What's wrong with compounding returns?

The ladder...diversify and get opposing results with a net of profit from day to day...sort of a hedge...Weight your family of systems according to their stats..constantly balance...

A smooth portfolio equity curve is more important than a roller coaster ride. You want it to slope up with no cliffs...Profit is important but slow and steady will cause your compounding to work more effectively...

I purposely tone down some of my systems by transfering dollars between the systems balances...

Compounding can also be used in bracket methodology, the setting of your targets and stops, and also a scaling approach...not just appliying it to balance and trade size...

Drawdown is more important than yield...Every rose has its thorns :)

I am currently trading a combination of Scalps and Carries in Retail Spot Forex and use all these things I am discussing...

Michael B.


Quote from achilles28:

So you suggest running more than one compounding algorithm simultaneously for one strategy?

Or trade at least two altogether distinct strategies at the same time?
More...
 
Good idea. And its one thats crossed my mind.

I might include two uncorrelated currency pairs to the primaries I trade (pound and euro) to smooth out the equity curve - hedge.

A range strategy could augment my trend following strategy well. But im too lazy to get around to it.
 
Brilliant stuff...it will be worth your time...

Heres an idea ...a "breakout reversal sort of strategy" and a "momentum strategy"...IN THE SAME PAIR, but separate accounts...you would need to measure the number of pips between the most recent high and low (the TP's distance determines what you consider the most recent) and enter accordingly in offsetting weight and directions....scaling/gridding as necessary...

You could put in multiple time frames to even complicate this more :)
These things I am discussing enable you to EXPERIENCE the trend and react...An "always in" approach with a scaling methodolog works best with this to extract money from the trends...

When your doing this your always in control, as you know the # of PIPS between your last cycle (most recent high and low)...You can weight your exposure as your near the borders...I have said enough now...get your chalkboards out and do the work...

Remember if your trading with fear and your heart is pumping vigoriously ...your compounding too much!!!:)

I maintain very low leverage in my favorite systems...

Michael B.


Quote from achilles28:

Good idea. And its one thats crossed my mind.

I might include two uncorrelated currency pairs to the primaries I trade (pound and euro) to smooth out the equity curve - hedge.

A range strategy could augment my trend following strategy well. But im too lazy to get around to it.
More...
 
Quote from ElectricSavant:


Heres an idea ...a breakout reversal sort of strategy and a momentum strategy...IN THE SAME PAIR, but separate accounts.
More...

Thanks, Michael. Those are good ideas.

I've recently contemplated something similar - bracket entries for failed breakouts. Sort of similar to pairing the breakout reversal with a momentum/breakout strategy.

You're right about stops having to be adjusted for a false bo reversal. More room for error.

To be honest, pairing a range-type strategy with a trend following fits my psychology better. With four pairs, I'm wary of overtrading and don't want to overdo it when it comes to playing volatility breakouts. Statistically, I could be completely wrong though (haven't checked).

Your complimentary range trading suggestion gave me the idea to trigger it when my trend-follower exists, and then decrease the range strategy positioning sizing incrementally, as time elapses.

The rationale being consolidation phases follow cessation of trends. And trends resume after periods of consolidation (usually lengthy).

I want to run another observation by you. Will send to your pm.
 
I find that reversal systems have high winrates in Retail Spot Forex...(you really do not need to find the tops and bottoms with a scaling appoach...actually you can be quite wastefiul and sloppy and still come out smelling like a rose with the thorns removed:)


Map your cycles...draw horizontal lines of tops and bottoms in your chart if you must :) The more lines the smaller you trades should be...REMEBER ONE OF THOSE LINES WILL WORK EVENTUALLY...Heck..You can draw pivots ...highs and lows...S & R...crazy eights...Find your way...

Hey you could use MAE and MFE based on your systems entries and form your scaling on the statistical probabilities...This can be utilizing compounding which is the subject of your thread I believe..

I love trading....there are so many ways to take money out of the market...Just Focus on one thing and master it..then another...then try to diversify and trade different methodologies...learn to put on the face of multiple personalites...

Keep your mind nimble and challenge yourself...break through your plateaus and trade well..

Observation skills and persistence are what carry the trader through...


Michael B.


Quote from achilles28:

Thanks, Michael. Those are good ideas.

I've recently contemplated something similar - bracket entries for failed breakouts. Sort of similar to pairing the breakout reversal with a momentum/breakout strategy.

You're right about stops having to be adjusted for a false bo reversal. More room for error.

To be honest, pairing a range-type strategy with a trend following fits my psychology better. With four pairs, I'm wary of overtrading and don't want to overdo it when it comes to playing volatility breakouts. Statistically, I could be completely wrong though (haven't checked).

Your complimentary range trading suggestion gave me the idea to trigger it whenever my trend-follower exists, and then decrease the range strategy positioning sizing incrementally, as time elapses.

The rationale being consolidation phases follow cessation of trends. And trends resume after periods of consolidation (usually lengthy).

I want to run another observation by you. Will send to your pm.
More...
 
This is brilliant :) (use correlation tables on the internet)


To be honest, pairing a range-type strategy with a trend following fits my psychology better. With four pairs
 
Quote from ElectricSavant:

you would need to measure the number of pips between the most recent high and low (the TP's distance determines what you consider the most recent) and enter accordingly in offsetting weight and directions....scaling/gridding as necessary...

You could put in multiple time frames to even complicate this more :)
These things I am discussing enable you to EXPERIENCE the trend and react...An "always in" approach with a scaling methodolog works best with this to extract money from the trends...

When your doing this your always in control, as you know the # of PIPS between your last cycle (most recent high and low)...You can weight your exposure as your near the borders...I have said enough now...get your chalkboards out and do the work...

Remember if your trading with fear and your heart is pumping vigoriously ...your compounding too much!!!:)

I maintain very low leverage in my favorite systems...

Michael B.
More...


Theres a lot there.

Im not sure what you mean by 'gridding' here?


You had mentioned trading an 'always in' approach in another thread; adding pair exposure during trend confirmation and presumably, if im reading you right, equalize exposure at market turning points (largely defined by the duration or measure of the last move, or series of moves).

This sounds like a cool strategy. I can see it lends to a real sense of 'stability'; always in one side or the other so you miss nothing.


Part of my current bo strategy already involves the incorporation of referencing the most recent win lengths to determine exit points. Average winners don't produce much more than 150-250 pips depending on the pair, and I draw my trendline exits accordingly.

Who knows, I could be missing a lot of the jewels in your posts. I'm somewhat of a advanced beginner.
 
I am going to go to the store and get Wifey some Cough Syrup...

Within MONEY MANAGEMENT you can use compounding, martingale, Kelly, FRM, Optimal F and various bet-sizing methods. You can ALSO apply some of these items to TRADE MANAGEMENT directly too...

I will tell you some conclusions, I have arrived at for me personally. The various ways to ramp up your trade size concerning money management (not trade management) does not yield more profit. I know this is a bold statement..

The only application of these methods are in a rank of your trade entry...You need to understand your system and how probable your signal is...I find that during high traffic times, my scalping signals work the best...therefore in my money management, I ramp up size and in trade management I lengthen the target...

Michael B.
 
You must log in or register to reply here.
Back
Top