Quote from ElectricSavant:
From today's entry point the next ten years would need to be record breaking for this to happen.
Don't we have the luxury of the past ten "rolling forward " years of history to understand where our entry point is in the range of things to come?
Lets not discuss the "sky is falling is possible" type of mentality to support "gambling or not"...
I find currencies a balancing act by governments and positioning due to trade balances and speculation by big players. Every action has a seemingly noticeable reaction and the balancing continues. I will attempt to diversify at the right time using this method in this Journal to "follow the juggle" lord willing.
Time to capture the flow is all that is needed to reverse accelerate the drawdown in dollars not PIPS...
Michael B.
I'm glad you've kept this journal going. I realize you are asking many questions looking for answers and opening this up for others to jump in. I salute your effort. I have been lurking, and have read most of the journal, and some of it more than once. I may have more time later this week.
For now let me just say that before this journal started I tested a version of this system though it lacked the martingale component and wasn't exactly this system. Some of the conclusions I came to after these tests:
backtesting this system can be tricky because there are so many exits and entries. It should be easy but it is more subtle than it seems - even though the core concept is simple.
Because of the subtle complexity of the system when backtested I didn't have confidence in the results I came up with, nor was I particularly excited about trading a long term system. I was really looking to find out: "What can I learn?", from this system.
Even with my reluctance to trust the results based on the subtle complexity of the backtesting, I also came to the realization that 100 pips was a very good parameter for a take profit (at least on EUR/USD) - much the same as two others have posted, though 30 also tested decently (from memory). The fact that others have gotten the same results makes me wonder if my testing had some merit.
The basic concept is that if you can keep juggling the balls in the air long enough, without running out of funds, at some point in the future you will be able to cash in handsomely. You can also profit from the juggling along the way. But there is the specter of a 10 year move that could potentially wipe you out or at least put you in serious hurt, even with miniscule position sizing.
Another poster on another board criticized you for using such a small position size - stating that he wanted to make it worthwhile. I can understand what he is talking about. Being ultra conservative in position sizing still won't eliminate the 10 year move specter, and it will limit the amount of short term profits you are able to make along the way. This one poster is systematically increasing trading size, while withdrawing initial capital. I presume he is attempting to get to a certain critical mass, from which he will level off and just withdraw like crazy for a while before increasing size further. This philosophy is "get while the getting is good" and even if you lose it all on one of these 10 year moves you have come out ahead in the venture by systematically withdrawing profits as you went along. There is something to be said for this idea, however it does increase the short term risk of ruin. The big risk is in when the 10 year move will start. But if I started trading this system as you are, I would probably be as conservative or more conservative than you at the outset - and then build it up as confidence grows.
The other big risk of this system is that the market maker eliminates 1 unit position sizing .
Is the statement flow > capacity the same as whether the sum of the small moves is always bigger than the sum of the large moves? If it is, then I would say this statement is true, but this depends wholly on how you small moves in this case (your take profit). However it is true in the long run. In the short run the large moves can be bigger than the sum of the small moves. Over time this trend will reverse itself - the question is whether you can withstand these times in the short term.
