The inspiration for the system came utilizing strength thread by ES Trader and I'd like to thank him for his work in creating his thoughts there.
As I read through that thread it seemed to me that some folks were getting phenomenal results and others were hitting massive drawdowns before these trades came good, if they did!
I started thinking about the process involved in constructing these massive 2000 pip baskets and it struck me that maybe relative strength wasn't the way to go. Because I feel it has merit but to my mind relative strength during the last few 4 hour candles I don't want to disrespect the thread or system in any way informs you just the relative strength during the past couple of 4 hour candles. It will not tell you a damn thing about what's going to happen. I understand the theory that if x currency was weakening against the rest of the currencies then you need to brief it and if y currency has been strengthening against the rest of the currencies then you want to be long but this doesn't take into account support and resistance, the general tendency or other things.
Therefore, I set to work with a little test account of 30 GBP working with a micro account and 2 weeks later I've 250 GBP. That does sound but don't forget on the few trades I had been exceptionally overexposed as a % of account. What I believe I've proven, to myself , is that it IS possible to open a lot of trades with the trend and have them go your way netting you some nice profits.
Using a little bit of trial and error I've established a few preliminary principles that I believe are worth following until I or anybody else could come up with something better.
First of all I want to explain exactly what I do. Basically I am going through every pair in turn and deciding whether I believe that the pair will go down or up. If I can't have a decision about the information I don't have a transaction. If I think it will go up I buy it, if I think it will return I sell it. Up until now I have been utilizing a 200 pip trailling stop loss. I let the trades develop during the next few hours and the trades that lose money or break even I close and the trades that enter profit I track the stop loss behind support and resistance.
The specific times of day tend to be around the 4 hour candle closes although I am actually using daily charts. I like to take trades first thing in the (UK) morning, therefore I've the overnight motion to use for direction and the forthcoming day to provide some motion. I like to take trades and allow them to develop.
For direction I am using support and resistance attracted on weekly charts zoomed out to obtain the most essential round numbers (charge into a commercial member for this technique) plus a 100sma, a 50 sma plus a 3 sma of the normal price. The last is something from a book I read once called the ma and I find I really like it with this particular method. Basically trades are taken by me using the IMMEDIATE trend which means that the direction the daily chart is shifting over the past couple of days instead of over a duration that is longer but I really do prefer to take trades from the direction of the general trend. Sometimes pairs just are not trending general but offer chances.
The way this works is that generally you may experience some drawdown since the spreads are cleared and trades settle down. I am yet to see a basket of trades return by over 30 GBP against me and when the trades come good the basket could go into profit, greatest one yet just over 100 GBP.
In folklore the seventh wave is obviously the greatest. It has been scientifically proven that when two wave formations move in the same direction at exactly the same time then you will experience a larger wave that can ch people unawares and frequently washes cars and people, etc from jetties and harbour walls. This is very much your equity moves whenever you're exposed to a huge basket of trades. As the trends assert themselves you will find an ebb and flow of equity, some up, some down. If you watch your equity move you may notice it push up with the ebb and back together with the flow. When all the trends on every one your pairs go back in the direction of this trend you will see what I mean about the seventh wave and your equity increases dramatically, sometimes in just a few minutes.
Enough of the poetic stuff. As I said, I have increased a test account from 30 to 250 GBP in 2 weeks opening baskets of trades with the trend so I feel this style of trading has to possess some merit and is worth discussing. A long weekend let's discuss it. I welcome inquiries and comments.
Some additional clarifiion comes to mind. As I am reducing the stop to 100 pips since although I have been using daily charts I am not really trading the daily motions, I am looking in my direction to capture profit from a number of smaller trades. I am using an EA called equity guard to control the risk, the stop is to give safety in case the equity EA doesn't function for any reason. From now I have decided to use 10 percent of my account on every basket and use 1 micro lot for every 30 GBP in that 10% with my 250 GBP account I should not be trading at all I understand to risk 1 micro lot. If the account was 600 GBP then I would risk 60 GBP and therefore use 2 lots. As mentioned before I am yet to get a basket drop over 30 GBP in equity swings and my upside was nice BUT I feel it would be better to use the equity guard EA to close all open trades should your basket shed you 30 GBP (some other currencies and you are going to have to work out acceptable levels for yourself) and take profit on all trades should you reach a profit of 50 GBP on open trades equity. This is since you may have a basket together with the capability to go a long way I've seen large profits eroded by holding them open long. Better to have a profit when it presents itself and begin again than to let it go and repent it.
Another thing to say is that you can tweak your basket if it's not working out. I shed the bad ones and wouldn't do this often but maybe once every 4 hours determine the trades are moving and maybe open. Remember that you're accepting loss and profit according to your general equity ditching a losing commerce is only going to affect your balance and not your own equity.
I'm all typed out for now but if I think of anything else I will post it. To get a grounding from the system I suggest that you read the trading. That will provide you an notion of it's just I am utilizing the tendency instead of strength/weakness that is recent and what I am doing.
I post the ea's and also some helpful indiors I've developed with the aid of a a few people I'll mention in the moment.
I am looking for some good ideas for how to improve this idea, just because I have produced a bucket of cash during the past couple of weeks doesn't mean it can't be enhanced. I'll post a chart or two as well to show the type of entry I am taking and when I open my next basket I'll attempt to post it .
After reading through I must mention that I don't take into account what I am trading concerning same currencies or limit the amount of trades I take. If all the aud pairs are stating buy I buy all of them and if all the eur pairs are sells I sell all of them. I am yet to reconcile myself to the concept of buying some eur pairs since they are going up and selling other eur pairs as they are moving down. This is and principles developed it's far better to only trade one currency in one direction at a moment?
Anyhow, enough already, looking forward to working with anybody who is interested to see what we can put together.
Update as of 23rd December 2011 here https://forexintuitive.com/forex-tra...ormations.html