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Dave's pyramiding journal
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Dave's pyramiding journal

  #1 (permalink)
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Dave's pyramiding journal

Alright, let's start off with some background information. I'm currently trading spot EUR/USD and quite successfully so. However, it's my intention to also begin trade WTI, S&P500 and OMXS30 more seriously. The strategy I'm going to use works (and by that I mean that I have tested it thoroughly, both backtested and live) good with oil, S&P500 and also the swedish stock index OMXS30 (since it moves pretty much like the S&P but during the London session). I'm sure it could work splendidly in other instruments as well but these three are the ones I'm focusing on.
The reason I'm doing this journal is because I've found it hard to motivate myself to do these trades, since I'm already trading EUR/USD as well. Hopefully that will change now. My goal is to take a screenshot of each trade and maybe write something about it, we all know the drill.

Ok, that's enough of that, on with the strategy and rules.

In the title it says pyramiding and that's what I do, I'm pyramiding. I guess my strategy is pretty straight forward and I’m sure a lot of people use variations of it. My goal is to capture intraday movements of +100 ticks in oil and +10 points in S&P500 and OMXS30.

Let's say WTI's trading at 100 dollars and that I buy 1 contract at 100,00 with a stop loss at 99,80. If price reaches 100,30 but then retraces back to 100,20, I buy one more contract and move both stop losses to 100,00. If price reaches 100,50 I wait for price to retrace to 100,40 but this time I buy 2 contracts. The stop loss for all contracts is now at 100,20. If price reaches 100,70 I wait for a retrace to yes, you guessed it, 100,60. Alright, this is going great, at 100,60 I'm buying another 4 contracts and placing the stop loss for all contracts at 100,40. This is usually where I stop buying but sometimes, if I feel really confident I might pick up 8 more contracts at 100,80. But this time, let's say I didn't.


Right, now I have a pretty decent position of 8 contracts. But remember, I never risked more than 20 ticks x 1 contract. Now the fun and hard part begins! As price moves up, my stop loss does too. While I do try to keep it at around 20 ticks I can now be a little creative and place it below recent lows or S/R levels. I'm never guessing where the trend might end, I can only exit my position by being stopped out. So let' say price shoots up to 101,00, I place my stop loss at 100,80 and I get stopped out on a retracement.

This would result in +300 ticks all in all, with a risk of 20. That's an OK result but nothing to get too excited about, it's those rare times when you manage to capture a really big move, when you're already “in the money” when one of those classic intraday oil rallies of a few hundred ticks begins, that's when you're really getting paid.
Trading like this will get you stopped out a lot and I mean a lot! The key is to keep trading (but not overtrading), and not to let a string of maybe 10, 15 losers or more put you off. We're waiting for the big one! The more aggressive version of this strategy is to enter without waiting for retracements, this of course results in a lot more losses but instead you're not risking that the price won't retrace back to our entry level. A lot of times I'm not getting any extra contracts at all, just because price didn't retrace. But that’s fine with me, I'll just do the best I can to manage the position I have. When I trade S&P500 and OMXS30 I tend to use the more aggressive version since price doesn't always wiggle around as much in those instruments, as it does in oil. But this all depends on the volatility and how I feel the market is moving.

Choosing the first entry is of course crucial and to do this I use the same old tricks as everyone else, S/R, trendlines, fibonacci, pivots, fundamentals, you name it. When I have clear idea of which way I think the market will go, I can be quite aggressive with the entries and trade against the short term trend, since I'm looking to capture big movements.


Here's an example from today's trading, I started buying it around 95.00, got stopped out several times before price finally stopped dropping. This time I didn't get the third entry so instead of 560 ticks, I got 220. The green boxes shows my entries and the yellow line shows why and how I moved my stop loss. The yellow line starting from 94.60 is supposed to go all the way up to 95.10, that's the level that told me to move up my stop loss.

Well, that's it for now I guess. My english isn't perfect but I hope I at least made myself understood. No trading tomorrow so new charts and ramblings will have to wait til Monday.

Attached Thumbnails
Dave's pyramiding journal-us-light-crude-aug-11-m15.png   Dave's pyramiding journal-us-light-crude-aug-11-10ticks.png  

Last edited by davebowman; July 14th, 2011 at 05:46 PM.
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  #3 (permalink)
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Basically you are doing the opposite of what redratsal is doing here but from a positive perspective

I would be curious to know which strategy is less prone to huge drawbacks relative to the profit it can make.

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  #4 (permalink)
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I am not familiar with redratsal or his trading strategy so I can't help you with a comparison. But since I'm risking very little on each trade(less than 0.5% of the allocated funds), I wouldn't say the draw down is a problem. While I do have a lot of losers, the occasional smaller winners usually makes up for it at the end of the week and like I said, it's when I manage to capture a big move I'm actually getting paid and that might only happen once a month.

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Crude, EUR/USD and the european stock indices are all looking quite weak, will be shorting on retraces, if I get any.

Limit sell at 96.80, SL at 97 (CL)
Limit sell at 1077, SL at 1079.5 (OMXS30)


Edit,

Stopped out in CL even before I had the time to post a chart. New short at 97.00, SL 97.20

Short at 1077 in OMXS30, SL at 1079.5

Since I'm only using Pro RealTime for charting the green boxes are representing my entries.

Attached Thumbnails
Dave's pyramiding journal-us-light-crude-aug-11-1min_2.png   Dave's pyramiding journal-omxs30_1min.png  

Last edited by davebowman; July 18th, 2011 at 05:05 AM.
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Short 1 more contract at 1074, SL on both contracts at 1078.

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Dave's pyramiding journal-omxs30_1min_e2.png  
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Stopped out for another 20 ticks in CL, short again at 97.20.

Looking for a drop down to the area around the daily S1.

Edit,

CL trading at 96.80 at the moment, will not be adding to my position at 97.00 unless the previous low of 96.72 is broken first. Stop loss at break even.

EUR/USD keeps going higher and making my shorts uncertain.

Attached Thumbnails
Dave's pyramiding journal-us-light-crude-aug-11-1min_3.png   Dave's pyramiding journal-us-light-crude-aug-11-m15_1.png  

Last edited by davebowman; July 18th, 2011 at 06:28 AM.
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2 more contracts at 1071, SL for the whole position at 1074.

SL for the one CL contract is now at 97.00

edit,

4 more contracts at 1068, SL at 1071

edit2,

OMXS30 trading at 1064.50, stop loss moved to 1068

edit3. OMXS30 trading at 1063, stop lossed moved to 1065, keeping this tight.

Attached Thumbnails
Dave's pyramiding journal-omxs30_1min_e3.png   Dave's pyramiding journal-omxs30_1min_e4.png  
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Moved the SL to 1064 and got stopped out.

First entry, 1 contract x 13 points
Second entry, 1 contract x 10 points
Third entry, 2 contracts x 7 points
Fourth entry, 4 contracts x 4 points

All in all, +53 points with a risk of 3. Crazy move!

Attached Thumbnails
Dave's pyramiding journal-omxs30_1min_exit.png  
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CL trading at 96.50, moving SL to 96.80

Edit,

CL trading at 96.15, moving SL to 96.40

Edit2,

95.95, SL at 96.20

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