is when an Oanda 1:50 margin would have a margin call assuming each trade made 0.5% with 1pip TP (this is actually not possible with 1:50 margin, in reality it would be capped at around 0.43% for EURUSD per trade increasing the 100pip margin call to 116pips)
Here are the statistics:
Success Count:4894786 Fail Count:37690 Success p:99.23588%
All ticks:2467238This means with any random entry without any regard to direction (you can flip a coin if you want to tell the direction.. haha) you will have 99.236% success yielding a failure rate of just 0.764% (about 8 trades every 1,000 trades).
This means my theory is correct, if you can be good at telling the trend with at least 90% accuracy for 3pip TP, then you will have success > 99.92%, this means out of 10,000 trades, you will margin call on only 8 of them.
Being able to tell the trend good enough to get 3pips without SL should be very easy and its probably already > 95% with enough practice. So this is a practical and sound system.
The more difficult thing is to not be greedy and be disciplined enough to wait for the certain pull backs. Also you will need to come up with a good enough money management plan where you withdraw money after making XXX% gains. At the end of the year, if you can end up with a 100% gain even with a margin call or two, then you are a winner! I’m sure most would even be happy with a 10-20% gain per year
Green pips to all!
Focus, Patience, Determination & Order in chaos
More good news guys!! Before the 94% with 3pip TP was for a trade ending within 24 hours. I now caculated the probability ignoring the time but for actual pip draw down of 100. The 100 pip draw down is when an Oanda 1:50 margin would have a margin call assuming each trade made 0.5% with 1pip TP (this is actually not possible with 1:50 margin, in reality it would be capped at around 0.43% for EURUSD per trade increasing the 100pip margin call to 116pips) Here are the statistics: Success Count:4894786 Fail Count:37690 Success p:99.23588% All ticks:2467238 This means with any random entry without any regard to direction (you can flip a coin if you want to tell the direction.. haha) you will have 99.236% success yielding a failure rate of just 0.764% (about 8 trades every 1,000 trades). This means my theory is correct, if you can be good at telling the trend with at least 90% accuracy for 3pip TP, then you will have success > 99.92%, this means out of 10,000 trades, you will margin call on only 8 of them. Being able to tell the trend good enough to get 3pips without SL should be very easy and its probably already > 95% with enough practice. So this is a practical and sound system. The more difficult thing is to not be greedy and be disciplined enough to wait for the certain pull backs. Also you will need to come up with a good enough money management plan where you withdraw money after making XXX% gains. At the end of the year, if you can end up with a 100% gain even with a margin call or two, then you are a winner! I’m sure most would even be happy with a 10-20% gain per year
Green pips to all! Hi Saver!
Just trying to get my head around the numbers. Maybe I am missing something?
You had 4,894,786 winning trades and 37,690 loosing ones. (4,932,476 total trades)
The target was 3 pips for each winning trade. Lets assume a 1 pip spread. So less 1 pip for entry, less another pip for exit. Leaving 1 pip for profit. i.e. 4,894,786 winning pips.
Each of the loosing trades were for 116 pips (correct?). 37,690 x 116 pips = 4,372,040 losing pips.
4,894,786 – 4,372,040 = 522,746 pips profit
In round numbers this means for every 5000 trades you take you will be 500 pips richer
That seems like a lot of trading to make 500 pips. The winner here is the broker.
The issue is the Risk to Reward Ratio. Either increase the targets or decrease the stop loss. Neither of those options are in spirit with the concept. The ‘edge’ of this system is once again, picking the right direction.
To keep moving the idea forward you need to start using unconventional approaches (e.g. Are you bound by FIFO rules?). Make the system attractive before compounding. I’ll share my ideas when I have more time.
What's it all about? It's all about money.
2 more points to the above post:
1. Using only one open trade per currency pair – it will take long time to reach the SL and prevent the 4-5 trades per day…
2. Using multiple open trades per currency pair – it will prevent using large lots per trade due to account size limitations…
… Real life limitations that are not taken into account in math & statistics…
G.
More good news guys!! Before the 94% with 3pip TP was for a trade ending within 24 hours. I now caculated the probability ignoring the time but for actual pip draw down of 100. The 100 pip draw down is when an Oanda 1:50 margin would have a margin call assuming each trade made 0.5% with 1pip TP (this is actually not possible with 1:50 margin, in reality it would be capped at around 0.43% for EURUSD per trade increasing the 100pip margin call to 116pips) Here are the statistics: Success Count:4894786 Fail Count:37690 Success p:99.23588% All ticks:2467238 This means with any random entry without any regard to direction (you can flip a coin if you want to tell the direction.. haha) you will have 99.236% success yielding a failure rate of just 0.764% (about 8 trades every 1,000 trades). This means my theory is correct, if you can be good at telling the trend with at least 90% accuracy for 3pip TP, then you will have success > 99.92%, this means out of 10,000 trades, you will margin call on only 8 of them. Being able to tell the trend good enough to get 3pips without SL should be very easy and its probably already > 95% with enough practice. So this is a practical and sound system. The more difficult thing is to not be greedy and be disciplined enough to wait for the certain pull backs. Also you will need to come up with a good enough money management plan where you withdraw money after making XXX% gains. At the end of the year, if you can end up with a 100% gain even with a margin call or two, then you are a winner! I’m sure most would even be happy with a 10-20% gain per year
Green pips to all! Hi bro, does it mean that it is a good idea to split our whole money into some different accounts? If we get margin call on 1 account, the profit on other account can cover it.
Hi SaverO,
this thread about 1-pip TP remind me an old reply made by TheRealThing (Joel Rensnik maybe you recall its nick in DIBS Method system) to similar question posted in FF http://www.forexfactory.com/showthread.php?p=2192537#post2192537 :
Too many people throw out the quick answer of “Money Management” when asked what separates winners from losers.
There is much truth in that knee-jerk reaction. to a degree….
But money management doesn’t have to be anything more than, “I will only risk 1/2% of my money on each trade regardless of other circumstances.”
For the right system or method that may be very valid.
But for carry traders, situation traders, arbs– these make up much more than 75% of the market by volume, that is not a valid answer to differentiate the winning class from the losing class.
The biggest hurdle to cross to get to the “winner” category is this: You need to find a way to trade consistently so that if you trade only one unit per trade, after all winners and losses are factored in– that after 1000 trades you should have a net gain.
If you can find such a method, you now have something to build on. Then you can have a good idea of what the edge of your system is and then go about making some real money. You will already know the system’s winning/losing profile.
To make just 1 pip-per-trade-for-sure, as this thread talks about, is definitely achieveable. But probably not the way most people would want to attack the problem. And if you eventually get good enough to pull it off you will find that you are throwing away the greatest potential the market offers to get that pip.
Not many people visiting this forum can accomplish the task of making a total of 100 pips of profit, one pip at a time before they blew out because of the market getting away from them. I guarantee that most would blow out before they had 50 trades.
I think everyone should open a sub-account at a place like Oanda, and fund it with $50. Try to make just one pip (at a minimum of $0.25/pip per trade). If you don’t immediately get your 1 pip you should wait until you get your 1 pip or the whole $50 gets taken out. (This is risking approximately 200 pips to get the 1 pip)
I guarantee anyone doing this exercise will find out trading truths that they never realized before. The taking of many trades with a definite goal will be instructive to you.
I wouldn’t recommend anything to others that I haven’t done myself. Over the past 2 weeks I traded 505 times, using no stoploss with a position size of $0.25/pip; making a minimum of 1 pip each trade on a little $50 trading account on Oanda. I quit because the markets got too busy for me to keep it up — and I thought I proved a point to myself.
I made a total of $192.73 profit on that $50 account for a total account size of $242.73. Fortunately for me, the Eur/Usd and the Gbp/Usd were definitely trending down, so that made my job a bit easier.
<b>This isn’t a jab at anyone or a chest-pounding statement of how good I am. Many of you could have done the same if they had started when I did.</b>
I learned a volume of information from this exercise. I realized, yet again, why I do what I do in my main accounts— hold on to winners, cut my losses on losers and push my big trades for even bigger profits. While I was taking a tiny pip in this exercise, my main account was sitting with single trade profits of 1000 pips in the pound and 700 pips in the euro. And there wasn’t much initial risk when I placed those trades.
Many would say I was lucky. (Wouldn’t be the first or the last time.
)And if you succeed in making 500 pips before getting that trade that just gets away from you, you will have the equivalent of a graduates degree in risk management.
The reason I find this one of the most interesting thread in FF is because the secret to the difficulty of extracting a “guaranteed” profit is the reason professionals make hundreds of thousands from huge moves that others are ignoring because they are trying for the “guaranteed” immediate gratification payment.
When you have a bad trade. Means trend change and price didnt reach TP for several hours, several days. You cant trade anymore (long and short at same time is forbidden), till the price reach your tp or margin call. So you take counter trade with less probabilty? If you find the trend, why take only 1 pip ? Your probablity based on the trend, but if your are sure of the trend, why take only 1 pip? Then if your are note sure of the trend, it means that is random. The market is reccurent, so 1 pip up and down have a very hight probability.
Very valid points you make and it something to consider for sure. Let me explain the theory again perhaps in a different way. Based on tick data, there is a 94% probability (94/100) of a trade being successful within 24 hours if placed randomly without regard to direction if the trade is for a total TP of 3pips (we need 3pips to count for spread, etc at least). So this means ever 6 out of 100 trades, if taken randomly, we would be wrong and could possibly face a margin call. This means the rate of failure is 6%. And let’s say that you can tell the trend direction AT THE LEAST for these 3pips with a 70% accuracy (Should be much easier than catching 10, 20, 50, 100 pips etc). What this means is there is a rate of failure of 30% in you determining this very easy trend detection. I’m sure we all would agree that its much difficult to catch larger amounts of pips with a single trade and for smaller amount of pips its easier. At the end, what you end up with is the following: 6% failure rate to start with and with the trend a 30% failure rate to end up with a final failure rate of 1.8% or 98.2% success rate. In reality, with enough practice, I believe its possible to achieve > 95% accuracy in trend detection and for the times which we are wrong, the 5% of the time, we have the 6% failure rate working for us to end up with probabilities > 99.9% I hope I am being clear. Let me say it again, so for the times which we fail to tell the trend correctly (the bad trades), we actually have the recurrence nature of the market working for us (since we aren’t using a SL) to increase the chance of getting that small TP.
Great explanation Saver!! I already had a good handle on the theory but this helped a lot.
When you have a bad trade. Means trend change and price didnt reach TP for several hours, several days. You cant trade anymore (long and short at same time is forbidden), till the price reach your tp or margin call. So you take counter trade with less probabilty? If you find the trend, why take only 1 pip ? Your probablity based on the trend, but if your are sure of the trend, why take only 1 pip? Then if your are note sure of the trend, it means that is random. The market is reccurent, so 1 pip up and down have a very hight probability.
Very valid points you make and it something to consider for sure. Let me explain the theory again perhaps in a different way. Based on tick data, there is a 94% probability (94/100) of a trade being successful within 24 hours if placed randomly without regard to direction if the trade is for a total TP of 3pips (we need 3pips to count for spread, etc at least). So this means ever 6 out of 100 trades, if taken randomly, we would be wrong and could possibly face a margin call. This means the rate of failure is 6%. And let’s say that you can tell the trend direction AT THE LEAST for these 3pips with a 70% accuracy (Should be much easier than catching 10, 20, 50, 100 pips etc). What this means is there is a rate of failure of 30% in you determining this very easy trend detection. I’m sure we all would agree that its much difficult to catch larger amounts of pips with a single trade and for smaller amount of pips its easier. At the end, what you end up with is the following: 6% failure rate to start with and with the trend a 30% failure rate to end up with a final failure rate of 1.8% or 98.2% success rate. In reality, with enough practice, I believe its possible to achieve > 95% accuracy in trend detection and for the times which we are wrong, the 5% of the time, we have the 6% failure rate working for us to end up with probabilities > 99.9% I hope I am being clear. Let me say it again, so for the times which we fail to tell the trend correctly (the bad trades), we actually have the recurrence nature of the market working for us (since we aren’t using a SL) to increase the chance of getting that small TP.
Great explanation Saver!! I already had a good handle on the theory but this helped a lot.
So if you continue in this logix this also means that after 24hours we could start some sort of damage mitigation, in order to close out the losing trade with the least possible loss, in order to prevent margin call…
This idea is not that bad…however most pro do not trade like this, retail may (will be) be asked by broker to leave (of course ONLY if you make money, and I mean Money not pennies) as will be regarded as toxic flow…
https://www.jpmorgan.com/pages/disclosures/fx_notice
This is the (almost )TOP of the mountain..and they are still playing games with their customers….and now you – bottom of the chain..
This idea is not that bad…however most pro do not trade like this, retail may (will be) be asked by broker to leave (of course ONLY if you make money, and I mean Money not pennies) as will be regarded as toxic flow… https://www.jpmorgan.com/pages/disclosures/fx_notice This is the (almost )TOP of the mountain..and they are still playing games with their customers….and now you – bottom of the chain..
Lets keep the negativity to a minimum people. This thread is to develop and work on Savers ideas that he was awesome enough to share. Stopping by to just spread your negative thoughts based on ignorance does no one any good. The above post could be said about any system and isn’t grounded in reality. If you aren’t interested then move on.
I’m personally trading this on a brand new demo account, trying to keep everything as real as possible. The only thing that will definitely change when i take it live is slippage, so that is still going to be an unknown. Until I take it live.
I don’t see why anyone would take a margin call but I understand that for testing purposes across thousands of ticks you have to have a method for saying the trade failed. Most discerning traders will wait for higher highs, higher lows for an Uptrend as Saver0 has put in the rules. So if you then see lower highs lower lows, it should be obvious that the trade cycle has changed and if you hold on in hope that higher highs are coming back , well , you’re not a trader.
The thing that I wanted to get across was along these lines and pardon me for using metaphor for my point:
When I watch my 3 year old daughter trying to learn Letters, Words and to Read, I quickly project that her enthusiasm for Letters and Books will lead her to be one of those people that loves Reading for life or maybe she’ll become an Author. The reality is that watching her try and figure out the abstract Letter as being something meaningful and that the repetition we have to do to make it stay lodged in our brain is if nothing else, time consuming. However, she is a little sponge and these things stick and she sees patterns which are becoming words that she can say and read. The next step was writing her name. The novel is a long way off. She has no intention currently of picking up her pen and after writing her name , penning her first edition.
Why is that we Traders, are shown something and expect to make 1000 Pips a month, when it takes 1 pip at a time. Why are we not satisfied with 1 pip, though for this threads purposes I am 1 pip + Spread + 1 pip for luck, I mean slippage :)
For this new account I am going to take 1 pip , following the rules and if the rules each 1 minute candle are met, then great , off we go. If the rules suddenly change, then close the trade. Yes I may make a few closes that would eventually have found the PT but i’d rather be in the game for as long as possible and from the few days testing I have done I see that 99.9% of my trades so far are winners. I closed 1 early which may not have reached PT but I also entered when not all of the rules were being met.
I see the errors of my early days/previous ways, I was taught to be a trend follower and a breakout trader to start with, with the potential of making thousands of pips a year. Risking 1:2 1st PT , getting to BE, allowing the rest to run on. The amount of days and weeks wasted watching my account rise by infinitesimal amounts, or watching it all give back, is soul destroying.
Having a good strategy, picking your entries like a sniper and being happy with a very small pip count with a healthy return fits my personality a lot more. I am more focused on the entry and I am very clear when it comes to the exit. I’ll post a myfxbook link at some point and that will also then be true for the live account, so you and I can see the similarities in profit curve both demo and live.
Good luck all. I’ll post again when I have something to show for the effort.
3 pip targets
“Stopping by to just spread your negative thoughts based on ignorance does no one any good.”
Ah yes…thoughts based on ignorance….wish you good luck in your trading career…
Hello,
Thanks for your answer and patience.
“Based on tick data, there is a 94% probability (94/100) of a trade being successful within 24 hours if placed randomly without regard to direction”
Something i dont really understand is the reccurence at instant T.
For example price is at 1.4003 now. so there is 94% that price move to 1.4000 and/or (?) 1.4006 from now.
But if price since 5 minutes had already visit x times 1.4000 and 1.4006, does the probabilities are the same? for example price has already see 1.4000 25 times, and 2 times 1.4006, there is probably more probabilities that price go to 1.4006 ? and probably less probabilty than 94% that price go to 1.4000 ?
Does your probabilties start from now? does your 94% takes price allready visited?
Hope i am cleared enough, and thanks in advance for your explanation.
Green pips to you
For example price is at 1.4003 now. so there is 94% that price move to 1.4000 and/or (?) 1.4006 from now.
There is 94% chance that the price will move to 1.40 AND 1.4006 within 24 hours
But if price since 5 minutes had already visit x times 1.4000 and 1.4006, does the probabilities are the same? for example price has already see 1.4000 25 times, and 2 times 1.4006, there is probably more probabilities that price go to 1.4006 ? and probably less probabilty than 94% that price go to 1.4000 ?
That’s a very interesting question! This is a bit similar to what I did with Zelo a while back with price levels. To answer your question, one would need to run some statistics. The probability would change when you make it conditional because you are no longer answering the probability question “What is the probability of price from time T going up 3pips AND down 3pips within H hours?”. Now you are trying to answer the question “What is the probability of price from time T that has gone up 3pip Z times to go down 3pips from the price at time T?”. See what I mean?
My guess is that the probability would increase by a lot because this would mean a strong resistance level and price tends to reject a good number of pips from a strong resistance.Very good question! I just might perform this experiment and see
Focus, Patience, Determination & Order in chaos
this thread about 1-pip TP remind me an old reply made by TheRealThing (Joel Rensnik maybe you recall its nick in DIBS Method system) to similar question posted in FF
Thank you so much for the quote! It was an interesting read.
This gave me an idea! Let’s say that I had 2 accounts, each with $100. I go long on one account and short on the other with a lot size equal to 1pip = 0.5% of the account. Now, what is the probability that both will hit 20pip TP before one margin calls, what about for 10pips? I don’t know what the answer is but if the probability is right, after 1000 such trades, total account size could be a significant number. Something worth experimenting.
For all the coders out there, attached is the Node.js script that I used to calculate these probabilities. Feel free to use it to run various statistics like the above and share your amazing results. If we all start experimenting, I’m sure we could come up with something that will guarantee a profit. It’s all in the probability
Look up instructions on how to install Node.js if you haven’t played with it before. It’s very easy to use. You will need to npm install the following modules: async, underscore, moment, fast-csv
Attached is also a small tick file from Oanda. You can download ticks going back years form Oanda now if you have a real money account with them. There are many places which you can get tick data from.
Focus, Patience, Determination & Order in chaos
Each of the loosing trades were for 116 pips (correct?). 37,690 x 116 pips = 4,372,040 losing pips. 4,894,786 – 4,372,040 = 522,746 pips profit In round numbers this means for every 5000 trades you take you will be 500 pips richer That seems like a lot of trading to make 500 pips. The winner here is the broker.
Based on your math (which looks correct for the most part), this looks like a holy grail system! I appreciate you taking the time to demonstrate this.
You don’t need a broker. Time to find some investments and trade directly with the inter-banks and pay a very tiny commission. Just send me 1% of the millions you make each year as a “thank you”! haha just playing. The broker is only for little guys like you and me. Who cares if I get them “rich” while I get “rich” as well. If the system works, it works.
Broker getting rich is least of my concerns. The only correction I would make to your calculations is your assumption that the broker gets 116pips from each one of my losses, they are only getting the spread.
The ‘edge’ of this system is once again, picking the right direction.
You actually proved that it’s not. The edge is not in picking the right direction. The edge is in the statistics. Being able to tell the direction is the icing on the cake. The cake is delicious on its own but you can have a huge impact on your account size and profits being able to tell the trend
Looks like it’s another victory to this system with further proof that there is a huge edge for us little guys!
Focus, Patience, Determination & Order in chaos
Cool thread Saver!
I also came to the conclusion a while ago that maybe a margin call isn’t so bad in the long run, and using your entire account as your stop loss works if the numbers are right, especially if you take withdrawals out after a streak of winners. I think this idea works well if you use another “axiom” of the market: breakouts work. I tested a combo of identifying the trend using TZ concepts and breakouts of CTZs and it looks like it has potential. It allows you to set limit orders so you don’t have to stalk the chart like a hawk, with the drawback of not being able to be in as many trades over time as the method that you have suggested.
I use it every now and then, but given my schedule I’ve been working on a strategy that’s better suited for my time constraints. I’d love to see how this turns out in a real account after a few months!
Green pips to all! 
)
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