Forex rebates on every trade - win or lose!

What happens if a position keeps moving against you for a long time, does he use a stoploss eventually. dont think i've added to a loosing position since the turn of the century!

Used to go to a casino in portugal back in the 70's as a youngster, hadn't heard of martingale then, just watched the roulette table and thought to play colours or evens after a run of three, going other way. pretty boring really, blackjack alot more fun, drinks were free!

What happens if a position keeps moving against you for a long time, does he use a stoploss eventually.

Therein lies the fundamental problem with the whole system, Gofe.

If he uses a stop, then he'll pick up a loss trade which will dent the profitability of the system. If he doesn't use a stop, then at some stage the market will turn and he will be able to close out for an overall net profit and maintain the profitability of the system.

In between there is a very grey and murky area where the small initial stake starts become a very large stake as more and more new trades are being taken as the trade goes the wrong way and the risk of being margined out gets higher and higher.

That is how the whole thing can blow up, but I wonder if there is any scenario whereby you could be safe if your pockets were deep enough.

it will only work if you have unlimited resources and if the chance is 1? I doubt that either is true?

not quite the same as the classic martingale system, from your description hils. It's worse in fact. In a casino, a losing bet/"trade" loses you a predetermined, finite amount i.e. your stake. You then double the next bet size, and so on, until you win. What you described seems to keep the losing positions open until a winner recovers the losses, so the losses accumulate faster (although as the multiple trades move into profit, you recover the losses faster too). Way more complicated than traditional martingale.

It's interesting because whenever the last trade wins and banks its profit, the previous losing trades are simultaneously closed too. Because the new positions are continually increasing in size, the profit from the last single win trade has so far been greater than the sum of the prior individual loss trades.

I can't quite work out if this would always be the case though as I think that the position sizes would probably need to increase exponentially in size for this to still happen as the number of loss trades in the sequence increased. Maybe a maths whizz could confirm if that is indeed the case.

There is also the hedge offset to consider from the winning trades going the other way as the losing positions are being counted.

To explain a bit more, this guy's system takes a position 60% larger each time when a position moves to a 30 pip loss and banks a 45 pip profit. So there is a practical limit as to how many pips the market is going to move before it retraces the 45 pips needed to close out.

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5044129/China-calls-for-the-reign-of-the-dollar-to-end.html

The smart money has already discounted anything the tiddleywinks say or do, Falco. They took them to the cleaners over oil and their Dollar trading last year was laughable. So they can fret all they want about the Fed printing money, but they may as well just face facts and get back to the paddy fields.

I detect a hint of disaffection for our Oriental bethren!

Not at all. But they've been guilty of blowing the bubble over the last few years, so there's no point in them bleating about it now it's burst.

Hilary - The Loonie Strategy !

I thought for a while that it rewarded failure.

If you have an initial winning trade you would bank 45 pip/lots.

If you were in a trade that produced a loss of at least 120 pips and then reversed 45 pips you would gain 231 pip/lots.

However, I did calculate it with a loss of at least 300 pips before the 45 pip gain and there I got a loss of 432 pip/lots.

If you had started trading with 1 mini lot by the time you were 300 pips down you would have a total of more than 18 standard lots on the table.

Mind, it is late and I may have calculated it incorrectly.

Interesting startegy but it would appear exceedingly dangerous if the Black Swan (Loon) appears or you find yourself up against central bank intervention.

power cut or similar at the wrong time could be costly

qwento,

Is the Loonie Strategy a name that you have made up because the guy is Canadian, or is it something that's well known?

In the 3 days that's he's been running it, he's down a total of 116 pips over 44 trades, but up a profit of $123. That's starting the sequence with an initial 0.1 lot (they're actually mini $10k's).

PF is a healthy 1.77.
His average loss 2.6 pips/trade and average trade duration is 15 hours 47 minutes.
He's currently got an open loss of $9.53 or 86 pips over 4 trades using about $6 of margin.

There's clearly nothing there that's earth shattering and, as this only represents a very small percentage of his total account, it could conceivably actually be quite safe.

At its worst to date, he had 7 open trades and his largest trade was only 1.98 lots. He clearly had quite a way further to go from there before he was ever going to feel the squeeze.

It was the Canadian connection.

As I said, and I think I'm right, it will make money as long as he gets his 45 pip profit within 5 or 6 lot increases. After that it could spiral out of control.

Unless he has a limit set on the number of times he increments the lot size he is in danger of encountering that one event that blows the entire account.

I'm sure you're right with your calculations about it being loss making after 5 or 6 lot increases. I suggested yesterday that I thought there would be a need to increase the lot sizes exponentially to maintain profitability with a long loss run. My maths aren't up to it (actually they are up to it, but my it's my head that isn't right now - too much Chilean Sauv B last night).

As you say, the Black Swan would be the killer. It would therefore be safest to consider the worst case number of open loss positions from extensive backtesting over many years and to use that to draw a line in the sand somewhere.

The other consideration is running it through news events.

I would have thought that you are unlikely to get filled at the correct levels which may also influence profitability.

It would be interesting to find out the biggest move on the majors without a 45 pip reversal.

I wonder why he picked 30/45 pips - does he know something we don't ??

Well Timmy Taxes might mince around, but Volcker gets straight to the point.

Volcker, showing he’s no economic diplomat, says “China didn’t have to buy all those dollars” and that they contributed to the problem. That said, he understands why the dollar-centric global monetary system is restive.

Did anyone read the weekend story about Spanish and ex-pat people shopping like mad in Morrisons in Gibralter to milk Chunnel?

Well my local Lidl was full of Slovaks today.

:o)

Never realised you had fallen under the Lidl spell of perceived value