Quote from achilles28:
Profit without risk? That's beyond Holy Grail...
I said profit while reducing risk to a point of virtually being made moot. I also said that there is a market configuration where losing capital is possible, and that when such a market condition exists (temporarily) I might exit the trade with a loss AND said loss would be no more than a single session's worth of capital outlay.
Quote from achilles28:
Black-Scholes thought they discovered "riskless" option pricing, only later a cool Trillion in the Red...
I'm not Black-Scholes. Black-Scholes is not me. I'm not in the red - I'm in the black.
Quote from achilles28:
I don't question your sincerity. But there's a few professed inconsistencies with your method.
1 - losses incurred during flat markets. Your strat depends on movement. Your background, equity options. So I'm thinking hedged and layered options entered around BIG S.R. levels that promise a good break, either way. Vega outweighs Theta and pays for the loser. Not saying there's anything wrong with it, but it doesn't appear beyond Holy Grail-ish. Maybe I'm off-base, altogether?
I said that my derivatives background gave me that ability to do creative thinking in the currency markets - period. I never said anything about using Currency Derivative Products in my own trading. Quite frankly, the current liquidity in the American Style Currency Options business, is not large enough for me at this stage. One day, I suspect that will change as more FX intermediaries start to offer ASO. Until then, I need to position more capital than what is safely handled by most platforms that do offer plain vanilla ASO, as ESO's will simply not work for me.
Quote from achilles28:
2 - sample period over which the method was tested, appears small (a few months). Historically, extended flat periods occur in FX. And while the macro outlook favors volatility, it could happen again. Never know.
Sample period is not as relevant here as you might think.
That not withstanding, your assumption, had it been true, would still be incorrect as the total volatility in the pair that I trade extending back through 1995 until today, has NEVER exhibited a period where the system that I deploy would have failed, with only 3 exceptions. I will not list those exceptions here, as that might give away too much.
Quote from achilles28:
3 - a reference was made to 4 trades a month? Why so few? If any non-directional trade can yield a profit, why aren't you always-in to maximize potential gains?
The four trades per month says nothing about the composition of those four trades, does it? I also stated that I wrap multiple positions around the same pair, so what you call four trades per month, could quite possibly be as little as 5 trades per week, or as many as 50 trades per week, concurrently. But, I'll never tell.
Quote from achilles28:
4 - although not on-topic, directional trading can and is, very profitable. I know you're wrong about that. A little hubris, which is natural..
Who ever said that it was not profitable?
Directional trading can be profitable, but "profit" depends on the trader. I personally, do not consider for example a mere 10% gain on a trade to be very profitable at all, IMO - but that's just me. Others, will consider a smaller 2% net per day, to be profitable - and that is their opinion based solely upon their needs. My needs are greater. I need to trade without much worry about losses AND I need more than 20% net gain on the trade at a minimum to make things work out for me personally - but that's just me.
There is no one size fits all definition of success in this business.
Quote from achilles28:
I'd be interested to know what you're daily % gain is?
An average of 20% net/net which translates to 100% per five day turn net/net, or 4,800% (flat) net/net per year (projected).
How's that stack up?
Quote from achilles28:
One last note - any market yields TONS of false positives that can last for days or months. Then, the market changes qualitatively, in the way and range it moves. I'd make sure your sample is deep, long and historical pricing totally accurate.... u never know...
The really great thing about the way I do it, is that it matters not which direction the wind decides to blow.
a) If the market moves in my direction for: 1) 5 days, or 2) To the Limit Order Level, then I net something well beyond 20% per day and 100% for the week.
b) If the market moves away from my direction and keeps going, then I net something less than 20% for the trade and less than 100% for the week.
c) If the market moves sideways for 4-5 consecutive days, I either: 1) Take any positive profit, reload and re-enter with the next/new trade profile, 2) Look down-range at my system's next trade signal to determine whether or not a "Hold" is recommended and then take profits when they become available, or 3) Liquidate all positions at a loss which was determined BEFORE I entered the trade to be no more than one session's worth of capital loss (very rare).
In other words, as darn near close to risk free as I can make it.
I'm happy with it. It works for me. It meets my needs and I can now focus on managing my cash flows instead of managing my trades.
Example: Today is Monday. I'm currently in a position that is losing capital. The total real-time loss right now is 0.068% of the total capital used in the trade. The total expected net/net return on this trade is now 42.85%. That means that the total draw against my Internal Margin (not to be confused with my bank's margin requirement) is only 15.86%.
That is well within "Hold" parameters for me and the way I trade. On this particular trade, I cannot EVER lose more than 15.86% draw against my Internal Margin (not my banks margin requirement). And, this is just Monday, with only 30% of this weeks move (volatility) set into the market.
That means that my current 0.68% net/net cash loss occurred within ONLY 30% of the market's expected move this week. So, by mathematical definition, it will be extremely hard for this trade to actually lose money come Friday of this week, for two (2) additional reasons that unfortunately I cannot reveal, but it does have a lot to do with the 70% market volatility remaining this week.
Within that 70% remaining this week, the market can move Long, or Short from here. If Long, it only has to move 70% of the total 70% to net the standard profit (maximum). If Short, only 50% of the 70% remaining to net the standard profit (minimum). Even if it failed to move that much this week, the historical record demonstrates that at some point next week, it will either move back to a position of overall break-even, or it will move into a position of minimum or maximum profit.
So, the only issue here is time-to-profit, not whether or not a profit will be made. All derivative free!
