The way I see, Madam Mae's strategy focus on catching meagre pips.
It is not going to work in the long run.
It is not going to work in the long run.
Ms. Mae’s Trade Strategy
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My style is most closely aligned with...
Guerrilla Trading
By Investopedia Staff
"Guerrilla trading," as the colorful term suggests, refers to the technique employed by nimble traders who dart in and out of the financial jungle in short skirmishes that aim to generate quick profits while keeping risk to a minimum. A guerrilla trader’s defining characteristic is a very short-term trading timeframe that is even smaller than that of a scalper, and makes a day trader look like a long-term investor. Only computerized trading systems such as high frequency systems have shorter trading timeframes than the guerrilla trader.
Since the objective of guerrilla trading is to make small profits in multiple transactions, its success depends on low commissions, high leverage and, most importantly, tight trading spreads. So while guerrilla trading techniques can be used in any financial market, it may be best suited to foreign exchange trading, especially the major currency pairs that have abundant liquidity and low spreads.
Characteristics of Guerrilla Trading
A guerrilla trader’s modus operandi is to make low absolute profits per trade, but to trade multiple times in a session so that the overall gains are substantial enough to justify the risk incurred in such short-term trading. Based on this profile, guerrilla trading generally has the following characteristics:
- Very short-term trading timeframe: The average trade for a guerrilla trader only lasts a few minutes, and hardly exceeds this timeframe. This is because the longer the time spent in a trade, the greater the risk that it can go against the trader.
- Small profits, even smaller losses: The guerrilla trader is quite content to make only 10 to 20 pips on a forex trade, compared with a scalper who may have an objective of more than twice this amount, or 25 to 50 pips. This means that the guerrilla trader cannot afford to risk more than a few pips on a single trade, with the maximum loss capped at levels as small as 5 to 10 pips.
- Large number of trades: Successful guerilla traders may execute more than 20 to 25 trades in a single trading session when conditions are conducive to such frenzied trading. This is generally likely to happen when important economic data such as the monthly U.S. payroll numbers or trade data is released.
- Technical analysis: Due to its short-term focus, guerrilla traders usually rely on technical analysis for timing their trades, and are adept at using tick charts or 1-minute charts to pinpoint entry and exit points for their trades.
- Low commissions and spreads: Because of its high trading volume and low-return nature, guerrilla trading is heavily reliant on low commissions and tight trading spreads. Guerrilla traders therefore limit themselves to the major currency pairs where liquidity is assured, rather than exotic currencies that may have greater profit potential but significantly lower liquidity.
- Experienced traders: Guerrilla trading is usually the province of experienced traders who possess enough trading acumen to have survived for a number of years. It is not recommended for novice traders, as such rapid-fire trading may wipe out their risk capital in a few sessions.
- Calculated risk-taking: Since guerrilla traders engage in calculated risk-taking that entails having a stop-loss of only a few pips per trade, they may often choose to stay on the sidelines when the markets are too volatile and the risk of loss is too great.
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I’m still fine tuning my system, even after two weeks. However, this last modification looks like it has the potential to remove the undesirable outcome of my average loss trades always being greater than my average profit trades, especially since my two main losses this last round of sessions occurred while I was asleep, and had I been awake to manage ALL of my trades, I WOULD have exited BOTH of those positions while they were still profitable.
That would have given me six out of eight winning trades, which is close to my goal of a minimum 80% success rate. In any event, my takeaway here is that this is definitely not a system where I can simply place my trades and walk away—at least not if I want maximum performance.
I’m hoping today’s adjustments will be the last significant modifications I make to my setup and that going forward will merely entail sharpening how I use the various components. The changes led to my average loss trades once again besting my average profit trades by more than double, so that’s where I will initially be focusing most of my attention.
What happened today is beginning to approach the kind of success I’ve experienced in the past, and reflects the potential I believe this newer, theoretically “multiplied-opportunity” producing method offers. Though it took me a couple of weeks, I’m thinking maybe I’ve finally just about worked out most of the bugs...but only time will tell.
A couple of days ago I wrote the Ms. Mae’s Trading Strategy is not a system where I can simply place my trades and walk away if I wish to maximize performance, and today, which was a losing day, certainly bore that out.
Everything was fine until I retired for the night. The problem was, I assigned preeminence to one set of factors when I should have assigned it to another. The reading(s) that I thought represented the most dominant aspect of price action was actually subservient to another that I had erroneously assigned less importance. The result was that four positions turned against me big time as I slept, turning my respectable winning day into an absoute monster of a loser.
When I awoke and saw my folly, I exited the remaining positions I had entered based on the incorrectly assigned priority, and entered new ones in accordance with my fresh insight.
Yesterday’s initial experimentation (which consisted of more than 45 trades) did not lead to the modification of any additional indicators, but did involve combining those from two separate setups on a single chart such that they complemented one another. I am still in the process of finalizing the corresponding rules, but once complete, the percent of profit trades should theoretically be significantly higher (it was approximately 63% today) and likewise the ratio of average profit trades to average loss trades, which was an absolute disaster this round of sessions.
Combining the two setups has resulted in a rather cluttered look , but each line serves a distinct purpose, with which I am very familiar (I’d better be, since I originated the system), so this does not really present much of a problem for me.
Multiple Simple Moving Average Envelope (Ms. Mae) Trading Strategy final setup:
The example pictured above illustrates conditions under which a trader would be wise to stay out of the market.
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Nobody's going to argue about that one: it's usually best to stay out of the market when you can't even see the price on your chart.
Nobody's going to argue about that one: it's usually best to stay out of the market when you can't even see the price on your chart.
I have a handful of discrete thoughts that I’m hoping I can paste together in a manner that makes them less disjointed than they currently seem in my head.
(I have come to trust these key moving averages and they are not likely to ever change.)
I believe it was on Thursday—the day I made far more trades (70+) than usual—that I claimed to have run into trouble due to giving priority to a factor that was actually subordinate to one I had erroneously assigned less importance.
Yet, the only reason Thursday's disaster was able to occur was because I was not managing my open positions, seeing as how I was in need of a few hours sleep. For I am convinced that price action lets me know the moment the intraday trend has turned against me, and it is my practice to exit positions immediately upon seeing this happen rather than wait for price to hit my stop loss (but I cannot do this while I am asleep).
It is this trusted “reading” (which I have now given the prominence it deserves) that makes these well-timed exits possible. However, on days like Friday, when there is practically no movement (in the Forex markets) over all three of the sessions, this particular measurement becomes unstable and problematic.
And to make matters worse, the possible solution I was entertaining to deal with the problem of having just four trades erase all my profits from the previous 50 trades, or my average loss trades bettering my average profit trades day after day (which was to increase my typical reward-to-risk ratio from 1:1 to 2:1, 3:1, or possibly even 4:1) would, under such circumstances, be moot.
In analyzing the cluttered “final” setup I posted on Thursday, I might have found my solution. You see, I removed all the envelopes and focused on the most essential moving averages. In fact, one of my formerly key moving averages was ultimately deleted due to its falling between two measurements that really mattered the most.
What was left is what you see above, minus the yellow MA.
(I have come to trust these key moving averages and they are not likely to ever change.)
I believe it was on Thursday—the day I made far more trades (70+) than usual—that I claimed to have run into trouble due to giving priority to a factor that was actually subordinate to one I had erroneously assigned less importance.
Yet, the only reason Thursday's disaster was able to occur was because I was not managing my open positions, seeing as how I was in need of a few hours sleep. For I am convinced that price action lets me know the moment the intraday trend has turned against me, and it is my practice to exit positions immediately upon seeing this happen rather than wait for price to hit my stop loss (but I cannot do this while I am asleep).
It is this trusted “reading” (which I have now given the prominence it deserves) that makes these well-timed exits possible. However, on days like Friday, when there is practically no movement (in the Forex markets) over all three of the sessions, this particular measurement becomes unstable and problematic.
And to make matters worse, the possible solution I was entertaining to deal with the problem of having just four trades erase all my profits from the previous 50 trades, or my average loss trades bettering my average profit trades day after day (which was to increase my typical reward-to-risk ratio from 1:1 to 2:1, 3:1, or possibly even 4:1) would, under such circumstances, be moot.
In analyzing the cluttered “final” setup I posted on Thursday, I might have found my solution. You see, I removed all the envelopes and focused on the most essential moving averages. In fact, one of my formerly key moving averages was ultimately deleted due to its falling between two measurements that really mattered the most.
What was left is what you see above, minus the yellow MA.
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