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Gav

Show you a trend, ok, my trend

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Here is another trading secret, again!?! 😆 I thought you guys like secrets,don’t you?

The purpose of writing this post is to get my mind organized. I have been working on developing my trading model for the past few days, and my brain is kinda experiencing information-overloaded now. If I can write down something here, that will help me to confirm I am working in the right direction. Remember? I am a detailed trader! 😆 Whatever…

Trend, trend, trend. How many days and nights, how much money has been spent on this topic. People pay hundreds if not thousands of dollars to purchase some strategies/methods/indicators just to tell you, ‘man, this is uptrend..’ Crap.

You can define a trend by calculating the slope of 200-day moving average..WOW!~ What’s that? Leave it to mathematicians. I have no idea how to calculate the slope of MAs… You can define a trend when the short term moving average crosses above long term moving average…WOW!~ this is typical, old generation snake oil salesman’s tricks…

Come on, let’s make our life simpler. An uptrend, according to Gav’s textbook, is nothing but higher highs and higher lows. The same goes for a downtrend. You want to see the waves continue forming. (did I mention wave? don’t mess it up with idiot wave theory…) Market moves in its own style, and pace. Grab a pencil, mark the highs and lows. what do you see? Here is a typical chart showing on my workstation when preparing my trades. What else do you wanna know?

I have no advice to offer here. A chart can show you a lot, and it can show you nothing at the same time. It is up to you whether you wanna trade with the trend or do some counter-trend trading. Identify trends should not take up 80% of your trading preparation time. It should be simple. Once identifying it, we have to drill down to look for entry opportunities and play around with position sizing. At least, that’s what I am doing.

While writing this post, I accidentally play the whipsaw song by Ed Seykota again.

“What do we do when we catch a trend, honey…?”

We ride that trend right to the end..

“What do we do when our risk is right, honey..?”

We make a lot of money and we sleep at night..

Update, short note, whatever

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I was stopped out by a couple of trades this week. But, to maintain my Guru snake oil sales man status, I am not going to post charts of my losing trades here. 😆 , remember, snake oil salesman never shows you losing trades. 😆 Come on, just a bunch of charts that were stopped. You won’t learn anything from my losing trades. And I am a very superstitious Asian man, I believe posting too much of losing trades here will bring you bad luck and trade worse…LOL… 🙂

The stopped trades this week, uhm.. maybe because of late entry, poor timing, I guess. I am finishing up my detailed journal for April. I am mesmerized by the good trades that I have made, and puking towards the crappy ones. 😆 I made a couple of crappy trades this month, I know that. Over all, it is still a good month for me.

I am still very much interested in researching the risk management module. As couple of readers commented in the Variable Fractional Percent method, there are weakness in the model , for sure. Let’s see if I can come up with something over the weekend.

It is a long weekend in Australia. I guess I might not be trading on Friday.

Have a good one.

Variable Fractional Percent (VFP) method

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Listen, I am going to reveal trading secret again! 🙂

I have been working on position sizing and risk management stuffs recently. I am trying to optimize the return of my trading since I see consistency in my trading recently. So, instead of increase setups or trading opportunities, I am thinking of stick to the old trick but increase position size, etc. However, this is not an easy subject.

I come across Variable Fractional Percent (VFP) from chaffcombe’s site.
He is a full-time currency trader, who is more into automated trading. Here is what I found from his explanation of Variable Fractional Percent (VFP)

Firstly you need to know your daily Net Asset Value (NAV) gain or loss in percent.

Start trading at a conservative 5% FFP (or whatever suits you). But instead of using a Fixed Fractional percent, you use a range say 2%-25%. Move up and down the scale by adding or subtracting half of your last daily NAV percentage.

For example start at 5% FFP

Next day profit on trades = 1.5%
Therefore your next FFP = 5 + (1.5 * 0.5 ) = 5.75%

Say you then lose 3%
Next FFP = 5.75 + (-3 * 0.5) = 4.25%

Obviously use ranges and a daily factor (here 50%) that suits you, but you’ll find this method really rewards good methods, and lightens up very quickly on bad.

The idea that catches my attention is that the method utilizes part of your previous day’s trading profit to determine the position size of your next trade. They put you in the condition that when you are on a roll, you are able to profit as much as possible, while during the drawdown, the system is reducing your position size accordingly.

The prerequisite of this management method is to have a consistent trading system. It doesn’t turn a losing system to a profitable system, but it maximizes the return of a profitable system and reduce the damage from a losing system.

I thought this idea provides some food for thought.

Is it time now?…GBPUSD..uhm…

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Last Thursday, we saw a sudden rally of GBPUSD, and we are now testing 2.0 handle. For trading purpose, I am looking at the possibility of riding the short term trend to around 2.02-ish level. Simple trend line breaking setup. Let’s see how it goes.

Here is the….. CHART!

[photopress:gbpusd20april2008_1.gif,full,1]

Here is the ….Trend score. We are still in the side way mode. So, risk of trading might be higher, but, as usual, it depends on how are you going to manage it. 🙂

[photopress:gbpusd20april2008_trend.jpg,full,1]

About this tool

One Aussie, one Cable, and one Euro..

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I started the the week with bullish view of Euro dollar. Since it was testing historical high, I did not jump in immediately. After the sell-off gap in the Monday Asian session was filled, I went long with extremely small position size. Yes, it was extremely small. LOL 😆 . Heck, I was stopped out sometime around Tuesday London session. Cost me -1R… I was still bullish, and I WAS looking for another entry opportunity..but AUSSIE dollar caught my attention, so instead of proving my view of EURO , I switched my attention, and capital, to Aussie.

What can I say? Gav knows how to trade Aussie dollar! 😆 Just kidding. But I feel extremely comfortable, and confident trading Aussie dollar. :-), this is yet another 100 pips Aussie trade.

Here is the…..CHART! Yet, another snake oil style chart. I have no idea why John did not include me in his snake oil salesmen category. I have working so hard to produce this type of trade/charts… Can somebody talk to John about this 😆

[photopress:AUDUSD16April2008.jpg,full,1]

Another trade was a Short position of GBPUSD. My target was kinda far. I was looking at the break of 1.96 level. (Was I too ambitious? Uhm….let’s see) I bailed out the position on Wednesday right before London session began as the spike of GBP did not impress me. I decided to bag the small profit and RUN!! 😆

Here is the …… CHART!!

[photopress:GBPUSD16April2008.jpg,full,1]

By the way, I am applying Variable Fractional Percent method for my money management recently. I will try to write up something on this topic later.