"Golden Arches" Project

ElectricSavant

ElectricSavant

This thread serves as a place to discuss/refine/share/explain/learn...etc, a complete Forex Trading method, that I have written for myself to trade and to share/archive with ET's guests. This is a method using technical analysis of regression combined with exhaustion. You could say it buy/sells on dips/rises in trend direction.

This is a unique method and I believe to be, "new ground", as I have not been able to find much published on the application of what I will illustrate to trading Retail Spot Forex with. But some of the trading techniques/precepts within it, were shared here in ET earlier.

I would like to encourage the guests here to spend some time and read this thread and other threads in ET. I hope to be able to share, what I have found, to be quite an enjoyable way to trade Retail Spot Forex. I am sure after reading in ET, you will find it the most valuable trading resource on the web, as I have. This may become your trading room, as it has for thousands of pro and novice traders alike!

I am in hopes to refine the presentation of this method, in this thread first, then to begin trading it next month with around 14K from a watchlist of 30 pairs, in a thread to be titled "Golden Arches". Perhaps, after the President Lincoln's Birthday/Holiday on 02/13/07, trading will begin. Lets see how this thread progresses.

A complete introduction of the method will follow shortly in two posts.

ElectricSavant™
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This method will trade short term (1 day to 14 days), but will interpret a direction, trading with a Long entry or a Short entry, using a medium term daily trend indicator (showing a direction that can last as long as one year). This method defines direction and then works its way down to entry.

This is a 24 hour system, but is manageable. I personally, juggle a full time job, while trading this (I am an independent professional and work from home) The method, generally, does not trade the beginning of each month, until the first Friday has passed. This is when many news reports are new and the NFP comes out. The volatility leading up to and during the National Farm payroll report (NFP) can be surprising and the method can use more leverage, when abstaining from trading, during the beginning of the month. I usually try to get flat in the beginning of each month, when I can. When your flat, excessive volatility, cannot harm you or make you feel uncomfortable. Each trader has discovered his tolerances and this is personal. IMPORTANT: I find that I can bank more money trading the three weeks with higher leverage, than trading all month with lower leverage.

You can trade this with Units, Base 10, Mini's or Lots.

There are not any hard stops, but there are indicator based exits that usually take the trade out with a profit :)

There are pre-determined targets using market based ATR calculations. This method can use pairs that hedge each other to maintain a low drawdown during the interim, while waiting for the targets to hit. Every effort will be made to enter early enough in the trend to achieve a profitable exit. Basket Exits can take place to offset losing trades.

The method can trade as high as 50:1 managed, combined leverage, but not usually (I start getting uncomfortable with 10:1 leverage or more, unless the basket has a lot of hedging going on). I use MT4 charts and I found a feed with 55 pair (North Finance)

This charting platform is free and available to all and thus it is used to illustrate with. I do not want to get into a discussion of dealers and their benefits & weaknesses. I do not want to get into a discussion about charting programs and their benefits and weaknesses.

I have 30 pairs in the watchlist:
AUD/JPY
AUD/NZD
AUD/USD
CAD/JPY
CHF/JPY
EUR/AUD
EUR/CAD
EUR/CHF
EUR/DKK
EUR/GBP
EUR/HUF
EUR/JPY
EUR/NOK
EUR/PLN
EUR/SEK
EUR/USD
GBP/CHF
GBP/JPY
GBP/USD
NZD/USD
USD/CAD
USD/CHF
USD/DKK
USD/HKD
USD/JPY
USD/MXN
USD/NOK
USD/PLN
USD/SGD
USD/ZAR

Note: Be careful how you open trades in the above pair. Do not get too overweighted in one currency with your open trades. Also, you can use hedging with pairs to utilize a sort of "slowing" for a trade with a longer hold time to keep UPL tamed. All of the arches come to volition eventually and you will learn to trust them. Longer timeframes and their arches take a longer time.

Again, This method uses a free charting platform to illustrate this method with and there is a download of a custom indicator, that you will need. The combination of this custom indicator and the unique use & setting of the DeMarker indicator together with the use of the ATR indicator, should reveal some interesting & profitable trades.

The custom indicator that you download, is the esoteric and not very published "CR indicator" (CurviLinear Second Order Regression). You will get seven curved lines in the price pane of your charts and you can color them as you wish. I have a black background so I left the first line in the colors tab of the indicator menu Dodger Blue and colored the other ones yellow.

Side Note: The CR indicator resembles an overlay of a curve that slides and adjusts with the advancing right edge and you cannot scroll back and look either...it is a changing dynamic of a 299 period linear regression line, with a curve added to it.

The second indicator is from MT4's existing indicator menu, named the "DeMarker indicator". This method uses a 10 period setting. Delete the levels and replace them with green and red colored horizontal lines drawn as a background at the 0.95 and the 0.05 levels. You can color the top line red for short and the bottom line green for long. You can also add some weaker breach lines as dotted lines at the 0.70 and the 0.30.

Now, I know this is not the traditional use/settings with the DeMarker indicator, but I am not trading high probability zones, tops or bottoms. I am just using it for entries, exits and "average in's" during an exhaustion/reversal moment. I have the 21D ATR in an indicator window below the DeMarker and Candlestick charts with the CR up there in the price portion. I squeeze that indicator pane manually for the ATR as I really do not care about the wiggly line...I just need to be able to hold my mouse over the end to get a value.

Now all-in-all, I trade this method with five 19" LCD's with two desktops with two isps. I have a UPS and a gasoline powered generator for emergencies. You do not really need all of this equipment, so do not get discouraged. Some traders even have more tools and you will discover what is necessary for you. You do not necessarily evolve into "more tools" either...I know a senior trader to me that uses dial up...so go figure...he won the trading championships a few years in a row too...

Now, if you have made it this far, here comes the "operational trading" part in the next post...
 
Entries are based on the breach of the DeMarker Indicator in the 4 Hr., 60M, 30M, or 15m timeframe. This secondary timeframe that has the DeMarker breach, must also display a CR arch agreeing with the daily CR arch direction. Be cautious during mature arches and virgin arches are best.

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Step One: Watch for breaches of the levels in your "30 pair" watchlist on the secondary timeframes with the DeMarker indicator. This is your signal for action and there is always something happening. This will also determine your target. Remember the daily and the secondary CR must agree about direction. There may be more than one agreement with several possible secondaries. The longer the timeframe the safer the target.

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Step Two: When you get a breach illustrated in step one and as long as it fits into your basket of pairs that are not repeating too much of the same currency as you do not want to get overexposed to one countries currency, then enter. Advanced traders can also enter currencies that go the opposite direction of an existing open trade to hedge it, if it is taking longer than expected to exit, with the targeted profit

There is not any reason to build up your balance, to just give it away, in a devastating "margin call" all with one "fatal swoop" ! Remember leverage can be a two-edged sword and can be your thorny rose now I know, that is a song!...

"Every Rose has its Thorns"---Poison
http://www.youtube.com/watch?v=YiEpLI5exrU

One more little detail that I learned here in ET. If your Long, round your target up to the nearest 4 or 9...and if your Short, round it down to the nearest 6 or 1. Stay away from 0's & 5's. I have coined the phrase, "optimal rounding", for this technique.
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The method will "average in" And yes it can take losses too, the "averaging in" part is simply to fine tune with and No! its not "averaging in" a losing trade. Note that when this method adds a trade, the target (limit order) will be changed to an exit yielding two times the 21 period ATR of the secondary confirming CR timeframe used to "average in" with from the average trade price.

So... "average in's", do not increase profit, but follow price to insure a higher winrate. When I have time, I glance at those 30 little DeMarker charts in various timeframes starting with the longest first to check for any breaches of the lines and CAN exit earlier than the limit orders, if I want to. Every minute of risk can reduce probability and turn trading into gambling and hoping!!! Also exiting out of a trend prematurely, that your edge is signaling must also be considered. Taking what the market is giving CANNOT be taught. Putting rules to this discretionary system CANNOT be 100% achieved, but I am trying :)

So again, Generally speaking... the method "average's in", "scales in", "add's to" or whatever you want to call it with the use of the Demarker. Again, the top line means short (0.95) and the bottom line means long (0.05). It is good to enter in the direction that both the Daily CR and a secondary CR agrees with. The weaker dotted breach lines can be used as early entry points in the DeMarker. Again, I cannot stress this enough...the longer timeframes are safer such as the daily and the 4 hr...and virgin arches are best.

There are not any stops in this method, other than the discretionary exit from a bad call. This usually occurs after the "Daily CR long term bias" has run out of steam and the the inherently faster timeframe Demarker has not signaled an exit out of the trade or a 2*ATR w/optimal rounding, limit order has not triggered. This is very rare indeed and would indicate that getting into the trade during the latent stages of an arch ("Mature Arch") should have never been risked in the first place. you can place a hedge with a pair that is signaling to tame the DD during the wait.

Using "average in's" together with the polynomial approximations (The CR indicator) in the method can be quite powerful and high winrates can be achieved.


Concerning the upcoming live trades in next months new thread:
I hope you find this method that puts the "curve" into your regression line and uses trade management (Average in's) to "tweak the arch" as pleasurable to trade, as I have.


I think that the
precision zones

that the DeMarker indicator gives, together with the
"curved directional regressive magnets",

coupled with the
illustrated trade management

in this thread, can provide a loose enough method for all to follow along and profit from in the upcoming trades to be illustrated in next months thread.


The entries do not need to be exactly mimicked, as I do them, as again this method can yield you, what you need, and is not dependent on, EXACT PRECISION.

Now you will see me post & discuss, Mature Arches, Virgin Arches, DeMarker buy & sell zones, price far away from the CR lines, let the price "run" with the CR and such, in the following trade calls, in next months thread. See this post for more discussion:

http://www.elitetrader.com/vb/showthread.php?s=&postid=1349598#post1349598

I will try and post screenshots of the charts, in the discussion of this. I will also promise to post my closed trades from my trading platform (Oanda currently), to confirm my real trading with real money, live for you to see.

But remember, I am not selling anything and I am not for hire and please remember that ET's PM box system is not YOUR recruiting tool. Please do not PM me and try to ask your questions here, in this thread, about the method.

ElectricSavant™
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Good detailed description.
I'm looking for pseudo code or formulas or just detailed descriptions of the 2 indicators in question: CR and Demark. If anyone's got it, please PM me. I'll be porting it to Wealth lab in an attempt to recreated ES' setup and hopefully add value.


thx

p.s. I'll be downloading the free SW(s) mentioned closer to the FEB time frame as I believe the demo accounts expire after 30 days. In the meantime, would like to get WL and IB up and running to follow along.
 
fifo,

Welcome!

I hope that you can put an upward curve in your trading equity :)

attaboy!

Michael B.

P.S. Fidelity is a sponsor here, so please feel free to post your code here in ET. Any sponsor reading this thread, please contribute on how your product (s) can be utilized for trading this method. You are most welcome here in ET and thank you for sponsoring this wonderful site.

Quote from fifo:

Good detailed description.
I'm looking for pseudo code or formulas or just detailed descriptions of the 2 indicators in question: CR and Demark. If anyone's got it, please PM me. I'll be porting it to Wealth lab in an attempt to recreated ES' setup and hopefully add value.


thx

p.s. I'll be downloading the free SW(s) mentioned closer to the FEB time frame as I believe the demo accounts expire after 30 days. In the meantime, would like to get WL and IB up and running to follow along.
More...
 
By the way...about the basket of pairs you carry at the same time...as the equity increases you can can allow two pairs with the same currency....the idea is to not weight the basket to heavily on one currency, thus I made the rules explained in the intro...but this is discetionary and advanced traders can double up on a currency to ramp up...be careful with the JPY pairs...

There can also be pairs that create a hedge for a longer term hold to tame the upl while waiting.

CorrelationSavant
 
Just now... there is a short sig on the Demarker for the EUR/GBP....but the price has dive bombed so far below the Daily CR...I just cannot take the short, eventhough the daily is saying short...the move has been made and I would like to see a 50% retrace and the CR lines to grow closer to price...Time will tell...but not now..

PrudentSavant
 
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