How much to buy w/2% risk of $1k and w/50pip SL?

[kenazen]

Originally Posted by ampris2000

The money mana. strat I use says if you're trading co-related pairs to split the pip value on those pairs so if all your stops were hit, it would still be a 1% loss.

I need to make a list of highly correlated pairs. Currently I just try not to use the same currency twice, for example, if I am long EUR/USD - I will not do any other trades that involve either EUR or USD. I think to find out what the betas are between the various currencies (I think I saw a chart somewhere on the web recently).

A beta will approach +1.0 for positive correlation and -1.0 for inverse correlation. Close to 0.0 is no correlation (the ideal!).

For example, if NZD and JPY have a beta of +1.0, they are basically interchangeable, and I would keep my bets involving them both at 1% total.

[kenazen]

Originally Posted by ampris2000

oh! I think I see what you're trying to do.

i'll work on it over the weekend.

So far I like your system the most. There is another interesting one on Aonda's site in a thread called "What's been working for me for the last 6 months" (I think).

These guys figure out which pairs pay the highest interest, then buy the top 10 pairs and hold for 6 months. They use 50x times leverage to get 50x the interest. Several of them were making +20% a month. They used uncorrelated pairs so they didn't need stop losses. They didn't care if the pairs went up or down, they just wanted to own them so they could collect 50x interest.

The 2 things I like about their system is that: 1) you don't have to guess direction, and 2) you trade every 6 months.

Every system has a weakness, or at least symmetry - so if they can make 20% a month, there is a way they can lose 20% a month (even if they don't know it). I haven't looked in to their method enough to find the symmetry yet.

I'm trying your system in one demo account, and I will try theirs in a seperate one. I am really liking Forex, there seems to be a lot of different ways to play in the market!

[kenazen]

Originally Posted by ampris2000

Then it will tell me where to set my s/l.
sometimes i've made big bets with a tight stop and it wasn't hit, sometimes they are hit before they continue on in the "winning" direction.

I don't think I could trade without being able to choose my own Stop Loss, that would be like having someone else choose your wife.

[MickMason]

Originally Posted by kenazen

They didn't care if the pairs went up or down, they just wanted to own them so they could collect 50x interest.

Every system has a weakness, or at least symmetry - so if they can make 20% a month, there is a way they can lose 20% a month (even if they don't know it). I haven't looked in to their method enough to find the symmetry yet.

I think a depreciating asset would probably do it!

If they're holding a currency which is losing value against it's counterpart then that's a loss, no matter what the interest rate yield advantage. I expect they're working on the premise that higher yielding currencies are typically carry trades, there's a thread on Moneytec about a similar strategy, the risk is if price doesn't move as anticipated, direction is as important as it is in any other strategy.

There's no free lunch in forex




Mick

[kenazen]

Originally Posted by MickMason

I think a depreciating asset would probably do it!

If they're holding a currency which is losing value against it's counterpart then that's a loss, no matter what the interest rate yield advantage. I expect they're working on the premise that higher yielding currencies are typically carry trades, there's a thread on Moneytec about a similar strategy, the risk is if price doesn't move as anticipated, direction is as important as it is in any other strategy.

There's no free lunch in forex
Mick

That sounds like what they were saying. They try to use uncorrelated pairs so that if they get unlucky on one, they might get lucky with another. I think they were using 10 pairs, and had so far been lucky enough to have the good and bad offset eachother. They did say there tended to be a biased drift in the right direction, which makes sense if big-time money managers were looking for a place to pick up interest.

The guy who started the thread (Magni3d) did not use Stop Losses at all, but I think most of the other guys did. I think I would, lol.

Another friend of mine, who manages a 7 figure account, said while having 10 pairs go against them might be statistically unlikely, what was statistically unlikely has a way of happening quite often in trading, lol.

[ArnieConan]

Keep in mind that correlations are not absolute, curriencies can decouple. You could get seriously hurt if, and when, it happens.

Also, read Nassim Taleb's book, "Fooled by Randomness" to get a very good sense of Black Swan events, hubris in trading, and the role of luck in trading.

Nat

[CAPRICO]

Hi,
I would like to know from some experienced forex traders, what is the risk involved in holding long /buy positon of GBP/JPY in my account inorder to get rollover interest benefits?
Can you enumarate some examples?
Also who provides the best rollover interests in the market today?
Who also provides free forex signals??
Pl.inform
caprico
milindjeste@rediffmail.com

[mrbrint]

man 7 pages to figure out unit values in the big o what a pain