Nature of Markets – Power of Probability, Compounding & 1pip

[smallcat]

Saver0 wrote:

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.

Innate wrote:

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. xxxx

Hi Chief. Could you please explain about this inter-banks? Dukascopy is one of it ?
I am very happy to know that the edge is not the “right direction”, but the “statistics”. So, knowing the trend (short term trend is enough for tick chart / M1 chart) will increase the probability.
Thank you very much for this great thread Chief

 

[smallcat]

gg53 wrote:

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.

thanks G, i am now  more sure about hitting 1 pip TP first (in the whole 10,000 trades), before she makes margin call to our account.

 

• This reply was modified 10 years, 9 months ago by smallcat.

[Saver0]

smallcat wrote:

Hi Chief. Could you please explain about this inter-banks? Dukascopy is one of it ?

No, you need to have large amount of funds, I’m talking about at least $200k etc to justify the initial costs of dealing with the inter-banks. They cost a lot per month just for the trading terminals.

Also I want to make something clear, the tick data can be a bit misleading. Because you only need a few ticks in a raw the wipe out an entire account to $0. So if you place the trade against the trend over and over again, soon your account will be worthless and you wouldn’t have enough when the trend is in your favor. Perhaps M5, M15 is better for practicality reasons to run statistics on.

Focus, Patience, Determination & Order in chaos

[IenDzi]

Thanks for script, Saver0.

I’ am playing with it all day.

I downloaded ticks data from DucasCopy.

I got some statistics for 4 month data:

SL – 100 pips; TP- 3 pips;

6987853 ticks;

trades:13973706

win:13551401

loss:405265

Win%: 97.096%

Win+loss won’t be equal trades, because if the trade doesn’t get TP or SL hit, it’s in progress, so I don’t count it anywhere.

I am going to do statistics with different TP, SL, and bigger tick data size. :)

The strange think is that Saver0 statistics are with lower tick size.  I compared two brokers with daily volume, so one had two times more ticks then the other. But on average a broker, which had lower ticks number , had about 50000 ticks per day.  So in statistics must be about 100000 trades per day, if i understand it correctly. :)

[gg53]

“…It is a very well proven and accepted principle of trading that volume confirms a trend.

There are many ways to define a move, such as a change in momentum, expansion of the range, the divergence of two moving averages, the RSI crossing through the 50% level, or even standard deviations.

However, let us take the simplest definition of a trend, being that of a new high or low.

We know that the lowest volume time of day is the New York close, or 10pm in London and highest volume is between 1pm and 4pm.  Therefore, if we consider the New York close to be the end of one trading day and the beginning of the next, we can apply a simple trading rule:

Buy if the market makes a new high, or sell if it makes a new low, between 1pm and 4pm.

…”

See attachments.

This method better complies with the RZ  thus highly reduce DD. Use it with the 1 pip profit method of this thread subject (with trailing), or to be sure that you are trading with the “Elephants” and not against them.

You already have the (old) tools to use it in the (dead) “Killing Zone” thread @FF.

 

G.

 

 

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[BalrogTrader]

nev wrote:

…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.

A very nice approach and strategy. Since I don’t have enough time to practice anything I still couldn’t touch this piece but I strongly feel that, if one combines this with anything promising -like the Killing Zone, Volume Trading, HGI, Kiads’ SS, Kiads’ 7 lines OHLC MA, Ehler’s Roofing Filter, … etc- he/she can make 40-50 USD per day with a 1000 $ 1:100 account.

In a not so distant future I’ll come back to markets and try the above mentioned method.

Best regards and thanks Saver…    

Nothing has ever motivated me more than this...

[Edington]

Hey Saver0,

Thanks for sharing your work. Can’t wait to test. 

Best,

M Edington

[smallcat]

Saver0 wrote:

 

No, you need to have large amount of funds, I’m talking about at least $200k etc to justify the initial costs of dealing with the inter-banks. They cost a lot per month just for the trading terminals. Also I want to make something clear, the tick data can be a bit misleading. Because you only need a few ticks in a raw the wipe out an entire account to $0. So if you place the trade against the trend over and over again, soon your account will be worthless and you wouldn’t have enough when the trend is in your favor. Perhaps M5, M15 is better for practicality reasons to run statistics on.

Thanks Saver0

gg53 wrote:

“…It is a very well proven and accepted principle of trading that volume confirms a trend. There are many ways to define a move, such as a change in momentum, expansion of the range, the divergence of two moving averages, the RSI crossing through the 50% level, or even standard deviations. However, let us take the simplest definition of a trend, being that of a new high or low. We know that the lowest volume time of day is the New York close, or 10pm in London and highest volume is between 1pm and 4pm. Therefore, if we consider the New York close to be the end of one trading day and the beginning of the next, we can apply a simple trading rule: Buy if the market makes a new high, or sell if it makes a new low, between 1pm and 4pm. …” See attachments. This method better complies with the RZ thus highly reduce DD. Use it with the 1 pip profit method of this thread subject (with trailing), or to be sure that you are trading with the “Elephants” and not against them. You already have the (old) tools to use it in the (dead) “Killing Zone” thread @FF. G.

Great information G. Trading on breakout is a good idea. Will try to combine it with other zone tool , i am sure it will be better.

[Saver0]

Hi all,

Here is the result of my trading thus far. It’s working out pretty well. I placed a pretty bad trade that caused a 30% draw down but lesson learned. This is why its important demo trade with this system or start with a very small account size that you don’t mind losing. It will take time to master just like anything.

Green pips and good luck to all!

• This reply was modified 10 years, 9 months ago by Saver0. Reason: Updated screenshot

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Focus, Patience, Determination & Order in chaos

[Neocount]

Saver what method are you using to determine your trades? PA? indicator based?

[Saver0]

Neocount wrote:

Saver what method are you using to determine your trades? PA? indicator based?

I’m working on a couple of indicators based on multi currency money flow. Don’t have anything significant yet worth sharing

Focus, Patience, Determination & Order in chaos

[scissors]

Hi

Currently using the following to take trend

1) use TZ in day time frame (h is 21) for general trend recognition

2) use crossing double moving average to in TF M15 to take the trade in general direction

Just for sharing purpose

Scissors

[e3]

Saver0 wrote:

Hi all, Here is the result of my trading thus far. It’s working out pretty well. I placed a pretty bad trade that caused a 30% draw down but lesson learned. This is why its important demo trade with this system or start with a very small account size that you don’t mind losing. It will take time to master just like anything. Green pips and good luck to all! [/quote

Avg trade length 12hrs?

[Saver0]

e3 wrote:

Avg trade length 12hrs?

Yea, the start date/time of the account was a little off. I had closed trades in there from a previous system. I uploaded a screenshot reflecting trades just based on this system. Average duration dropped to about 2hrs. I have a few bad habits so I had a few “bad entries” where I had to wait 4-6hrs for that really threw off those short quick perfect trades I made  I also have to trade off hours, like right now where only the AUD and JPY markets are active due to my work hours so the trades tend to take longer to close.

If you execute well and follow the rules, the trades will end within 5-10 minutes.

Focus, Patience, Determination & Order in chaos

[e3]

Saver0 wrote:

e3 wrote:

Avg trade length 12hrs?

Yea, the start date/time of the account was a little off. I had closed trades in there from a previous system. I uploaded a screenshot reflecting trades just based on this system. Average duration dropped to about 2hrs. I have a few bad habits so I had a few “bad entries” where I had to wait 4-6hrs for that really threw off those short quick perfect trades I made I also have to trade off hours, like right now where only the AUD and JPY markets are active due to my work hours so the trades tend to take longer to close. If you execute well and follow the rules, the trades will end within 5-10 minutes.

Thanks for the clarification.  Nerves of steel to wait 4-6 hours, I start getting a bit twitchy after 30 seconds.

[Saver0]

e3 wrote:

Thanks for the clarification.  Nerves of steel to wait 4-6 hours, I start getting a bit twitchy after 30 seconds.

Yea, I know the feeling

Here is a good practice. For every trade we have a good odd of price hitting the TP within 24 hours (~94%) but for whatever reason, soon after you placing the order you realize that you violated one of the rules. Close the trade no matter if its in profit or loss (most likely in a loss). Soon you should see that the number of mistakes will reduce and your account balance will start to increase.

When we realize we made a mistake, the correction has to be made immediately. Don’t let chance/luck (~94%) end up being the reason you win the trade. Let it be your skills!  Once you trade enough, the best practice and perfect trades will become second nature like the way you breath!    I’m not at that level obviously but I see my skills are improving following this philosophy.

Focus, Patience, Determination & Order in chaos

[haikanoz]

Hi SaverO and fellow traders,

Interesting and odd strategy, but really interesting.  The % probability looks interesting too.

I have to admit that Im diligently practicing your 1-pip strategy for the 2nd week now. So far so good, although am not that good at spotting perfect entry. So far all trades close TP within the same day. Hope my account can survive for some time, so that I can withdraw my initial amount, and continue to trade/compound the profit.

Hope somebody can discus this probability (as my SL is margin call, what are the probability that I’ll get margin call after trade #100, 140 and 500)

 

initial acc :USD 1000

probability of fail-trade (get margin call) : 1/1000 (trade with 99.9 % success rate)

% profit per-trade : 0.5%

avg num of trade per day: 5

 

acc after trade #100 (day20) : USD 1638.48  probability get margin call: 10 %

acc after trade #140 (day28) : USD 2000.24 (double the acc) probability get margin call: 14 %

acc after trade #500 (day100) : USD 12046.61 probability get margin call: 50 %

 

Green 1-pip to all

• This reply was modified 10 years, 9 months ago by haikanoz.
• This reply was modified 10 years, 9 months ago by haikanoz.
• This reply was modified 10 years, 9 months ago by haikanoz.

[DocT]

Hi All

Although it has been mentioned here before, I thought I’d re-enforce here that commission based model does not really work for this system.

I tried both FXCM Spread Bet account (commission in spread) and FXCM low spread + commission for comparison and was shocked!!!

The commission from both legs wiped out the profit from the 1 pip gain! And it was emotionally difficult to see the commission hits in the account!

And they take 50% as margin per trade leaving the margin % low!!!

So although my spreads are ave 2.5 EU and GU, the gains do not get wiped out – I will stick with Spread Bet account in UK and make it work for this system.

Cheers

Doc

• This reply was modified 10 years, 9 months ago by DocT.

[smallcat]

DocT wrote:

Hi All Although it has been mentioned here before, I thought I’d re-enforce here that commission based model does not really work for this system. I tried both FXCM Spread Bet account (commission in spread) and FXCM low spread + commission for comparison and was shocked!!! The commission from both legs wiped out the profit from the 1 pip gain! And it was emotionally difficult to see the commission hits in the account! And they take 50% as margin per trade leaving the margin % low!!! So although my spreads are ave 2.5 EU and GU, the gains do not get wiped out – I will stick with Spread Bet account in UK and make it work for this system. Cheers Doc

Thanks for this information Doc. Have you calculated, how many pips gain we must get in order to cover the commission?

 

[smallcat]

Saver0 wrote:

e3 wrote:

Thanks for the clarification. Nerves of steel to wait 4-6 hours, I start getting a bit twitchy after 30 seconds.

Yea, I know the feeling Here is a good practice. For every trade we have a good odd of price hitting the TP within 24 hours (~94%) but for whatever reason, soon after you placing the order you realize that you violated one of the rules. Close the trade no matter if its in profit or loss (most likely in a loss). Soon you should see that the number of mistakes will reduce and your account balance will start to increase. When we realize we made a mistake, the correction has to be made immediately. Don’t let chance/luck (~94%) end up being the reason you win the trade. Let it be your skills! Once you trade enough, the best practice and perfect trades will become second nature like the way you breath! I’m not at that level obviously but I see my skills are improving following this philosophy.

Good idea on closing bad trades bro. How about using averaging or hedging strategy instead of closing the bad trade? Thanks.

[DocT]

Hi Smallcat

To cover the commissions you need – wait for it – 1 pip!

So you could aim for 3 pips, lose 1 to comms and gain 2.

Am still playing around with the accounts – just hate seeing the negatives in the account balance…

Doc

 

[Pigh77]

Hi,

to me seems that only having strategies with 95/99% of successfull trades will give a good performance. Yesterday I tested some around 85% successfull trades and it was not enought to cover the loss derived from other 15% unsuccessfull trades

• This reply was modified 10 years, 9 months ago by Pigh77.

[Neocount]

I am using TradersWay VAR account which is spread based and the spread on the majors stays around 1.5 which is very good imo. Of course you have the occasional swap but there is no way around that.

• This reply was modified 10 years, 9 months ago by Neocount.

[BalrogTrader]

Finally I was able to try the method last night. Here are the results:

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Nothing has ever motivated me more than this...

[Jhlewis10]

Nice job Balrog!

 

[Author]

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